LIMITED PARTNERSHIP AGREEMENT
OF
VAIL RANCH LIMITED PARTNERSHIP
A CALIFORNIA LIMITED PARTNERSHIP
This Limited Partnership Agreement is made and entered into as of April 1, 1994,
by and between LANDGRANT CORPORATION, a California corporation, as the General
Partner, and OLD VAIL PARTNERS, a California General Partnership, as the Limited
Partner, for the purpose of forming a Limited Partnership under the Revised
Limited Partnership Act of the State of California.
ARTICLE 1
FORMATION OF THE PARTNERSHIP
1.1 Formation. The parties hereby form a Partnership under the Revised
Limited Partnership Act of the State of California. The rights and liabilities
of the Partners shall be as provided in the Act, except as otherwise expressly
provided herein.
1.2 Name,. The name of the Partnership shall be VAIL RANCH LIMITED
PARTNERSHIP, a California Limited Partnership, or such other name as the General
Partner may hereafter designate by Notice in writing to the Limited Partner.
1.3 Business Purpose. The business of the Partnership shall be to
acquire, develop, improve, operate, maintain, lease, hold, sell, or dispose of
the Property (described on Exhibit "A" hereto) of the Partnership for long-term
investment or for use in its trade or business, and to engage in any other
activities related or incidental thereto, as more particularly set forth in
Paragraph 6.2. Without limiting the generality of the foregoing, the Partnership
intends to develop a shopping center on the Property and related parking and
appurtenances, as generally depicted on Exhibit "A-1" hereto.
1.4 Place of Business. The principal place of business of the
Partnership shall be 12625 High Bluff Drive, Suite 212, San Diego, California
92130, or such other places as the General Partner may designate from
time-to-time upon giving written notice of any such change to the Limited
Partners.
1.5 Certificate of Limited Partnership. The General Partner shall
execute and acknowledge a Certificate of Limited Partnership pursuant to the
provisions of the Act. The General Partner shall thereafter cause the
Certificate of Limited Partnership to be filed in the office of, and on a form
prescribed by, the Secretary of State of the State of California. In addition,
the General Partner shall record a copy of such Certificate of Limited
Partnership in the Office of the County Recorder of each county in which the
Partnership owns or intends to own real property or any interest in real
property. The Certificate of Limited Partnership shall be amended by the General
Partner as required by the Act.
1.6 Accent for Service of Process. The Partnership's agent for service of
process shall be Christopher Smith.
1.7 Term. The Partnership shall become a California Limited Partnership
on the date the Certificate of Limited Partnership is filed in the office of the
Secretary of State of the State of California, and shall continue until fifty
(50) years from the date hereof, unless terminated or dissolved earlier in
accordance with this Agreement or by law.
1.8 Ownership of Property. All Partnership Property shall be held and
conveyed in the name of the Partnership, and no Partner individually shall have
any right to own any Partnership Property. No right of partition with respect to
the Property shall exist in any Partner or in any Partner's heirs, successors or
assigns, and any such right that might be effected by action of law is hereby
waived for and on behalf of themselves, their respective heirs, executors,
administrators, legal representatives, successors and assigns.
In connection with any transfer of the Real Property or any portion
thereof to the Partnership, (i) the Partnership shall obtain title to such Real
Property, subject to such liens, encumbrances, and exceptions to title of record
as are disclosed in Exhibit "B" hereto as well as all real property taxes,
current and delinquent, and all unpaid general and special bonds and assessments
(including delinquent installments), the printed exceptions contained in a
standard coverage CLTA Owner's Policy of Title Insurance and such other matters
as expressly approved in writing by the General Partner, (ii) all closing costs
in connection with the contribution of such Property the Partnership shall be
paid for by the Partnership, (iii) the General Partner shall obtain title
insurance showing title vested in the Partnership; and (iv) the Partners shall
cause to be executed and recorded such easements and similar agreements as the
General Partner and any governmental authority having jurisdiction may
reasonably determine regarding the construction, maintenance, use and
governmental approval of such shared facilities as parking lots, roads, walkways
and the like located or to be located on the Real Property.
1.9 Property Transfer. Immediately subsequent to the execution hereof,
the Limited Partner shall execute and deliver to Union Land Title Insurance
Company of California or other mutually satisfactory escrow company ("Union") a
fully executed Grant Deed (the "Deed") conveying to the Partnership that portion
of the Real Property required for the development of the property (the
"Property"), together with escrow instructions in a form mutually satisfactory
to both the General Partner and the Limited Partner providing, in part, that the
transfer of the Property shall be effective only upon, and Union shall do all
acts necessary for, recordation of such deed by Union.
ARTICLE 2
DEFINED TERMS
The following defined terms shall, unless the context otherwise
requires, have the meanings specified in this Article 2. The singular shall be
deemed to refer to the plural, the masculine gender shall be deemed to refer to
the feminine and neuter, and vice versa, as the context may require.
2.1 "Accountants" means Harlan & Boettger or such other firm of
independent accountants as may be engaged from time to time by the General
Partner for the Partnership.
2.2 "Act" means the Revised Limited Partnership Act of the State of
California.
2.3 "Additional Partners" means any Person or Persons admitted to the
Partnership as a General or Limited Partner pursuant to Paragraph 3.3 below.
2.4 "Affiliate" means, when used with reference to a specified Person:
(a) any Person who directly or indirectly controls, is controlled by or is under
common control with the specified Person, (b) any Person who is an officer,
General Partner or trustee of, or serves in a similar capacity with respect to,
the specified Person, or for which such Person is an officer, partner or trustee
or serves in a similar capacity, and (c) any Person who, directly or indirectly,
is the beneficial owner of thirty percent (30%) or more of any class of equity
securities of the specified Person, or of which such Person, directly or
indirectly, is the owner of thirty percent (30%) or more of any class of equity
securities.
2.5 "Agreement" means this Limited Partnership Agreement, as amended
from time to time.
2.6 "Capital Account" as to any Partner, means an account maintained on
the Partnership's books reflecting the excess (or deficit) of:
(a) the sum of: (i) such Partner's Capital Contributions, (ii)
such Partner's share of Taxable Income, and (iii) such Partner's
share of tax-exempt income of the Partnership, less
(b) the sum of: (i) such Partner's share of Tax Loss, (ii) such
Partner's share of other Partnership expenditures [including "Section
705 (a) (2)(B), Expenditures" within the meaning of Treasury Regulation
Section 1.704-1(b)(2)(iv)(i)] that are not deductible for federal income
tax purposes (but excepting payments on indebtedness or expenditures to
the extend included in the basis of any Partnership asset), and (iii)
any distributions to such Partner of Distributable Cash of sale or
Financing Proceeds.
2.6.1 Capital Account Adjustments Under Code. Notwithstanding any
other provision in this Agreement, each Partner's Capital Account shall be
maintained and adjusted in accordance with the Code and the Treasury Regulations
thereunder, including Treasury Regulation 1.704-1(b)(2)(iv) and appropriate
adjustments to Capital Accounts permitted in the case of a Partner who receives
the benefit or detriment of any special basis adjustment under Sections 734, 743
and 754 of the Code. it is intended that such adjustments shall be made to
Capital Accounts to give effect to any income, gain, loss or deduction (or items
thereof) that is specially allocated pursuant to this Agreement. Subject to
Paragraph 2.6.5, each Partner's Capital Account shall include that of any
predecessor holder of the Interest of such Partner. A Partner who has more than
one Interest in the Partnership shall have a single Capital Account that
reflects all such interests regardless of the class of Interests owned by such
Partner and regardless of the time or manner in which such Interests were
acquired.
2.6.2 Basic Allocation of Contributed Property. In the event that
property is contributed to the Partnership with a basis to the Partnership
different from such property's fair market value at the time of its
contribution, Capital Accounts shall be adjusted, in accordance with Treasury
Regulation Sections 1.7041 (b) (2) (iv) (d) (3) and 1. 704-1 (b) (2) (iv) (g) ,
for allocations to the Partners of depreciation, depletion, amortization, and
gain and loss, as computed for book purposes, with respect to such contributed
property. Consistent with the provisions of Treasury Regulation Section 1. 704-1
(b) (2) (iv) (g) (3), "Book Depreciation" (as defined herein) for each item of
Partnership property shall equal the amount that bears the same relationship to
the "Adjusted Book Basis" (as defined herein) of such item of Partnership
property as the "Tax Depreciation" (as defined herein) with respect to such item
of Partnership property for such year bears to the "adjusted basis" (within the
meaning of Section 1011 (a) of the Code) of such item of Partnership property.
Notwithstanding the foregoing, if an item of Partnership property shall have an
"adjusted basis" (as defined herein) equal to zero, Book Depreciation shall be
determined under a reasonable method which shall be selected by the General
Partner. As used herein: "Book Depreciation" means the deduction or allowance
for depreciation, depletion or amortization (as the case my be) that shall be
allowable to the Partnership with respect to an item of Partnership property,
the Book Basis of such item as the same may be adjusted from time to time by
Book Depreciation allowable with respect to such item of Partnership property;
and "Tax Depreciation" means the deduction or allowance for depreciation,
depletion or amortization (as the case may be) that shall be allowable for
federal income tax purposes to the Partnership with respect to an item of
Partnership property.
2.6.3 Reduction for Distributions. A Partner's Capital Account
shall be reduced by the fair market value (determined without regard to Section
7701(g) of the Code) of any property distributed by the Partnership to such
Partner, whether in connection with a liquidation of the Partnership or of such
Partner's Interest or otherwise. Accordingly, Capital Accounts shall first be
adjusted to reflect the manner in which the unrealized income, gain, loss, and
deduction inherent in such property (that has not been previously reflected in
Capital Accounts) would be allocated, pursuant to Article 5 of this Agreement,
among the Partners if there were a taxable disposition of such property for its
fair market value (taking into account Section 7701(g) of the Code) on the date
of distribution.
2.6.4 Carryover Upon Transfer. Upon the transfer of all or any
part of an Interest, the transferor's Capital Account that is attributable to
the transferred interest shall carry over to the transferee Partner. If the
transfer of any interest in the Partnership causes a termination of the
Partnership under Section 708(b)(1)(B) of the Code, the Capital Account that
carries over to the transferee Partner shall be adjusted in accordance with
Paragraph 2.7.4 of this Agreement and Treasury Regulation Section
1.704-1(b)(2)(iv)(e) in connection with the constructive liquidation of the
Partnership under Treasury regulation Section 1.708-1(b) (1) (iv) . The
constructive reformation of the Partnership shall be treated as the formation of
a new partnership, and the capital accounts of the partners of such new
partnership shall be determined and maintained accordingly.
2.6.5 Adjustments at Partnership Level. Adjustments to Capital
Accounts in respect to Partnership income, gain, loss, deduction and
non-deductible expenditures (or item thereof) shall be made with reference to
the federal tax treatment of such items (and in the case of book items, with
reference to the federal tax treatment of the corresponding tax items) at the
partnership level, without regard to any requisite or elective tax treatment of
such items at the Partner level.
2.6.6 Other Adjustment Requirements. If the foregoing rules fail
to provide guidance on how adjustments to Capital Accounts should be made to
reflect particular adjustments to Partnership capital on the books of the
Partnership, adjustments to Capital Accounts shall be made in a manner that (i)
maintains equality between the aggregate Capital Accounts of the Partners and
the amount of Partnership capital reflected on the Partnership's balance sheet,
as computed for book purposes, (ii) is consistent with the underlying economic
arrangement of the Partners, and (iii) is based, wherever practicable, on
federal tax accounting principles.
2.7 "Capital Contribution" means the total amount of money and the fair
market value (determined consistent with Section 752(c) of the Code and without
regard to Section 7701(g) of the Code) of any property contributed to the
Partnership by any Partner (or the predecessor holders of the Interest of any
Partner). The Capital Contributions of the Partners shall be as follows:
2.7.1 The value of the initial Capital Contribution of the
Limited Partner was calculated on the basis of Four and 00/100ths Dollars
($4.00) per square foot of the net usable land contributed to the Partnership
(approximately 1,170,892 square feet). Should the actual (ALTA Survey) square
feet be more or less, the Limited Partner contribution will be adjusted up or
down based on the Four and 00/100ths Dollars ($4.00) per square foot. Net usable
land is defined as gross acreage minus street dedications for road improvements.
2.8 "Code" means the Internal Revenue Code of 1986, as amended (or any
succeeding law).
2.9 "Distributable Cash" means, with respect to any fiscal period, all
cash receipts from operations in the ordinary course of business, without
deduction for depreciation, but after deducting payments for Operating Cash
Expenses, payments required to be made in connection with any loan to the
Partnership or any other loan secured by a lien on any Property of the
Partnership, capital expenditures with respect to any such Property, and any
amounts set aside for the restoration, increase or creation of reserves if and
to the extent not paid for from financing or from a Letter of Credit or proceeds
of a loan made to the Partnership by the General Partner.
2.10 "Financing" means any mortgage financing, refinancing, or borrowing
secured by any Property but excluding any loan made by the Partnership or any
secured loan made to the Partnership.
2.11 "General Partner" means LANDGRANT CORPORATION, a California
corporation.
2.12 "Incapacity" means the entry of any order for relief in bankruptcy,
of incompetence or of insanity, or the death, dissolution or termination (other
than by merger or consolidation), of any Person.
2.13 "Interest" means the general profit and loss allocation to the
partners (without special allocation), which percentage is as follows:
General Partner 50%
Limited Partner 50%
2.14 "Limited Partner" means OLD VAIL PARTNERS, a California General
Partnership, as well as any Person admitted to the Partnership as a Limited
Partner, or Substituted Limited Partner; and any decision or vote to be made by
the Limited Partner shall be made by the holder or holders of more than fifty
percent (50%) of the outstanding Interests held by all Limited Partners.
2.15 "Notice" means a writing, containing the information required by
this Agreement to be communicated to any Person, effective either upon personal
delivery or three (3) business days after being duly sent by registered or
certified mail, return receipt requested, to such Person, if a Partner, at the
address set forth below or such other address as such Partner may hereafter
designate by giving Notice as provided herein, and to any other Person at the
last known mailing address of such Person; provided, however, that any
communication containing such information sent to a Person (including a Partner)
and actually received by such Person shall constitute Notice for all purposes
under this Agreement, and provided further, that any Partner may change its
address by giving Notice to the other Partner as provided herein.
