SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Security Exchange Act of
1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-12
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Units of limited partnership interest
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
1175 West Moana Lane, Suite 200
Reno, Nevada 89509
(775) 825-3355
SOLICITATION OF CONSENT OF LIMITED PARTNERS
Dear Limited Partner:
It is our pleasure to provide you with the enclosed Consent Solicitation
Statement. The Statement contains information relating to the adoption by
Resources Accrued Mortgage Investors 2, L.P. of a Second Amended and Restated
Limited Partnership Agreement that requires the consent of the holders of a
majority of the outstanding units of limited partnership interest in your
partnership. YOUR VOTE IS IMPORTANT.
As you are aware, Resources Accrued Mortgage Investors 2, L.P. was formed
to make and acquire mortgage loans using the proceeds of its initial public
offering conducted in 1988 and, in March 2003, acquired the deed to the
property underlying its last remaining mortgage loan. If the Second Amended
and Restated Limited Partnership Agreement is approved, the partnership, to be
renamed "Biggest Little Investments L.P.," will be able to leverage its
property in an effort to increase the value of its current property, purchase
additional real estate for investment and/or development and make or acquire
additional mortgage loans or short-term loans, as well as reinvest operating
income.
In making your decision, you should carefully review and consider the
information set forth in the Consent Solicitation Statement. You should also
be aware that each of the affiliates of Maxum LLC, the general partner of your
partnership, has indicated that it will vote "YES" on the adoption of the
Second Amended and Restated Limited Partnership Agreement. These affiliates
own 48.2% of the outstanding units of limited partnership of Resources Accrued
Mortgage Investors 2, LP.
As your general partner, we recommend that you vote "YES" on this matter.
Your vote on this matter is very important. Abstentions or failure to
return the enclosed consent form will have the same effect as voting against
adoption of the Amended and Restated Limited Partnership Agreement. Therefore,
you are requested to complete, sign and return the consent form in the enclosed
postage-paid envelope at your earliest convenience and, in any event, by the
expiration date of the consent period which is 12:00 midnight, New York City
time, on October 8, 2003, or such later date and time as we may set.
If you have any questions about the Second Amended and Restated Limited
Partnership Agreement or the consent solicitation statement, please call our
information and solicitation agent, MacKenzie Partners, Inc., at (800) 322-
2885.
Maxum LLC, General Partner
September 5, 2003
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
1175 West Moana Lane
Suite 200
Reno, Nevada 89509
CONSENT SOLICITATION STATEMENT
This Consent Solicitation Statement is being furnished to the limited
partners (the "Limited Partners") of Resources Accrued Mortgage Investors 2,
L.P., a Delaware limited partnership (the "Partnership"). The general partner
of the Partnership, Maxum LLC, a Nevada limited liability company (the "General
Partner"), is soliciting your consent to the adoption of a Second Amended and
Restated Limited Partnership Agreement of the Partnership (the "Amended LP
Agreement"), as described in this Consent Solicitation Statement. No meeting
will be held in connection with this solicitation of votes from the Limited
Partners.
Only Limited Partners of record at the close of business on August 29,
2003 (the "Record Date") are entitled to notice of and to vote on adoption of
the Amended LP Agreement. On the Record Date, there were 187,919 units of
limited partnership interest in the Partnership ("Units") issued and
outstanding, held of record by 2,021 Limited Partners. Approval of the Amended
LP Agreement requires the affirmative vote of Limited Partners holding a
majority of the outstanding Units. Please note that affiliates of the General
Partner, holding a total of 90,577 Units, representing approximately 48.2% of
the total number of outstanding Units, have indicated that they will vote "YES"
for adoption of the Amended LP Agreement.
To be counted, a properly completed Consent Form must be received by
MacKenzie Partners, Inc., the Partnership's information and solicitation agent
in connection with this Consent Solicitation (the "Information and Solicitation
Agent") or American Stock Transfer & Trust Co., the Partnership's transfer
agent, at or before 12:00 midnight, New York City time, on October 8, 2003,
unless the General Partner extends the period for giving consents (the
"Expiration Date"). You may revoke your consent at any time before the
Expiration Date.
Your vote is important. Failure to return the enclosed Consent Form will
have the same effect as a vote against adoption of the Amended LP Agreement.
You are encouraged, therefore, to review carefully this Consent Solicitation
Statement and to complete, date, sign and mail your Consent Form in the
enclosed postage-paid envelope.
Limited Partners who vote against adoption of the Amended LP Agreement
will not have any rights of appraisal or similar rights.
This Consent Solicitation Statement and the related consent form is being
mailed to Limited Partners on or about September 5, 2003.
QUESTIONS AND ANSWERS ABOUT THE REQUESTED CONSENT
The following highlights selected information contained elsewhere in this
Consent Solicitation Statement and may not contain all of the information that
may be important to you. To understand the proposed Amended LP Agreement fully
and for a more complete description of the consent being requested, you should
read this entire document carefully (including exhibits).
WHY IS THE GENERAL PARTNER SOLICITING CONSENTS?
The General Partner is seeking your consent to the adoption of a Second
Amended and Restated Agreement of Limited Partnership of the Partnership.
WHAT ARE THE BENEFITS TO THE PARTNERSHIP AND TO ME IF THE AMENDED LP AGREEMENT
IS ADOPTED?
If the Amended LP Agreement is adopted, the name of the Partnership will
be changed to "Biggest Little Investments L.P." and the Partnership will be
permitted to reinvest operating income and proceeds from the sale or
refinancing of its properties or the disposition of its mortgage loans, as well
as leverage its property, to purchase additional real estate for investment
and/or development or to make or acquire additional mortgage loans or short-
term loans. Should the Partnership be able to borrow funds secured by the
Sierra Marketplace Shopping Center (the "Sierra Marketplace"), the Partnership
will utilize the funds to attract new tenants, undertake physical improvements,
continue its efforts to have the City of Reno insert a traffic light to allow
greater access to the Sierra Marketplace and, possibly, acquire additional
properties
The General Partner believes that the ability to reinvest proceeds and
leverage assets of the Partnership will enable it to maximize the value of the
Partnership's current property, the Sierra Marketplace. In addition, the
General Partner hopes that the ability to sell and lease the Partnership's
properties to affiliates of the General Partner will create leasing
opportunities for Sierra Marketplace. An affiliate of the General Partner owns
the property adjacent to Sierra Marketplace and the General Partner anticipates
that this affiliate may lease space within Sierra Marketplace and/or work
together with the General Partner to market space to businesses that are
complementary to the property adjacent to Sierra Marketplace.
The Amended LP Agreement also provides the Partnership with the ability to
repurchase Units offered to it by the Limited Partners, which is not permitted
under the Current LP Agreement. Accordingly, if the Amended LP Agreement is
adopted, the Limited Partners may have the opportunity to liquidate their
investments in the Partnership at any time, subject to certain conditions.
WHAT IS THE FUTURE FOR THE PARTNERSHIP IF THE AMENDED LP AGREEMENT IS NOT
ADOPTED?
If adoption of the Amended LP Agreement is not approved by Limited
Partners holding a majority of the outstanding Units, the Partnership will
continue to own the Sierra Marketplace, its sole property, and to be forced to
continue to operate under the strict constraints of its existing limited
partnership agreement, an agreement drafted to deal with the funding of
mortgage loans and not the ownership and operation of real estate.
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WHO IS ENTITLED TO VOTE ON THE PROPOSED AMENDED LP AGREEMENT?
You are entitled to vote on the adoption of the proposed Amended LP
Agreement if you owned Units on August 29, 2003 and have been admitted as a
Limited Partner. See "Voting Rights and Information - Record Date," page 17.
HOW DO I CONSENT TO ADOPTION OF THE PROPOSED AMENDED LP AGREEMENT?
If you wish to consent to adoption of the Amended LP Agreement, you should
complete, sign, date and return the Consent Form to the Information and
Solicitation Agent in the enclosed envelope with pre-paid postage. YOUR VOTE
ON THIS MATTER IS VERY IMPORTANT. Your failure to return the enclosed Consent
Form will have the same effect as a vote against adoption of the Amended LP
Agreement. See "Voting Rights and Information - Consents," page 16.
HOW LONG DO I HAVE TO CONSENT?
You may submit your signed Consent Form now. In order for your Consent
Form to be accepted, it must be received by the Information and Solicitation
Agent no later than 12:00 midnight, New York City time, on the Expiration Date,
October 8, 2003, unless the General Partner extends the period for giving
consents, in which case the new Expiration Date will be the last date on which
your Consent Form will be accepted. See "Voting Rights and Information -
Solicitation Period," page 17.
HOW WILL I BE NOTIFIED IF THE CONSENT PERIOD IS EXTENDED?
If the consent period is extended, the General Partner will issue a press
release announcing the extension no later than 9:00 a.m., New York City time,
on the next business day after the day the consent period was scheduled to
expire and may furnish you with a supplement to this Consent Solicitation
Statement. See "Voting Rights And Information - Solicitation Period," page 16.
HOW DO I WITHDRAW OR CHANGE MY CONSENT?
You may withdraw or change your executed and returned Consent Form at any
time prior to the Expiration Date by delivering to the Information and
Solicitation Agent a signed and subsequently dated Consent Form or a written
notice stating that your consent is revoked. After the Expiration Date, all
consents previously executed and delivered and not revoked will become
irrevocable. See "Voting Rights and Information - Consents," page 17.
WHAT HAPPENS IF I VOTE AGAINST ADOPTION OF THE AMENDED LP AGREEMENT, BUT THE
AMENDED LP AGREEMENT NEVERTHELESS RECEIVES THE REQUIRED LIMITED PARTNER
APPROVAL?
Whether or not you vote against adoption of the Amended LP Agreement, if
the Amended LP Agreement receives the approval of Limited Partners holding a
majority of the outstanding Units, the Amended LP Agreement will be adopted and
the Partnership will change its name to Biggest Little Investments L.P.
TO WHOM MAY I SPEAK IF I HAVE QUESTIONS ABOUT THE CONSENT SOLICITATION?
The Partnership has retained MacKenzie Partners, Inc. as the Information
and Solicitation Agent to answer your questions about the proposed Amended LP
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Agreement and regarding completion of the Consent Form, to provide you with
additional copies of this Consent Solicitation Statement, the Consent Form and
other related materials and to solicit consents to adoption of the proposed
Amended LP Agreement. The telephone number of MacKenzie Partners is (800) 322-
2885.
FORWARD-LOOKING AND OTHER STATEMENTS
This Consent Solicitation Statement contains certain forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, that are subject to risks and uncertainties. Forward-looking
statements include information relating to the Partnership's and General
Partner's intent, belief or current expectations. Forward-looking statements
in this Consent Solicitation Statement are identified by words or phrases such
as "anticipate," "believe," "estimate," "expect," "intend," "may be,"
"objective," "plan," "predict," "project" and "will be" and similar words or
phrases (or the negative thereof). Actual events or results may differ
materially from those discussed in forward-looking statements as a result of
various factors, including, without limitation, those discussed elsewhere in
this Consent Solicitation Statement.
BACKGROUND
The General Partner believes that the Partnership is constrained by the
strict provisions of the Current LP Agreement, which limits the Partnership to
the business of issuing or acquiring mortgage loans and prohibits the
Partnership from reinvesting the proceeds from the sale or refinancing of its
assets. Accordingly, the General Partner desires to adopt the Amended LP
Agreement, which would permit the Partnership to acquire and develop real
estate and make short-term loans, as well as invest in additional mortgage
loans. In addition, the General Partner desires to change the name of the
Partnership to "Biggest Little Investments L.P." to reflect the presence of its
current asset, Sierra Marketplace Shopping Center, in Reno, Nevada, known as
the "Biggest Little City."
The General Partner's manager and members have extensive knowledge of the
Reno, Nevada area and the real estate situated there. Such individuals have
been affiliated with entities involved in real estate investment and
development in Reno and other areas since 1972, including Western. The General
Partner believes that its knowledge of the Reno, Nevada real estate market may
help maximize the value of the Partnership's sole remaining property, Sierra
Marketplace, which the Partnership acquired in February 2003 in lieu of
foreclosing on its mortgage loan issued to the former owner thereof. In
addition, the General Partner hopes that the ability to sell and lease the
Partnership's properties to affiliates of the General Partner will create
leasing opportunities for Sierra Marketplace. An affiliate of the General
Partner owns the property adjacent to Sierra Marketplace and the General
Partner anticipates that this affiliate may lease space within Sierra
Marketplace and/or work together with the General Partner to market space to
businesses that are complementary to the property adjacent to Sierra
Marketplace.
The Amended LP Agreement also provides the Partnership with the ability to
repurchase Units offered to it by the Limited Partners, which is not permitted
under the Current LP Agreement. Accordingly, if the Amended LP
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Agreement is adopted, the Limited Partners may have the opportunity to
liquidate their investments in the Partnership at any time, subject to certain
conditions.
From the late 1990s through 2001, certain affiliates of the General
Partner expressed interest in acquiring either the assets of, or the general
partnership interests in, the Partnership. During 2001, an affiliate of the
General Partner, Western Real Estate Investments, LLC ("Western"), purchased
749 Units at prices per Unit ranging from $82.75 to $130.00, through
intermediaries (e.g. through the trading system operated by American
Partnership Board, Inc., which publishes sell offers by holders of Units). In
February 2001, Western commenced a tender offer to acquire Units in an effort
to increase its investment in the Partnership, which resulted in its
acquisition of 6,841 Units at an aggregate purchase price of $848,106,
constituting approximately 3.55% of the outstanding Units.
On October 10, 2001, the former managing general partner of the
Partnership and its affiliates entered into the General and Limited Partner
Interest Assignment Agreement with the General Partner and Western (the
"Purchase Agreement"), pursuant to which, as of January 1, 2002, the General
Partner acquired the managing and associate general partnership interests in
the Partnership for a total purchase price of $1,000,000 and Western acquired
57,695 Units, constituting approximately 30% of the outstanding Units, from
affiliates of the former general partners of the Partnership for an aggregate
purchase price of $3,395,181.46 and an assignment of the settlement rights of
the General Partner's affiliated entities with respect to the litigation then
pending against the then selling entities. Consummation of the transaction was
conditioned upon the approval by the holders of a majority of the outstanding
Units of the amendment to the Partnership's Amended and Restated Limited
Partnership Agreement (the "Current LP Agreement") reflecting the transfer by
former general partners of their respective interests in the Partnership to the
General Partner. The Partnership obtained the necessary consents pursuant to a
consent solicitation statement filed with the Securities and Exchange
Commission on November 1, 2001. The Purchase Agreement also required the
former general partners to cause the Partnership to distribute all cash
reserves other than $500,000 immediately prior to the change in general
partners, resulting in a distribution equal to $25.12 per unit on December 31,
2001.
On August 14, 2002, Virginia Springs Limited Liability Company, also an
affiliate of the General Partner ("Virginia Springs"), acquired 9,703 Units at
a purchase price of $95 per unit, pursuant to a tender offer commenced on March
29, 2002.
In late September 2002, the Partnership made a distribution to the Limited
Partners of $33.79 per Unit which represented 90% of the settlement proceeds
with respect to the litigation brought against the former general partners of
the Partnership and two of their affiliates. On December 11, 2002, the
Partnership made a distribution to the limited partners of $3.72 per Unit which
represented the remaining portion of the settlement proceeds.
On February 18, 2003, Virginia Springs commenced another tender offer,
pursuant to which it acquired 12,344 Units for an aggregate purchase price of
$839,392.
In addition, Ben Farahi, the managing member of the General Partner and a
member of Western and Virginia Springs, owns 44 Units acquired in his
individual capacity.
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As result of the transactions described above, affiliates of the General
Partner own an aggregate of 90,582 Units, constituting 48.2% of the outstanding
Units. Accordingly, affiliates of the General Partner are able to
significantly influence any decision submitted to the vote of Limited Partners
of the Partnership, including decisions on amendment of the Current LP
Agreement, the removal of General Partner, the sale of substantially all of the
Partnership's assets and the liquidation of the Partnership.
DESCRIPTION OF THE SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP
The following summary is qualified in its entirety by reference to the
full text of the proposed Amended LP Agreement, which is attached as Exhibit A
to this Consent Solicitation Statement, as well as to the text of the Current
LP Agreement.
Unit Issuances and Repurchases
The Amended LP Agreement does not provide for the issuance of additional
Units, but does permit the Partnership to repurchase Units of the Partnership
at a price based on market considerations upon the request of a Limited
Partner, subject to certain conditions. The Current LP Agreement prohibits
Partnership repurchases of Units.
Purposes of the Partnership
Mortgage Loans. The Amended LP Agreement provides for the Partnership to
invest in, hold, sell, dispose of and otherwise act with respect to additional
first and junior mortgage loans on fee or leasehold interests in real property
or other beneficial interests essentially equivalent to a mortgage on real
property, as well as loans secured by interests in partnerships, real estate
investment trusts, joint ventures or other entities. The Current LP Agreement
provides for this business purpose; however, under the Current LP Agreement,
the Partnership is limited to the use of the proceeds from its initial public
offering which occurred in 1988. Therefore, the Partnership would not be
permitted to issue or acquire any new mortgage loans.
Investments in Real Estate. Pursuant to the Amended LP Agreement, the
Partnership may also purchase, exchange, acquire, lease, own, mortgage,
encumber, improve or cause to be improved, use lend, borrow, operate, service,
maintain, develop, convey and otherwise dispose of and sell, handle, subdivide,
plat, trade and deal in any property, commercial or multi-family, real, person
or mixed, chooses in action, or any interest therein, including any non-income
producing property, subject to certain limitations. The Current LP Agreement
does not permit the Partnership to engage in this business.
Short-Term Loans. The Amended LP Agreement provides that the Partnership
may lend funds on an unsecured basis for periods not to exceed one year at
interest rates based on market conditions. The Current LP Agreement does not
permit the Partnership to engage in this business.
Financing; Reinvestment of Cash Flow. Pursuant to the Amended LP
Agreement, the Partnership may obtain financing using a maximum of 80% of the
appraised value of its assets as collateral. Furthermore, the Partnership may
reinvest "operating cash flow," "disposition proceeds" and "net sale or
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refinancing proceeds," each as hereinafter defined, in the sole discretion of
the General Partner, in additional mortgage loans and properties. The Current
LP Agreement specifically prohibits the Partnership from leveraging its assets
and from reinvesting operating cash flow and disposition proceeds. For
purposes of the Amended LP Agreement, "operating cash flow" means the gross
cash revenues received by the Partnership excluding partner capital
contributions, the proceeds of any loans made to the Partnership, proceeds from
the disposition of mortgage loans and the sale or refinancing of other assets
of the Partnership, less expenses incurred in operating the Partnership's
business and cash reserves; "disposition proceeds" means receipts from payments
of principal on mortgage loans, the Partnership's share of any appreciation in
value of a property securing a mortgage loan, prepayments or prepayment
penalties on a mortgage loan or proceeds from any disposition of a mortgage
loan, less any expenses incurred in connection with the receipt of such
amounts, payment of any debt in connection with such mortgage loan and any
necessary reserves; and "net sale or refinancing proceeds" means consideration
received in exchange for a Partnership asset, reimbursement for loss of a
Partnership asset, any refinancing of indebtedness secured by a Partnership
asset and working capital reserves, less related expenses and unpaid debt and
any reserves necessary to satisfy outstanding indebtedness of the Partnership.
Provisions Not Amended by the Amended LP Agreement
Pursuant to the Amended LP Agreement, the Partnership will continue until
December 31, 2016, as in the Current LP Agreement. Also, the Amended LP
Agreement maintains the provisions of the Current LP Agreement with respect to
capital contributions, the limited liability of limited partners, allocations
and distributions, assignment of Units, substituted limited partners, the
rights and powers of Limited Partners, removal of the General Partner,
termination and dissolution of the Partnership and the power of attorney
granted to the General Partner by the Limited Partners, except for the addition
of applicable provisions related to the additional businesses in which the
Partnership would be entitled to engage and the removal of provisions relating
to the use of initial offering proceeds.
Books and Records
The section of the Amended LP Agreement entitled "Books, Records,
Accountings and Reports" is only amended by replacing the requirement to issue
quarterly reports to Limited Partners with a statement that such reports will
be timely posted on the Partnership's website.
Powers of the General Partner
The Amended LP Agreement provides the General Partner with the same powers
and limitations on authority as set forth in the Current LP Agreement, except
as required to reflect the ability of the Partnership to engage in additional
businesses; leverage its assets; reinvest operating, disposition and sale or
refinancing proceeds; and repurchase Units. The Amended LP Agreement also
permits the Partnership to engage in certain transactions with the General
Partner and its affiliates that are prohibited by the Current LP Agreement;
provided, however, the terms of such transactions are competitive with similar
transactions entered into on an arms'-length basis.
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Indemnification of the General Partner
The Amended LP Agreement provides for the Partnership to indemnify the
General Partner and its affiliates performing services on behalf of the
Partnership and certain other affiliates of the Partnership for losses arising
out of actions determined in good faith to be in the best interests of the
Partnership and such conduct did not constitute gross negligence, fraud or
willful or wanton misconduct by the indemnified person. The Current LP
Agreement prohibits indemnification if the conduct did not constitute
negligence or misconduct.
See "Conflicts of Interest" for a description of the services which may be
provided to the Partnership by the General Partner or its affiliates and the
fees payable to such parties in consideration for services provided.
THE GENERAL PARTNER RECOMMENDATION
The General Partner submits for your consideration and approval the
proposed Second Amended and Restated Agreement of Limited Partnership to
facilitate the Partnership's ability to engage in the business of real estate
acquisition and development and making short term loans, as well as to issue or
acquire additional mortgage loans and to change the name of the Partnership to
"Biggest Little Investments L.P." The General Partner believes that adoption
of the Amended LP Agreement will provide the Partnership with the opportunity
to increase the value of its existing property, the Sierra Marketplace Shopping
Center, by enabling the Partnership to use its interest in Sierra Marketplace
as collateral to borrow the funds necessary to attract new tenants to Sierra
Marketplace with businesses that are complementary to the adjoining property.
In addition, the General Partner hopes to use the proceeds from any increase in
the value of Sierra Marketplace to buy and develop additional real estate
and/or to make additional mortgage loans.
Under the Partnership's current Amended and Restated Limited Partnership
Agreement, adoption of the Amended LP Agreement requires the affirmative
consent of Limited Partners holding a majority of the issued and outstanding
Units of limited partnership interest. As of the record date for the
determination of Limited Partners entitled to notice of and to vote upon
adoption of the Amended LP Agreement, affiliates of the General Partner
collectively owned approximately 47.99% of the outstanding Units.
The General Partner encourages you to review the information contained in
this Consent Solicitation Statement and make your own determination. In making
your decision, you should carefully review and consider the information set
forth in this Consent Solicitation Statement.
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RISK FACTORS
Limited Partners should consider the following risks in evaluating whether
to consent to adoption of the Amended LP Agreement.
Risks of Real Estate Investment
The Partnership's investments in real property, if any, will be subject to
the risks generally incident to the development, financing, ownership and
operation of real property. National and local economic conditions (including
interest rates, an oversupply of space or a reduction in demand for real
estate) may affect the investment climate for real estate investment. Other
risks include unanticipated renovations (with resulting increases in operating
expenses) required by governmental rules or acts of God (which may also result
in uninsured losses).
In addition, the Partnership's financial stability will depend on the
ability of its existing and future, if any, lessees to pay rent. The inability
of the lessees to operate their businesses on a profitable basis could prevent
them from being able to make lease payments to the Partnership. In addition,
if the Partnership is unable to renew or relet promptly the leases for a
significant amount of its space, or if the rental rates upon such renewal or
reletting are significantly lower than the original rates, the Partnership's
cash position would also be adversely affected.
Risk in Leveraging
The investments of the Partnership may be leveraged. That is, the
acquisition of properties by the Partnership (as well as Sierra Marketplace,
the property already owned by the Partnership) will most likely be financed, in
substantial part, by borrowings. Although such borrowings permit the
acquisition of properties of greater aggregate cost than could be financed
solely with Partnership capital, such action also increases the Partnership's
exposure to losses.
The Partnership's use of borrowings presents an additional element of risk
in the event that the Partnership's cash flow is insufficient to meet the
principal and interest payments on such borrowings. If the Operating Cash Flow
is insufficient to service the debt incurred by the Partnership, the
Partnership's equity in one or more properties is likely to be reduced or
eliminated through foreclosure, which may have adverse tax consequences for
Limited Partners.
In connection with such indebtedness, the Partnership may execute
mortgages or deeds of trust securing payment of promissory notes providing for:
(i) substantial final payment of principal ("balloon payments") or (ii)
renegotiable or floating interest rates. Financing involving balloon payments
involves greater risk than financing where the principal amount is fully
amortized over the term of the loan, since the ability of the Partnership to
repay at maturity the outstanding principal amount of the balloon may be
dependent upon the Partnership's ability to obtain adequate refinancing, which
ability will in turn be dependent upon economic conditions in general and the
value of the underlying properties in particular. Financing involving
renegotiable or floating interest rates includes greater risk than financing
where the interest rate is fixed, since such interest rates could rise
substantially.
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Sierra Marketplace
If the Amended LP Agreement is approved, the Partnership intends to borrow
funds secured by Sierra Marketplace, the Partnership's current property, and to
use such funds to attract new tenants, undertake physical improvements,
continue its efforts toward the design and installation of a traffic light to
allow greater access to Sierra Marketplace and invest in additional properties.
However, there can be no assurances that the Partnership will be able to borrow
the funds on economically favorable terms and, even if such funds are
available, that the General Partner will be able to successfully maximize the
value of Sierra Marketplace.
Investments in Mortgages
Pursuant to the Amended LP Agreement, the Partnership may invest in
additional mortgages. If the Partnership were to invest in additional
mortgages it would be subject to the risks of such investment, which include
the risk that borrowers may not be able to make debt service payments or pay
principal when due, the risk that the value of the mortgaged property may be
less than the amounts owed, and the risk that interest rates payable on the
mortgages may be lower than the Partnership's cost of funds. If the
Partnership invests in additional mortgages and if any of the above occur, the
Partnership's funds from operations could be adversely affected.
Real Estate Development
In the event that the Partnership engages in real estate development as
permitted under the Amended LP Agreement, it will be subject to a number of
additional risks, including the risks that financing for such development may
not be available on favorable terms, that construction may not be completed on
budget or on schedule (resulting in increased debt service expense and
construction costs) and that properties may not be leased on profitable terms.
Timely construction may be adversely affected by the failure to obtain
discretionary governmental permits, strikes and by shortages in building
materials or supplies or fuel for equipment.
Dependence on General Partner
The success of the Partnership will depend to a large extent on the
quality of management provided by the General Partner since the General Partner
will continue to have sole control over virtually all aspects of the
Partnership's operations and the Limited Partners will have no right to
participate in the management of the Partnership.
Uninsured Losses; Costs and Availability of Insurance
It shall be the responsibility of the General Partner to arrange for or
acquire comprehensive casualty insurance for each of the properties purchased
by the Partnership and liability insurance for the Partnership in amounts which
the General Partner determines are sufficient to cover reasonably foreseeable
losses or to comply with covenants contained in promissory notes, mortgages or
deeds of trust encumbering the properties. However, there are certain types of
losses (generally of a catastrophic nature, such as earthquakes, floods, wars
and acts of terror) which are uninsurable, and recent increases in the costs of
insurance generally have resulted in premium rates which make insurance against
certain losses not economically insurable. There can be no assurance that the
costs of certain insurance coverage which
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the Partnership would otherwise obtain will not increase further and result in
the Partnership being unable to obtain coverage from certain risks at rates
which are economic for the Partnership. To the extent that that Partnership is
required to and does obtain insurance at increased rates, there can be no
assurance that the rental income from the properties will increase sufficiently
to result in the Partnership not realizing a decrease in its Operating Cash
Flow as a result. If the Partnership suffers a loss for which it is not
insured, such loss could result in a loss of all or a portion of the Limited
Partners' invested capital or the loss of the property.
Resale of Properties
It is the intention of the General Partner to use its best efforts to sell
any Partnership properties for cash and either subject to or upon the
assumption of then outstanding mortgages. However, the Partnership when
reselling properties may find it necessary or desirable to provide financing to
purchasers thereof. In the event the Partnership finds it necessary or
desirable to provide such financing upon the resale of its properties, the
reinvestment in additional properties or a liquidation of the Partnership may
be delayed beyond the time of disposition of its properties until any such
loans are repaid or otherwise liquidated.
Risk of Joint Ventures
Some of the Partnership's investments may be owned by joint venture
partnerships between the Partnership and the seller of the property or other
parties. If the Partnership enters into a joint venture with affiliates of the
General Partner, additional restrictions are set forth. (See "Conflicts of
Interest-Joint Ventures.") Investments in joint venture partnerships which own
properties may involve risks not otherwise present, including, for example, the
risk that the Partnership's co-venturer might become bankrupt, that such co-
venturer may at any time have economic or business interests or goals which are
inconsistent with the interests or goals of the Partnership or that such co-
venturer may be in a position to take action contrary to the Partnership's
instructions, requests, policies or objectives. Among other things, actions by
such co-venturer might subject property owned by the joint venture to
liabilities in excess of those contemplated by the terms of the joint venture
or other adverse consequences.
Potential Environmental Liability
Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real estate may be liable for the costs of clean-up of
certain conditions relating to the presence of hazardous or toxic material on,
in or emanating from the property, and any related damages to natural
resources. Such laws often impose liability without regard to whether the
owner knew of, or was responsible for, the presence of hazardous or toxic
materials. The presence of such materials, or the failure to address such
conditions properly, may adversely affect the ability to sell or rent the
property or to borrow using the property as collateral. Persons who dispose of
or arrange for the disposal or treatment of hazardous or toxic materials may
also be liable for the costs of clean-up of such materials, or for related
natural resource damages, at or from an off-site disposal or treatment
facility, whether or not such facility is owned or operated by such persons.
Certain environmental laws also impose liability for the release of
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asbestos-containing materials ("ACMs") into the air and third parties may seek
recovery from owners or operators of properties for personal injury associated
with ACMs.
In connection with the ownership, development, operation or management of
real estate, the Partnership would be considered an owner or operator of real
estate and, therefore, may potentially be liable for clean-up costs, as well as
certain other related costs, including governmental fines and monetary awards
associated with injuries to persons, property or natural resources. No
assurance can be given that existing environmental assessments with respect to
real estate reveal all environmental liabilities, than any prior owner of the
real estate did not create any material environmental condition not known to
the Partnership or that a material environmental condition does not otherwise
exist as to the real estate.
Changes in Laws
Costs resulting from changes in real estate taxes or other governmental
requirements may, in certain instances, be passed through to tenants of any
properties to be developed by the Partnership and, therefore, may not affect
the Partnership. However, certain leases the Partnership may enter into may
not provide fully for such pass throughs. Increases in income, service or
transfer taxes generally are not passed through to tenants and may adversely
affect the Partnership's ability to make distributions to the Limited Partners.
Changes in laws increasing potential liability for environmental conditions or
increasing the restrictions on discharges or other condition may result in
significant unanticipated expenditures, which would adversely affect the
Partnership's ability to make distributions to the Limited Partners.
Tax Risks
In the event that the Amended LP Agreement is adopted, there may be
various risks associated with the federal income tax aspects of the
Partnership's ability to leverage its assets, invest in and develop real
estate, issue short-term loans and reinvest Operating Cash Flow, Disposition
Proceeds and Net Sale or Refinancing Proceeds. Accordingly, each Limited
Partner is strongly urged to consult his or her own tax advisor concerning the
effects of federal income tax statutes and regulations on the adoption of the
Amended LP Agreement and his or her individual tax situation.
CONFLICTS OF INTEREST
Pursuant to the Amended LP Agreement, the Partnership will continue until
December 31, 2016, as in the Current LP Agreement. Also, the Amended LP
Agreement maintains the provisions of the Current LP Agreement with respect to
capital contributions, the limited liability of limited partners, allocations
and distributions, assignment of Units, substituted limited partners, the
rights and powers of Limited Partners, removal of the General Partner,
termination and dissolution of the Partnership and the power of attorney
granted to the General Partner by the Limited Partners, except for the addition
of applicable provisions related to the additional businesses in which the
Partnership would be entitled to engage and the removal of provisions relating
to the use of initial offering proceeds.
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Fees Payable to General Partner and Affiliates. The General Partner and
certain individuals or entities affiliated with the General Partner are
entitled to provide services to the Partnership in return for fees under the
Amended LP Agreement as follows:
Development, Construction or Major Repairs or Rehabilitation of
Partnership Assets. The General Partner and its affiliates may develop,
construct or provide major repairs or rehabilitation of Partnership assets, or
render any services in connection with such activities, only if the development
fee paid in connection with such project does not exceed 10% of the direct
costs of the project and the construction fee paid in connection with such
project does not exceed 10% of the direct costs of the project. In addition,
the only fees paid to the General Partner or its affiliates for services
rendered during the period surrounding any new mortgage loan or property made
or purchased by the Partnership may consist of a development fee, a
construction fee and a real estate commission in connection with the
acquisition of the land from non-affiliates of the General Partner, which fees
must be comparable to and competitive with the fees paid to non-affiliated
persons rendering comparable services in the same geographical area.
Acquisition Fees. The Partnership may pay to the General Partner or its
affiliates, as initial consideration for their services in connection with the
evaluation, investigation, negotiation, selection and purchase of all real
properties, and otherwise rendering acquisition services either directly or
indirectly, acquisition fees in an amount equal to 2% of the price of each such
Partnership property.
Refinancing Fees. The Partnership may pay to the General Partner or its
affiliates, for services rendered in connection with the refinancing of a
Partnership property, a mortgage placement fee equal to the lesser of: (i) 1%
of the refinancing proceeds of the property or fees which are competitive for
similar services in the geographical area where the property is located.
Guaranty Fees. In the event that the General Partner or its affiliates
guaranty any indebtedness of the Partnership, the Partnership shall pay to the
General Partner or such affiliates, as the case may be, a fee in an amount
competitive with guaranty fees of a similar nature.
Property Management Fees. An affiliate of the General Partner may provide
property management services to the Partnership, and if so will be entitled to
a fee equal to the lesser of (a) fees which are competitive for similar
services in the same geographic area or (b)(i) 5% of the gross revenues with
respect to residential properties; (ii) 6% of the gross revenues with respect
to industrial and commercial properties; or (iii) 1% of the gross revenues with
respect to industrial and commercial properties which are leased on a long-term
net basis (except for a one time initial leasing fee of 3% of gross revenues).
In the event that an affiliate of the General Partner provides leasing
services, such affiliate shall be paid a fee which is competitive for similar
services in the same geographic area.
Subordinated Real Estate Commission. The Partnership may pay for real
estate brokerage services to all persons involved in the sale of its
properties, real estate brokerage fees, that do not in the aggregate exceed the
lesser of (i) a percentage of the gross sales price of a property equal to one-
half of the fees which are reasonable, customary and competitive, taking into
consideration the size, type and location of the Partnership property, or (ii)
3% of the gross sales price of such property.
Insurance Commissions. Insurance commissions may be payable to insurance
agencies affiliated with the General Partner for providing insurance brokerage
services in connection with the issuance of insurance covering Partnership
assets, subject to certain conditions.
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Other Fees. In addition, the General Partner and its affiliates will
continue to be entitled to receive mortgage placement fees and acquisition fees
in connection with mortgage loans made or acquired, and property management
fees, real estate commissions and insurance commission with respect to
properties underlying, or acquired upon foreclosure of, a mortgage loan issued
or acquired by the Partnership, as provided for in the Current LP Agreement.
Elimination of Fees Payable to the General Partner. Notwithstanding the
above, the Amended LP Agreement eliminates fees payable to the General Partner
under the Current LP Agreement for evaluating potential mortgage loans to issue
or acquire and the subordinated incentive fee payable to the General Partner
after a certain return is provided to the Limited Partners. The Amended LP
Agreement also eliminates the limitation on the amount of fees payable to the
General Partner set forth in the Current LP Agreement.
Transactions with General Partner and Affiliates. Pursuant to the terms
of the Amended LP Agreement, the Partnership may enter into transactions with
the General Partner or its affiliates as follows:
Joint Ventures. The Partnership may enter into joint venture investments
with the General Partner or its affiliates subsequent to the acquisition of a
property by the General Partner or its affiliates, or may invest in joint
venture arrangements with another partnership or entity formed by the General
Partner or its affiliates, subject to certain conditions.
Affiliate Lenders. The Partnership may receive permanent loans (having a
term in excess of 36 months) from an affiliated entity.
Purchases and Leases of Property from Affiliates. The Partnership may
purchase or lease property from the General Partner or its affiliates upon fair
terms at a price or rental not in excess of appraised value.
Sales and Leases of Property to Affiliates. The Partnership may lease its
assets to the General Partner or its affiliates pursuant to a lease-back
arrangement, the terms of which are no less favorable to the Partnership than
those offered to and accepted by persons who are not affiliates of the General
Partner. The General Partner and its affiliates may purchase assets of the
Partnership only at a purchase price equal to the fair market value thereof.