To the General Partner: To the Limited Partner:
LANDGRANT OLD VAIL PARTNERS
Attn: Christopher Smith Attn: Harold Elkan
12625 High Bluff Drive 5230 Carroll Canyon Road
Suite 212 Suite 310
San Diego, CA 92130 San Diego, CA 92121
With a copy to: With a copy to:
EUROWEST PROPERTIES, INC. Attn: Peter W.
Edelmann P.O. Box 881691 San Diego, CA 92108
2.16 "Operation Cash Expenses" means, with respect to any fiscal period,
the amount of cash disbursed in the ordinary course of business during such
period, including, without limitation, all cash expenses, such as advertising,
promotion, property management, insurance premiums, taxes, utilities, repair,
maintenance, legal, accounting, bookkeeping, equipment use and telephone
expenses. Operating Cash Expenses shall include fees paid by the Partnership to
any partner or any Affiliate thereof permitted by this Agreement, and the
actual cost of goods, materials and administrative services used for or by the
partnership, whether incurred by any Partner, any Affiliate thereof or any
non-Affiliate in performing functions set forth in this Agreement reasonably
requiring the use of such goods, materials or administrative services.
Operating Cash Expenses shall not include expenditures paid from Reserves or
expenditures attributable to obtaining Sale or Financing Proceeds and shall not
include any expenditures paid for from Financing proceeds or from a Letter of
Credit or the proceeds of any loan made to the Partnership.
2.17 "Partners" means the General and Limited Partners, collectively.
2.18 "Partnership" means the Limited Partnership formed under this
Agreement.
2.19 "Partnership Minimum Gain" with respect to any taxable year of the
Partnership means the "partnership minimum gain" computed strictly in accordance
with the principles of Section 1.704-1T(b)(4)(iv)(c) of the Temporary Treasury
Regulations. Subject to the previous sentence, "Partnership Minimum Gain" means
the amount determined as follows: (i) first, compute, with respect to each
Nonrecourse Liability of the Partnership, the amount of taxable income or gain
that would be realized by the Partnership if the Partnership disposed of (in a
taxable transaction) the Partnership property subject to the Nonrecourse
Liability in full satisfaction of that Nonrecourse Liability (and for no other
consideration), and (ii) then, add together the amounts so computed for all
Nonrecourse Liabilities of the Partnership. This sum is the "Partnership Minimum
Gain".
2.20 "Person" means any individual, partnership, corporation, trust,
estate or other entity.
2.21 "Property" means the Real Property, all improvements now or
hereafter constructed thereon, and all personal property used in connection
therewith, including any interest of the Partnership therein or any part
thereof, and any other real or personal property owned by the Partnership from
time to time.
2.22 "Property Development Fee" means any fee or compensation payable to
the General Partner, any Affiliate thereof, or any non-Affiliate for property
development services, subject to the limitations set forth in Paragraph
6.4.1(a).
2.23 "Property Management Fee" means any fee payable to the General
Partner, any Affiliate thereof, or any non-Affiliate for property management
services subject to the limitations on fees payable to the General Partner or
its Affiliates set forth in
Paragraph 6.4.1(c).
2.24 "Real Property" means all of the Real Property located at the
southwest intersection of Redhawk Parkway and Highway 79 South, in the City of
Temecula, County of Riverside, State of California, more particularly described
on Exhibit "A" attached hereto, that is presently owned and to be contributed
to the Partnership pursuant to Paragraph 3.4 hereof, by OLD VAIL PARTNERS on
behalf of the Limited Partner.
2.25 "Reserves" means, with respect to any fiscal period, funds set
aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by the General Partner for working
capital, to pay taxes, insurance, debt service, repairs, replacements,
renewals, and for other costs or expenses incident to the ownership or
operation of the Property.
2.26 "Sale" means any Partnership transaction (other than the receipt of
Capital Contributions) not in the ordinary course of its business, including
without limitation sales, exchanges or other dispositions of real or personal
property, condemnations, recoveries of damage awards and insurance proceeds
(other than business or rental interruption insurance proceeds), and principal
payments with respect to loans made by the Partnership pursuant to this
Agreement, but excluding any Financing.
2.27 "Sale or Financing Proceeds" means all cash receipts arising from a
sale or Financing, less the following:
(a) The amount necessary for the payment of all debts and
obligations related to the particular Sale or Financing;
(b) The amount of cash paid or to be paid in connection with such
Sale or Financing (which shall include, with regard to damage recoveries
or insurance or condemnation proceeds, cash paid or to be paid in
connection with repairs, replacements or renewals, in the discretion of
the General Partner, relating to damage to or partial condemnation of
the affected Property); and
(c) The amount considered appropriate by the General Partner to
pay taxes, insurance, debt service, repairs, replacements or renewals,
or other costs or expenses of the Partnership (including costs of
improvements or additions in connection with any Property) or to provide
for the purchase of an interest in real property in connection with any
Property, or to provide Reserves therefore.
2.28 "Substituted Limited Partner" means any Person admitted to the
Partnership as a Limited Partner pursuant to Paragraph 7.3.
2.29 "Taxable Income" or "Tax Loss" means the income or loss of the
Partnership for each fiscal year as determined for Federal income tax purposes,
including but not limited to related federal tax items such as capital gain or
loss, tax preferences, credits, depreciation and investment credit recapture.
2.30 Other Internal Definitions. The following terms shall have the
meanings defined in the paragraphs shown beside each of the following terms:
Term
Actual Cost 6.5.3
Appraised Value 9.4.4
Buy-Out Notice 7.5.1
Controlling Person 6.5.4
Effective Date of Buy-Out Notice 7.5.1
Encumbrances 7.5.3
Event of Default 9.1
First Appraiser 9.4.1
First Refusal Notice 7.2
Guaranteed Payment 5.4.2
Initial Notice 7.5.1
Insolvency Laws 9.1(b)
Liability Notice 7.5.1
Minimum Gain Charge-Back 5.4.7
Net Usable Land 2.7.1
Offering Partner 7.5.1
Offering Partner Value 7.5.1 Phase I
Property 3.4.(b)2
Phase II Property 3.4.(b)2
Receiving Partner Value 7.5.1
Receiving Partner 7.2
Second Appraiser 9.4.2
Selling Partner 7.2
Single Appraiser 9.4.1
Stated Value 7.5.1
Tax Matters Partner 10.6
Third Appraiser 9.4.2
Transfer 7.1
Undisclosed Liability 7.2, 7.5.2
Union 1.9
ARTICLE 3
PARTNERS AND CAPITAL
3.1 General Partner. The General Partner shall be LANDGRANT
CORPORATION, which shall own a fifty percent (50%) interest in the
Partnership.
3.2 Limited Partner. The Limited Partner shall be OLD VAIL PARTNERS
which shall own a fifty percent (50%) interest in the Partnership.
3.3 Additional or Substituted Partners. The General Partner may not
admit additional general or Limited Partners to the Partnership except
upon approval of the Limited Partners, and on terms and conditions
established herein or from time to time by the General Partner and
approved by the Limited Partner. Each additional Partner shall comply with
all conditions to being admitted to the Partnership, as set forth in
Paragraphs 7.1 and 7.3.2.
3.4. Partnership Capital. The contributions of the General Partner and
the Limited Partner to the capitalization of the Partnership shall be as
follows:
(a) The Limited Partner shall contribute to Vail Ranch Limited
Partnership all of the land currently owned by OLD VAIL PARTNERS on
behalf of the Limited Partner and identified in Exhibit "A" attached
hereto. The General Partner shall procure and contribute to the
Partnership contract rights with retail operators listed on Exhibit "C"
attached.
(b) The Partners' Capital Accounts shall be established based on
the following allocation of value to assets contributed to the
Partnership by the Partners:
1. The Limited Partner shall be allocated a capital
account of Four Million Six Hundred Eighty-Three Thousand Five
Hundred Seventy-One and 00/100ths Dollars ($4,683,571.00) based
on valuation of the net usable land contributed to the
Partnership. Said amount of land is estimated to be approximately
1,170,892 square feet and to have a value of Four and 00/100ths
Dollars ($4.00) per square foot. Should the actual (ALTA Survey)
square feet be more or less, the Limited Partner contribution
will be adjusted up or down based on the net usable land. The
Limited Partners' capital account will accrue interest
(non-compounded) at the rate of Wall Street's prime rate +1,
beginning at the execution of the Limited Partnership. Interest
will only accrue on 10.0 acres (10.0 acre value - $1,742,400),
which is Phase I of the project. Thereafter, interest will accrue
on the additional acreage as development occurs. For purposes of
calculating accrued interest on future development, development
begins the earlier of: (i) construction loan funding; or (ii)
when concrete pad is poured for additional phase. The dirt
calculation will be on a 5:1 ratio. For example, if 20,000 square
feet of building is being constructed, the corresponding dirt
contribution for accruing interest would be 20,000 x 5, or
100,000 square feet.
2. The General Partner shall be allocated a capital
account of Three Hundred Thousand and 00/100ths Dollars
($300,000.00) as recognition of the value to be contributed from
the contract rights that they have secured from retailers listed
on Exhibit "C". The General Partners' capital account will be
allocated one-third ($100,000) to "PHASE I" (approximately 10
acres located on the eastern portion of the property) and
two-thirds ($200,000) to "PHASE II". The General Partners'
capital account will accrue interest under the same terms as the
Limited Partners' capital account.
3. The Capital Account for the Limited Partner (Phase I)
shall be adjusted downward upon the discharge of encumbrances
against the Property contributed to the Partnership by the
Limited Partner if the Partnership pays off the encumbrances with
the exception of improvement cost for Country Glen and Presley
dirt, which will be a Partnership expense. This property is
presently subject to various liens and assessments for the
periods ending April 1993, December 1993, and April 1994,
including general real estate taxes and assessments, State of
California delinquent taxes for fiscal year 1989-1990, Assessment
Lien and Reimbursement Agreement executed June 22, 1992, with
Presley of San Diego. The Partnership acknowledges that Riverside
County has started a foreclosure proceeding because of the
delinquent tax assessment. The Limited Partner hereby agrees,
within thirty (30) days after the Partnership Agreement is
executed, to cure the County foreclosure proceeding by either
paying in full the delinquent taxes or negotiating a partial
settlement with installment payments. If the Partnership pays off
any encumbrance, the Limited Partner shall be deemed to have
received a distribution of capital equal to the total amount of
such payment upon the discharge of such encumbrances and the
Limited Partner capital account shall be reduced by the amount of
such deemed distributions of capital within thirty (30) days
after the payment of such taxes and assessments. No Partner shall
be paid interest on any Capital Contribution or Capital Account,
except as specifically provided herein. The Partnership shall not
redeem or repurchase any Interest, and no Partner shall have the
right to withdraw, or receive any return of, its Capital
Contribution or Capital Account, except as specifically provided
herein.
3.5. Partnership Funds.
3.5.1 Bank Account. The Partnership shall establish an interest-bearing
bank account administered by the General Partner for the deposit of
Partnership funds. Cash contributed to or borrowed by the Partnership and
cash proceeds from the sale of land owned by the Partnership shall be
deposited in such account. Interest earned thereon shall be distributed to
the Partners not less than four times per calendar year.
3.5.2 Sources of Funds
3.5.2.1 Initial Pre-Development Funds. The initial funds to be used
for the benefit of pre-development expenses are proposed and outlined
on Exhibit "D" which will be revised after development proposals are
reviewed. These pre-development expenses will be funded by the General
Partner and from Partnership funds. Said funds will be deposited into
the Partnership's bank account.
3.5.2.2 Additional Funds. The General Partner contemplates success
in procuring the necessary predevelopment approvals and contracts. Once
pre-development work is completed, it will be necessary for the
Partnership to procure additional capital. This capital will be
obtained as follows:
(a) Pad Sale Proceeds: The Partnership will undertake to sell a
portion of the Partnership Property to certain specified retailers who
are a party to the contracts contributed by the General Partner. These
sale proceeds will remain within the Partnership to be used for
Partnership purposes in creating the shopping center as contemplated by
the parties.
(b) Construction Loan Proceeds:The Partnership will obtain a
construction loan to provide the capital necessary to complete the
improvements contemplated by the parties. The Partnership Property shall
be used as security for the construction loan. The construction loan will
be secured by a deed of trust encumbering all or a portion of the
Partnership Property.
(c) Capital Costs Shortfall: In the event that the construction loan
and proceeds from the sale of portions of the Partnership Property to
retailers are not adequate to cover all of the capital costs necessary
to construct the improvements to be made a part of the contemplated
shopping center (including without limitation all interest,
governmental impositions, and all other costs related to construction
of the shopping center), the General Partner and Limited Partner shall
each have the opportunity, but shall not be required, to contribute the
necessary capital either as equity or debt to the Partnership. The
Partners shall not make unequal equity contributions to the Partnership
without the approval of the General Partner. If all partners do not
contribute an equal additional amount to the Partnership as their
equity contribution, each of the Partners will "squeeze down"
proportionately to accommodate all of the additional equity interests
in the Partnership in the same manner as if such additional equity
financing was provided by new investors. If the General Partner and
Limited Partner do not contribute sufficient additional capital to the
Partnership to meet capital expenditures for the construction of the
project and eliminate any shortfall, then the General Partner will
solicit from the marketplace additional equity investors to provide the
additional capital necessary to complete all of the shopping center
improvements. Such capitalization may occur in phases or in one lump
sum depending on market conditions. To the extent of such equity
financing, each of the Partners of the Partnership shall "squeeze down"
proportionately to accommodate the additional equity interest of the
Persons providing such capital. Such reductions, however, in the
aggregate, shall not exceed twenty-five percent (25%) of the entire
ownership without the Limited Partner and General Partner approval.
(d) Operating Revenues Shortfall Phase I: To the extent the
operating revenues are not adequate to pay all of the operating
expenses and the costs of the third-party debt, the General Partner
shall be responsible for the costs of the operating shortfall. The
General Partner shall be obligated to fund the operating shortfall so
long as it can be demonstrated that the value of the property is
greater than the amount of additional capital being invested. In the
alternative, the General Partner may solicit additional equity
investors. Before the General Partner may solicit outside investors,
the Limited Partner shall first have the opportunity, but shall not be
required, to contribute the necessary capital to the Partnership. Any
such additional capital contribution by the Limited Partner may be made
either as equity or debt as the Limited Partner may determine. If the
Limited Partner elects to contribute additional capital to the
Partnership as equity, the Limited Partner shall realize an increase in
percentage of ownership interest in the Partnership in the same manner
if it was a third party equity investor. To the extent capital is
raised and ownership interest are to be transferred, the parties shall
"squeeze down" proportionately.
(e) Operating Revenue Shortfall Phase II. Should Operating Revenues
not be available to carry Phase II prior to its Development Completion
(defined as 75% of gross leaseable square footage completed with
certificates of completion received), the Limited Partner shall have
the obligation to provide necessary funds. Should the G Limited Partner
be unable to provide the necessary funds, the General Partner will be
obligated to make "best efforts,"-is to provide the necessary funds.
Funds will be attained either through third-party debt or equity. To
the extent of such equity financing, each of the partners of the
Partnership shall "squeeze down" proportionately to accommodate the
additional equity interest of the persons providing such capital. Such
reductions, however, in the aggregate, shall not exceed twenty-five
percent (25%) of the entire ownership without the Limited Partner and
General Partner approval.
Both General Partner and Limited Partner will have reciprocal Buy/Sell Options
on the Phase II property during the Development Completion stage if there are
Operating Shortfalls. The Buy/Sell Option shall be in accordance with Section
7.5.
Upon Phase II Development Completion, the General Partners will have the same
responsibility to handle Operating Revenue Shortfall as 3.5.2.2.(d) above.
3.5.3. Partner Loans. Cash proceeds realized from the sale of
Partnership Property shall be deposited into an interest-bearing account and
shall be deemed "Partnership Cash". As Partnership Cash is withdrawn from the
Partnership's bank account and used for any purpose other than distribution to
Partners, the amount of cash so used shall accrue interest at the rate of Prime
plus one percent (1%) from the date withdrawn. The accrued interest shall be
cumulative but shall not be compounded.
The Partners will accrue interest proportionately from the
Partnership cash used for development and construction costs. The proportionate
share attributed to the Limited Partner will be hereinafter referred to as
"Limited Partner Loan" and the interest that accrues thereon shall be "Preferred
Interest". The proportionate share attributed to the General Partner will be
hereinafter referred to as "General Partner Loan" and the interest that accrues
thereon shall be referred to as "Preferred Interest".
Any cash contributed to the Partnership by the General Partner,
other than proceeds realized from the sale of land, will be referred to as a
"General Partner Cash Loan" and shall be treated as debt of the Partnership on
which interest shall accrue at the annual rate of Prime plus one percent (1%)
payable as set forth in Paragraph 4.1 hereof.
3.6. Liability of Partners
3.6.1 Limited Partners. No Limited Partner shall be liable for
the debts, liabilities, contracts or any other obligations of the Partnership. A
Limited Partner shall be liable only to make its initial Capital Contribution,
and no Limited Partner shall be required to lend any funds to the Partnership
or, after its Capital Contribution has been paid, to make any further Capital
Contribution to the Partnership, except as provided in Paragraph 9.7 of this
Agreement.
3.6.2 Return of Distributions. In accordance with the
requirements of California law, a Limited Partner may, under certain
circumstances, be required to return to the Partnership, for the benefit of
Partnership creditors, amounts previously distributed to it as a return of
capital. It is the intent of the Partners that no distribution to any Limited
Partner of Distributable Cash or of Sale or Financing Proceeds shall be deemed a
return or withdrawal of capital for purposes of this Agreement, even if such
distribution represents, for federal income tax purposes or otherwise (in whole
or in part), a return of capital, and that no Limited Partner shall be obligated
to pay any such amount to or for the account of the Partnership or any creditor
of the Partnerships. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Limited Partner is
obligated to make any such payment, that obligation shall be the obligation of
such Limited Partner and not of the General Partner.
3.6.3 No Personal Liability. The General Partner shall have no
personal liability for repayment to the Limited Partners of their Capital
Contributions, or for repayment to the Partnership of the negative amounts of
such Limited Partners' Capital Accounts, if any.
ARTICLE 4
REVENUES AND DISTRIBUTIONS
4.1 Operating Revenues. Operating revenues shall be derived from rents
and other charges paid by tenants of the shopping center and interest income
from moneys held on deposit. Operating revenues shall be used pursuant to the
following priorities:
(a) Operating Expenses of the Partnership;
(b) Interest on third-party debt, if any;
(c) Preferred Interest on General Partner Cash Loan principal
pursuant to 3.5.3, if operating revenues are available, otherwise,
interest will accrue;
(d) Repayment of General Partner Cash Loan principal pursuant to
3.5.3, if operating revenues are available;
(e) Preferred Interest on General Partner and Limited Partner
Loan prorata (per ownership interest) pursuant to 3.5.3, if operating
revenues are available, otherwise, interest will accrue;
(f) Pay carry cost of Phase II property (Assessment District and
real property taxes). Limited Partners' capital account in Phase I will
be reduced by General Partner proportionate contribution to Phase II.
(g) Repayment of General Partner Loan principal and Limited
Partner Loan principal prorata (per ownership interest), if operating
revenues are available;
(h) Repayment of construction loan/permanent loan if operating
revenues are available;
(i) Return of the Capital Accounts of the Partners prorata (per
ownership interest) until all capital accounts are reduced to zero.
Any distribution of Distributable Cash to the Partners shall be made not
less frequently than annually.
4.2 Distributions of Sale or Financing Proceeds. All cash proceeds from
permanent loan, refinancing, or sale of the Project shall be distributed in
the following priorities:
(a) Cost of Transaction;
(b) Operating Expenses, if not otherwise paid by operating
revenues;
(c) Repayment of third party principal and interest, if any;
(d) Preferred Interest on General Partner Cash Loan Principal;
(e) Repayment of General Partner Cash Loan Principal;
(f) Preferred Interest on any Limited Partner Loans and General
Partner Loans prorata (per ownership interest);
(g) Repayment of Limited Partner Loan principal and General
Partner Loan Principal prorata (per ownership interest);
(h) Return of the Capital Accounts of the Partners prorata (per
ownership interest) until all capital accounts are retired; and
(i) Distribution to the Partners in proportion to their Ownership
Interest in the Partnership.
Such distributions to the Partners shall be made not less
frequently than annually (or, in the case of a Sale of all of the
Partnership Property within thirty (30) days after the closing of such
Sale). Noncash proceeds (i.e. Note, deed of trust) shall continue to be
held as assets of the Partnership with the cash proceeds distributed in
accordance with the above.
ARTICLE 5
ALLOCATIONS OF TAXABLE INCOME AND TAX LOSS
5.1 In General. Taxable Income and Tax Loss of the Partnership shall be
determined and allocated with respect to each fiscal year of the Partnership as
of the end of such year. Subject to the other provisions of this Article 5, an
allocation to a Partner of a share of Taxable Income or Tax Loss shall be
treated as an allocation of the same share of each item of income, gain, credit,
loss and deduction that is taken into account in computing Taxable Income or Tax
Loss.
5.2 Allocation of Operating Income and Loss. Except as provided in
Paragraphs 5.3 and 5.4 of this Agreement, (a) to the extent cash is distributed
during the then current fiscal year, net income for tax purposes shall be
allocated in accordance with actual cash distributions and thereafter net income
shall be allocated in proportion to the Partners' respective ownership interest
in the Partnership; and (b) net losses shall be allocated in proportion to each
Partner's positive capital account balance until all capital accounts reach
zero, and thereafter net losses shall be allocated in proportion to the
Partner's respective ownership Interest in the Partnership.
5.3 Gain and Loss from Sale or Financing.
5.3.1 Gain. Subject to Paragraphs 5.3.2 and 5.3.3, and all
subparagraphs of Paragraph 5.4 of this Agreement, any gain realized
from a Sale or Financing shall be allocated to the Partners in
proportion to their Interests in the Partnership.
5.3.2 Loss. Subject to all subparagraphs of 5.4 of this Agreement,
any loss realized from a sale or Financing shall be allocated to the
Partners in proportion to their Interests in the Partnership.
5.3.3 Recaptured Depreciation. Subject to all subparagraphs of 5.4
(other than Paragraph 5.4.1) of this Agreement, any gain realized from
a Sale or Financing and treated as ordinary income for federal income
tax purposes because attributable to the recapture of any depreciation
("Recaptured Depreciation") shall be allocated to the Partners in the
same ratio as prior allocations to such Partners of Tax Losses or
Taxable Income attributable to Recaptured Depreciation (but only to the
extent of gain otherwise allocable to each partner pursuant to this
Paragraph 5.3).
5.4 Additional Allocation Provisions. Notwithstanding the foregoing
provisions of this Article 5:
5.4.1 Ordinary Income from Sale. Subject to Paragraph 5.3 of this
Agreement, in the event that any Taxable Income to be allocated
hereunder includes income resulting from the sale or disposition of
property that is treated as ordinary income for federal income tax
purposes, then the Taxable Income so treated as ordinary income shall
be allocated to and reported by the Partners in proportion to their
accumulated depreciation or cost recovery allocations. For that
purpose, the Partnership shall keep records of such allocations.
5.4.2 Partner Distribution v. Guaranteed Payment. In the event that
any amount claimed by the Partnership to constitute a deductible
expense in any fiscal year is treated for federal income tax purposes
as a distribution made to a Partner in its capacity as a member of the
Partnership and not a "guaranteed payment" as defined in Section 707(c)
of the Code or a payment to a Partner not acting in his capacity as a
partner under Section 707 (a) of the Code, then the Partner who is
deemed to have received such distribution shall first be allocated an
amount of Partnership gross income equal to such payment, its Capital
Account shall be reduced to reflect the distribution and, for purposes
of this Article 5, Taxable Income and Tax Loss shall be determined
after making the allocation required by this Paragraph 5.4.2.
5.4.3 Income or Loss Allocation to Assignee. For any fiscal year
during which an Interest is assigned by a Partner (or by an assignee or
successor in interest to a Partner), the portion of the Taxable Income
and Tax Loss of the Partnership that is allocable in respect of such
Interest shall be apportioned between the assignor and the assignee of
the Interest on the basis of the number of days during such fiscal year
that each is the owner thereof, without regard to (a) the results of
Partnership operations before or after such assignment, or (b) any
payments or distributions made to the Partners before or after such
assignment, except as otherwise provided in and required by Section
706(d) (2) of the Code.
5.4.4 Cost Recovery Deductions. In the event that the admission of
any Partner causes a reduction in cost recovery deductions allowed with
respect to any Property under Section 168(h) (6) of the Code, then the
General Partner may, in its sole discretion, separately allocate cost
recovery deductions so that (a) the reduction in cost recovery
deductions resulting from the application of Section 168(h) (6) will be
allocated to the Partner whose ownership of Interests caused Section
168(h) (6) to apply, and (b) the cost recovery deductions of the
remaining Partners will, to the extent possible, not be diminished.
5.4.5 Minimum One Percent (1%) Interest. Notwithstanding the
foregoing provisions of this Article 5, the General Partner's interest
in each item of Partnership income, gain, loss, deduction or credit
shall equal at least one percent (1%) of each of those items at all
times during the existence of the Partnership. In determining the
General Partner's interest in those items, no Limited Partner's
interest owned by the General Partner shall be taken into account.
5.4.6 Contributed Property. Notwithstanding the foregoing provisions
of this Article 5, any income, gain, loss and deduction with respect to
property contributed to the Partnership by a Partner shall be shared
among the Partners, pursuant to Treasury Regulations promulgated under
Section 704(c) of the Code, so as to take account of the variation, if
any, between the basis of the property to the Partnership and its fair
market value at the time of contribution.
5.4.7 Minimum Gain Charge-back. In the event that there is a net
decrease in the Partnership Minimum Gain during a Partnership taxable
year, each Partner shall be allocated items of income and gain in
accordance with Section 1.704-1T(b) (4) (iv) (e) of the Temporary
Treasury Regulations and its requirements for a "minimum gain
charge-back."
5.4.8 Code Reallocation Requirements. In the event that the Code or
any Treasury Regulations promulgated thereunder require allocations of
items of income, gain, loss, deduction or credit different from those
set forth in this Agreement, upon the advice of the Partnership's
Accountants, the General Partner is hereby authorized to make new
allocations in reliance upon the Code, the Treasury Regulations and
such advice of the Partnership's Accountants. Such new allocations
shall be deemed to be made pursuant to the fiduciary obligation of the
General Partner to the Partnership and the Limited Partners, and no
such new allocation shall give rise to any claim or cause of action by
any Limited Partner. ARTICLE 6
RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER
6.1 Management of the Partnership.
6.1.1 General Authority. Subject to the consent of the Limited
Partner where required by this Agreement, the General Partner, within the
authority granted to it under this Agreement, shall have the exclusive right and
authority to manage the business of the Partnership and is hereby authorized to
take any action of any kind and to do anything and everything it deems necessary
or appropriate for and on behalf of the Partnership in accordance with the
provisions of this Agreement and applicable law.
6.1.2 Fiduciary Responsibilities. The General Partner shall be
under a fiduciary duty to conduct the affairs of the Partnership in the best
interests of the Partnership and the Limited Partners, including the safekeeping
and use of all partnership funds and assets and the use thereof for the
exclusive benefit of the Partnership. Neither the General Partner nor any
Affiliate of the General Partner shall enter into any transaction with the
Partnership unless the transaction is expressly permitted hereunder or consent
of the Limited Partner thereto is obtained. The General Partner shall not in its
capacity as General Partner receive any salary, fees, commissions, profits,
distributions or allocations, except fees, commissions, profits, distributions
and allocations to which it is entitled under this Agreement or the agreements
entered into pursuant to Paragraph 6.4.1 below.