Purchases by Affiliates of Partnership Fixed Assets. The General Partner
or its affiliates may purchase assets of the Partnership in their own name (and
assume loans in connection therewith) and temporarily hold title thereto for
the purpose of facilitating the acquisition of such assets or obtaining
financing for the Partnership, or any other purpose related to the business of
the Partnership, provided that such assets are purchased by the Partnership for
a price no greater than the cost of such assets to the General Partner, and
provided there is no difference in interest rates of the loans secured by the
assets at the time acquired by the General Partner and the time acquired by the
Partnership, nor any other benefit arising out of said transaction to the
General Partner apart from other compensation otherwise permitted by the
Amended LP Agreement.
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VOTING RIGHTS AND INFORMATION
Record Date
The General Partner has set the close of business on August 29, 2003 as
the Record Date for the determination of Limited Partners entitled to notice of
and to vote upon adoption of the Amended LP Agreement. Only Limited Partners
of record as of the Record Date will be entitled to vote upon adoption of the
Amended LP Agreement. On the Record Date, there were 187,919 Units issued and
outstanding, held of record by 2,021 Limited Partners. The Partnership has no
other class of securities.
Required Vote
Under the terms of the Current LP Agreement, adoption of the Amended LP
Agreement requires the affirmative consent of Limited Partners holding a
majority of the issued and outstanding Units. As of the Record Date,
affiliates of the general partners owned 90,577 Units in the aggregate or
approximately 48.2% of the Units and have indicated that they will vote "YES"
for adoption of the Amended LP Agreement. Abstention or failure to return the
enclosed Consent Form, as well as shares held of record by a broker or nominee
who has not received instructions from his, her or its customer and lacks
voting authority, will have the same effect as a vote against adoption of the
Amended LP Agreement. Each Limited Partner who has been admitted to the
Partnership is entitled to cast one vote for each Unit held of record on
adoption of the Amended LP Agreement. Holders of half-Units are entitled to
cast half a vote for each half-Unit held of record.
Solicitation Period
The solicitation period is the time during which Limited Partners may vote
for or against adoption of the Amended LP Agreement. The solicitation period
will commence upon delivery of this Consent Solicitation Statement and the
Consent Form and will continue until October 8, 2003, the Expiration Date. The
General Partner may, in its sole discretion, elect to extend the solicitation
period but not beyond 45 days from the date that this Consent Solicitation
Statement is sent to the Limited Partners. If the solicitation period is
extended, the General Partner will issue a press release announcing the
extension no later than 9:00 a.m., New York City time, on the next business day
after the day the solicitation period was scheduled to expire.
Consents
A Consent Form is included with this Consent Solicitation Statement. All
Consent Forms that are properly executed and returned to the Partnership's
transfer agent, American Stock Transfer & Trust Co., prior to the Expiration
Date will be voted in accordance with the instructions contained therein. All
properly executed Consent Forms that contain no voting instructions will be
deemed to have voted in favor of adoption of the Amended LP Agreement. Consent
Forms will be effective only when actually received by the Partnership's
information agent. Consent forms may be withdrawn at any time prior to the
Expiration Date. In addition, following the submission of a Consent Form, but
before the expiration of the solicitation period, Limited Partners may change
their vote. For a withdrawal or change of vote to be effective, a Limited
Partner must execute and deliver, prior to the Expiration Date, a subsequently
dated Consent Form or a written notice stating that the consent is revoked to
American Stock Transfer & Trust Co.
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Consent Forms and notices of withdrawal or change of vote dated after the
Expiration Date will not be valid. If you have any questions about: (i) how to
complete the Consent Form; (ii) where to send the consent; (iii) how to obtain
additional Consent Forms; or (iv) the proposed Amended LP Agreement, please
contact MacKenzie Partners, Inc. at (800) 322-2885.
Effective Time of Amendments
If approved by the Limited Partners, a Certificate of Amendment to the
Partnership's Certificate of Limited Partnership reflecting the change of the
Partnership's name to Biggest Little Investments L.P. will be filed with the
Secretary of State of the State of Delaware and the Amended LP Agreement will
become effective as soon as possible.
The Amended LP Agreement will apply prospectively from and after the date
it becomes effective. All Limited Partners will be bound by the Amended LP
Agreement, if it is adopted, whether or not they vote in favor of the Amended
LP Agreement. Limited Partners do not have a statutory or contractual right to
be paid the fair value of their Units in connection with the proposal described
in this Consent Solicitation Statement.
Cost of Solicitation
The Partnership will bear the costs of preparing and mailing this Consent
Solicitation Statement, including legal expenses, in addition to the fees and
reasonable out-of-pocket expenses of the Information and Solicitation agent.
To assist in the solicitation of consents, the Partnership has engaged
MacKenzie Partners, Inc. to act as Information and Solicitation Agent for a fee
of $4,000, plus reasonable out-of-pocket expenses. In addition to
solicitations by mail, consents may be solicited in person or telephonically by
the Information and Solicitation Agent, and by the manager and other members of
the General Partner. The manager and other members will not be additionally
compensated, but may be reimbursed for out-of-pocket expenses incurred in
connection with the solicitation. Arrangements also will be made to furnish
copies of solicitation materials to custodians, nominees, fiduciaries and
brokerage houses for forwarding to beneficial owners of Units. Such persons
will be paid for reasonable expenses incurred in connection therewith.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth each person that, to the General Partner's
knowledge, beneficially owned more than 5% of the total number of Units of
limited partnership interest as of August 29, 2003, the Record Date. No Units
are owned by the General Partner.
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Number of
Units
Beneficially Percent of
Name of Beneficial Owner (1) Owned Class
- ---------------------------- ------------ ----------
Virginia Springs Limited
Liability Company(2) 22,042 11.73%
Western Real Estate
Investments, LLC(3) 68,491 36.45%
Ben Farahi (4) 90,577 48.20%
John Farahi (4) 90,533 48.18%
Bob Farahi (4) 90,533 48.18%
Group (5) 90,577 48.20%
(1) The principal business address of each such individual or entity, all of
which are affiliates of the General Partner and, together with the
General Partner, members of a "group" as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, is 1175 West Moana Lane,
Suite 200, Reno, Nevada 89509.
(2) Virginia Springs Limited Liability Company ("Virginia Springs") shares
voting and investment power with respect to such Units with its members,
Ben Farahi, John Farahi and Bob Farahi.
(3) Western Real Estate Investments, LLC ("Western") shares voting and
investment power with respect to such Units with its members, Ben Farahi,
John Farahi and Bob Farahi.
(4) Each of Ben Farahi, John Farahi and Bob Farahi shares voting and
investment power with respect to 22,042 of such Units with Virginia
Springs, and 68,084 of such Units with Western. Ben Farahi is also the
sole beneficial owner of an additional 44 Units.
On October 10, 2001, RAM Funding, Inc., then the managing general partner
of the Partnership ("RAM Funding"), Presidio AGP Corp., then the associate
general partner of the Partnership ("Presidio AGP"), and all affiliates of RAM
Funding and Presidio AGP who or which owned Units (the "Former LPs"), entered
into a General and Limited Partner Interest Assignment Agreement (the "Purchase
Agreement") with the current General Partner and Western. Pursuant to the
Purchase Agreement, the General Partner acquired all of the managing and
associate general partnership interests from Ram Funding and Presidio,
respectively, for a purchase price of $1,000,000 and Western acquired all of
the Units owned by the Former LPs, resulting in a change of control of the
Partnership effective January 1, 2002. In consideration for each Unit owned by
the Former LPs, Western paid an aggregate purchase price of $3,395,181.46 and
an assignment of the settlement rights of the General Partner's affiliated
entities with respect to the litigation then pending against the then selling
entities. Western obtained the funds necessary to purchase the Former LP Units
from a capital
contribution made by Farahi Investment Company, the former managing member of
Western. Consummation of the transaction was conditioned upon the approval
by the holders of a majority of the outstanding Units of the amendment to the
Current LP Agreement reflecting the transfer by RAM Funding and Presidio AGP
of their respective interests in the Partnership to the General Partner, and
other customary closing conditions. The Partnership obtained the necessary
consents pursuant to a consent solicitation statement filed with the Securities
and Exchange Commission on November 1, 2001.
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MAXUM LLC
General Partner
Date: September 5, 2003
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EXHIBIT A
SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
BIGGEST LITTLE INVESTMENTS L.P.
Second Amended and Restated Limited Partnership Agreement ("Agreement")
dated as of _____________, 2003, among Maxum LLC, a Nevada limited liability
company, as the General Partner and the Limited Partners (as defined below).
WHEREAS, on August 14, 1986, in accordance with and pursuant to the laws
of the State of Delaware, certain entities formed a limited partnership named
Resources Accrued Mortgage Investors 2, L.P. (the "Partnership");
WHEREAS, as of January 2, 2002, Maxum LLC, a Nevada limited liability
company (the "General Partner"), became the sole general partner of the
Partnership;
WHEREAS, as of __________, 2003, the General Partner obtained the consent
of the requisite number of Limited Partners to change the name of the
Partnership to Biggest Little Investments L.P. and to adopt this Second Amended
and Restated Agreement of Limited Partnership of the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. NAME, REGISTERED AGENT AND PLACE OF BUSINESS.
The name of the Partnership is Biggest Little Investments L.P.; its
registered office in Delaware is at 2711 Centerville Road, Suite 400,
Wilmington, Delaware 19808 and the name of the Partnership's registered agent
for service of process at that address is Corporation Service Company. Its
principal place of business is 1175 West Moana Lane, Suite 200, Reno, Nevada
89509 or such other place as the General Partner may hereafter determine.
2. DEFINITIONS.
The following terms used in this Agreement shall (unless otherwise
expressly provided herein or unless the context otherwise requires) have the
following respective meanings:
"Acquisition Expenses" shall mean the total of all fees and expenses
related to the selection and acquisition of properties, whether or not made or
acquired, including but not limited to, credit reports, appraisals, attorneys'
fees and expenses, insurance, accountants' fees and expenses, travel and
communications expenses, non-refundable option payments on property not
acquired and miscellaneous expenses.
"Acquisition Fees" shall mean the total of all fees and commissions paid
by any Person, including the General Partner or its Affiliates, in connection
with the origination or acquisition of any Mortgage Loan or selection and
purchase, development or construction of any property by the Partnership
whether designated as a Mortgage Placement Fee, real estate commission,
Acquisition Fee, finder's fee, selection fee, Development Fee, Construction
Fee, nonrecurring management fee, consulting fee or any other similar fee or
commission, however designated and however treated for tax or accounting
purposes. Aggregate Acquisition Fees payable to all Persons in connection with
the making or acquiring of Mortgage Loans and the purchase of Partnership
properties may not exceed such compensation as is customarily charged in
arm's-length transactions by others rendering similar services as an ongoing
public activity in the same geographic locale and for comparable properties.
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"Additional Interest" shall mean the Partnership's share in the
Appreciation of a property securing a Mortgage Loan.
"Adjusted Contribution" shall mean the aggregate capital contributed in
cash to the Partnership by the original purchasers of Units, reduced by any
distributions of Disposition Proceeds and/or Net Sale or Refinancing Proceeds
and/or Operating Cash Flow.
"Affiliate" of a Person shall mean: (i) any Person directly or indirectly
controlling, controlled by or under common control with the specified Person;
(ii) any Person who, directly or indirectly, is the beneficial owner of 10% or
more of any class of voting securities of, or otherwise has a substantial
beneficial interest in, the specified Person or of which the specified Person
is directly or indirectly the owner of 10% or more of any class of equity
securities, or in which the specified Person has a substantial beneficial
interest; (iii) any Person who is an officer, director, manager, trustee or
partner of, or serves in a similar capacity with respect to, the specified
Person; and (iv) if the specified Person is an officer, director, manager,
trustee or partner, any entity for which the specified Person acts in any such
capacity; provided, however, that a partner in a partnership or joint venture
with (a) the Partnership or (b) an Affiliate of the General Partner, shall not
by virtue of such relationship necessarily be deemed an Affiliate of such
General Partner. For purposes of this definition, the term "control" shall
include the control or ownership of 10% or more of the outstanding voting
securities the Person referred to.
"Appraised Value" shall mean the fair market value of any real property
which is to be security for a Mortgage Loan, according to an MAI Appraisal.
"Appreciation" with respect to a property underlying a Mortgage Loan,
shall mean the amount calculated by subtracting (a)(i) the equity
capitalization of the borrower (provided, however, that if a borrower owns more
than one property, this calculation shall be based upon the equity
capitalization of the borrower applicable to the property(ies) to which the
Mortgage Loan relates), (ii) the aggregate of the outstanding Principal
balances of all mortgage liens encumbering the mortgaged property, including
the subject Mortgage Loan at the time of such calculation and (iii) all
reasonable and ordinary expenses of sale, from (b) either the Appraised Value
of the underlying property at the date of prepayment or maturity of the
Mortgage Loan or the sales price of the property if the property is sold at the
maturity or prepayment of the Mortgage Loan.
"Certificate of Limited Partnership" shall mean the document, as amended,
which was filed with the Secretary of State of the State of Delaware on August
14, 1986, pursuant to the Delaware Revised Uniform Limited Partnership Act, in
connection with the formation of the Partnership, and in any other jurisdiction
where the Partnership owns realty or must qualify to do business.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent revenue laws.
"Construction Fee" shall mean a fee for acting as a general contractor
and/or construction manager to construct improvements, supervise and coordinate
projects or to provide Major Repairs and Rehabilitation on a Partnership Fixed
Asset.
"Development Fee" shall mean a fee for the packaging of a Partnership
Fixed Asset, including negotiating and approving plans, and undertaking to
assist in zoning, variances and financing for the specific Partnership Fixed
Asset, either initially or at a later date.
"Disposition" shall mean any Partnership transaction not in the ordinary
course of its business including, without limitation, Principal payments,
Additional Interest, prepayments, prepayment penalties, sales, exchanges,
foreclosures or other dispositions of a Mortgage Loan, recoveries of damage
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awards and insurance proceeds but excluding the receipt of Sale or Refinancing
Proceeds, all forms of interest payments when due on a Mortgage Loan (except
Additional Interest) and business or rental interruption insurance proceeds.
"Disposition Proceeds" shall mean receipts from Dispositions less (i) the
amount paid or to be paid in connection with or as an expense of such
Disposition; (ii) the amount necessary for the payment of all debts and
obligations of the Partnership including, but not limited to, fees to the
General Partner or its Affiliates; and (iii) any amount set aside by the
General Partner for working capital reserves.
"Distributions" shall mean any cash distributed to the Limited Partners
and the General Partner arising from their interests in the Partnership, but
shall not include any payment to the General Partner under the provisions of
Articles 3 or 9.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Front-End Fees" shall mean fees and expenses paid by the Partnership for
any services rendered during the period surrounding any new origination or
acquisition of a Mortgage Loan or selection and purchase of a Partnership Fixed
Asset by the Partnership, including Acquisition Fees, Acquisition Expenses and
any other similar fees, however designated by the General Partner.
"General Partner" shall include the General Partner and any other Person
which succeeds it in such capacity as well as any additional General Partner.
"Indemnified Persons" shall have the meaning ascribed to that term in
Section 20.3.
"Independent Advisor" shall mean a long-established, nationally recognized
investment banking firm, accounting firm, mortgage banking firm, bank, real
estate financial consulting firm or advisory firm with a staff of real estate
professionals.
"Investment in Properties" shall mean the amount actually paid or
allocated to the making of or investment in Mortgage Loans or the purchase,
development, construction or improvement of properties acquired by the
Partnership including the purchase of properties, working capital reserves
allocable thereto and any other cash payments such as interest and taxes, but
excluding Front-End Fees.
"Limited Partner" shall mean any Unit holder who shall be admitted to the
Partnership as a Limited Partner including as an additional or substituted
Limited Partner. Reference to a Limited Partner shall refer to any one of
them.
"MAI Appraisal" shall mean an appraisal made by an independent qualified
appraiser who is a member in good standing of the American Institute of Real
Estate Appraisers.
"Majority Vote" shall mean the affirmative vote of the holders of more
than 50% of the outstanding Units.
"Major Repairs and Rehabilitation" shall mean the repair, rehabilitation
or reconstruction of a Partnership Fixed Asset where the aggregate costs exceed
10% of the fair market value of the Partnership Fixed Asset at the time of such
services.
"Mortgage Loans" shall mean notes, debentures, bonds and other evidences
of indebtedness or obligations which are secured or collateralized by (a) fee
or leasehold interests in real property, (b) other beneficial interests
essentially equivalent to a mortgage on real property or (c) interests in
partnerships, real estate investment trusts, join ventures or other entities
which own or have an interest in real property.
-23-
"Net Asset Value" shall mean the book value of all assets, including
accrued interest on Mortgage Loans but excluding interest on temporary
investments, minus all liabilities of the Partnership computed in accordance
with generally accepted accounting principles.
"Net Income" or "Net Loss" shall mean the taxable income or taxable loss
of the Partnership (including the Partnership's share of income or loss of any
partnership, venture or other entity which holds a Mortgage Loan), as
determined for federal income tax purposes, computed (i) by taking into account
each item of Partnership income, gain, loss, deduction or credit not already
included in the computation of taxable income and taxable loss and (ii) by
excluding each such Partnership item which is separately allocated pursuant to
Article 10 hereof.
"Operating Cash Flow" shall mean the gross cash revenues received by the
Partnership as a result of the conduct by the Partnership of its business
operations, including interest on Mortgage Loans or temporary investments and
lease payments on net leases from builders and sellers, without deduction for
depreciation, but not including: (i) any Capital Contributions received from
Partners; (ii) the proceeds of any loans made to the Partnership; (iii) any
Disposition Proceeds; or (iv) any Net Sale or Refinancing Proceeds; reduced by
the sum of the following, to the extent made from such cash revenues: (x) all
principal and interest payments on indebtedness of the Partnership, and all
other sums paid to lenders (including loans made by Partners); (y) all cash
expenditures (including expenditures for capital improvements and replacements)
incurred incident to the normal operation of the Partnership's business,
including any management fees; and (z) such cash reserves as the General
Partner in its sole discretion deems reasonable, prudent, necessary and
appropriate for proper operation of the Partnership business.
"Original Contribution" shall mean the amount of $250 for each Unit which
amount shall be attributed to such Unit in the hands of subsequent holders
thereof.
"Partners" shall mean collectively the General Partner and the Limited
Partners and reference to a "Partner" shall be to any one of the Partners.
"Partnership Act" shall mean the Delaware Revised Uniform Limited
Partnership Act.
"Partnership Fixed Assets" shall mean the real estate, together with the
buildings, improvements, equipment, furniture, fixtures and personal property
associated therewith, owned by the Partnership.
"Person" shall mean any individual, corporation, partnership, joint
venture, associate, joint stock company, trust, unincorporated organization,
limited liability company or partnership or other legal entity.
"Principal" of a Mortgage Loan shall mean the funds loaned to a borrower
and upon which interest is calculated, but excluding accrued interest.
"Property Management Fee" shall mean the fee which may be payable to
Affiliates of the General Partner pursuant to Section 3.5.1.
"Qualified Plans" shall mean qualified pension, profit sharing and other
employee retirement benefit plans (including Keogh [H.R.10] Plans) and trusts,
bank commingled trust funds for such plans and individual retirement accounts
("IRAs").
"Sale or Refinancing Proceeds" shall be whichever of the following shall
be applicable: (i) consideration received by the Partnership in exchange for
the Partnership Fixed Assets; (ii) compensation received by the Partnership (by
way of insurance, eminent domain awards or otherwise) as reimbursement for the
loss, destruction or other taking of the Partnership Fixed Assets; (iii) the
amount of any refinancing of any indebtedness secured by the Partnership Fixed
Assets; or (iv) any excess working capital reserve as determined by the General
Partner, subject to any limitations imposed by
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this Agreement. "Net Sale or Refinancing Proceeds" shall be determined by
subtracting from the Sale or Refinancing Proceeds the sum of: (i) any expenses
incurred to obtain Sale or Refinancing Proceeds (including sales, refinancing
or brokerage commissions subject to the provisions of this Agreement and
attorneys' fees); (ii) the unpaid balance of any indebtedness relating to the
Partnership Fixed Assets with respect to which Sale or Refinancing Proceeds are
received; and (iii) provision for such reserves as the General Partner deems
reasonable, appropriate and necessary to satisfy the Partnership's then
outstanding indebtedness. Sale or Refinancing Proceeds shall include cash,
deferred payment contracts, securities or other property.
"Substantially All of the Assets" shall mean, unless the context otherwise
dictates, Mortgage Loans and/or Partnership Fixed Assets representing 66-2/3%
or more of the Net Asset Value of the Partnership assets as of the end of the
most recently completed fiscal quarter.
"Terminating Sale" shall have the meaning ascribed to that term in Section
10.14.5.
"Unit" shall mean a unit of limited partnership interest representing an
Original Contribution. A Unit shall entitle the holder thereof to an interest
in Net Income, Net Loss and Distributions of the Partnership as specified in
Article 10 without regard to capital accounts.
3. PURPOSES.
The purposes of the Partnership and certain limitations on its activities
shall be as set forth below in Sections 3.1 through 3.6.
3.1 Investment in Mortgage Loans.
3.1.1 Investments. The Partnership shall invest in, hold, sell,
dispose of and otherwise act with respect to first and junior Mortgage Loans on
fee or leasehold interests in real property or other beneficial interests
essentially equivalent to a mortgage on real property, as well as loans secured
by interests in partnerships, real estate investment trusts, joint ventures or
other entities. Upon a default in any of its Mortgage Loans, the Partnership
may acquire, exchange, lease, manage, mortgage, encumber, improve, use, lend,
borrow, operate, service, maintain, develop, convey, sell, subdivide, plat,
trade and deal in or otherwise dispose of the underlying property upon such
terms and conditions as the General Partner deems appropriate, subject to the
provisions of this Agreement.
3.1.2 Mortgage Placement Fee Payable to the General Partner and its
Affiliates. The General Partner or its Affiliates shall receive Mortgage
Placement Fees in an amount not to exceed such compensation customarily charged
in arm's-length transactions by others rendering similar services as an ongoing
public activity in the same geographical location for comparable mortgage
loans, payable on the funding of such Mortgage Loan, except where such funding
is payable over a period of time. Services in connection with making Mortgage
Loans shall include any of the following as required: negotiating and
structuring transactions, coordinating closings including selecting counsel,
causing to be reviewed legal documentation, disbursing Mortgage Loan proceeds,
causing filings to be made, causing a review of and approving all title
insurance arrangements, preparing reports for the Partners and other similar
services.
3.2 Investment in Real Estate.
3.2.1 Investments. The Partnership shall purchase, exchange, acquire,
lease, own, mortgage, encumber, improve or cause to be improved, use, lend,
borrow, operate, service, maintain, develop, convey and otherwise dispose of
and sell, handle, subdivide, plat, trade and deal in any property, commercial
or multi-family, real, personal or mixed, choses in action, or any interest
therein, including any non-income producing property, either
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directly or indirectly, as licensee or franchisee, individually or in
association with other Persons, whether for the account of the Partnership, or
as agent or representative for other individuals, partnerships, firms,
corporations or entities, whether public, governmental or private, and
generally engage in and conduct any form of business as may be necessary or
convenient in connection with any activities in the various states, territories
and dependencies of the United States and in the District of Columbia. The
interests in real property to be acquired by the Partnership shall normally
take the form of fee title or of a leasehold estate having a term, including
renewal periods, of at least 45 years. The Partnership shall not acquire
interests in other limited partnerships.
3.2.2 Limitations on Investments in Certain Entities.
(a) Controlling Interest. The Partnership shall not invest in any
general partnership or joint venture unless it acquires a controlling interest
in such general partnership or joint venture, or the Partnership has reserved
for itself the right to control the general partnership or joint venture
through its right to withhold approval of decisions having a material effect on
the property (i.e., the sale or refinancing of the property; the expenditure of
funds for capital improvements; the selection of depreciation and accounting
methods for federal income tax purposes; the selection of the amount and type
of insurance; and the making, termination or modification of long-term leases).
In such event, duplicate property management or other fees shall not be
permitted.
(b) Determination of Value. In determining the value of the
Partnership's interest in a joint venture arrangement, if the Partnership's
investment is made at the time of the acquisition of the property, the
Partnership's interest shall be equivalent to its cash contribution to the
joint venture in relation to the total contribution made by the Partnership and
its joint venture partner. In determining the value of the Partnership's
interest in a joint venture arrangement with another program sponsored by the
General Partner or its Affiliates, the Partnership shall obtain an appraisal
prepared by an MAI Appraiser who shall determine the value of the property at
the time the Partnership purchases its interest in such joint venture. The
Partnership will then pay a pro-rata portion of such value to determine its
investment in the joint venture.
(c) Affiliated Investments. If the Partnership enters into a
joint venture investment with the General Partner or its Affiliates subsequent
to the acquisition of the property by the General Partner or its Affiliates,
the Partnership will be subject to the restrictions set forth in this Agreement
with respect to the ownership and sale or refinancing of Partnership Fixed
Assets. The Partnership shall be permitted to invest in joint venture
arrangements with another partnership or entity formed by the General Partner
or any of its Affiliates only if all of the following conditions are met: (i)
the two partnerships or entities have identical investment objectives; (ii) the
Partnership will not incur any duplicate property management or other fees;
(iii) the compensation to the General Partner and its Affiliates must be
substantially identical in both partnerships or entities; (iv) the Partnership
must have the right of first refusal to buy the interest of the other joint
venture partner if said other partner wishes to sell the property held by such
joint venture; and (v) the investment by each such joint venture partner must
be on substantially the same terms and conditions. It should be noted that
there is a potential risk of an impasse on joint venture decisions and there
can be no assurance that the Partnership will have sufficient resources to
exercise its right of first refusal.
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(d) Junior Trust Deeds. Investments by the Partnership in junior
trust deeds and other similar obligations shall be prohibited, except for
junior trust deeds which arise from the sale of Partnership Fixed Assets.
3.2.3 Financing.
(a) Amount. The maximum amount of permanent indebtedness secured
by Partnership Fixed Assets which may be incurred by the Partnership shall not
exceed, with respect to any Partnership Fixed Asset, 80% of the Appraised Value
of that Partnership Fixed Asset.
(b) Terms. The General Partner will use its best efforts to
obtain financing under the most favorable terms available to the Partnership.
(c) Affiliate Lenders. The Partnership may receive permanent
loans (having a term in excess of 36 months) from an affiliated entity.
3.2.4 Other Affiliate Transactions.
(a) Purchases and Leases of Property from Affiliates. Any
Partnership Fixed Asset purchased or leased by the Partnership from the General
Partner or its Affiliates will be purchased or leased upon terms which are fair
to the Partnership at a price or rental not in excess of Appraised Value. In
addition, the cost of the Partnership Fixed Asset and all improvements thereon
will be clearly established. If the General Partner or its Affiliate's cost is
less than the price to be paid by the Partnership, the price to be paid will
not be deemed fair, regardless of the Appraised Value, unless material changes
occur to the Partnership Fixed Asset which have increased the value since the
General Partner or its Affiliates acquired the property. Material factors may
include the passage of a significant amount of time (but in no event less than
two years), the assumption by the General Partner or its Affiliates of the risk
of obtaining a re-zoning of the property and its subsequent re-zoning, or some
other extraordinary event which in fact increases the value of the Partnership
Fixed Asset. The Partnership will also obtain from an Independent Advisor, a
letter of opinion to the effect that any proposed purchase or lease from the
General Partner or its Affiliates is fair and at least as favorable to the
Partnership as a purchase or lease from an unaffiliated entity in similar
circumstances. The Independent Advisor's compensation will be paid by the
General Partner or its Affiliates and will not be reimbursable by the
Partnership. The Partnership may not acquire Partnership Fixed Assets from a
limited partnership in which the General Partner or its Affiliates have any
interest.
(b) Sales and Leases of Property to Affiliates. The Partnership
shall not sell or lease Partnership Fixed Assets to the General Partner or its
Affiliates except as follows:
(i) The Partnership may lease Partnership Fixed Assets to the
General Partner or its Affiliates pursuant to a lease-back arrangement, the
terms of which are no less favorable to the Partnership than those offered to
and accepted by Persons who are not Affiliates of the General Partner.
(ii) The General Partner or its Affiliates may purchase
Partnership Fixed Assets (or contract rights related thereto) from the
Partnership only if the General Partner or its Affiliates agree to purchase any
such Partnership Fixed Asset (or contract rights) at a purchase price equal to
the fair market value thereof.
(c) Purchases by Affiliates of Partnership Fixed Assets. The
General Partner or its Affiliates may purchase Partnership Fixed Assets in
their own name (and assume loans in connection therewith) and temporarily hold
title thereto for the purpose of facilitating the acquisition of such
Partnership Fixed Assets or the borrowing of money or obtaining of financing
for the Partnership, or any other purpose related to the business of the
Partnership, provided that such Partnership Fixed Assets are purchased by the
Partnership on the terms and subject to the conditions set forth in Section
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3.2.4(a), and provided there is no difference in interest rates of the
loans secured by the Partnership Fixed Assets at the time acquired by the
General Partner and the time acquired by the Partnership, nor any other benefit
arising out of said transaction to the General Partner apart from other
compensation otherwise permitted by this Agreement.
(d) Development, Construction or Major Repairs or Rehabilitation
of Partnership Fixed Assets by Affiliates. The General Partner and its
Affiliates may develop, construct or provide Major Repairs or Rehabilitation of
Partnership Fixed Assets, or render any services in connection with such
activities, only in accordance with the following:
(i) The Development Fee paid in connection with such project
shall not exceed 10% of the direct costs of the project (direct costs shall not
include construction site personnel or utilities).
(ii) The Construction Fee paid in connection with such project
shall not exceed 10% of the direct costs of the project (direct costs shall not
include construction site personnel or utilities).
(iii) The only Front-End Fees paid to the General Partner or
its Affiliates in connection with such project shall consist of a Development
Fee, a Construction Fee and a real estate commission in connection with the
acquisition of the land from Persons who are not Affiliates of the General
Partner. Such fees, plus any additional Acquisition Fees and Acquisition
Expenses to non-Affiliated Persons must be comparable to and competitive with
the fees paid to non-Affiliated Persons rendering comparable services in the
same geographical area.
3.2.5 Compensation to the General Partner and its Affiliates.
(a) Acquisition Fees. The Partnership shall pay to the General
Partner or its Affiliates, as initial consideration for their services in
connection with the evaluation, investigation, negotiation, selection and
purchase of all properties, and otherwise rendering acquisition services either
directly or indirectly, Acquisition Fees in an amount equal to 2% of the price
of each such Partnership Fixed Asset.
(b) Refinancing Fees. The Partnership shall pay to the General
Partner or its Affiliates, for services rendered in connection with the
refinancing of a Partnership Fixed Asset, a mortgage placement fee equal to the
lesser of: (i) 1% of the refinancing proceeds of the Partnership Fixed Asset;
or (ii) fees which are competitive for similar services in the geographical
area where the Partnership Fixed Asset is located.
(c) Development Fees. The Partnership shall pay to the General
Partner or its Affiliates, for services rendered in connection with the
development and construction of any Partnership Fixed Asset, a Development Fee
equal to 10% of the total costs of development.
(d) Construction Fees. The Partnership shall pay to the General
Partner or its Affiliates, for services rendered in connection with the
development and construction of any Partnership Fixed Asset, a Construction Fee
equal to 10% of the total costs of development.
(e) Guaranty Fees. In the event that the General Partner or its
Affiliates guaranty any indebtedness of the Partnership, the Partnership shall
pay to the General Partner or such Affiliates, as the case may be, a fee in an
amount competitive with guaranty fees of a similar nature.
3.3 Short-Term Loans. The Partnership shall lend funds on an unsecured
basis for periods not to exceed one year at interest rates based on market
conditions.
3.4 Investment of Partnership Funds. The Partnership may reinvest
Operating Cash Flow, Disposition Proceeds and/or Net Sale or Refinancing
Proceeds, in the sole discretion of the General Partner, in additional Mortgage
Loans and properties in accordance with the provisions of Section 10.8 below.
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3.5 Other Fees Payable to the General Partner and its Affiliates.
3.5.1 Property Management Fees. An Affiliate of the General Partner may
provide property management services should such services be required by the
Partnership, including after foreclosure on a Mortgage Loan or with respect to
any other Partnership Fixed Asset, and if so will be entitled to a fee which
shall be paid monthly and shall be equal to the lesser of (a) fees which are
competitive for similar services in the same geographic area or (b)(i) 5% of
the gross revenues with respect to residential properties; (ii) 6% of the gross
revenues with respect to industrial and commercial properties; or (iii) 1% of
the gross revenues with respect to industrial and commercial properties which
are leased on a long-term net basis (except for a one time initial leasing fee
of 3% of gross revenues). Where an Affiliate of the General Partner provides
property management services, any property management fees payable to
unaffiliated parties will be paid out of the property management fees paid to
the manager. Included in such fees shall be bookkeeping services and fees paid
to unrelated persons for property management services. In the event that an
Affiliate of the General Partner provides leasing services, such Affiliate
shall be paid a fee which is competitive for similar services in the same
geographic area.
3.5.2 Subordinated Real Estate Commission. The Partnership may pay for
real estate brokerage services to all Persons involved in the sale of (a)
properties acquired upon foreclosure of Mortgage Loans or (b) Partnership Fixed
Assets, real estate brokerage fees which are reasonable, customary and
competitive, taking into consideration the size, type and location of the
Partnership Fixed Asset ("Competitive Commission"), and shall not in the
aggregate exceed 6% of the gross sales price of the Partnership Fixed Asset;
however, as to any Affiliate of the General Partner, such fees shall be paid
only if such Affiliate provides a substantial amount of services in the sale
effort and shall not exceed the lesser of (i) a percentage of the gross sales
price of a Partnership Fixed Asset equal to one-half of the Competitive
Commission, or (ii) 3% of the gross sales price of such Partnership Fixed
Asset. The real estate brokerage fee shall be payable upon the completion of
the sale of each Partnership Fixed Asset.
3.5.3 Insurance Commissions. Insurance commissions may be payable to
insurance agencies affiliated with the General Partner for providing insurance
brokerage services in connection with the issuance of insurance covering
Partnership Fixed Assets or other properties owned by the Partnership or
underlying Mortgage Loans, but only if the conditions set forth in Section
14.2.16 are satisfied.
3.6 Further Assurances. The Partnership shall do each and everything
necessary, suitable or proper for the accomplishment of any of the purposes or
the attainment of any one or more of the objectives herein enumerated, either
alone, or in association with, or as agent or representative for, other Persons
(whether public, governmental or private), or to accomplish any other lawful
business whatsoever, or which shall at any time appear conducive to or
expedient for the protection or benefit of the Partnership.
4. TERM.
The Partnership commenced concurrently with the filing of the Certificate
of Limited Partnership with the Secretary of State of the State of Delaware,
and shall continue until December 31, 2016, unless previously terminated in
accordance with the provisions of this Agreement.
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5. GENERAL PARTNER.
5.1 Capital Contributions of General Partner. The General Partner has
succeeded to the interest of the former general partners of the Partnership,
who contributed an aggregate of $1,000 in cash to the Partnership. At all
times during the existence of the Partnership, the General Partner shall have
an aggregate present and continuing interest in Net Income, Net Loss and
Distributions according to the provisions of Article 10.
5.2 Capital Accounts. A separate capital account shall be maintained for
the General Partner pursuant to Section 10.13 hereof.
5.3 Deficiencies. In the event that, immediately following the
liquidation of the Partnership referred to in Section 18.2, the General Partner
shall have a deficiency in its capital account as determined in accordance with
tax accounting principles and if the assets available for distribution upon the
dissolution and termination of the Partnership are insufficient to allow
Distributions to the Limited Partners of amounts equal to the then balances in
their capital accounts as determined in accordance with generally accepted tax
principles, then the General Partner shall contribute in cash to the capital of
the Partnership an amount equal to the lesser of (a) the deficiency in the
General Partner's capital account or (b) the excess of 1.01% of the total
Original Contribution over the total capital contributions of the General
Partner. Such contribution shall be made no later than the end of the
Partnership taxable year in which the liquidation occurs (of, if later, within
90 days after the date of such liquidation).
6. LIMITED PARTNERS.
6.1 Capital Accounts. A separate capital account shall be maintained for
each Limited Partner pursuant to Section 10.13 hereof.
6.2 No Exchange of Units for Mortgage Loans or Partnership Fixed Assets.
The Partnership shall not acquire Mortgage Loans or Partnership Fixed Assets in
exchange for Units.
7. LIABILITY OF LIMITED PARTNERS.
7.1 General Limitation on Liability. Limited Partners shall not be bound
by, or be personally liable for, the expenses, liabilities or obligations of
the Partnership in excess of their contributions, and no Limited Partner shall
be required to lend funds to the Partnership, to make any further contribution
of capital to the Partnership or to repay to the Partnership, any Partner or
any creditor of the Partnership all or any portion of any negative amount of
such Limited Partner's capital account.