6.1.3 Reliance Upon General Partner. Except in the case of any
transaction or action prohibited by Paragraph 6.3, any Person dealing with the
Partnership or the General Partner may rely upon a certificate signed by the
General Partner as to its authority to make any undertaking on behalf of the
Partnership, and shall not be required to determine any facts or circumstances
bearing upon the existence of such authority.
6.1.4 Limited Partner Scope. No Limited Partner shall participate
in or have any control over the Partnership business or any authority or right
to act for or bind the Partnership. The Limited Partner hereby consents to the
exercise by the General Partner of the powers conferred on it by this Agreement.
6.2 Authority of the General Partner. Subject to the Limited Partner's
right to consent pursuant to Paragraphs 6.3 and 6.4.3 below and except to the
extent otherwise provided herein, the General Partner, in the name of and on
behalf of the Partnership, is hereby authorized to:
(a) Acquire, through purchase, lease, easement, exchange or
otherwise, any personal property or acquire, through easement, any real
property which may be necessary, convenient or incidental to the
accomplishment of the purposes of the Partnership;
(b) Operate, maintain, develop, improve or cause to have
constructed any real or personal property necessary, convenient or
incidental to the accomplishment of the purposes of the Partnership and
to lease retail space to third parties;
(c) Sell, assign, exchange, grant options to sell, exchange or
otherwise encumber or dispose of all or substantially all of the
Property;
(d) Prepay in whole or in part, refinance, recast, increase,
modify or extend any mortgages affecting any Property or in connection
therewith execute any extensions, modifications or renewals of mortgages
on any Property if the terms, rates and conditions of the proposed
transaction are competitive or customary as then prevailing in the
industry for similar loans and purposes in the same general vicinity as
the Property and the proposed transaction is in the best interests of the
Partnership;
(e) Execute any and all agreements, contracts, documents,
certifications and instruments necessary or convenient in connection with
the acquisition, financing, management, leasing, maintenance, operation,
sale or other disposition of the Property;
(f) Borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Partnership, and secure the same by mortgage, pledge or other lien on any
Property or other assets of the Partnership;
(g) Execute, in furtherance of any or all of the purposes of the
Partnership, any deed, option, lease, mortgage, mortgage note, bill of
sale, contract or other instrument purporting to convey, exchange or
encumber the real or personal property of the Partnership;
(h) Deal with, or otherwise engage in business with, or provide
services to and receive compensation therefore from, any Person who has
provided or may in the future provide services, lend money, sell property
to or purchase property from the General Partner or any Affiliate of the
General Partner. No such dealing, engaging in business or providing of
services may involve any direct or indirect payment by the Partnership of
any rebate or any reciprocal arrangement which would have the effect of
circumventing any restriction set forth herein upon dealings with the
General Partner or any Affiliate of the General Partner;
(i) Employ agents, employees, managers, brokers, accountants, attorneys,
consultants and other Persons necessary or appropriate to accomplish the
purposes of the Partnership, and pay fees, expenses, salaries, wages and other
compensation to such Persons;
(j) Pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend, or compromise, upon such terms as it may determine and upon
such evidence as it may deem sufficient, any debt, obligation, suit, liability,
cause of action, or claim to which an Affiliate of the General Partner is not a
party or is not otherwise involved (unless the Limited Partner's consent thereto
is obtained as contemplated in Paragraph 6.4.3 below), including taxes, either
in favor of or against the Partnership;
(k) Determine the appropriate accounting method or methods to be used
by the Partnership;
(1) Cause the Partnership to make or revoke any of the elections
referred to in Sections 48, 168, 195, 709, 732, 754 or 1017 of the Code, or any
similar provisions enacted in lieu thereof;
(m) Establish and maintain Reserves for such purposes and in such
amounts as it deems appropriate from time to time;
(n) Pay full recourse debts or obligations prior to nonrecourse debts or
obligations so long as such payment is consistent with the General Partner's
fiduciary duties to the Limited Partners;
(o) Amend this Agreement to reflect any change in address, reduction of
Capital Accounts upon the return of capital to partners, or other matters
permitted under the terms of this Agreement;
(p) Procure and maintain such insurance as the General Partner deems
necessary or appropriate for the business in which the Partnership is engaged,
which may include without limitation fire and extended coverage, worker's
compensation, public liability, and General Partners' errors and omissions
insurance; and
(q) Engage in any kind of activity and perform and carry out contracts
of any kind necessary in connection with or incidental to the accomplishment of
the purposes of the Partnership, as may be lawfully carried on or performed by a
partnership under the laws of the State of California and consistent with the
General Partner's fiduciary duties.
6.3 Restrictions on Authority of General Partner. Without the consent of
the Limited Partner, which consent shall not be unreasonably withheld and which
shall be given or denied within five (5) business days after receipt of the
General Partner's request therefore, and, if not so given or denied within such
period, shall be deemed given, the General Partner shall not have the authority
to:
(a) Do any act in contravention of this Agreement;
(b) Do any act which would make it impossible to carry on the
ordinary business of the Partnership;
(c) Confess a judgment against the Partnership;
(d) Possess Partnership property, or assign its rights in
specific Partnership property, for other than a Partnership purpose;
(e) Knowingly perform any act that would subject any Limited
Partner to liability as a General Partner in any jurisdiction;
(f) Sell or otherwise dispose of any of the assets of the
Partnership;
(g) Finance, refinance, mortgage, assign, or otherwise encumber,
modify, or extend any mortgage affecting any of the Property;
(h) Elect to dissolve the Partnership.
6.4 Authority of the Partners to Deal with the Partnership.
6.4.1 Permitted Fees and Agreements. Without limitation upon the
other powers set forth herein, and in addition to the duties or obligations of
the General Partner as General Partner of the Partnership (and, in the case of
the agreements described in subparagraphs (a), (b) and (c) below, subject to
obtaining the consent of the Limited Partner thereto prior to the execution
thereof and to any material amendment thereof), the General Partner is expressly
authorized for, in the name of, and on behalf of the Partnership to:
(a) Receive a Property Development Fee of Two Hundred Forty
Thousand and 00/100ths Dollars ($240,000.00) as consideration for
property development services with respect to the Real Property in
accordance with the separate Development Management Services Agreement in
the form attached hereto as Exhibit "E" subject to the conditions of this
Agreement. The Property Development Fee shall be payable in monthly
installments of Ten Thousand and 00/100ths Dollars ($10,000.00)
commencing upon the execution of this Agreement and continuing thereafter
until paid to One Hundred Twenty Thousand and 00/100ths Dollars
($120,000.00), which is the agreed-upon Property Development Fee for
Phase I (approximately ten [10] acres). The Partners anticipate that the
Partnership's cash flow may from time to time be insufficient to allow
such installments to be paid as scheduled, and to the extent that such
installments are not paid to the General Partner, they shall accrue as an
obligation of the Partnership and be paid once Partnership funds are
available. The General Partner will be paid an additional One Hundred
Twenty Thousand and 00/100ths Dollars ($120,000) for development services
of Phase II, commencing at the beginning of Phase II. Beginning of Phase
II is defined as at least 30,000 square feet of leases executed -or a
combination of leases executed and signed purchase and sale agreements
totaling at least 30,000 square feet. The fee would be paid under the
same structure as Phase I.
(b) Enter into a separate Construction Services Agreement
contract in the form attached as Exhibit "F," with HBD CONSTRUCTION,
INC., an affiliate of the General Partner, as the general contractor and
pay contractor's fees at the rate of six percent (6%) of all hard [direct
and indirect] construction costs [and expenses], and also pay customary
general condition expenses specific to each job for on-site supervision
of construction work, all as provided thereunder, and subject further to
the Limited Partner's right to consent, which consent shall not be
unreasonably delayed or withheld, to any and all change orders in such
contract in excess of Twenty Thousand and 00/100ths Dollars ($20,000.00)
individually and One Hundred Thousand and 00/100ths Dollars ($100,000.00)
in the aggregate, and subject finally to the terms of this Agreement;
(c) Enter into a separate Property Management Agreement in the
form attached hereto as Exhibit "G" with LGD Asset Management as the
initial property manager and pay Property Management Fees as provided
therein. Such Property Management fees shall be a specified monthly fee
or a percentage of the charges billed to anchors, pads, and shops, with
respect to the Property, plus a sum to cover basic management costs
directly attributable to the shopping center;
(d) Reimbursement to the General Partner of administrative
expenses incurred by the General Partner in connection with its
management of the Partnership and its business affairs pursuant to the
provisions of Paragraph 6.5.2; and
(e) Borrow money from the General Partner or any Limited Partner
or any Affiliate under the terms and conditions of Paragraphs 6.4.3(b)
and 6.4.4.
6.4.2 Marketing and Leasing Services. The General Partner shall be
responsible for leasing the project to anchor tenants, pad tenants, and
satellite shop tenants. Atwater Realty is an affiliate company of the General
Partner which has a California brokers license and shall be appointed the
Exclusive Listing Agent for the Partnership. The brokerage agreement shall
provide for the payment of brokerage commissions according to the brokerage
commission schedule set forth in the Marketing Service Agreement attached as
Exhibit "H." No brokerage commission shall be paid by the Partnership, and the
General Partner shall not be entitled to reimbursement from the Partnership nor
any Limited Partner, on any transaction described in paragraph 6.4.1(b) hereof.
The Parties will execute a mutually-agreeable Marketing Services Agreement. The
Marketing Services Agreement shall also give the General Partner the exclusive
right to sell the project after its completion, when and if the Partnership
determines that a sale is in its best interest. The fee is specified in Exhibit
"H," the Marketing Services Agreement.
6.4.3 Prohibitions. Other than as specifically authorized in this
Paragraph 6.4, without the consent of the Limited Partner, the General
Partner shall not enter into any agreements, contracts or arrangements on
behalf of the Partnership with itself or any of its Affiliates, including the
following:
(a) A loan of money to the General Partner or any Affiliate of a
General Partner.
6.4.4 Limitations. Any agreement, contract or arrangement between the
Partnership and the General Partner or any or its Affiliates permitted by
this Paragraph 6.4 shall be subject to the following conditions:
(a) Any such agreement, contract or arrangement shall be embodied
in a written contract which precisely describes the subject matter
thereof and all compensation to be paid therefore. Any fees payable to
the General Partner or any of its Affiliates shall be competitive in
price and terms with those of non-Affiliated Persons rendering comparable
services in the same general locality as the Real Property and which
could reasonably be made available to the Partnership;
(b) No rebates or "give-ups" may be received by the General
Partner or any such Affiliate, nor may the General Partner or any such
Affiliate participate in any reciprocal business arrangement which would
have the effect of circumventing any of the provisions of this Agreement;
and
(c) Such agreements, contracts or arrangements shall be fully and
properly disclosed to all Partners, if not previously disclosed, in one
of the reports provided for in Article 10.
6.5 Payment of Certain Fees and Expenses.
6.5.1 Reimbursement of Limited Partner Expenses. The Limited
Partner shall, upon submission to the General Partner of all evidence reasonably
necessary to document the expenditure, be reimbursed for all out-of-pocket costs
reasonably incurred by the Limited Partner in relocating any signs existing on
the Real Property as of the date hereof which are required to be relocated on
account of development of Real Property by the Partnership. In addition, the
Partners hereby acknowledge that any lighting fixtures located on the Real
Property as of the date hereof which are required to be removed on account of
such development shall become the personal property of the Limited Partner and
shall be delivered to the Limited Partner immediately after the removal thereof.
6.5.2 Reimbursement of Pre-Development and Partnership
Administration Expenses. To the extent practicable, Partnership expenses shall
be billed directly to and paid by the Partnership. Reimbursements to the General
Partner or any of its Affiliates by the Partnership shall be allowed, however,
for (a) the Actual costs paid or incurred prior to the date of this Agreement as
specified in Exhibit "I" attached hereto, and (b) the Actual Cost of Operating
Cash Expenses of the Partnership, including without limitation the Actual Cost
of all expenses, fees and other charges, including without limitation goods,
materials, salary and overhead expenses (only in connection with time spent on
Partnership accounting) and administrative services related to (i) Partnership
operations, (ii) Partnership accounting, including without limitation financial,
accounting and other services such as preparation of financial statements and
tax returns for the Partnership, bookkeeping, and preparation of loan
applications, (iii) communications with Partners, (iv) legal services for both
the General Partner and the Limited Partner, (v) tax services, (vi) computer
services, (vii) risk management, (viii) Partnership organization expenses, and
(ix) such other related operational and administrative expenses as are necessary
for the prudent organization and operation of the Partnership.
6.5.3 Definition of "Actual Cost". As used in Paragraph 6.5.2(b),
the "Actual Cost" of goods and materials means the actual cost or expense to the
General Partner or any of its Affiliates of goods and materials used for or by
the Partnership obtained from entities not affiliated with the General Partner,
and "Actual Cost" of administrative services means the prorata cost of personnel
(as if such persons were employees of the Partnership) providing administrative
services to the Partnership. The amount for such services to be reimbursed to
the General Partner or any Affiliate thereof shall be the lesser of the General
Partner's or Affiliate's Actual Cost, or the amount the Partnership would be
required to pay to independent parties for comparable administrative services in
the same general vicinity as the Real Property. Notwithstanding the foregoing,
the Partnership shall not reimburse the General Partner or any Affiliate for:
(a) Services for which the General Partner or an Affiliate is
entitled to compensation by way of a separate fee under this
Agreement or any exhibit hereto;
(b) Any rent, depreciation, utilities or other administrative
items generally constituting the General Partner's or Affiliate's
overhead; or
(c) Any of the salaries or fringe benefits incurred or allocated
to any Controlling Person of any General Partner or any Affiliate
thereof.
6.5.4 Definition of "Controlling Person". The term "Controlling
Person" shall mean any Person, whatever his or her title, who performs executive
or senior-management functions for the General Partner or its Affiliates similar
to those of directors, executive management and senior management, or any Person
who either holds a five percent (5%) or more equity interest in the General
Partner or its Affiliate, or has the power to direct or cause the direction of
the General Partner or its Affiliates, whether through the ownership of voting
securities, by contract or otherwise, or, in the absence of a specific role or
title, any Person having the power to direct or cause the direction of the
management level employees and policies of the General Partner or its
Affiliates. It is not intended that every Person who carries a title such as
vice president, senior vice president, secretary or treasurer be included in the
definition of Controlling Person.