7.2 Certain Liabilities of Limited Partners. Under state law, it is
possible that a Limited Partner may be liable to the Partnership to the extent
of a previous Distribution made to such Limited Partner which represents a
return of the Limited Partner's Original Contribution if the Partnership does
not have sufficient assets to discharge its liabilities. If a court of
competent jurisdiction holds that, notwithstanding the provisions of this
Agreement, any Limited Partner is obligated to make such payment, such
obligation shall be the obligation of such Limited Partner and not of the
General Partner.
8. UNITS.
8.1 Status of Units. Each Unit is fully paid and nonassessable.
8.2 Repurchases. Neither the Partnership, nor the General Partner or its
Affiliates shall be obligated or required to redeem or purchase any Units.
However, the Partnership may purchase outstanding Units if such purchase does
not impair the capital or operations of the Partnership at a price determined
by the General Partner, in its sole discretion, based on market considerations.
A Limited Partner wishing to have such Limited Partner's Units purchased (the
"Tendering Limited Partner") shall mail or deliver a written request therefor
to the Partnership's principal office (executed by its trustee or authorized
agent, if applicable), setting forth
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the name and address of the Tendering Limited Partner and the number of Units
tendered. Such requests will be considered by the General Partner. The General
Partner may request, and the Tendering Limited Partner shall provide, any
further information needed by the General Partner in order to determine whether
or not to accept the tender. In the event that the General Partner determines,
in its sole discretion, to honor a request for purchase, it will notify the
Tendering Limited Partner in writing of such fact and will forward to such
Limited Partner the documents necessary to effect such purchase within 60 days
thereafter.
9. PARTNERSHIP EXPENSES.
9.1 Reimbursement of Expenses. All Partnership expenses shall be billed
directly to and paid by the Partnership. The General Partner and its
Affiliates may be reimbursed by the Partnership for the actual cost to the
General Partner or its Affiliates of goods and material used for or by the
Partnership and obtained from unaffiliated parties and administrative services
necessary to the prudent operation of the Partnership, provided that
reimbursement for administrative services will be at the lesser of (a) the
actual cost of such services or (b) the amount which the Partnership would be
required to pay to independent parties for comparable services.
9.2 Limitations on Reimbursement. The General Partner and its Affiliates
shall not be reimbursed by the Partnership for the following expenses:
(a) services for which the General Partner or its Affiliates are
entitled to compensation in the form of a separate fee pursuant to Article 3
hereof;
(b) rent, depreciation, utilities or other administrative items
generally constituting the General Partner's overhead;
(c) salaries, fringe benefits, travel expenses or other
administrative items incurred by or allocated to any controlling person of
the General Partner or its Affiliates; for purposes of this subsection,
"controlling person" shall mean: (i) any individual, regardless of title,
who performs executive or senior management functions for the General Partner
or its Affiliates similar to those of executive management or senior
management; (ii) directors; (iii) Persons holding 5% or more equity interest
in the General Partner or its Affiliates or (iv) Persons having the power to
direct or cause the direction of the General Partner or its Affiliates
through ownership of voting securities, by contract or otherwise (it is not
intended that every individual who carries a title such as vice president,
senior vice president, secretary or treasurer be considered a controlling
person); or
(d) the fees and expenses of any Independent Advisor to the Partners
with respect to transactions with Affiliated entities.
9.3 Partnership Obligations. Subject to Sections 9.1 and 9.2, the
Partnership shall pay all expenses of the Partnership (which expenses shall be
billed directly to the Partnership) which may include, but are not limited to:
(a) all costs of personnel employed by the Partnership, the General
Partner or its Affiliates and involved in the business of the Partnership;
(b) legal, audit, accounting, brokerage and other fees;
(c) printing, engraving and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, registration and
recording of documents evidencing ownership of an interest in the Partnership
or in connection with the business of the Partnership;
(d) fees and expenses paid to independent contractors, appraisers,
mortgage bankers, brokers and servicers, leasing agents, consultants, on-site
managers, real estate brokers, insurance brokers and other agents;
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(e) expenses in connection with the disposition, replacement,
alteration, repair, remodeling, refurbishment, leasing, refinancing and
operation of Partnership Fixed Assets upon foreclosure or otherwise,
including the costs and expenses of foreclosures, insurance premiums, real
estate brokerage, leasing commissions and maintenance of any such Partnership
Fixed Asset and any tax or assessment thereon;
(f) the cost of insurance as required in connection with the business
of the Partnership;
(g) expenses of organizing, revising, amending, converting, modifying
or terminating the Partnership;
(h) the cost of preparation and dissemination of information and
documentation relating to potential Dispositions of Mortgage Loans;
(i) expenses in connection with Distributions made by the Partnership
to, and communications and bookkeeping and clerical work necessary in
maintaining relations with, the Limited Partners, including reports of meetings
of the Partnership, and of preparation of proxy statements and solicitations of
proxies in connection therewith;
(j) expenses in connection with preparing and mailing reports required
to be furnished to Limited Partners for investor, tax reporting, federal
securities law or other purposes, or which reports the General Partner deems
the furnishing thereof to Limited Partners to be in the best interests of the
Partnership;
(k) the cost incurred in connection with any litigation or proceeding
in which the Partnership is involved, as well as in the examination,
investigation or other proceedings conducted by any regulatory agency of the
Partnership, including legal and accounting fees incurred in connection
therewith;
(l) computer services including the cost of any computer equipment or
services used for or by the Partnership, including establishment and
maintenance of investment records and processing of accounting records relating
to the Partnership;
(m) the cost of any accounting statistical or bookkeeping equipment
necessary for the maintenance of the books and records of the Partnership; and
(n) supervision and expense of professionals retained by the
Partnership in connection with any of the foregoing, including, without
limitation, attorneys, accountants and appraisers.
10. ALLOCATION OF INCOME AND LOSS AND DISTRIBUTIONS.
10.1 Allocations of Net Income, Net Loss and Tax Exempt Items.
10.1.1 Allocations. Except as otherwise provided in Sections 10.1.2,
10.3, 10.4 and 10.5 of this Agreement, Net Income (other than Net Income
attributable to Disposition Proceeds and Net Sale or Refinancing Proceeds), Net
Loss and all items of income exempt from federal income tax shall be allocated
2.5% to the General Partner and 97.5% to the Limited Partners.
10.1.2 Mandatory Allocations. Notwithstanding the foregoing, (a) in the
event Code Section 704(c) or Code Section 704(c) principles applicable under
Treas. Reg. 1.704-2 require allocations of income or loss of the Partnership
in a manner different than set forth above, the provisions of Section 704(c)
and the regulations thereunder shall control such allocations among the
Partners, and (b) all deductions of the Partnership which are attributable to
(i) any loan of the Partnership which is guaranteed by a Partner or (ii) any
loan made to the Partnership by a Partner (or which are treated as such by
Treas. Reg. under 1.704-2) shall be allocated solely to such Partner if so
required by such Treas. Regs.
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10.2 Apportionment of Net Income, Net Loss and Distributions Among Limited
Partners. Except as otherwise provided in this Article 10, that portion of Net
Income, Net Loss and Distributions allocated to the Limited Partners shall be
apportioned among the Limited Partners for any calendar quarter in the ratio in
which the number of Units owned by each Limited Partner on the first day of
such calendar quarter bears to the total number of Units owned by all Limited
Partners as of that date.
10.3 Allocations Causing Negative Capital Accounts. Notwithstanding
Section 10.2, to the extent that any allocation of Net Loss and/or item of
deduction to a Limited Partner would reduce such Limited Partner's capital
account balance (determined after taking into account all prior Distributions
and all prior allocations of Net Income and Net Loss) below zero or would
increase the negative balance in such Limited Partner's capital account at a
time when another Limited Partner has a positive capital account balance, such
Net Loss shall instead be allocated pro rata to Limited Partners having
positive capital account balances in proportion to their respective positive
capital account balances until such capital account balances are reduced to
zero; provided, however, that in no event shall there be a reallocation of any
item of income, gain, loss or deduction allocated among the Partners pursuant
to this Agreement for prior years. In the event the provisions of this
Paragraph 10.3 prohibit the allocation of any portion of Net Loss and/or item
of deduction to every Limited Partner, such portion of the Net Loss shall
instead be allocated to the General Partner.
For purposes of determining a Limited Partner's capital account balance
for purposes of Net Loss or deduction allocations under this Section 10.3,
Distributions made prior to or contemporaneously with any allocation to a
Limited Partner shall be reflected in such Partner's capital account prior to
making such allocation to such Partner. For purposes of this Section 10.3 and
Section 10.4, a Partner's capital account shall be reduced for the items
described in Treas. Reg 1.704-1(b)(ii)(d)(4), (5) and (6).
For purposes of determining the amount of expected Distributions and
expected capital account increases described above: (A) the rules set forth in
Treas. Reg. 1.704-1(b)(2)(iii)(c) concerning the presumed value of Partnership
Fixed Assets shall apply, and (B) gross income or Net Income allocated to a
Partner pursuant to Section 10.4 hereof shall be taken into account. For
purposes of this Section 10.3 and Section 10.4, a Partner's capital account
shall be increased to the extent that such Partner is obligated to fund
deficits in such Partner's capital account upon liquidation of the Partnership
or is treated as obligated to restore such deficits pursuant to Treas. Reg.
1.704-1(b)(2)(ii)(c), any addition thereto pursuant to Treas. Reg. 1.704-
2(g)(i) and 1.704-2(i)(5) after taking into account any changes during such
year in partnership minimum gain (as determined in accordance with Treas. Reg.
1.704-2(d)) and in the minimum gain attributable to any Partner for
nonrecourse debt (as determined under Treas. Reg. 1.704-2(i)(3)).
10.4 Special Allocations. Notwithstanding the provisions of Section 10.3
hereof,
(a) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treas. Reg. 1.704-
1(b)(2)(ii)(d)(4), (5) and (6) which create or increase a deficit capital of
such Partner, then items of Net Income and gain (consisting of a pro rata
portion of each item of Partnership income, including gross income, and gain
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for such year and, if necessary, for subsequent years) shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations, the deficit capital account so
created as quickly as possible. It is the intent that this Section 10.4(a) be
interpreted to comply with the alternate test for economic effect set forth in
Treas. Reg. 1.704-1(b)(2)(ii)(d).
(b) In the event any Partner would have a deficit capital account
at the end of any Partnership taxable year which is in excess of the sum of any
amount that such Partner is obligated to restore to the Partnership under
Treas. Reg. 1.704-1(b)(2)(ii)(c) and such Partner's share of minimum gain as
defined in Treas. Reg. 1.704-2(g)(1) (which is also treated as an obligation to
restore in accordance with Treas. Reg. 1.704-1(b)(2)(ii)(d)), the capital
account of such Partner shall be specially credited with items of Partnership
income (including gross income) and gain in the amount of such excess as
quickly as possible.
(c) Notwithstanding any other provision of this Section 10.4, if
there is a net decrease in the Partnership's minimum gain as defined in Treas.
Reg. 1.704-2(d) during a taxable year of the Partnership, then the capital
account of each Partner shall be allocated items of income (including gross
income) and gain for such year (and if necessary for subsequent years) equal to
that Partner's share of the net decrease in Partnership minimum gain. This
Section 10.4(c) is intended to comply with the minimum gain chargeback
requirement of Treas. Reg. 1.704-2 and shall be interpreted consistently
therewith. If in any taxable year that the Partnership has a net decrease in
the Partnership's minimum gain, and the minimum gain chargeback requirement
would cause a distortion in the economic arrangement among the Partners and it
is not expected that the Partnership will have sufficient other income to
correct that distortion, the General Partner may in its discretion (and shall,
if requested to do so by a Partner) seek to have the Internal Revenue Service
waive the minimum gain chargeback requirement in accordance with Treas. Reg.
1.704-2(f)(4).
10.5 Allocation of Net Income and Net Loss from Dispositions and Sale or
Refinancing of Partnership Fixed Assets. Except as otherwise provided in
Sections 10.1.2, 10.3, 10.4, 10.9 and 10.14, Net Income or Net Loss for tax
purposes arising from a Disposition, or the sale or refinancing of a
Partnership Fixed Asset, (other than a Terminating Sale) shall be allocated in
the following order of priority:
(a) to the Partners to the extent of and in proportion to the
amount of Disposition Proceeds or Net Sale or Refinancing Proceeds in respect
of which such Distribution is to be made which is to be distributed to each of
them pursuant to Section 10.7 (other than pursuant to Section 10.7.1); and
(b) the remainder of such Net Income, if any, shall be allocated
to the Partners to the extent of the amount of Disposition Proceeds or Net Sale
or Refinancing Proceeds to be distributed to the Partners pursuant to Section
10.7.1.
10.6 Distributions of Operating Cash Flow. Distributions of Operating
Cash Flow shall be allocated 97.5% to the Limited Partners and 2.5% to the
General Partner. Such Distributions shall be apportioned among Limited Partners
as Net Income and Net Loss are apportioned and, when available, may be
distributed or reinvested in Mortgage Loans, properties or as otherwise
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permitted under Article 3 of this Agreement in the sole discretion of the
General Partner.
10.7 Disposition Proceeds; Net Sale or Refinancing Proceeds. Except as
otherwise provided in Section 10.8 below, Distributions of Disposition Proceeds
and Net Sale or Refinancing Proceeds shall be made in the following order of
priority:
10.7.1 First, 97.5% to the Limited Partners and 2.5% to the General
Partner until each Limited Partner has received an amount which, when added to
prior Distributions of Disposition Proceeds and Net Sale or Refinancing
Proceeds and cash from reserves equals such Limited Partner's Original
Contribution;
10.7.2 Second, 97.5% to the Limited Partners and 2.5% to the General
Partner until each Limited Partner has received an amount which, when added to
all prior Distributions to such Limited Partner from all sources other than
pursuant to Section 10.7.1, equals at least a 12% per annum cumulative
compounded return on such Limited Partner's Adjusted Contribution, commencing
as of the last day of the calendar quarter in which such Limited Partner's
Original Contribution was received by the Partnership; and
10.7.3 Third, the remainder, 97.5% to the Limited Partners and 2.5% to the
General Partner.
10.7.4 The Distributions set forth in Sections 10.7.2 and 10.7.3 are
subject to the payment of the subordinated real estate commission, if any,
described in Section 3.5.2, with payment of such commission, if any, being
subordinated to certain Distributions to the Limited Partners as provided in
Section 3.5.2.
10.8 Reinvestment Option. All Operating Cash Flow, Disposition Proceeds
and Net Sale or Refinancing Proceeds received by the Partnership during any
calendar quarter shall be distributed within 60 days following the end of such
calendar quarter. Notwithstanding the previous sentence, the Partnership may
reinvest Operating Cash Flow, Disposition Proceeds and Net Sale or Refinancing
Proceeds in additional Mortgage Loans or Partnership Fixed Assets or as
otherwise permitted pursuant to Article 3 hereof. Prior to any reinvestment,
the General Partner must believe that any additional investment will enhance
the overall return to the Limited Partners and is consistent with the
Partnership's overall investment policies.
10.9 Distributions of Liquidation Proceeds. Notwithstanding the
provisions of Section 10.7 above, Distributions of Proceeds arising in
connection with a Terminating Sale shall be distributed to the General Partner
and Limited Partners in accordance with the positive balances in their
respective capital accounts after allocating income from the Disposition
pursuant to Section 10.14 hereof.
10.10 One Percent Interest of General Partner. Notwithstanding any
provision to the contrary in this Agreement, in no event shall the General
Partner's interests in each material item of the Partnership income, gain,
loss, deduction or credit be less than 1% of each such item at all times during
the existence of the Partnership.
10.11 Fees/Distributions. To the extent that the Partnership shall be
entitled to any deduction for federal income tax purposes as a result of any
Distributions made to the General Partner, such deduction shall be allocated
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for federal income tax purposes to the General Partner. To the extent that any
fee payable to the General Partner is recharacterized as a Partnership
distribution, gross income of the Partnership of equivalent amount shall be
allocated to the General Partner prior to making the other tax allocations
required by this Article 10. Any deduction attributable to the receipt by the
General Partner of an interest in the Partnership shall be allocated to the
Limited Partners on a per Unit basis. Any income recognized by the Partnership
attributable to amounts paid or payable to the Partnership by the General
Partner or its Affiliates which is required to be distributed solely to the
Limited Partners shall be allocated to the Limited Partners in proportion to
and to the extent of such amounts which are required to be distributed to each
Limited Partner.
10.12 Distribution Subject to Payments. All Distributions are subject to
the payment of Partnership expenses and to the maintenance of reasonable
reserves. In addition, the Partnership may not pay any Distribution to the
extent that, after giving effect to the Distribution, all liabilities of the
Partnership, other than liabilities to partners on account of their interests
in the Partnership, exceed the fair value of the Partnership assets.
10.13 Capital Accounts.
10.13.1 Increases and Decreases. A separate capital account shall be
maintained for each Partner. The capital account of each Partner shall be
increased by (a) the amount of money contributed by such Partner to the capital
of the Partnership; and (b) such Partner's share of Partnership Net Income (or
item thereof) and any income or gain that is exempt from federal income
taxation. The capital account of each Partner shall be decreased by (i) the
amount of money distributed to such Partner by the Partnership; (ii) such
Partner's share of Net Loss (or item thereof) for tax purposes; and (iii) such
Partner's share of expenditures of the Partnership which are neither deductible
nor properly chargeable to capital account under Code Section 705(a)(2)(B) or
are treated as such expenditures under Treas. Reg. 1.704-1(b)(2)(iv)(i).
10.13.2 Single Capital Account. 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
(e.g., general or limited) and regardless of the time or manner in which such
interests were acquired.
10.13.3 Contribution of Property. In the event that property (other
than cash) is contributed (or deemed contributed pursuant to the provisions of
Code Section 708) by a Partner to the Partnership, the computation of capital
accounts, as set forth in this Section 10.13, shall be adjusted as follows:
(a) the contributing Partner's capital account shall be increased
by the fair market value of the property contributed to the Partnership by such
Partner (net of liabilities secured by contributed property that the
Partnership is considered to assume or take subject to under Code Section 752);
and
(b) as required by Treas. Reg. 1.704-1(b)(2)(iv)(g) and 1.704-
1(b)(4)(i), if the capital account of any Partner reflects a fair market value
for property which differs from such property's adjusted basis, each Partner's
capital account shall be adjusted to take account of the amount of
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book gain and book loss (other than book loss attributable to expenditures of
the Partnership described in Section 10.13.1(iii)) allocated to such Partner
pursuant to Article 10 hereof and shall not take into account the Net Income
and Net Loss for tax purposes allocated to such Partner pursuant to this
Article 10.
10.13.4 Special Rules. In the event that property is distributed (or
deemed distributed pursuant to the provisions of Code Section 708) by the
Partnership to a Partner the following special rules shall apply:
(a) the capital accounts of the Partners receiving the
distribution first shall be adjusted (as provided in Code 704(b) and Treas.
Reg. 1.704-1(b)(2)(iv)(e)) to reflect the manner in which the unrealized
income, gain, loss and deduction inherent in such property (that has not
already been reflected in the Partners' capital accounts) would be allocated to
such Partners if there were a taxable disposition of such property for its fair
market value on the date of distribution; and
(b) the capital account of the Partner who is receiving the
distribution of property from the Partnership shall be charged with the fair
market value of the property at the time of distribution (net of liabilities
secured by such property that such Partner is considered to assume or take
subject to under Code Section 752).
10.13.5 Capital Account Maintenance Requirements. The foregoing
provisions are intended to satisfy the capital account maintenance requirements
of Code Section 704(b) and Treas. Reg. 1.704-1(b)(2)(iv) and such provisions
shall be modified to the extent required by such Section or any successor
provision thereto.
10.14 Termination Rules. In connection with a Terminating Sale, Net Income
shall be allocated as follows:
10.14.1 first, to all Partners having negative capital account
balances in proportion to and to the extent of their respective negative
capital account balances;
10.14.2 then, to the Partners until the capital account balance
of each Partner (determined after making the allocation described in
subparagraph 10.14.1 but before distributing the proceeds from such Terminating
Sale) shall be equal to the Distributions which would be made to such Partner
if the Proceeds from such sale were distributed pursuant to Sections 10.7.1.
10.7.2 and 10.7.3;
10.14.3 in the event that Net Income to be allocated to Limited
Partners pursuant to Section 10.14.2 shall be insufficient to bring the capital
account balance of each Limited Partner, to whom such allocation is required,
to said balance, then such Net Income shall be allocated first to Limited
Partners having the smallest capital accounts per Unit so as to equalize, to
the extent possible, the capital accounts per Unit of all Limited Partners; and
10.14.4 the remainder of such Net Income, if any, shall be
allocated 2.5% to the General Partner and 97.5% to the Limited Partners. The
portion of the Net Income under this Section 10.14.4 which is allocated to the
Limited Partners as a group, shall, to the extent of any unpaid cumulative
return of the Limited Partners under Section 10.7.2, first be
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allocated among the Limited Partners pro rata in proportion to such unpaid
return due each Limited Partner.
10.14.5 A "Terminating Sale" shall mean the disposition of the
last one-third in Principal amount of the Partnership's Mortgage Loans and
Partnership Fixed Assets, commencing with the first such disposition.
11. ASSIGNMENT OF UNITS.
11.1 Procedures. Subject to Sections 11.3 and 11.4, Limited Partners shall
have the right to assign ten or more whole Units, provided, however, unless
prohibited by any applicable state securities law, four Units may be acquired
or retained by IRA or Keogh Plans, and provided further that a Limited Partner
must assign all of such Limited Partner's Units if such Limited Partner would
otherwise retain less than the minimum amount. Such assignment shall be made by
a written instrument, the terms of which are not in contravention of any of the
provisions of this Agreement, which instrument shall be duly executed by the
assignor of such Units; provided, however, that no proposed assignment of a
Unit shall be effective for any purpose until the "effective date" of such
assignment (as defined in Section 11.2) shall have occurred. A Limited Partner
shall, within thirty days after assignment, notify the General Partner of such
proposed assignment of a beneficial interest in any Units which occurs without
a transfer of record ownership.
11.2 Treatment o/ Assignor and Assignee; Effective Date. An assignee shall
be entitled to receive allocations of Net Income, Net Loss and Distributions
and all reports and other notices from the Partnership attributable to Units
assigned from and after the "effective date" of the assignment of such Units.
The Partnership and the General Partner shall be entitled to treat the assignor
of such Units as the absolute owner thereof in all respects, and shall incur no
liability for allocations of Net Income, Net Loss or Distributions, or
transmittal of reports and notices required to be given to Limited Partners
hereunder which are made in good faith to such assignor until such "effective
date" and transfers of Units shall not be recognized for any purpose until the
"effective date." The "effective date" of an assignment on which the assignee
shall be deemed an assignee of record shall be the first day of the calendar
quarter following the later of (a) the date set forth on the written instrument
of assignment, a copy of which has been delivered to the Partnership, or (b)
the date on which the Partnership has actual notice of the proposed assignment
of Units.
11.3 Restrictions.
(a) Except as provided in this Section 11.3, no assignment of Units by a
Limited Partner may be made if (i) the Units sought to be assigned, when added
to the total of all other Units assigned within the period of twelve
consecutive months prior to the proposed date of assignment would, in the
opinion of counsel for the Partnership, result in the termination of the
Partnership under the Code, or (ii) if in the opinion of counsel for the
Partnership, such assignment would be in violation of any applicable federal or
state securities laws (including any investor suitability standard). However,
with respect to clause (i), such assignment may be made if upon the application
and at the expense of the Limited Partner desiring to assign such Limited
Partner's Units, there shall have been granted to the transferring Limited
Partner and the Partnership a private ruling by the Internal Revenue Service
that the proposed assignment would not cause a termination.
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(b)In order to prevent the Partnership from being treated as a "publicly
traded partnership" for federal tax purposes, when the General Partner
determines in its sole discretion, that a proposed transfer was effected on a
secondary market (or a substantial equivalent thereof), the General Partner has
the right to refuse to recognize any such attempted transfer of Units, or
economic rights therein, which would constitute a transfer in a secondary
market (or a substantial equivalent thereof) as defined under Code Section 7704
and any regulations promulgated thereunder. The Limited Partners agree not to
transfer their Units on a secondary market (or a substantial equivalent
thereof). The Limited Partners agree to provide all information respecting
transfers which the General Partner deems necessary in order to determine
whether the transfer occurred on a secondary market (or a substantial
equivalent thereof). In the event that the determination that a transfer would
be effected on a secondary market (or substantial equivalent thereof) is made,
the General Partner shall exercise such right by taking any actions it deems
necessary or appropriate in its reasonable discretion so that such transfer is
not in fact recognized. The right to exercise the foregoing restriction on
transfers shall not be exercised if the General Partner determines in its
reasonable discretion that the exercise of such restriction would result in the
Partnership being deemed to hold plan assets for purposes of ERISA. The General
Partner shall incur no liability to any investor or prospective investor for
any action or inaction by it in connection with the foregoing, provided it
acted in good faith.
11.4 Ineffective Transfers. Any assignment, sale, exchange or other
transfer in contravention of any of the provisions of this Article 11 shall be
void and deemed ineffectual and shall not bind or be recognized by the
Partnership.
12. SUBSTITUTED LIMITED PARTNERS.
12.1 Requirements. Notwithstanding Article 11, no assignee shall have the
right to become a substituted Limited Partner in place of such assignee's
assignor unless all of the following conditions are first satisfied:
12.1.1 the provisions of this Article 12 are complied with;
12.1.2 the instrument of assignment sets forth the intention of the
assignor that the assignee succeed to the assignor's interest as a substituted
Limited Partner in the Limited Partner's place;
12.1.3 the assignor and assignee shall have executed and acknowledged
such other instruments as the General Partner may deem necessary or desirable
to effect such substitution, including the written acceptance and adoption by
the assignee of the provisions of this Agreement, as the same may be amended,
and execution, acknowledgement and delivery to the General Partner of a special
power of attorney, the form and content of which are described herein; and
12.1.4 a transfer fee sufficient to cover all reasonable expenses
connected with such substitution (not to exceed $150) shall have been paid to
the Partnership.
12.2 Consent. By executing or adopting this Agreement, each Limited
Partner hereby consents to the admission of additional or substituted Limited
Partners by the General Partner and to an assignee of Units becoming a
substituted Limited Partner in accordance with the foregoing.
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12.3 Amendments. The General Partner shall cause this Agreement and, if
required by the Partnership Act or any other applicable law, any separate
Certificate of Limited Partnership, to be amended to reflect the admission
and/or substitution of Limited Partners at least once in each calendar month,
but not later than thirty days after the effective date of the assignment of a
Unit.
12.4 Special Exercise of the Rights of a Limited Partner. If a Limited
Partner dies, such Limited Partner's executor, administrator or trustee, or if
a Limited Partner is adjudicated incompetent, such Limited Partner's committee,
guardian or conservator, or if a Limited Partner is adjudicated bankrupt, the
trustee or receiver of such Limited Partner's estate, shall have all the rights
of a Limited Partner for the purpose of settling or managing such Limited
Partner's estate and such power as the decedent, incompetent or bankrupt
possessed to assign all or any part of such Limited Partner's Units and to join
with the assignee thereof in satisfying conditions precedent to such assignee
becoming a substituted Limited Partner. The death, dissolution or bankruptcy of
a Limited Partner shall not dissolve the Partnership.
13.BOOKS, RECORDS, ACCOUNTINGS AND REPORTS.
13.1 Location of Records. The Partnership's books and records, this
Agreement and any amendment hereto or restatement hereof, any separate
Certificate of Limited Partnership and any amendment thereto or restatement
thereof, and copies of each appraisal of properties underlying Mortgage Loans
or constituting Partnership Fixed Assets shall be maintained at the principal
offices of the Partnership or such other place as the General Partner may
determine and shall be open to inspection, examination and copying by Limited
Partners or their duly authorized representatives at all reasonable times. A
reasonable charge for copying may be charged by the Partnership. The Limited
Partners shall not receive copies of this Agreement and any amendment hereto or
restatement hereof, the Certificate of Limited Partnership and any amendment
thereto or restatement thereof or a current list of all Partners in the
Partnership unless they request in writing a copy from the General Partner and
pay any necessary duplication fee. Each appraisal of property underlying a
Mortgage Loan or constituting a Partnership Fixed Asset shall be maintained by
the Partnership and available for such inspection and examination for a period
of at least five years following the date of first funding of the Mortgage Loan
or closing date of the acquisition of the Partnership Fixed Asset,
respectively.
13.2 Annual Reports. The General Partner shall have prepared at least
annually (a) financial statements (balance sheet, statement of income or loss,
partners' equity and changes in financial position) prepared in accordance with
generally accepted accounting principles and accompanied by a report therein
containing an opinion of an independent certified public accounting firm; (b) a
statement of cash flow; (c) Partnership information necessary in the
preparation of the Limited Partners' federal income tax returns; (d) a report
of the business of the Partnership; (e) a statement as to the compensation
received by the General Partner and its Affiliates during the year from the
Partnership, which statement shall set forth the services rendered or to be
rendered by the General Partner and its Affiliates and the amount of fees
received, and (e) a report identifying Distributions from: (i) Operating Cash
Flow of that year and/or prior years; (ii) Disposition Proceeds and Net Sale or
Refinancing Proceeds; and (iii) cash from working
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capital reserve accounts and other sources, together with a breakdown of all
costs reimbursed to the General Partner and its Affiliates from the
Partnership. Within the scope of the annual audit, the independent certified
public accountants must verify the allocation of such costs to the Partnership.
The method of verification shall be in accordance with generally accepted
accounting standards and shall include such tests of the accounting records and
such other auditing procedures which the independent certified public
accountants consider appropriate in the circumstances. Copies of the annual
report shall be distributed to each Limited Partner within 120 days after the
close of each taxable year of the Partnership; provided, however, all
Partnership information necessary in the preparation of the Limited Partners'
federal income tax returns shall be distributed to each Limited Partner not
later than 75 days subsequent to December 31 of each year. Quarterly and other
financial information will be posted on the Partnership's website on a timely
basis.
13.3 Report on Acquisitions. Within 60 days after the end of each
calendar quarter in which the Partnership has funded a Mortgage Loan or closed
an acquisition of a Partnership Fixed Asset, a report will be submitted to each
Limited Partner describing the terms of such Mortgage Loan or such Partnership
Fixed Asset and such other information as the General Partner deems
appropriate.
13.4 ERISA Report. To enable Limited Partners subject to annual reporting
requirements under ERISA to file such annual reports as they relate to an
investment in the Partnership, within 75 days after the close of the
Partnership's fiscal year, the General Partner shall furnish Limited Partners
with appraisals or good faith estimates of fair market value of the
Partnership's assets.
13.5 Information Returns. The General Partner shall cause information
returns for the Partnership to be prepared and timely filed with the
appropriate authorities.
13.6 Miscellaneous Reports. The General Partner shall cause to be
prepared and timely filed, with appropriate federal and state regulatory and
administrative bodies, all reports required to be filed with such entities
under then current applicable laws, rules and regulations. A Limited Partner
shall be provided with a copy of any such report upon request upon payment of
any duplication fee.
14.RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND DUTIES OF THE GENERAL
PARTNER.
14.1 Services of the General Partner. The General Partner shall only be
responsible for the following services to the Partnership:
14.1.1 supervising the organization of the Partnership;
14.1.2 arranging for (a) the identification of suitable investments for
the Partnership; (b) a review of the significant factors in deciding whether to
make a particular investment; and (c) the making of such final investment
decision;
14.1.3 supervising Partnership management, which includes: (a)
establishing policies for the operation of the Partnership; (b) causing the
Partnership's agents or employees to arrange for the provision of services
necessary to the operation of the Partnership (including any necessary
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mortgage servicing, property management, accounting and legal services and
services relating to Distributions by the Partnership); (c) when necessary or
appropriate, approving actions to be taken by the Partnership; (d) providing
advice, consultation, analysis and supervision with respect to the Partnership
making or acquiring Mortgage Loans and acquiring Partnership Fixed Assets
(including compliance with federal, state and local regulatory requirements and
procedures); (e) executing documents on behalf of the Partnership and (f)
making all decisions as to accounting matters; and
14.1.4 approving the terms of Dispositions and sales or refinancings of
Partnership Fixed Assets, including establishing the terms for and arranging
any such transaction.
14.2 Powers of the General Partner. The conduct of the Partnership's
business shall be controlled solely by the General Partner in accordance with
this Agreement. The General Partner will have responsibility for the
selection, evaluation, negotiation, financing and disposition of Partnership
Mortgage Loans and Partnership Fixed Assets as well as overall administrative
responsibility for the Partnership and the responsibility for operations
overall Mortgage Loans made and Partnership Fixed Assets acquired. The General
Partner shall have all authority, rights and powers conferred by law and those
required or appropriate to the management of the Partnership's business which,
by way of illustration but not by way of limitation, shall, subject only to the
provisions of Section 14.4, include the right, authority and power:
14.2.1 to make or purchase Mortgage Loans or interests therein and to
purchase properties in its own name or an Affiliate's name or in the name of a
nominee, a trust or otherwise and hold title thereto temporarily for the
purpose of facilitating such origination or acquisition or for any other
purpose related to the business of the Partnership, subject to the terms and
conditions set forth in Article 3 of this Agreement;
14.2.2 to originate, acquire, hold, foreclose, sell, dispose of and
otherwise act with respect to Mortgage Loans, in such Principal amounts and
upon such other terms as the General Partner deems to be in the best interests
of the Partnership for both Affiliated and nonaffiliated entities, including
Mortgage Loans on properties with respect to which an Affiliate of the General
Partner has made a loan;
14.2.3 to purchase, exchange, acquire, lease, own, mortgage, encumber,
improve, develop or cause to be improved, use, lend, borrow, operate, service,
maintain, develop, convey and otherwise dispose of and sell, handle, subdivide,
plat, trade and deal in any property, commercial or multi-family, real,
personal or mixed, choses in action, or any interest therein, including any
non-income producing property, either directly or indirectly, as licensee or
franchisee, individually or in association with other Persons, whether for the
account of the Partnership, or as agent or representative for other
individuals, partnerships, firms, corporations or entities, whether public,
governmental or private, subject to the terms and conditions of this Agreement;
14.2.4 to make short-term loans in accordance with the provisions of
Section 3.3 hereof;
14.2.5 to utilize Operating Cash Flow, Disposition Proceeds or Net Sale
or Refinancing Proceeds for making Mortgage Loans and/or Investment in
Properties;
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14.2.6 to employ persons in the operation and management of the
business of the Partnership including, but not limited to, agents, employees,
managers, accountants, attorneys, consultants, architects, contractors,
engineers and others, on such terms and for such compensation as the General
Partner shall determine, provided that the General Partner and its Affiliates
shall only receive compensation and reimbursement as provided in Articles 3 and
9 and provided further that any such agreement shall be terminated immediately
upon dissolution of the Partnership under Section 18.2;
14.2.7 to open bank accounts and deposit and maintain funds in the
name of the Partnership in banks or savings and loan associations;
14.2.8 to deposit funds with banks with which both the Partnership and
Affiliates may have written or informal requirements which provide for the
maintenance of "compensating balance" arrangements, provided that the
Partnership shall advise such banks that the Partnership's funds may not be
used for compensating balance purposes except for the sole benefit of the
Partnership;
14.2.9 to allow the Partnership to borrow money from the General
Partner or its Affiliates on a short-term basis, at any time and from time to
time, and in connection therewith to pay interest and other financing charges
or fees which shall not exceed the interest and other financing charges or fees
which would be charged by unrelated lending institutions or comparable loans
for the same purpose, in the same locality of the Partnership Fixed Asset if
the loan is made in connection with a particular Partnership Fixed Asset,
provided, however, that no prepayment charge or penalty shall be required by
the General Partner or its Affiliates on any such loan to the Partnership
secured by either a first or a junior or all-inclusive trust deed, mortgage or
encumbrance on a Partnership Fixed Asset, except to the extent that such
prepayment charge or penalty is attributable to the underlying encumbrance;
14.2.10 to obtain and pay for all insurance coverage that the General
Partner, in its sole discretion, determines to be necessary or desirable for
the protection of the Partnership, any property owned by the Partnership and
any of the Partners, including comprehensive liability insurance in connection
with the Partnership Fixed Assets and umbrella liability policies covering all
Limited Partners, subject, however, to the restriction that the Partnership
shall not incur the cost of that portion of liability insurance which insures
the General Partner or its Affiliates for any liability as to which the General
Partner or its Affiliates are prohibited from being indemnified under this
Agreement;
14.2.11 to prepare or cause to be prepared reports, statements and
other relevant information for distribution to the Limited Partners, including
annual reports;
14.2.12 to require in all Partnership obligations that the General
Partner shall not have any personal liability thereon but that the person or
entity contracting with the Partnership is to look solely to the Partnership
and its assets for satisfaction, and in the event that any such obligation has
personal liability, the General Partner may require its satisfaction prior to
contracts without such personal liability, provided, however, that the
inclusion of the aforesaid provisions shall not materially affect the cost of
the service or material being supplied and all Partnership obligations are
satisfied in accordance with prudent business practices as to time and manner
of payment;
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14.2.13 to cause the Partnership to make or revoke any of the elections
permitted by the Code;
14.2.14 to select as the Partnership's accounting year a calendar year
or such fiscal year as approved by the Internal Revenue Service;
14.2.15 to determine the appropriate accounting method or methods to be
used by the Partnership in maintaining its books and records;
14.2.16 to purchase insurance brokerage services from an Affiliate in
connection with obtaining insurance on any Partnership Fixed Asset, but only if
(a) the cost of providing such service, including the cost of the insurance, is
no greater than the lowest quotation obtained from two unaffiliated insurance
agencies, and the coverage and terms are likewise comparable; and (b) the
Affiliate is independently engaged in the business of providing such services
to persons other than Affiliates and at least 75% of its insurance brokerage
service gross revenue is derived from persons other than Affiliates;
14.2.17 to assure any Person dealing with the Partnership or the
General Partner that such Person may rely upon a certificate signed by the
General Partner as authority with respect to: (a) the identity of the General
Partner or any Limited Partner, (b) the existence or nonexistence of any fact
which constitutes a condition precedent to acts by the General Partner or in
any other manner germane to the affairs of the Partnership; (c) the Persons who
are authorized to execute and deliver any instrument or document of the
Partnership; or (d) any act or failure to act by the Partnership or as to any
other matter whatsoever involving the Partnership or any Partner;
14.2.18 to take such steps, including making any amendment to this
Agreement, as the General Partner determines are advisable or necessary in
order to preserve the tax status of the Partnership as a pass-through entity
for federal income tax purposes, including, without limitation, imposing
restrictions on transfers of Units (provided such restrictions on transfers do
not cause the Partnership's assets to be deemed to be "plan assets" with
respect to investors which are qualified plans);
14.2.19 in the event that either (i) the assets of the Partnership
would constitute "plan assets" for purposes of ERISA or (ii) the transactions
contemplated hereunder would constitute prohibited transactions under ERISA or
the Code and an exemption for such transactions could not be obtained from the
Department of Labor (or the General Partner determines not to seek such an
exemption), upon notice to all Limited Partners but without the consent of any
Limited Partner, (a) to restructure the Partnership's activities to the extent
the General Partner deems necessary (after consulting with counsel) to comply
with any exemption in the final plan asset regulation adopted by the Department
of Labor or to comply with any requirement the Department of Labor might impose
as a condition to granting a prohibited transaction exemption or (b) to compel
a dissolution and termination of the Partnership;
14.2.20 in addition to any amendment otherwise authorized herein, to
amend this Agreement from time to time without the consent of the Limited
Partners,
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(a) to add to the representations, duties or obligations of the
General Partner or its Affiliates or surrender any right or power granted to
the General Partner or its Affiliates herein, for the benefit of the Limited
Partners;
(b) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with law or with any other provision herein,
or to add any other provision with respect to matters or questions arising
under this Agreement which would not be inconsistent with law or with the
provisions of this Agreement;
(c) to delete from or add any provision to this Agreement required
to be so deleted or added by the staff of the Securities and Exchange
Commission or by a state securities commissioner or similar such official,
which addition or deletion is deemed by such commission or official to be for
the benefit or protection of the Limited Partners;
(d) to change the name of the Partnership to any lawful name which
it may select;
(e) to reflect the addition or substitution of Limited Partners or
the reduction of capital accounts upon the return of capital to Partners; or
(f) to the extent the General Partner reasonably believes
necessary or desirable to comply with the law or to preserve the tax benefits
associated with an investment in Units, or to take advantage of new tax
benefits or to avoid tax detriments for any Limited Partner as a result of new
legislation, regulations, and/or judicial or administrative interpretations of
the law (such permitted actions may include, but are not limited to, amending
provisions of this Agreement concerning tax allocations, or taking action under
this Agreement pertaining to ERISA plan assets or prohibited transaction
exemptions, or avoiding reclassification of the Partnership as other than a
pass-through entity for tax purposes or avoiding reclassification of the
character of its income for tax purposes).