6.6 Duties and Obligations of General Partner.
6.6.1 In General. The General Partner shall take all actions
which may be necessary or appropriate (a) for the continuation of the
Partnership's existence as a Limited Partnership under the laws of the State of
California (and under the laws of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Limited Partners
or to enable the Partnership to conduct the business in which it is engaged),
and (b) for the acquisition, development, maintenance, preservation and
operation of the Property in accordance with the provisions of this Agreement
and applicable laws and regulations. the ultimate responsibility for property
development, construction, leasing, and management services as well as the
day-to-day services in connection with such responsibilities are obligations of
the General Partner.
6.6.2 Development of Partnership Property. The General Partner
shall be responsible for the construction of the shopping center including all
on-site and off-site improvements, buildings, and tenant improvements. The
General Partner will immediately assume the development responsibilities as will
be defined in the Development Services Agreement between the Partnership and the
General Partner. It shall be the responsibility of the General Partner to manage
the coordination and supervision of the design, development, construction
permitting, financing, marketing, leasing and operations of the contemplated
shopping center. The responsibility will include the production of financial
statements and operational reports. This work shall be more precisely described
in separate written agreements between the Partnership and affiliated operating
entities of the General Partner. Upon completion of the shopping center, the
General Partner shall be responsible for managing the shopping center.
6.6.3 Time Devoted to Partnership. The General Partner shall
devote to the Partnership only such time as may be reasonably necessary for the
proper performance of its duties hereunder, but the officers and directors of
the General Partner shall not be required to devote their full time to the
performance of such duties.
6.6.4 Federal Net Worth Requirements. To the extent applicable,
the General Partner shall use its best efforts to maintain its net worth at all
times at a level sufficient to meet all requirements of the Code and currently
applicable regulations, rulings, and revenue procedures of the Internal Revenue
Service, and to meet any future requirements set by the United States Congress,
the Internal Revenue Service, any agency of the federal government or the
courts, in order to assure that the Partnership will be classified for federal
income tax purposes as a partnership and not as an association taxable as a
corporation.
6.6.5 Doing Business Requirements. The General Partner shall take
such action as may be reasonably necessary or appropriate in order to form or
qualify the Partnership under the laws of any jurisdiction in which the
Partnership does business or in which such formation or qualification is
reasonably necessary in order to protect the limited liability of the Limited
Partners or in order to continue in effect such formation or qualification. The
General Partner shall file or cause to be filed for recordation in the office of
the appropriate authorities of the State of California, or any of its political
subdivisions, and in each other jurisdiction in which the Partnership is formed
or qualified, such certificates (including Limited Partnership and fictitious
name certificates) and other documents as are required by the statutes rules or
regulations of such jurisdictions.
6.6.6 Non-Recourse Permanent Financing. To the maximum extent
practicable and except for the Limited Partner's existing financing on the
Property, the General Partner shall at all times conduct its affairs and the
affairs of the Partnership and its Affiliates in such a manner that neither the
Partnership nor any Partner nor any Affiliate of any Partner will have any
personal liability under any mortgage on any Property, unless in the opinion of
the General Partner it would be in the best interests of the Limited Partner,
the Partnership and/or the General Partner to incur such personal liability.
Notwithstanding the foregoing, the Partnership, the General Partner and/or any
Affiliate of the General Partner may incur personal liability under any mortgage
securing a construction loan or loans for the purpose of constructing
improvements on the Real Property.
6.6.7 Tax Returns. The General Partner shall prepare or cause to
be prepared and shall file on or before the due date (or any extension thereof)
any federal, state, and local tax returns required to be filed by the
Partnership. The General Partner shall cause the Partnership to pay any taxes
payable by the Partnership.
6.6.8 Insurance. The General Partner shall obtain and keep in
force, or cause to be obtained and kept in force, if necessary or appropriate,
during the term hereof, fire and extended coverage, worker's compensation and
public liability insurance in favor of the Partnership, with such insurers and
in such amounts as the General Partner shall deem advisable, but in amounts not
less than (and with deductible amounts not greater than) those customarily
maintained with respect to properties comparable to the Property.
6.7 Other Business Activities and Competition. Any Partner may engage
independently or with others in other business ventures of every nature and
description, including without limitation the ownership of other properties and
the making or management of other investments. Nothing in this Agreement shall
be deemed to prohibit the General Partner or any Affiliate of the General
Partner from dealing, or otherwise engaging in business with, Persons
transacting business with the Partnership, or from providing services related to
the purchase, sale, financing, management, development, or operation of real or
personal property and receiving compensation therefor, not involving any rebate
or reciprocal arrangement which would have the effect of circumventing any
restriction set forth herein upon dealings with the General Partner or any
Affiliate of the General Partner. Neither the Partnership nor any Partner shall
have any right by virtue of this Agreement or the Partnership relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper.
6.8 Limitation on Liability of General Partner: Indemnification. The
General Partner shall not be liable, responsible, or accountable in damages or
otherwise to any Limited Partner for any act or omission performed or omitted by
it in good faith pursuant to the authority granted to it by this Agreement in a
manner reasonably believed by it to be within the scope of the authority granted
to it by this Agreement and not opposed to the best interests of the Partnership
or the Limited Partner; provided, however, that the General Partner shall not be
relieved of liability with respect to any claim, issue, or matter as to which it
or any Affiliate shall have been adjudged to be liable for gross negligence,
fraud, or bad faith in the performance of its fiduciary duty to the Limited
Partners. Except in the case of any such judgment of liability, the Partnership
shall indemnify the General Partner against any loss or damage incurred by it in
connection with any such act or omission performed by it in good faith pursuant
to the authority granted to it in this Agreement in a manner reasonably believed
by it to be within the scope of such authority and not opposed to the best
interests of the Partnership or the Limited Partner, and against expenses
(including attorneys' fees) actually and reasonably incurred by it in connection
with the defense or settlement of any threatened, pending or completed action or
suit by any Person in connection with any such act or omission. The satisfaction
of any obligation to indemnify and hold the General Partner harmless shall be
from and limited to Partnership assets, and no Partner shall have any personal
liability on account thereof.
ARTICLE 7
TRANSFERS OF PARTNERS' INTEREST
ADMISSION OF SUBSTITUTED OR ADDITIONAL PARTNERS
7.1 Restrictions on Transfer. Each Partner shall be able to transfer its
interest in Partnership profits and losses on the terms and subject to the
conditions specifically authorized herein. Otherwise, no Partner may sell,
transfer, pledge, hypothecate, encumber, or otherwise assign or dispose of
("Transfer") all or any portion of its Interest in the Partnership without the
prior written consent of the other Partner, which consent may be withheld for
any reason, including but not limited to the reasons or failure of any
conditions set forth in Paragraph 7.3.2. Any attempted Transfer in contravention
of the provisions of this Article 7 shall be void and without any force or
effect, and shall constitute a material breach of this Agreement. In addition to
all other rights and remedies at law and in equity, in the event of any such
attempted Transfer, the other Partner shall be entitled to an order or decree
restraining and enjoining such action, and the violating Partner shall not plead
in defense thereto that there would be an adequate remedy at law, it being
expressly hereby acknowledged and agreed that damages at law would be an
inadequate remedy for any such breach. Without limiting the generality of the
foregoing restriction, no Partner shall make any commitment to Transfer any
portion of its Interest to any Person not then a Partner or an Affiliate of a
Partner at any time (i) prior to Ralph's completing the construction of its
building on the Property, or (ii) after the delivery of a Buy-Out Notice (as
defined in Paragraph 7.5.1) pursuant to which buy-out procedures under that
Paragraph 7.5 are then pending. Notwithstanding the foregoing restrictions or
anything to the contrary in this Agreement, the Limited Partner may, without the
prior written consent of the General Partner, assign its partnership interest in
distribution of proceeds (and not its Interest) in the Partnership in accordance
with the provisions of California Corporations Code Section 15672; and the
General Partner may transfer no more than fifty percent (50%) of its Interest to
an Affiliate or any non-Affiliate without prior consent of the Limited Partner.
It is understood and agreed that it is the desire of RCSA Holdings,
Inc., General Partner of Old Vail Partners, to be bought out of its interest at
the earliest time possible. It is estimated and targeted that this would occur
between 12 and 18 months after the start of each phase of the development.
Further, all parties will give their best effort to accomplish this buy-out
within the time frames estimated, or as soon thereafter as possible. RCSA
Holdings, Inc. would be agreeable, subject to approval of terms, conditions and
price, to being bought out of the entire development at one time rather than
over the phased development.
7.2 Right of First Refusal.
(a) Provided that the Property has been improved with a building
for use by Ralph's, if a Partner (the "Selling Partner") receives a bona fide
arms-length, irrevocable written offer satisfactory to the Selling Partner from
a Person not then a Partner or Affiliate offering to purchase all of the Selling
Partner's Interest, the Selling Partner shall, prior to the acceptance of that
offer, give written notice (the "First Refusal Notice") to the other Partner
(the "Receiving Partner") setting forth the identity of the proposed transferee,
the amount and terms of the offer, and the Selling Partner's willingness to
accept such offer, together with true and correct copies of the offer and all
other documents pertaining thereto. The Selling Partner shall disclose in the
First Refusal Notice to its best knowledge all liabilities and potential
liabilities of the Partnership of which the Selling Partner has actual
knowledge. Within five (5) days after receipt of the First Refusal Notice, the
Receiving Partner shall disclose in writing to the Selling Partner any
additional liabilities or potential liabilities of the Partnership of which the
Receiving Partner has actual knowledge which are not set forth in the First
Refusal Notice. Each Partner shall represent in such written disclosure that the
disclosures therein are true, correct and complete. Such representations shall
survive both the closing described in this Paragraph 7.2 and the termination or
dissolution of the Partnership. The Receiving Partner may, by written notice
given within fifteen (15) business days after receipt of the First Refusal
Notice, exercise its right to purchase the Selling Partner's Interest on the
same terms contained in the First Refusal Notice; provided, however, that the
closing of such sale (i) shall occur no earlier than ninety (90) days after the
Receiving Partner's exercise of the right to purchase or such later date as is
specified in the First Refusal Notice, and (ii) shall take place at the offices
of the Receiving Partner's legal counsel. If, at or prior to the closing, either
Partner discovers a liability or potential liability (other than third party
tort claims) which is not disclosed or required to be disclosed pursuant to this
Paragraph 7.2 ("Undisclosed Liability"), then (A) if the Receiving Partner so
elects, the Partners shall proceed with the closing of the purchase and sale at
the price established in the First Refusal Notice, or (B) if the Receiving
Partner does not elect to proceed under (A) above, upon agreement of the
Partners the closing of the purchase and sale shall proceed at a purchase price
adjusted to reflect the Undisclosed Liability. If the Receiving Partner does not
elect to purchase the Selling Partner's Interest, then, subject to any consent
required by Paragraph 7.1 or 7.3.2, such Interest may be sold to the outside
third party on terms no more favorable to the transferee than previously offered
to the Receiving Partner as set out in the First Refusal Notice. After any such
sale, or after ninety (90) days from the expiration of said fifteen (15)
business day exercise period without the Receiving Partner having exercised its
rights to purchase under this Paragraph 7.2, the Selling Partner's Interest
shall again become subject to the foregoing right of first refusal. This right
of first refusal is in addition to, and is not a limitation upon, any other
right to consent or withhold consent to a proposed Transfer pursuant to this
Agreement, and shall remain in full force and effect with respect to successive
assignees of Interests hereunder to the same extent and in the same manner as
such right was applicable to any predecessor Partner.
(b) At any closing held pursuant to subparagraph 7.2(a) above
where the Selling Partner's interest is transferred to the Receiving
Partner, the Selling Partner shall deliver to the Receiving Partner a
legally enforceable assignment of Partnership Interest in form approved
by the Receiving Partner prior to the closing, including provisions by
which (i) the Selling Partner agrees to indemnify and hold the Receiving
Partner harmless from and against any and all liability or a loss of
value arising or accruing, with respect to the Partnership Interest sold,
as a result of any liability or potential liability of the Partnership
which was materially understated or should have been but was not
disclosed by the Selling Partner in accordance with subparagraph 7.2(a)
above; (ii) the Receiving Partner agrees to indemnify the Selling Partner
for any and all liability or loss of value arising or accruing, with
resect to the Partnership Interest sold, as a result of liabilities or
potential liabilities which were materially overstated by the Receiving
Partner in its disclosure pursuant to subparagraph 7.2(a) above; and
(iii) the General Partner agrees to indemnify and hold the Limited
Partner harmless from and against any and all liability or loss of value
arising or accruing as a result of actions taken by the General Partner
without the consent of the Limited Partner after the date of delivery of
the First Refusal Notice where such consent was required to be otherwise
obtained pursuant to this Agreement. Except for this indemnity, from and
after the closing, the Selling Partner shall have no further interest in
the assets or Profits of the Partnership.
7.3 Assignees and Substituted Partners.
7.3.1 Transfer to Affiliates. Without the consent of any other
Partner, and notwithstanding the provisions of Paragraph 7.1, a General Partner
or Limited Partner after thirty (30) days' prior written notice to the
Partnership and each other Partner, may Transfer all (but not a portion) of its
Interest in the Partnership to an Affiliate. The General Partner is hereby
permitted to assign its General Partner interest to a partnership which Chris
Smith and C. Samuel Marasco are the managing General Partners.
7.3.2 Transfer Requirements. The Partnership need not recognize for
any purpose any Transfer of all or any portion of the Interest of a
Partner, and the assignee shall not become an Additional or Substituted
Partner, unless:
(a) There shall have been filed with the Partnership a duly
executed counterpart of the instrument making such Transfer, together
with all appropriate consents thereto from the General Partner or
otherwise required under this Agreement or other agreements to which the
Partnership is a party or by which any Partnership Property is bound;
(b) Such Transfer would not constitute a breach or default
thereunder or under any agreement between the Partnership and any
third party;
(c) Such Transfer, when considered with all other Transfers of
Interests in the Partnership within the previous 12 months, would not
result in the Partnership's being considered to have been terminated
within the meaning of Section 708 of the Code; unless the transferring
Partner indemnifies the other Partner to its reasonable satisfaction from
and against all incremental tax liabilities resulting from such Transfer;
(d) Such Transfer shall not violate any applicable federal or
state securities laws (including any investor suitability
standards);
(e) The transferee shall assume and agree to be bound by and to
perform all applicable obligations under this Agreement; provided, that
no such assignment and assumption shall relieve any transferring Partner
of its obligations or liabilities under such agreements and instruments
existing prior to the Transfer except with written consent of the other
Partner not a party to the Transfer;
(f) The parties to any such Transfer shall have executed and
acknowledged an amendment to this Agreement and other applicable
documents as the Partnership may deem necessary or appropriate to
recognize such Transfer and substitution and to set forth the name,
address, Capital Contribution, and Interest of the Partner to be
admitted; and
(g) The transferring Partner or any additional Partner shall have
paid a transfer fee sufficient to cover all reasonable legal or
accounting fees, filing costs, and other expenses incurred by the
Partnership or any other Partner in connection with documenting any such
Transfer or accommodating the transferring Partner or additional
Partner's extraordinary requests in connection with such Transfer.
7.3.3 Incapacity of Limited Partner. Subject to all provisions
contained in Article 9 below, in the event of any Incapacity of a Limited
Partner, then its executor, administrator, trustee, committee, guardian,
conservator, or receiver, as the case may be, shall have all rights of a Limited
Partner for the purpose of settling or managing its estate, and such power as
the decedent, bankrupt, or incompetent possessed to assign or otherwise deal
with all or any part of its Interest.
7.3.4 Status of Assignor. Any Limited Partner who assigns all of
its Interest in the Partnership shall cease to be a Limited Partner of the
Partnership, except that unless and until a Substituted Limited Partner is
admitted in its stead, such assigning Limited Partner shall retain the statutory
rights and obligations of an assignor of a Limited Partnership interest under
the Act.
7.3.5 Status of Assignee. Subject to all provisions contained in
this Agreement, the rights of an assignee of an Interest who does not become a
Substituted Limited Partner shall be limited to the receipt of its share of
Distributable Cash, Sale or Financing Proceeds, Taxable Income, and Tax Loss as
determined under this Agreement. Such assignee who desires to make a further
Transfer shall be subject to all of the provisions of this Article 7 to the same
extent and in the same manner as any predecessor Limited Partner desiring to
make a Transfer of its Interest.
7.4 Joint Ownership of Interests. Subject to the other provisions of
this Agreement, an Interest may be acquired by two or more individuals, who
shall, at the time they acquire such Interest, indicate to the Partnership
whether the Interest is being held by them as joint tenants with the right of
survivorship or as tenants-in-common. In the absence of any such designation,
they shall be presumed to hold such Interest as tenants-in-common. Any action or
vote with respect to a jointly held Interest shall require the action or vote of
all of the owners of such Interest. Upon the death of the owner of an Interest
held in joint tenancy with the right of survivorship, the Interest shall become
owned solely by the survivor or jointly by the survivors as a Limited Partner
and not as an assignee. The Partnership need not recognize the death of one of
the owners of a jointly-held Interest until it shall have received Notice of
such death. Upon written notice to the General Partner from both owners of a
jointly-held Interest and the submission of such documentation as may be
required, the General Partner shall cause the Interest to be divided into two or
more Interests, which shall thereafter be owned separately by each of the former
owners.
7.5 Reciprocal Buy-Sell Option.
7.5.1 Buy-Sell Offer. Provided that Phase I and Phase II are
substantially (75%) improved with buildings, either Partner (the "Offering
Partner") at any time, so long as such Partner is not in default on any
obligation to be performed hereunder, may implement the buy-sell procedures set
forth in this Paragraph 7.5 by such Partner giving a written notice (the
"Initial Notice") to the other Partner (the "Receiving Partner") of the Offering
Partner's election to implement these buy-sell procedures. The Offering Partner
shall give a copy of the Initial Notice to the Partnership's accountants and
shall include therein the Offering Partner's opinion of the gross value of the
Partnership Property ("Stated Value"), with a request that such accountants make
a written determination with twenty (20) days of the total amount that would be
distributed to the offering Partner (the "Offering Partner Value") and the total
amount that would be distributed to the Receiving Partner (the "Receiving
Partner Value"), both in accordance with this Agreement, if the Property were
sold for the Stated Value as of the date of the Initial Notice to the
accountants and all of the liabilities of the Property and the Partnership were
paid prior to distribution of any Distributable Cash. Each respective Partner
shall disclose in writing to the accountants and the other Partner, to its best
knowledge, all liabilities and potential liabilities of the Partnership of which
that Partner has actual knowledge (the "Liability Notice"), either (i) with the
Initial Notice if that Partner is the offering Partner, or (ii) within five (5)
days after receipt of the Initial Notice if that Partner is the Receiving
Partner, as the case may be.
Each Partner shall represent that such disclosures therein are true,
correct and complete. Such representations shall survive both the closing as
described in Paragraph 7.5.3 and any termination or dissolution of the
Partnership. Within fifteen (15) days following receipt by the Offering Partner
of the accountants' determination, the Offering Partner shall deliver to the
Receiving Partner (the date of such delivery being the "Effective Date of
Buy-Out Notice") a written irrevocable offer ("Buy-Out Notice") to do either of
the following, at the Receiving Partner's election: (i) purchase the entire
Interest of the Receiving Partner at the Receiving Partner Value, or (ii) sell
the entire Interest of the Offering Partner to the Receiving Partner at the
Offering Partner Value. Such Buy-Out Notice shall set forth the Stated Value and
shall contain the accountants' determination of the offering Partner Value and
the Receiving Partner Value.
7.5.2 Buy/Sell Acceptance. From the date the Buy-Out Notice is given,
the Receiving Partner shall have thirty (30) days in which to notify the
Offering Partner in writing of the Receiving Partner's election to either
purchase the Offering Partner's Interest at the offering Partner Value, or to
sell its own Partnership Interest at the Receiving Partner Value. Failure of the
Receiving Partner to give such a Notice of acceptance to the Offering Partner
within such thirty (30) day period shall be deemed to be an acceptance of the
Offering Partner's offer to purchase the Receiving Partner's Interest. Following
the date of delivery of the Buy-Out Notice, the General Partner shall not enter
into any contracts or other agreements or take or fail to take any other action
which could materially and adversely affect the value of the Partnership's
assets or materially increase or decrease the liabilities of the Partnership
without the express written consent of the Limited Partner (unless the General
Partner becomes the buying Partner under this Article). If the Receiving Partner
determines to purchase the Offering Partner's Interest, the Receiving Partner
shall have up to but not more than sixty (60) days from its receipt of the
Buy-Out Notice (including any escrow period) within which Receiving Partner must
purchase the Interest of the Offering Partner. If the Receiving Partner
determines to sell its Partnership Interest, the Offering Partner may designate
a closing of such sale at any time up to sixty (60) days after delivery of the
Buy-Out Notice, at which time the offering Partner shall purchase the Receiving
Partner's Interest at the Receiving Partner Value. If at or prior to the
closing, either Partner discovers a liability or potential liability (other than
third party tort claims) which was not disclosed or required to be disclosed
pursuant to Paragraph 7.5.1 above ("Undisclosed Liability"), then
(i) if the buying Partner so elects, the Partners shall proceed
with the closing of the purchase and sale at the price established in the
Buy-Out Notice;
(ii) if the buying Partner does not elect to proceed under (i)
above, upon agreement of the Partners, the closing of the purchase and
sale shall proceed at a purchase price adjusted to reflect the
Undisclosed Liability; or
(iii) all actions previously taken and notices previously given
pursuant to this Article shall be void and the buy-sell options set forth
herein may only be exercised by either Partner again implementing the
buy-sell procedures set forth in Paragraph 7.5.1 above.
7.5.3 Closing Procedures. The purchase and sale shall be for cash at
the closing, to be held at the offices of the Partnership or the attorneys
for the purchasing Partner or at another mutually acceptable place. Costs
of the transaction,
including recording fees, escrow and title costs, if any, and other fees (but
not attorneys' fees for the parties), shall be divided equally between the
Partners. At the closing, the selling Partner shall transfer to the buying
Partner the entire Partnership Interest of the selling Partner, free and clear
of all liens, security interests, and other competing claims (the "Encumbrances"
which may then encumber the Interest being transferred and which are not
approved by the buying Partner. The selling Partner shall indemnify and hold the
buying Partner harmless from and against any such encumbrances against the
Interest being sold. Subject to Paragraph 7.5.4 below, from and after the
closing, the selling Partner shall have no further interest in the assets or
profits of the Partnership and shall not be responsible for any of its losses
(except uninsured third party tort claims arising out of incidents which
occurred prior to the closing), and all obligations of the Partnership to the
selling Partner (including but not limited to all capital accounts, loans,
advances and obligations of the selling Partner under any project financing, and
all obligations of the selling Partner to the buying Partner) shall be deemed
satisfied and discharged in full. The foregoing obligation to remove
Encumbrances against a Partnership Interest shall not extend to Encumbrances
against any Property owned by the Partnership, except that the Partners shall
cooperate in seeking to obtain a release of the selling Partner by all project
lenders.
7.5.4 Indemnity Regarding Undisclosed Liabilities and
Indebtedness. At the closing held pursuant to Paragraph 7.5.3 above, the selling
Partner shall deliver to the buying Partner a legally enforceable assignment of
Partnership Interest in form approved by the buying Partner prior to the
closing, including provisions by which (i) the selling Partner agrees to
indemnify and hold the buying Partner harmless from and against any and all
liability of loss of value arising or accruing, with respect to the Partnership
Interest sold, as a result of any liability or potential liability of the
Partnership which was materially understated or should have been but was not
disclosed by the selling Partner in accordance with this Paragraph 7.5; (ii) the
buying Partner agrees to indemnify the selling Partner for any and all liability
or loss of value arising or accruing, with respect to the Partnership Interest
sold, as a result of liability or potential liabilities which were materially
overstated by the buying Partner in its disclosure pursuant to this Paragraph
7.5; and (iii) the General Partner agrees to indemnify and hold the Limited
Partner harmless from and against any and all liability or loss of value arising
or accruing as a result of actions taken by the General Partner, without the
consent of the Limited Partner, after the date of delivery of the Buy-Out Notice
where such consent was required to be obtained pursuant to that Paragraph 7.5.
Except for such indemnity, from and after the Closing, the selling Partner shall
have no further interest in the assets of profits of the Partnership.
7.6 Distribution of Proceeds on Sale. In the event of a sale or other
Transfer (whether voluntary or involuntary) by the Partnership of all or part of
the Property (whether held in the name of the Partnership or any partner), the
proceeds therefrom shall be distributed in accordance with the order of priority
set forth in subparagraph 9.8.1(a) below, with the balance thereon being
distributed to the Partners within thirty (30) day after the closing of such
Sale.
7.7 Section 754 Elections. In the event of a Transfer of all or any part
of the Interest of a Limited Partner, the General Partner, in its sole
discretion, may make an election to adjust the basis of the Partnership's assets
pursuant to Section 754 of the Code.
ARTICLE 8
CHANGE IN GENERAL PARTNERS
8.1 Admission of Successor or Additional General Partners.
8.1.1 Succession. With such consent of the Limited Partner as may
be then required under Paragraph 7.1 or under the Act for the admission of a
General Partner, the General Partner may at any time designate one or more
Persons to be its successor or to be an additional General Partner, in each case
with such participation in the General Partner's Interest as it and such
successor(s) or additional General Partner(s) may determine; provided, that the
Interest of any other Partner shall not be affected thereby. Each such designee
shall become a successor or additional General Partner upon satisfying the
conditions of Paragraph 7.3 of this Agreement.
8.1.2 Voluntary Withdrawal. Except in connection with a Transfer
to a successor or additional General Partner pursuant to Paragraph 8.1.1 of this
Agreement (other than an assignment to an Affiliate pursuant to Paragraph 7.1),
the General Partner shall have no right to retire or withdraw voluntarily from
the Partnership, or to Transfer its Interest, without the written consent of the
Limited Partner, except that it may cause to be admitted to the Partnership as
an additional General Partner or Partners, or substitute in its stead as the
General Partner, any entity which has, by merger, consolidation, or otherwise,
acquired substantially all of its assets or stock and continued its business;
provided, that the Interest of any other Partner shall not be affected thereby.
Each such successor or additional General Partner shall be admitted as such to
the Partnership upon satisfying the conditions of Paragraph 7.3.2 of this
Agreement.
8.1.3 Replacement. Any voluntary withdrawal by the General Partner from
the Partnership, or any Transfer by the General Partner of its Interest, shall
be effective only upon the admission in accordance with Paragraph 8.1.1 or 8.1.2
of this Agreement of a successor or additional General Partner, as the case may
be.
8.2 Incapacity of General Partner.
8.2.1 Termination of Interest. Upon the Incapacity of a General
Partner, such Partner shall immediately cease to be a General Partner and its
Interest in the Partnership shall terminate; provided, however, that such
termination shall not affect any rights or liabilities of such General Partner
which accrued prior to such Incapacity (or accrued thereafter but were caused by
actions taken by the General Partner prior to such Incapacity), or the value, if
any, at the time of such Incapacity of the Interest of such General Partner.
8.2.2 Continuation of Business. In the event of the retirement
(including the withdrawal of a General Partner in accordance with Paragraph 8.1
of this Agreement) or Incapacity of the General Partner, the business of the
Partnership shall be continued (a) by any remaining General Partner or Partners
if the retiring General Partner or the General Partner to which the Incapacity
relates is not then the sole General Partner, or (b) upon the vote of the
Limited Partner within sixty (60) days, after the date of such retirement or
Incapacity, to continue the business of the Partnership and to admit one or more
successor General Partners.