Such amendments shall be deemed to be made pursuant to the General
Partner's fiduciary obligation to the Partnership and the Limited Partners, and
no such amendment shall give rise to any claim or cause of action by any
Limited Partner.
14.2.21 to place record title to or ownership of, or the right to own,
Mortgage Loans, Partnership Fixed Assets or other Partnership assets in the
name or names of a nominee or nominees, trustee or trustees for any purpose
convenient or beneficial to the Partnership;
14.2.22 to redeem or repurchase Units on behalf of the Partnership in
accordance with the provisions of this Agreement; and
14.2.23 to execute, acknowledge and deliver any and all instruments to
effectuate all of the foregoing, and to take all such action in connection
therewith as the General Partner shall deem necessary or appropriate.
14.3 Comparison With General Partnership. The General Partner shall,
except as otherwise provided in this Agreement or the Partnership Act, have all
the rights and powers and shall be subject to all the restrictions of a partner
in a partnership without limited partners.
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14.4 Limitations. Neither the General Partner nor any Affiliate shall
have the authority to:
14.4.1 enter into contracts with the Partnership which would bind the
Partnership after the removal, adjudication of bankruptcy or insolvency of the
last remaining General Partner or continue the business with Partnership assets
after the occurrence of such event;
14.4.2 alter the primary purposes of the Partnership as set forth in
Article 3;
14.4.3 receive any rebate or give-up or participate in any reciprocal
business arrangement which would enable it or an Affiliate to circumvent any of
the provisions of this Agreement;
14.4.4 cause the Partnership to invest in any Mortgage Loan or
Partnership Fixed Asset through joint ventures with an Affiliate except in
accordance with Section 3 of this Agreement;
14.4.5 cause the Partnership to invest in any Mortgage Loan or
Partnership Fixed Asset with unaffiliated co-lenders except on the same terms
and conditions (although not necessarily the same percentage interest) as such
co-lenders;
14.4.6 cause the Partnership to exchange Units for Mortgage Loans or
Partnership Fixed Assets;
14.4.7 do any act in contravention of this Agreement or which would
make it impossible to carry on the ordinary business of the Partnership;
14.4.8 confess a judgment against the Partnership in connection with
any threatened or pending legal action;
14.4.9 possess any Partnership asset or assign the rights of the
Partnership in specific Partnership assets for other than a Partnership
purpose;
14.4.10 perform any act (other than an act required by this Agreement
or any act taken in good faith reliance upon counsel's opinion) which
would, at the time such act occurred, subject any Limited Partner to liability
as a general partner in any jurisdiction;
14.4.11 employ, or permit the employment of, the funds or assets of the
Partnership in any manner except for the exclusive benefit of the Partnership;
14.4.12 commingle the Partnership funds with those of any other Person
except to the extent that funds are temporarily retained by property managers
or mortgage servicers and except that funds of the Partnership and funds of
other partnerships sponsored by the General Partner or its Affiliates may be
held in an account or accounts established and maintained for the purpose of
making computerized disbursements and/or short-term investments; provided,
however, that Partnership funds are protected from claims of such other
partnerships and/or their creditors;
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14.4.13 operate the Partnership in such a manner as to have the
Partnership classified as an "investment company" for purposes of the
Investment Company Act of 1940;
14.4.14 except as specifically provided for in this Agreement, cause
the Partnership to invest in or underwrite the securities of other issuers for
any purposes;
14.4.15 cause the Partnership to invest in real estate contracts of
sale unless such contracts of sale are in recordable form and are appropriately
recorded in the chain of title;
14.4.16 grant the General Partner or any Affiliate an exclusive right
to sell or exclusive employment to sell the Partnership's investments for the
Partnership;
14.4.17 cause the Partnership to make any Mortgage Loan to Affiliates
or buy, sell or lease any Partnership Fixed Asset to or from Affiliates or
renegotiate, dispose of or enter into, cause or permit the occurrence of any
subsequent material transaction with respect to any Mortgage Loan or
Partnership Fixed Asset to any Affiliate or make any other loan to the General
Partner or its Affiliates, except as permitted by, and in accordance with, the
terms set forth in Article 3 hereof;
14.4.18 cause the Partnership to invest in Mortgage Loans unless it
first obtains a mortgagee's or owner's title insurance policy or commitment as
to the priority of the mortgage or the condition of title;
14.4.19 cause the Partnership to invest in or make Mortgage Loans on any
one property if the aggregate amount of all mortgage loans outstanding on the
property including the Principal amount of the Partnership's Mortgage Loan,
would exceed an amount equal to 80% of the Appraised Value of the property at
the time the Mortgage Loan is made, as determined in an MAI Appraisal unless
substantial justification exists because of the presence of other underwriting
criteria; provided that the Partnership may loan additional funds to a borrower
if the Principal outstanding plus such outstanding indebtedness and additional
advances do not exceed 80% of the Appraised Value of the underlying property at
the time the Mortgage Loan is made or at the time of any new appraisal (for
purposes of this section 14.4.19, the "aggregate amount of all mortgage loans
outstanding on the property including the Principal amount of the Partnership's
Mortgage Loan," shall include all interest (excluding contingent participations
in income and/or appreciation in value of the mortgaged property - e.g.
Additional Interest), the current payment of which may be deferred pursuant to
the terms of such loans to the extent that deferred interest on each loan
exceeds 5% per annum of the principal balance of the loan);
14.4.20 except as provided in Article 16, admit a person as a General
Partner except with the consent of the Limited Partners as provided for in this
Agreement;
14.4.21 except as permitted by Article 3, receive any insurance
brokerage fee or write any insurance policy covering any of the properties
underlying the Mortgage Loans;
14.4.22 cause the Partnership to acquire limited partnership interests
in any other limited partnership;
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14.4.23 incur aggregate borrowing of the Partnership with respect to
Partnership Fixed Assets in excess of 80% of the aggregate value as determined
by the lender as of the date of financing as to all such properties which are
financed; or
14.4.24 cause the Partnership to incur that portion of liability
insurance which insures the Indemnified Persons for any liability from which
such Indemnified Persons are prohibited from being indemnified pursuant to
Article 20 of this Agreement.
14.5 No Personal Liability. The General Partner shall have no personal
liability for the repayment of the Original Contributions of any Limited
Partner or to repay the Partnership any portion or all of any negative balance
in their capital accounts, except as otherwise provided in Section 5.3.
14.6 Notice of Limitation on Liability. The General Partner shall use its
best efforts, in the conduct of the Partnership's business, to put all
suppliers and other Persons with whom the Partnership does business on notice
that the Limited Partners are not liable for Partnership obligations and all
agreements to which the Partnership is a party shall include a statement to the
effect that the Partnership is a limited partnership organized under the
Partnership Act; but the General Partner shall not be liable to the Limited
Partners for any failure to give such notice to such suppliers or other
Persons.
14.7 Accounting Matters. The General Partner shall make all decisions as
to accounting matters in connection with the accounting methods adopted by the
Partnership in accordance with generally accepted accounting principles and
procedures applied on a consistent basis and shall make all decisions with
respect to tax accounting matters in accordance with tax accounting principles.
The General Partner may rely on the Partnership's independent certified public
accountants to determine whether such decisions are in accordance with
generally accepted accounting principles.
14.8 Tax Matters Partner. The General Partner is designated the "Tax
Matters Partner" in accordance with Section 6231(a)(7) of the Code and, in
connection therewith and in addition to all other powers given thereunder,
shall have all other powers needed to perform fully hereunder including,
without limitation, the power to retain all attorneys and accountants of its
choice and the right to settle any audit without the consent of the Limited
Partners.
14.9 Funds and Assets. The General Partner shall have a fiduciary
responsibility for the safekeeping and use of all funds and assets of the
Partnership, whether or not in its immediate possession or control, and shall
not employ, or permit another to employ, such funds or assets in any manner
except for the exclusive benefit of the Partnership.
14.10 Preservation of Tax Status. The General Partner shall use its best
efforts to take such actions as are necessary to preserve the Partnership's
status as a partnership or other pass-through entity for tax purposes in light
of any amendment to the Code or administrative or judicial interpretations
thereof.
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15. RIGHTS AND POWERS OF THE LIMITED PARTNERS
15.1 Control. Limited Partners shall take no part in any manner in the
control, conduct or operation of the Partnership and shall have no right or
authority to act for or bind the Partnership.
15.2 Voting Rights. Limited Partners shall have the right, by Majority
Vote, to vote only upon the following matters affecting the basic structure of
the Partnership:
15.2.1 removal of a General Partner and election of a successor General
Partner in place thereof;
15.2.2 subject to and in accordance with the provisions of Article 16
and Section 18.1.1, election of a successor General Partner and continuation of
the business of the Partnership;
15.2.3 termination and dissolution of the Partnership pursuant to
Article 18;
15.2.4 amendment of this Agreement, provided such amendment is not for
any of the purposes set forth in Sections 14.2.18, 14.2.19 or 14.2.20;
15.2.5 sale of all or Substantially All of the Assets of the
Partnership in a single sale, or in multiple sales in the same twelve-month
period, except in the liquidation and winding-up of the business of the
Partnership upon its termination and dissolution in the ordinary course of
business, or merger of the Partnership with and into another entity where the
Partnership does not survive the merger;
15.2.6 a material change in the Partnership's purposes set forth in
Article 3 above;
15.2.7 voluntary assignment of the General Partner's interest in the
Partnership, except as otherwise provided in Section 16.5; and
15.2.8 extension of the term of the Partnership.
15.3 Meetings; Notices. The General Partner may at any time call a meeting
of the Limited Partners or for a vote, without a meeting, of the Limited
Partners on matters on which they are entitled to vote, and shall call for such
meeting or vote following receipt of written request therefor of Limited
Partners holding 10% or more of the Units held by all Limited Partners as of
the date of receipt of such written request ("notice date"). Within 10 days of
such notice date, the General Partner shall notify all Limited Partners of
record as of the notice date as to the time and place of the Partnership
meeting, if called, or if no such meeting has been called, the date upon which
the votes will be counted, and shall deliver a detailed statement of the action
proposed, including a verbatim statement of the wording of any resolution
proposed for adoption by the Limited Partners and of any proposed amendment to
this Agreement. The date of any Partnership meeting or the date upon which
such votes, without a meeting, will be counted shall be not less than ten nor
more than sixty days following mailing of the notice thereof by the General
Partner. All expenses of the voting and such notification shall be borne by
the Partnership. If a meeting is adjourned to another time or place, and if an
announcement of the adjournment of time or place is made at the meeting, it
shall not be necessary to give any notice of
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the adjourned meeting. The presence in person or by proxy of a majority in
interest of the Limited Partners shall constitute a quorum at all meetings of
the Limited Partners; provided, however, that if there be no such quorum,
holders of a majority in interest of the Limited Partners present 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 meeting of
Limited Partners need be given to any Limited Partner who attends in person or
is represented by proxy, except for a Limited Partner attending 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 Limited Partner entitled to such notice who, in
writing, executed and filed with the records of the meeting, either before or
after the time thereof, waives such notice.
15.4 Voting Procedures. A Limited Partner shall be entitled to cast one
vote for each Unit that such Limited Partner owns: (a) at a meeting, in
person, by written proxy or by a signed writing directing the manner in which
such Limited Partner desires that his, her or its vote be cast, which writing
must be received by the General Partner prior to such meeting; or (b) without a
meeting by a signed writing directing the manner in which such Limited Partner
desires that his, her or its vote be cast, which writing must be received by
the General Partner prior to the date upon which the votes of Limited Partners
of record on the notice date, whether at a meeting or otherwise, shall be
counted. No General Partner shall be entitled to vote unless and to the extent
it owns Units. The laws of the State of Delaware pertaining to the validity and
use of corporate proxies shall govern the validity and use of proxies given by
Limited Partners. At each meeting of Limited Partners, the General Partner
shall appoint such officers and adopt such rules for the conduct of such
meeting as the General Partner shall deem appropriate. In connection with each
meeting or vote without a meeting of the Limited Partners, the Partnership
shall provide for proxies or written consents which specify a choice between
approval and disapproval of each matter to be acted upon at the meeting or by
vote without a meeting. For purposes of obtaining a written vote under this
Agreement, the General Partner may require a written response within a
specified time, but not less than ten days nor more than 45 days.
15.5 Limitations. No Limited Partner shall have the right or power to: (a)
withdraw or reduce his contribution to the capital of the Partnership except as
a result of the dissolution of the Partnership; (b) bring an action for
partition against the Partnership; (c) cause the termination and dissolution of
the Partnership by court decree or otherwise, except as set forth in this
Agreement or as provided by law; or (d) demand or receive property other than
cash in return for such Limited Partner's contribution. No Limited Partner
shall have priority over any other Limited Partner either as to the return of
contributions of capital or as to Net Income, Net Loss or Distributions. Other
than upon the termination and dissolution of the Partnership or as otherwise
provided by this Agreement, there has been no time agreed upon when the
contribution of each Limited Partner may be returned.
16. REMOVAL, BANKRUPTCY OR DISSOLUTION OF THE GENERAL PARTNER AND TRANSFER OF
THE GENERAL PARTNER'S INTEREST.
16.1 Removal by Limited Partners. The General Partner may be removed from
the Partnership and a successor General Partner elected upon a Majority Vote of
the Limited Partners. Written notice of the removal of the General
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Partner shall be served upon such General Partner either by certified or by
registered mail, return receipt requested, or by personal service. Such notice
shall set forth the date upon which the removal is to become effective. Should
the General Partner be removed from the Partnership, any portion of the fees or
any other fee or reimbursable expense pursuant to Articles 3 or 9 payable under
this Agreement which is then due but not yet paid, shall be paid by the
Partnership to the General Partner or its Affiliates, as the case may be, in
cash within 30 days of the date of removal as stated in the written notice of
removal, unless such amount is included in the price for the General Partner's
interest in the Partners as determined under Section 16.3 hereof.
16.2 Purchase of General Partner Interest. Upon the removal, adjudication
of bankruptcy, dissolution or other cessation to exist of the General Partner,
its interest in the Net Income, Net Loss and Distributions of the Partnership
shall be purchased by the Partnership for a price determined according to the
provisions of Section 16.3, provided there is at least one remaining General
Partner at such time (including a successor General Partner elected pursuant to
this Section 16.2) and the business of the Partnership is continued. Until the
dissolution of the Partnership, the General Partner shall not take any
voluntary step to dissolve itself or to withdraw from the Partnership. The
General Partner's entire interest in the Partnership shall not be assignable,
except as provided in Section 16.5, without a Majority Vote of Limited
Partners. Any entity to which the entire interest of the General Partner in the
Partnership is assigned in compliance with this Section shall be substituted in
its stead as a General Partner of the Partnership by the filing of appropriate
amendments to the Partnership Agreement and to any separate Certificate of
Limited Partnership.