8.2.3 Acts of Continuation. At the time of any Incapacity of a
General Partner or as soon thereafter as feasible, the remaining or newly
elected General Partner or Partners shall continue the business of the
Partnership and shall (a) give Notice to the Limited Partner of such event, and
(b) make such amendments to this Agreement and execute and file for recordation
such amendments and other documents as are necessary to reflect the termination
of the Interest and ceasing to function of the General Partner having such
Incapacity.
8.3 Liability of a Withdrawn General Partner. Any General Partner who
voluntarily or involuntarily for any reason (including Incapacity) withdraws
from the Partnership or Transfers its Interest, shall be and remain liable for
all obligations and liabilities incurred by it or resulting from its actions as
a General Partner prior to the time that such withdrawal or transfer becomes
effective as provided in Paragraph 8.1 above, but it shall be free of any
obligation or liability as a General Partner incurred on account of the
activities of the Partnership from and after the time that such withdrawal or
Transfer becomes effective.
ARTICLE 9
DEFAULT AND DISSOLUTION
9.1 Events of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") hereunder:
(a) Any Transfer or attempted Transfer by a Partner of its Interest,
except as may be permitted under this Agreement;
(b) A general assignment by any Partner for the benefit of
creditors, or the calling of a general meeting of all or substantially
all of the creditors of that Partner;
(c) Default in performance of any other agreement or obligation of
any Partner herein contained if said default continues for a period of
thirty (30) days after Notice of such default from the non-defaulting
Partner or the Partnership, except that an Event of Default shall not
be deemed to have occurred if any such default is of a nature that it
reasonably requires more than thirty (30) days to cure, is capable of
being fully cured within a reasonable time, and the defaulting Partner
is diligently proceeding to cure the default.
9.2 Election of Non-Defaulting Partner. Upon the occurrence of an Event
of Default, the non-defaulting Partner may give Notice to the Partnership and
the defaulting Partner within thirty (30) days after acquiring knowledge of such
Event that it elects to do either of the following:
(a) Terminate and liquidate the Partnership as set forth below; or
(b) Acquire the defaulting Partner's Interest as set forth below.
9.3 Purchase of Interest Upon Default. Upon such election of a Partner to
acquire a defaulting Partner's Interest following an Event of Default, the
non-defaulting Partner may acquire the defaulting Partner's Interest at a price
determined pursuant to Paragraph 9.4.4 and 9.4.5 below.
9.4 Appraisal and Buy-Out Procedures.
9.4.1 First Appraiser. If the non-defaulting Partner elects to
purchase the defaulting Partner's Interest, it shall designate in its Notice of
election a Person to serve as its appraiser, duly qualified as provided in
Paragraph 9.4.3 below (the "First Appraiser"). The Partners may mutually agree
in writing to use only the First Appraiser or another appraiser mutually
appointed by them (a "Single Appraiser").
9.4.2 Additional Appraisers. If within ten (10) days after the
service of the Notice of election and designation referred to above the Partners
have not mutually agreed on a Single Appraiser, the defaulting Partner may give
written Notice to the non-defaulting Partner designating a second Person as its
appraiser (the "Second Appraiser"). If the Second Appraiser is not so designated
within or by the time above specified, then the appointment of the Single
Appraiser shall be binding upon all parties. Either the Single Appraiser or the
First and Second Appraisers so designated or appointed shall, within thirty (30)
days after the Single Appraiser or the Second Appraiser is appointed, as the
case may be, determine the Appraised Value. If, as applicable, within 20 days
after the Second Appraiser is appointed, the First Appraiser and Second
Appraiser do not agree upon the Appraised Value, they shall themselves appoint a
third appraiser (the "Third Appraiser"). In the event that such Appraisers or
such Partners are unable to agree upon such an appointment within said 20-day
period, then either Partner, on behalf of both, may request such appointment by
a California State Superior Court Judge of competent jurisdiction in the
district in which the Property is located. In the event of the failure, refusal
or inability of any appraiser to act, a new appraiser shall be appointed in his
stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of such appraiser. Each Partner will pay the fees
and expenses of the appraiser appointed by such Partner, or in whose stead, as
above provided, such appraiser was appointed. The fees and expenses of the Third
Appraiser, and any other expenses (including the expenses of the Single
Appraiser, if applicable) shall be borne equally by both parties.
9.4.3 Appraiser Qualifications. Any appraiser designated to serve
in accordance with the provisions of this Agreement (i) shall be disinterested
and impartial; (ii) shall be a duly licensed MAI appraiser and a member in good
standing of the American Institute of Real Estate Appraisers (or any successors
association or body of comparable standing if such Institute is not then in
existence), qualified to appraise real estate and other assets of the type
covered by this Agreement; and (iii) shall have been actively engaged in the
appraisal of real estate in the general vicinity of the Real Property for a
period of not less than five (5) years immediately preceding his appointment.
9.4.4 Determination of Appraised Value. The appraiser(s) shall
determine fair market value, as of the applicable Event of Default, of the
Partnership Property as follows: (i) the appraised value shall be determined by
a Single Appraiser, if applicable, or (ii) shall be agreed upon by both
appraisers in the event that two appraisers serve; or (iii) shall be the average
of the appraised values of the two appraisers who are closest together in the
event that three appraisers serve. After reaching a decision, the appraisers
shall give written notice to each Partner and the Accountants of the final value
as determined by them (the "Appraised Value") within fifteen (15) days after
appointment of the Third Appraiser or the mutually agreed upon Single Appraiser,
as the case may be. The Accountants shall, within thirty (30) days after such
notice from the appraiser(s), and based upon a value equal to ninety percent
(90%) of the Appraised Value, determine the value of the defaulting Partner's
Interest after adjusting the value of Partnership assets as follows:
(a) Subtracting the product of liabilities of the Partnership
(including but not limited to any Partnership obligations or indebtedness
attributable to or secured by the Property), multiplied by the defaulting
Partner's Interest;
(b) Subtracting the amount of any third party claims against or
liabilities of the defaulting Partner which are secured by or charged
against the defaulting Partner's Interest;
(c) Subtracting any other amounts owed by the defaulting Partner to
the Partnership or the non-defaulting Partner; and
(d) Adding any amounts owed by the Partnership or the non-defaulting
Partner to the defaulting Partner.
9.4.5 Closing Procedures. After such appraisal, the
non-defaulting Partner shall purchase the defaulting Partner's Interest for a
price equal to the value of the defaulting Partner's Interest as determined by
the appraiser(s) and the Accountants pursuant to Paragraph 9.4.4 above at a
mutually acceptable time, but not later than sixty (60) days after Notice of the
final Appraised Value has been delivered to the Partners. The sale shall be
conducted in accordance with the procedures set forth in Paragraph 7.5.3, with
the non-defaulting Partner being the purchasing party and the defaulting Partner
being the selling party.
9.4.6 Alternate Remedies. If the appraiser(s) fail to reach a
decision within thirty (30) days after the appointment of the Third Appraiser or
the mutually agreed upon Single Appraiser, as the case may be, the
non-defaulting Partner shall have the right to withdraw its election to purchase
the defaulting Partner's Interest pursuant to this Paragraph 9.4 and to dissolve
and liquidate the Partnership by giving the defaulting Partner written notice
thereof within ten (10) days after the end of such thirty (30) day period.
9.4.7 Interim Management. During the period beginning with the Event of
Default and ending with the closing of sale pursuant to this Paragraph 9.4 or
the final liquidation and termination of the Partnership, the business affairs
of the Partnership shall be conducted by the non defaulting Partner so as to
preserve the assets of the Partnership and maintain the status thereof which
existed immediately prior to such dissolution, consistent with reasonably
prudent business practice. If the Limited Partner is the non-defaulting Partner,
it shall not be liable as a General Partner for actions of the General Partner
prior to the commencement of the Limited Partner's management of the affairs of
the Partnership pursuant to this subparagraph, and, if it does not desire to
manage the business of the Partnership as a General Partner, it shall be
entitled to appoint a receiver, at the expense of the Partnership, to manage
such affairs.
9.5 Events of Dissolution. The Partnership shall dissolve upon the
happening of any of the following events:
(a) An Event of Default has occurred as provided above and the
non-defaulting Partner has elected to dissolve as provided in
Paragraph 9.2(a);
(b) The retirement or Incapacity of a sole General Partner,
unless the business of the Partnership is continued as provided in
Paragraph 8.2.2;
(c) The sale or other disposition of all of the interests in and
loans secured by the real Property (including purchase money
security interests) of the Partnership;
(d) The mutual determination by the General Partner and the
Limited Partner to dissolve the Partnership;
(e) The expiration of the term of the Partnership;
(f) The happening of any other event causing the dissolution of
the Partnership under the laws of the State of California.
9.6 Effect of Dissolution. The dissolution of the Partnership shall be
effective on the day on which the event occurs giving rise to the dissolution,
but the Partnership shall not terminate until this Agreement has been canceled
and the assets of the Partnership shall have been distributed as provided in
Paragraph 9.8. Notwithstanding the dissolution of the Partnership, the business
of the Partnership and the affairs of the Partners prior to the termination of
the Partnership shall continue to be governed by this Agreement.
9.7 Capital Contribution upon Dissolution. Each Partner shall look
solely to the assets of the Partnership for all distributions with respect to
the Partnership, any return of its Capital Contribution thereto, its Capital
Account and its share of Taxable Income or Tax Loss, and shall have no recourse
therefor (upon dissolution or otherwise) against any other Partner; provided,
however, that upon the dissolution and termination of the Partnership, each
Partner shall contribute to the Partnership an amount equal to the deficit
balance in its Capital Account. Such contribution shall be made within ten (10)
days of Notice by the General Partner but in no event later than the end of the
Partnership's taxable year (determined without regard to Section 706(c)(2)(A) of
the Code) during which the liquidation of such Partner's Interest occurs (or, if
later, then ninety (90) days after the date of such liquidation). Any amount so
contributed by any Partner shall be distributed first to any creditors of the
Partnership entitled thereto, and the balance to the other Partners in
proportion to their then positive Capital Account balances.
9.8 Liquidation.
9.8.1 Distribution of Proceeds. Upon dissolution of the
Partnership, the General Partner shall liquidate the assets of the Partnership,
and after allocating (pursuant to Article 5 of this Agreement) all income, gain,
credits, losses, and deductions resulting therefrom, shall apply and distribute
the proceeds thereof (a) first, as contemplated by the definition herein of the
term "Sale or Financing Proceeds," one by one, to the payment of the obligations
of the Partnership to third parties (including any obligation of the Partnership
to the General Partner or any Affiliate thereof on account of a loan from such
General Partner or Affiliate to the Partnership), to the expenses of
liquidation, and to the setting up of any Reserves for contingencies which the
General Partner may consider necessary; and (b) then, to the Partners in
proportion to the positive balances in the Partners' respective Capital
Accounts. Any such Reserves shall be released and distributed to the Partners in
proportion to the positive balances in their respective Capital Accounts as soon
as all contingencies have been satisfied or otherwise released.
9.8.2 Deferral of Sale. Notwithstanding Paragraph 9.8.1 of this
Agreement, in the event that the General Partner determines that an immediate
sale of all or any portion of the Partnership's assets would cause undue loss to
the Partners, the General Partner, in order to avoid such loss, may, after
giving Notice to the Limited Partner, to the extent not then prohibited by the
act, either defer liquidation of and withhold from distribution for a reasonable
time any assets of the Partnership except those necessary to satisfy the
Partnership's debts and obligations, or distribute the assets to the Partners in
kind.
9.8.3 Distribution in Kind. If any assets of the Partnership are
to be distributed in kind, such assets shall be distributed on the basis of the
fair market value thereof, and any Partner entitled to any interest in such
assets shall receive an interest therein as a tenant-in common with all other
Partners so entitled. The fair market value of such assets shall be determined
by an independent MAI appraiser to be selected pursuant to Paragraph 9.4. The
Capital Accounts of all Partners shall be adjusted as of the date of
distribution in kind as if the assets were sold on such date for their fair
market value (taking into account Section 7701(g) of the code) and Taxable
income or Tax Loss arising from the sale were allocated in accordance with this
Agreement.
9.8.4 Final Termination. The General Partner shall cause the
cancellation of this Agreement and shall file all applicable notices of
termination following the final liquidation and distribution of all of the
Partnership's assets.
ARTICLE 10
BOOKS AND RECORDS,
ACCOUNTING, REPORTS, TAX ELECTIONS, ETC.
10.1 Books and Records. The books and records of the Partnership shall
be maintained at the principal office of the Partnership and shall be available
for examination there by any Partner or its duly authorized representatives at
any reasonable time. To the extent permitted by law, the General Partner will
permit the Limited Partner and its duly authorized representatives to inspect
and copy such books and records. The Partnership shall maintain such books and
records and provide such financial or other statements as the General Partner in
its sole discretion deems advisable, subject to the requirements of this
Agreement.
10.2 Accounting and Fiscal Year. The Accountants shall prepare or review
all annual financial statements of the Partnership, which statements will be
prepared in accordance with generally accepted accounting principles, and shall
review or prepare for execution by the General Partner all tax returns of the
Partnership. Subject to Section 448 of the Code, the books of the Partnership
shall be kept on such method of accounting for tax and financial reporting
purposes as may be determined by the General Partner. The fiscal year of the
Partnership shall end on December 31 of each year, or on such other date
permitted under the Code as the General Partner may determine.
10.3 Bank Accounts and Deposits. The bank accounts of the Partnership
shall be maintained at such banking institutions as the General Partner shall
determine, and withdrawals shall be made only in the regular course of
Partnership business on such signature or signatures as the General Partner
shall determine. All deposits and other funds not needed in the operation of the
business or not yet invested may be invested in United States government
securities, securities issued or guaranteed by United States government
agencies, securities issued or guaranteed by states or municipalities, savings
and loan association deposits, deposits in members of the Federal Home Loan Bank
System, deposits at a commercial bank or government securities dealer secured by
any of the above, commercial paper, or funds or unit investment trusts investing
in the above. The funds of the Partnership shall not be commingled with the
funds of any other Person.
10.4 Reports. The General Partner shall provide to the Limited Partner a
copy of each financial report prepared for or on behalf of the Partnership
received by the General Partner from the Partnership's independent certified
public accountant, which shall contain a detailed accounting of any expenses
incurred by the Partnership in connection with any arrangement required to be
disclosed pursuant to Paragraph 6.4.4(c) above and shall be prepared and
delivered to the Limited Partner in any event not less frequently than
quarterly. Without limiting the generality of the foregoing, within 120 days
after the end of each fiscal year, the General Partner shall send to each Person
who was a Limited Partner or assignee at any time during the fiscal year then
ended (a) a balance sheet as of the end of such fiscal year, and statements of
income, Partners' equity and changes in financial position for such fiscal year,
all of which shall be prepared in accordance with generally accepted accounting
principles and accompanied by an auditor's report containing an opinion of the
Accountants, (b) a cash flow statement, (c) a report summarizing the fees and
other remuneration and reimbursed expenses for such fiscal year from the
Partnership to the General Partner and each Affiliate of the General Partner,
and (d) a statement with respect to such year showing the Distributable Cash and
Sale or Financing Proceeds distributed to Persons who were Limited Partners or
assignees at any time during such year. In addition, within 75 days after the
end of each calendar year, the General Partner shall send to each Person who was
a Limited Partner or assignee at any time during the fiscal year ending during
such calendar year such tax information as shall be necessary for the
preparation by such Limited Partner or assignee of its federal income tax
return, and required state income and other tax returns with regard to
jurisdictions in which the Partnership is formed or qualified or owns Property.
10.5 Depreciation and Elections. With respect to any depreciable assets
of the Partnership, the Partnership may elect to use, so far as permitted by the
provisions of the Code, any depreciation method which is appropriate in the
opinion of the General Partner. The Partnership may, in the discretion of the
General Partner, make or elect not to make, and may revoke or elect not to
revoke, any election permitted or required to be made by the Partnership for
federal income or state tax purposes.
10.6 Designation of Tax Matters Partner. The General Partner is hereby
designated as the "Tax Matters Partner" of the Partnership under Section
6231(a)(7) of the Code, to manage administrative tax proceedings conducted at
the Partnership level by the Internal Revenue Service with respect to
Partnership matters. Any Partner or assignee may participate in such
administrative proceedings relating to the determination of Partnership items at
the Partnership level, to the extent permitted by the Code. Expenses of such
administrative proceedings undertaken by the Tax Matters Partner shall be paid
from Partnership assets. Each Limited Partner or assignee who elects to
participate in such proceedings shall be responsible for its own expenses
incurred in connection with such participation. The cost of any adjustments to a
Limited Partner or assignee, and the cost of any resulting audits or adjustments
of a Limited Partner's or assignee's tax return, will be borne solely by the
affected Limited Partner or assignee.
ARTICLE 11
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS 11.1 Meetings.
11.1.1 In General. Meetings of the Partners for any purpose, to
be held at the principal office of the Partnership, may be called by the General
Partner on its own initiative, and shall be called by the General Partner on
written request from the Limited Partner. Any such call or request shall state
the purpose of the proposed meeting and the matters proposed to be acted upon
there. In addition, the General Partner may submit any matter (upon which the
Limited Partner is entitled to act) to the Limited Partner for a vote by written
consent without a meeting.
11.1.2 Notice and Procedures. Notice of any meeting shall be
given to each Partner not less than ten (10) days nor more than sixty (60) days
before the date of the meeting. Such Notice shall state the place, date, hour
and purpose of the meeting, and shall indicate that it is being issued at the
direction of the Partner or Partners calling the meeting. If a meeting is
adjourned to another time or place, and if any announcement of the adjournment
of time and place is made at the meeting, it shall not be necessary to give
Notice of the adjourned meeting. The presence in person or by proxy of the
holders of a majority of the outstanding Interests of the Limited Partners shall
constitute a quorum at all such meetings; provided, however, that if there be no
such quorum, the holders of a majority in Interest of the Partners who are
present or represented by proxy may adjourn the meeting from time to time
without further Notice, until a quorum shall have been obtained. No Notice of
the time, place or purpose of any such meeting need be given to any Partner who
attends in person or is represented by proxy (except for a Partner who attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened), or to any Partner entitled to such Notice who, in a writing
executed and filed with the records of the meeting, either before or after the
time thereof, waives such Notice.
11.1.3 Vote Determination Date. For the purpose of determining
the Partners entitled to vote at any meeting of the Partnership or any
adjournment thereof, the General Partner may fix, in advance, a date as the
record date for any such determination. The determination date shall be not more
than 50 days nor less than 7 days before any such meeting.
11.1.4 Proxy. Each Partner other than the General Partner may
authorize any Person to act for it by proxy, whether by waiving Notice of any
meeting, or voting or participating at a meeting. Every proxy must be signed by
the applicable Partner or its attorney-in-fact. No proxy shall be valid after
the expiration of 12 months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the Partner
executing it.
11.1.5 Rules and Officers. At each meeting, the General Partner
shall appoint such officers and adopt such rules for the conduct of such meeting
as the General Partner shall deem appropriate.
11.2 Voting Rights. The Limited Partner shall have the right to vote on:
(a) Those matters specified in Paragraphs 6.3, 6.4.3 and 6.4.4 or
elsewhere in this Agreement; and
(b) Amendments to this Agreement, subject to the provisions
hereof, provided that such amendments (a) shall not allow any
Limited Partner to take part in the management of the Partnership's
business, and (b) shall not, without the consent of the General
Partner, alter the rights, powers or duties of the General Partner
as set forth herein. ARTICLE 12
OTHER PROVISIONS
12.1 Appointment of General Partner as Attorney-in-Fact.
12.1.1 In General. Each Limited Partner, including each
Additional and Substituted Limited Partner, by its execution of this Agreement,
irrevocably constitutes and appoints the General Partner as its true and lawful
attorney-in-fact with full power and authority in its name, place and stead to
execute, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents as may be necessary or appropriate to carry out
the provisions of this Agreement, including but not limited to:
(a) All certificates and other instruments (including
counterparts of this Agreement), and all amendments thereto, which the
General Partner deems appropriate to form, qualify or continue the
Partnership as a Limited Partnership (or a partnership in which the
Limited Partner will have limited liability comparable to that provided
in the Act), in the jurisdictions in which the Partnership may conduct
business or in which such formation, qualification or continuation is,
in the opinion of the General Partner, necessary or desirable to protect
the limited liability of the Limited Partners;
(b) All amendments to this Agreement adopted in accordance with
the terms hereof, and all instruments which the General Partner deems
appropriate to reflect a change or modification of the Partnership in
accordance with the terms of this Agreement; and
(c) All conveyances of Property with a value of Twenty Thousand
and 00/100ths Dollars ($20,000.00) or less in the aggregate.
Nothing in this Section shall, however, authorize the General Partner to
execute amendments to this Agreement as attorney-in-fact for the Limited Partner
other than those amendments which the General Partner is authorized to make
pursuant to Paragraph 6.2 of this Agreement.
12.1.2 Irrevocable. The foregoing appointment of the General Partner as
attorney-in-fact shall be deemed to be a power coupled with an interest, in
recognition of the fact that each of the Partners under this Agreement will be
relying upon the power of the General Partner to act as contemplated by this
Agreement in any filing and other action by it on behalf of the Partnership,
shall survive the bankruptcy, death, adjudication of incompetence or insanity,
other Incapacity, or dissolution of any Person hereby giving such power, and the
transfer or assignment of all or any portion of the Interests of such Person,
and shall not be affected by the subsequent incapacity of the principal,
provided, however, that in the event of the assignment by a Limited Partner of
all of its Interest, the foregoing power of attorney of an assignor Limited
Partner shall survive such assignment only until such time as the assignee shall
have been admitted to the Partnership as a Substituted Limited Partner and all
required documents and instruments shall have been duly executed, filed and
recorded to effect such substitution.
12.2 Representative of Limited Partner. Except as otherwise provided
herein, RCSA Holdings, Inc., General Partner of Old Vail Partners, Harold Elkan,
President, or such other individuals as the Limited Partner may designate by
notifying the General Partner in writing from time to time, shall have the
authority to represent the Limited Partner in its dealings with the General
Partner on all matters relating to the Partnership.
12.3 Amendments.
12.3.1 Admission Transfer or Continuation. Each additional and
Substituted Limited Partner, additional General Partner and successor General
Partner shall become a signatory hereto by signing such number of counterpart
signature pages to this Agreement, a power of attorney to the General Partner,
and such other instruments, in such manner, as the General Partner shall
determine. By so signing, each Additional and Substituted Limited Partner,
additional General Partner or successor General Partner, as the case may be,
shall be deemed to have adopted and to have agreed to be bound by all of the
provisions of this Agreement. If this Agreement is amended as a result of adding
or substituting a Limited Partner or increasing the investment of a Limited
Partner, the amendment to this Agreement shall be sufficient when it is signed
by the General Partner and by the Person to be substituted or added or who is
increasing its investment in the Partnership, and, if a Limited Partner is to be
substituted, by the assigning Limited Partner. If this Agreement is amended to
reflect the designation of an additional General Partner, the amendment to this
Agreement shall be sufficient when it is signed by the other General Partner or
General Partners and by the additional General Partner. If this Agreement is
amended to reflect the withdrawal of a General Partner and if the business of
the Partnership is to be continued, the amendment to this Agreement shall be
sufficient when it is signed by the withdrawing General Partner (and such
General Partner hereby so agrees) and by the remaining or successor General
Partner or General Partners.
12.3.2 Right With Consent: Prohibition. In addition to other
amendments authorized herein, amendments may be made to this Agreement from time
to time by the General Partner with the consent of the Limited Partner;
provided, however, that without the consent of the Partners to be adversely
affected by an amendment, this Agreement may not be amended so as to (a) convert
a Limited Partner's Interest into a General Partner's interest, (b) modify the
limited liability of a Limited Partner, or (c) alter the interest of a Partner
in Taxable Income, Tax Loss, Distributable Cash or Sale or Financing Proceeds.
12.3.3 Rights Without Consent. In addition to other amendments
authorized herein, amendments may be made to this Agreement from time to time by
the General Partner, without the consent of any Limited Partner: (a) to cure any
ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to make any other provisions
with respect to matters or questions arising under this Agreement that are not
inconsistent with the provisions of this Agreement; (b) to delete or add any
provision of this Agreement required to be so deleted or added by any federal or
state official, which addition or deletion is deemed by such official to be for
the benefit or protection of the Limited Partner; and (c) to take such actions
as may be necessary (if any) to insure that the Partnership will be treated as a
partnership, and that each Limited Partner will be treated as a Limited Partner,
for federal income tax purposes. Notwithstanding the foregoing, no amendment
shall be adopted pursuant to this Paragraph 12.2.3 unless the adoption thereof
(i) is for the benefit of or is not adverse to the interests of the Limited
Partner, (ii) does not affect the distribution of Distributable Cash or Sale or
Financing Proceeds or the allocation of Taxable Income or Tax Loss among the
Partners or between the Limited Partners as a class and the General Partner as a
class, and (iii) does not affect the limited liability of the Limited Partner or
the status of the Partnership as a partnership for federal income tax purposes.
12.3.4 Filings. In making any amendments, there shall be prepared
and filed by the General Partner such documents and certificates as may be
required under the Act and under the laws of any other jurisdiction applicable
to the Partnership.
12.4 Security Interest and Right of Set-Off. As security for any
withholding tax or other liability or obligation, to which the Partnership may
be subject as a result of any act or status of any Limited Partner, or to which
the Partnership may become subject with respect to the Interest of any Limited
Partner, the Partnership shall have (and each Limited Partner hereby grants to
the Partnership) a security interest in all Distributable Cash and Sale or
Financing Proceeds distributable to such Limited Partner to the extent of the
amount of such withholding tax or other liability or obligation. The Partnership
shall have a right of set-off against such distributions of Distributable Cash
or Sale or Financing Proceeds, in the amount of such withholding tax or other
liability or obligation.
12.5 Commissions. Each Partner acknowledges, represents, and warrants to
the Partnership and the other Partners that, as of the effective date of this
Agreement, no finder's fee, broker's commission, or similar fee has or will
become payable by such Partner, any Affiliate of such Partner, or the
Partnership as a result of the formation of the Partnership, the contribution of
assets to the Partnership, the operation of the Partnership business, or the
sale or encumbrance of any portion of the Partnership Property. Such
representation and warranty shall survive the termination or dissolution of the
Partnership; and in the event of any such claim, the Partner through whom such
claim is made shall be liable for the cost of any defense, dispute, or payment
and shall indemnify and hold the other Partner harmless therefor.
12.6 Binding Provisions. The covenants and agreements contained herein
shall be binding upon, and inure to the benefit of, the heirs, executors,
administrators, personal representatives, successors and assigns of the
respective parties hereto.
12.7 Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California.
12.8 Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all of the parties have not signed the
same counterpart.
12.9 Severability of Provisions. Each provision of this Agreement shall
be considered severable, and if for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those portions of
this Agreement which are valid.
12.10 Article and Paragraph Titles. Article and Paragraph titles are
for descriptive purposes only and shall not control or alter the meaning of this
Agreement as set forth in the text.
12.11 Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties hereto respecting the matters
generally addressed herein including all matters regarding the Partnership;
there are no representations, agreements, arrangements, or understandings,
verbal or written, between the parties hereto relating to the subject matter of
this Agreement which are not fully expressed herein.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
"General Partner" "Limited Partner"
LANDGRANT CORPORATION, a OLD VAIL PARTNERS, a
California corporation California General Partnership
By: /S/ C. Samuel Marasco By: RCSA HOLDINGS, INC.,
C. Samuel Marasco, President A California corporation
General Partner
By: /S/ Chris Smith By: /S/ Harold S. Elkan
Chris Smith, Vice President Harold S. Elkan, President
By: /S/ Steven R. Whitman
Steven R. Whitman, Asst.
Secretary
By: /S/ Peter Werner Edelmann
Peter Werner Edelmann, a married
Man , holding title as his sole and
Separate property