16.3 Sale Price. Upon the sale of its interest pursuant to Section 16.2,
the General Partner (the "Terminated Partner") shall receive from the
Partnership the fair market value of its interest in the Partnership,
determined by agreement between the Terminated Partner and the Partnership or,
if they cannot agree, by arbitration in accordance with the then current rules
of the American Arbitration Association in Reno, Nevada. The expenses of
arbitration shall be borne equally by the Terminated Partner and the
Partnership. For this purpose, the fair market value of the interest of the
Terminated Partner shall be deemed to be the amount the Terminated Partner
would receive upon dissolution and termination of the Partnership under Section
18.2 assuming such dissolution or termination occurred on the date of the
dissolving event and assuming the assets of the Partnership were sold for their
then fair market value without compulsion of the Partnership to sell such them.
In the case of voluntary withdrawal, payment shall be made by a non-interest
bearing unsecured promissory note with principal payable from Distributions, if
any, which the Terminated Partner otherwise would have received had the
Terminated Partner not withdrawn as a General Partner in the Partnership. In
the case of involuntary withdrawal, removal, adjudication of bankruptcy or
dissolution, payment shall be made by a promissory note bearing 9% simple
interest per annum on the unpaid principal amount with principal and all unpaid
accrued interest subject to mandatory prepayment from any Distribution which
the Terminated Partner otherwise would have received and the remaining unpaid
principal balance and unpaid accrued interest on such promissory note due and
payable five years from the date of the occurrence of the applicable event
specified in Section 18.1.
16.4 Purchase by Successor General Partner. When a successor General
Partner is elected under Section 16.2, such successor General Partner
("Acquiring Partner") shall purchase from the Partnership, within 60 days of
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its election, the interest which the Partnership purchased from the Terminated
Partner. For such interest the Acquiring Partner shall pay the amount
determined pursuant to Section 16.3 to be the fair market value of such
interest. Payment shall be made by a promissory note bearing 9% simple interest
per annum on the unpaid principal amount secured by assignment by the Acquiring
Partner to the Partnership of the future Distributions by the Partnership to
the Acquiring Partner, which principal amount together with accrued interest
shall be payable at the times and in the amount equal to 75% of such
Distributions until such time as the principal amount together with accrued
interest is paid in full, but shall become due and payable in full by the
Acquiring Partner at such time as the Partnership is wound up and liquidated.
16.5 No Limitation on Merger or Reorganization of the General Partner.
Nothing in this Agreement shall be deemed to prevent the assignment by the
General Partner of its economic interest in the Partnership or the merger or
reorganization of the General Partner into or with any other entity, or the
transfer of all the membership interests of the General Partner and the
assumption of the rights and duties of the General Partner, as the case may be,
by, in the case of a merger, reorganization or consolidation, the surviving
corporation or by operation of law.
17. CERTAIN TRANSACTIONS.
The General Partner, any Limited Partner, any Affiliate, any shareholder,
officer, director, manager, partner or employee thereof, or any person owning a
legal or beneficial interest therein, may engage in or possess an interest in
any other business or venture of every nature and description, independently or
with others including, but not limited to, the ownership, financing, leasing,
operation, management, brokerage and development of real property. Subject to
their fiduciary duties to the Partnership, neither the General Partner nor any
Affiliate of the General Partner shall be obligated to present any particular
investment opportunity to the Partnership, even if such opportunity is of a
character which, if presented to the Partnership, could be taken by the
Partnership and each of them shall have the right to make for its own account
(individually or as trustee) or to recommend to others any such particular
investment opportunity.
18. TERMINATION AND DISSOLUTION OF THE PARTNERSHIP.
18.1 Terminating Events. The Partnership shall be terminated and dissolved
upon the earliest to occur of the following:
18.1.1 the withdrawal, removal, adjudication of bankruptcy, insolvency,
dissolution or other cessation of existence as a legal entity of the General
Partner unless, within 90 days of the date of such event, the Limited Partners
by Majority Vote elect to continue the business of the Partnership, in a
reconstituted form if necessary, and elect a successor General Partner
effective as of the date of such event;
18.1.2 a Majority Vote (which may, but need not be solicited by the
General Partner) in favor of dissolution and termination of the Partnership;
18.1.3 the expiration of the term of the Partnership;
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18.1.4 the disposition of all of the assets held by the Partnership and
receipt of final payment with respect to all investments, unless the
Partnership is reconstituted by the General Partner within 90 days following
the disposition of the final Partnership asset;
18.1.5 the election by the General Partner, pursuant to Section 14.2.19,
without the consent of any Limited Partner, in the event that either (i) the
Partnership's assets constitute "plan assets," as such term is defined for
purposes of ERISA, or (ii) the transactions contemplated under this Agreement
constitute "prohibited transactions" under ERISA and an exemption for such
transactions could not be obtained from the United States Department of Labor
or the General Partner determines not to seek such an exemption; or
18.1.6 the entry of a decree of judicial dissolution by a court of
competent jurisdiction.
18.2 Liquidation and Distribution of Assets. Upon a dissolution and
termination of the Partnership for any reason, the General Partner shall take
full account of the Partnership's assets and liabilities, shall liquidate the
assets as promptly as is consistent with obtaining the fair value thereof, and
shall apply and distribute the proceeds therefrom in the following order:
18.2.1 first, to the payment of creditors of the Partnership, including
Partners but excluding secured creditors whose obligations will be assumed or
otherwise transferred on the liquidation of Partnership assets; and
18.2.2 second, after allowance for the expenses of liquidation and the
setting up of any reserves for contingencies which the General Partner
considers necessary, to the Partners in accordance with the positive balances
in their capital accounts after Net Income arising from a Disposition or sale
or refinancing of a Partnership Fixed Asset and Net Loss has been allocated in
accordance with Article 10 hereof.
18.2.3 Notwithstanding anything to the contrary, the General Partner has
the right to defer liquidation if, in the opinion of the General Partner, the
sale of Partnership assets in liquidation would result in a material under
realization on the Partnership's assets.
19.SPECIAL POWER OF ATTORNEY.
19.1 Grant of Power of Attorney. By completing and signing the
Partnership's subscription form or any transfer form, each Limited Partner
grants to the General Partner a special power of attorney irrevocably making,
constituting and appointing the General Partner, with full power of
substitution, as the attorney-in-fact for such Limited Partner, with power and
authority to act in such Limited Partner's name and on such Limited Partner's
behalf to execute, acknowledge and swear to in the execution, acknowledgement
and filing of documents, which shall include, by way of illustration but not of
limitation, the following:
19.1.1 this Agreement, any separate Certificate of Limited Partnership,
as well as any amendment to or restatement of the foregoing which, under the
laws of the State of Delaware or the laws of any other state, are required to
be filed or which the General Partner deems to be advisable to file;
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19.1.2 any other instrument or document which may be required to be
filed by the Partnership under the laws of any state or by any governmental
agency, or which the General Partner deems advisable to file; and
19.1.3 any instrument or document which may be required to effect the
continuation of the Partnership, the admission of any additional or substituted
Limited Partner, or the dissolution and termination of the Partnership
(provided such continuation, admission or dissolution and termination are in
accordance with the terms of this Agreement), or to reflect any reduction in
amount of contributions of Partners.
19.2 Character of Power of Attorney. The special power of attorney
granted by each Limited Partner:
19.2.1 is a special power of attorney coupled with an interest, is
irrevocable, shall survive the death or legal incapacity of the granting
Limited Partner, and is limited to those matters herein set forth;
19.2.2 may be exercised by the General Partner acting alone for each
Limited Partner by a facsimile signature of the General Partner or by one of
its officers, or by listing all of the Limited Partners executing any
instrument with a signature of the General Partner or one of its officers
acting as its attorney-in-fact; and
19.2.3 shall survive an assignment by a Limited Partner of all or any
portion of such Limited Partner's Units except that, where the assignee of the
Units owned by a Limited Partner has requested admission to the Partnership as
a substituted Limited Partner, the special power of attorney shall survive
assignment for the sole purpose of enabling the General Partner to execute,
acknowledge and file any instrument or document necessary to effect such
substitution.
20. INDEMNIFICATION
20.1 Agreement to Indemnify. No Indemnified Person shall have any
liability to the Partnership or to any Partner for any loss suffered by the
Partnership which arises out of any action or inaction of the Indemnified
Person if the Indemnified Person in good faith determined that such course of
conduct was in the best interest of the Partnership, and such course of conduct
did not constitute gross negligence, fraud or willful or wanton misconduct of
the Indemnified Person. The Partnership, its receiver or its trustee shall, to
the maximum extent permitted by law, indemnify, save harmless and pay all
judgments and claims against each of the Indemnified Persons from any
liability, loss or damage incurred by the Indemnified Person or by the
Partnership by reason of any act performed or omitted to be performed by, any
Indemnified Person, including costs and reasonable attorneys' fees and any
amount expended in the settlement of any claim of liability, loss or damage;
provided that (a) the General Partner must have determined, in good faith, that
such course of conduct was in the best interests of the Partnership, and (b)
such course of conduct did not constitute gross negligence, fraud or willful or
wanton misconduct by the Indemnified Person and (c) any such indemnification
shall be recoverable only from the assets of the Partnership and not from the
assets of the Limited Partners. All judgments against the Partnership and the
Indemnified Persons, wherein the Indemnified Persons are entitled to
indemnification, must first be satisfied from Partnership assets before the
Indemnified Persons are responsible for such obligations. The Partnership shall
not pay for any
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insurance covering liability of the Indemnified Persons for actions or
omissions for which indemnification is not permitted hereunder; provided,
however, that nothing contained herein shall preclude the Partnership from
purchasing and paying for such types of insurance, including extended coverage
liability and casualty and workers' compensation, as would be customary for any
person owning comparable assets and engaged in a similar business, or from
naming the Indemnified Persons as additional insured parties thereunder,
provided that such addition does not add to the premiums payable by the
Partnership. Nothing contained herein shall constitute a waiver by any Limited
Partner of any right which such Limited Partner may have against any party
under federal or state securities laws.
20.2 Limitations. Notwithstanding Section 20.1, the Indemnified Persons
and any person acting as a broker dealer shall not be indemnified or saved
harmless pursuant to Section 20.1 from any liability, loss or damage incurred
by it in connection with (i) any claim or settlement involving allegations that
federal or state securities laws were violated by the Indemnified Persons
unless: (a) there has been a successful adjudication on the merits on each
count involving alleged securities law violations and the court determines that
indemnification of litigation costs should be made, (b) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction and
the court determines that indemnification of litigation costs should be made or
(c) a court of competent jurisdiction approves a settlement of the claims and
determines that indemnification of the settlement and related costs should be
made, after having been advised as to the current position of the Securities
and Exchange Commission and all applicable state securities authorities
regarding indemnification for violations of securities law or (ii) any
liability imposed by law, including liability for gross negligence, fraud or
willful or wanton misconduct.
20.3 Definition of Indemnified Persons. For purposes of this Article 20,
the term "Indemnified Persons" shall include (a) the General Partner and (b)
any person acting within the scope of the General Partner's authority who
performs services on behalf of the Partnership and who or which (i) directly or
indirectly controls, or is controlled by, or is under common control with the
General Partner, (ii) owns or controls 10% or more of the outstanding voting
securities of the General Partner, (iii) is an officer, director, manager,
partner or trustee of the General Partner or (iv) is an entity in which a
General Partner acts as an officer, director, manager, partner or trustee.
21. MISCELLANEOUS
21.1 Counterparts. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all of the
parties hereto, notwithstanding that all of the parties are not signatories to
the original or the same counterpart.
21.2 Binding Provisions. The terms and provisions of this Agreement shall
be binding upon and shall inure to the benefit of the successors and assigns of
the respective Partners.
21.3 Severability. In the event any sentence or paragraph of this
Agreement is declared by a court of competent jurisdiction to be void, such
sentence or paragraph shall be deemed severed from the remainder of the
Agreement and the balance of the Agreement shall remain in effect.
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21.4 Notice. All notices under this Agreement shall be in writing and
shall be given to the party entitled thereto by personal service or by mail,
posted to the address maintained by the Partnership for such Person or at such
other address as such Person may specify in writing.
21.5 Headings. Paragraph titles or captions contained in this Agreement
are inserted only as a matter of convenience and reference and in no way
define, limit, extend or describe the scope of this Agreement nor the intent of
any provision hereof.
21.6 Meanings. Whenever required by the context hereof, the singular shall
include the plural, and vice-versa; and the masculine gender shall include the
feminine and neuter genders, and vice-versa.
21.7 List of Partners. The names, addresses and contributions to capital
of the Partners are set forth on Exhibit I attached hereto, which exhibit shall
be maintained at the principal place of business of the Partnership.
21.8 Governing Law. Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed under the laws of the State of
Delaware and that the Partnership Act as now adopted and as hereafter amended
from time to time shall govern the limited partnership aspects of this
Agreement.
21.9 Other Jurisdictions. In the event the business of the Partnership is
carried on or conducted in states in addition to the State of Delaware, then
the parties agree that this Partnership shall qualify to do business under the
laws of each state in which business is actually conducted by the Partnership,
and they severally agree to execute such other and further documents as may be
required or requested in order that the General Partner legally may qualify
this Partnership to do business in such states. The power of attorney granted
to the General Partner in Article 19 shall constitute the authority of the
General Partner to perform the ministerial duty of qualifying the Partnership
to do business under the laws of any state in which it is necessary to file
documents or instruments of qualification. A Partnership office or principal
place of business in any state may be designated from time to time by the
General Partner.
21.10 Power to Reconstitute. In the event that the State of Delaware
amends the Partnership Act in any manner which precludes the Partnership, at
any time, from obtaining an opinion of tax counsel to the effect that the
Partnership will be treated as a pass-through entity for federal income tax
purposes and not as an association taxable as a corporation, then the General
Partner may, in its sole discretion, reconstitute the Partnership under the
laws of another state.
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IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Agreement of Limited Partnership as of the date first above
written.
GENERAL PARTNER: LIMITED PARTNERS:
MAXUM LLC
By: Maxum LLC, as Attorney-In-Fact
By:_______________________ By:__________________________
Name: Ben Farahi Name: Ben Farahi
Title: Manager Title: Manager
CONSENT FORM
THIS WRITTEN CONSENT IS SOLICITED BY THE GENERAL PARTNER OF RESOURCES
ACCRUED MORTGAGE INVESTORS 2, L.P. FOR ACTION BY WRITTEN CONSENT OF LIMITED
PARTNERS TO BE EFFECTIVE AS SET FORTH IN THE CONSENT SOLICITATION ACCOMPANYING
THIS CONSENT FORM.
This Consent Form ("Consent Form") must be completed and returned by every
limited partner who wishes to vote for or against the proposal (the
"Proposal") to adopt the Second Amended and Restated Agreement of Limited
Partnership of Resources Accrued Mortgage Investors 2, L.P. (the
"Partnership"), as described in the Consent Solicitation Statement accompanying
this Consent Form.
This Consent Form must be returned to and received by:
American Stock Transfer & Trust Co.
59 Maiden Lane
New York, New York 10038
prior to 12:00 midnight, New York City time, on October 8, 2003, or such later
date as may be designated to all limited partners (the "Expiration Date"). The
Consent Form will be effective only when it is actually received by American
Stock Transfer & Trust Co. A self-addressed return envelope has been provided
for your convenience, and it is recommended that you use certified or
registered mail, return receipt requested.
All Consent Forms that are properly executed and returned to MacKenzie
Partners, Inc. prior to the Expiration Date will be voted in accordance with
the elections set forth therein. Any limited partner who abstains or fails to
return a signed Consent Form will be deemed to have voted AGAINST the Proposal.
Properly executed Consent Forms that are not marked as to the Proposal will be
deemed to be voted FOR the Proposal.
Before completing this Consent Form, you and your advisor, if any, should
carefully review the Consent Solicitation Statement. The text of the proposed
Second Amended and Restated Agreement of Limited Partnership of the Partnership
is described in detail in the Consent Solicitation Statement.
If you have any questions regarding the Proposal or if you would like
assistance in completing this Consent Form, please contact MacKenzie Partners,
Inc. at (800) 322-2885 or (212) 929-5500.
Consent Forms may be withdrawn at any time prior to the Expiration Date.
In addition, you may change your vote subsequent to the submission of a Consent
Form, but prior to the Expiration Date. For a withdrawal or change of vote to
be effective, you must execute and deliver, prior to the Expiration Date, a
subsequently dated Consent Form or a written notice stating that the consent is
revoked to MacKenzie Partners, Inc. at the address set forth above. Consent
Forms and notices of withdrawal or change of vote dated after the Expiration
Date will not be valid.
RESOURCES ACCRUED MORTGAGE INVESTORS 2, L.P.
CONSENT
The undersigned, with respect to each unit of limited partnership interest
in Resources Accrued Mortgage Investors 2, L.P. (the "Partnership") held of
record by the undersigned on August 29, 2003, hereby sets forth his, her or its
vote in connection with the written consent solicited by the general partner of
the Partnership as described in the Consent Solicitation Statement accompanying
this Consent Form. You may vote for, against or abstain from voting on the
Proposal by marking the appropriate box set forth in the item on the reverse
side. In order to effect the Proposal, it must be approved by limited partners
holding a majority of the outstanding units. Accordingly, abstentions on the
Proposal will have the same effect as a vote AGAINST the Proposal.
The General Partner recommends a vote FOR adoption of the Second Amended
and Restated Agreement of Limited Partnership of the Partnership.
PROPOSAL: Approval of the Second Amended and Restated Agreement of
Limited Partnership of the Partnership:
[_] FOR [_] AGAINST [_] ABSTAIN
The undersigned hereby acknowledges receipt of the Consent Solicitation
Statement, dated __________, 2003. If units are owned jointly, all joint
owners must sign below.
Date: ____________________________________
Signature of Owner: ________________________
Print Name:______________________________
Signature of Joint Owner: ___________________
Print Name:_______________________________
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE ABOVE LABEL REPRESENTING YOUR
PARTNERSHIP INTEREST(S). WHEN SUCH INTEREST(S) ARE HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE HAVE SIGNED
IN FULL CORPORATE NAME BY THE PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP OR LIMITED LIABILITY COMPANY, PLEASE HAVE SIGNED IN THE ENTITY'S
NAME BY AN AUTHORIZED PERSON.