EX-4
Partnership Agreement
EXHIBIT A
LIMITED PARTNERSHIP AGREEMENT
MERIDIAN HEALTH CARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
Preliminary Statement ........................................................... A-3
Article I - Defined Terms ................................................... A-3
Article II -Name; Purpose; Term and Certificate ................ A-10
Section 2.1 Name; Formation ............................................ A-10
Section 2.2 Place of Registered Office ................................ A.10
Section 2.3 Purpose ........................................................... A-10
Section 2.4 Term ................................................................ A-10
Section 2.5 Recording of Certificate ................................... A-10
Article III - Partners; Capital ............................................... A-10
Section 3.1 General Partners; Assignor Limited Partner;
Subordinated Limited Partners ....................................... A-10
Section 3.2 Investors .......................................................... A-11
Section 3.3 Partnership Capital .......................................... A-11
Section 3.4 Liability of Partners and Investors .................... A-12
Article IV - Allocations, Distributions and Applicable Rules ............. A-12
Section 4.1 Allocation of Profit or Loss from a Sale .......... A-12
Section 4.2 Distribution of Net Proceeds from a Refinancing or Sale ............... A-13
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss from
Operations ..................................................................... A-13
Section 4.4 Liquidation or Dissolution ............................... A-14
Section 4.5 General and Special Rules ............................... A-14
Article V - Rights, Powers and Duties of Partners ............... A-18
Section 5.1 Management and Control of the Partnership; Tax Matters Partner ............ A-18
Section 5.2 Authority of General Partners ......................... A-18
Section 5.3 Authority of Investors ...................................... A-21
Section 5.4 Restrictions on Authority ................................. A-21
Section 5.5 Authority of Partners and Affiliated Persons to Deal with Partnership ..........A-22
Section 5.6 Duties and Obligations of the General Partners ....................... A-23
Section 5.7 Compensation of General Partners .................... A-25
Section 5.8 Other Businesses of Partners ..................... ...... A-25
Section 5.9 Liability of General Partners and Assignor Limited Partner to Limited
Partners or Investors ....................................................... A-25
Section 5.10 Indemnification ............................................... A-25
Article VI - Transferability of a General Partner's Interest ............................... A-26
Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General Partner;
Transfer of Interests ........................................................ A-26
Section 6.2 Election and Admission of Successor or Additional General Partners ............A-26
Section 6.3 Events of Withdrawal of A General Partner ............................. A-26
Section 6.4 Liability of a Withdrawn General Partner .............. A-27
Section 6.5 Valuation of Partnership Interest of General Partner ............. A-27
Article VII - Assignment of Assignee Units to Investors; Transferability of Limited
Partner Interests and Units ............................................. A-28
Section 7.1 Assignments of the Assignee Units to Investors ............................. A-28
Section 7.2 Transferability of Units .................................... A-29
Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an Investor or a
Limited Partner .............................................................. A-30
Section 7.4 Effective Date ........................................ ......... A-30
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Section 7.5 Substitute Limited Partners ...............................A-30
Section 7.6 Retirement or Withdrawal of a Limited Partner .. A-30
Article VIII - Dissolution, Liquidation and Termination of the Partnership A-31
Section 8.1 Events Causing Dissolution ...............................A-31
Section 8.2 Liquidation .................................................... A-31
Section 8.3 Capital Contribution Upon Dissolution .............. A-32
Article IX - Certain Payments to the General Partners and Affiliates ...
A-32 Section 9.1 Reimbursement of Certain Costs and Expenses of the
General Partners and
Affiliates ................................................................... .. A-32
Section 9.2 Fees ............................................................... A-33
Article X - Books and Records; Bank Accounts; Reports ................. A-34
Section 10.1 Books and Records ........................................ A-34
Section 10.2 Bank Accounts .............................................. A-34
Section 10.3 Reports ......................................................... A-34
Section 10.4 Federal Tax Elections ................................... . A-35
Article XI - Meetings of Investors ....................................... A-36
Section 11.1 Calling Meetings .............................................. A-36
Section 11.2 Notice; Procedure .......................................... A-36
Section 11.3 Right to Vote ................................................ A-36
Section 11.4 Proxies; Rules ............................................... A-36
Article XII - General Provisions .......................................... A-37
Section 12.1 Appointment of Administrative General Partner as Attorney-in-Fact A-37
Section 12.2 Waiver of Partition ........................................ A-37
Section 12.3 Notification ...................................................... A-37
Section 12.4 Word Meanings ................................................ A-37
Section 12.5 Binding Provisions ............................................ A-37
Sectio 12.6 Applicable Law ................................................ A-37
Section 12.7 Counterparts ................................................. A-38
Section 12.8 Separability of Provisions ................................ A-38
Sectio 12.9 Paragraph Titles ............................................... A-38
Section 12.10 Entire Agreement .......................................... A-38
Section 12.11 Amendments ................................................ A-38
Signatures ............................................................................ A-39
Schedule A ..........................................................................A-41
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MERIDIAN HEALTH CARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP AGREEMENT
OF LIMITED PARTNERSHIP THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of
December 8, 1987, is by and among Brown Healthcare, Inc., a Maryland
corporation, as the Administrative General Partner, Meridian Healthcare
Investments, Inc., a Maryland corporation, as the Development General Partner,
Realty Associates 1988 Limited Partnership, a Maryland limited partnership, and
Meridian Healthcare Investments, Inc., a Maryland corporation, as Subordinated
Limited Partners, and Brown Healthcare Holding Co., Inc., a Maryland
corporation, as the Assignor Limited Partner.
Preliminary Statement
The General Partners, the Subordinated Limited Partners, and the Assignor
Limited Partner desire to form Meridian Healthcare Growth and Income Fund
Limited Partnership (the "Fund"), pursuant to the Delaware Revised Uniform
Limited Partnership Act. NOW, THEREFORE, in consideration of the mutual promises
made herein, the parties hereto, intending to be legally bound, hereby agree as
follows: ARTICLE I DEFINED TERMS The defined terms used in this Agreement shall,
unless the context otherwise expressly requires, have the meanings specified in
this Article I.
"Accountants" means such nationally recognized firm of independent
certified public accountants as shall be engaged from time to time by the
General Partners on behalf of the Fund.
"Acquisition Expenses" means expenses, including, but not limited to, legal
fees and expenses, travel and communications expenses, costs of appraisals,
non-refundable option payments on property not acquired, accounting fees and
expenses, title insurance, and miscellaneous expenses related to selection and
acquisition of Facilities or Operating Partnership Interests, whether or not
acquired.
"Acquisition Fees" means the total of all fees and commissions paid by any
party on behalf of the Fund or an Operating Partnership in connection with the
selection, purchase or development of, or investment in, any Facility by the
Fund or an Operating Partnership, including, without limitation, any real estate
commission, selection fee, non-recurring management fee, development fee, or any
fee of a similar nature, however designated.
"Act" means the Delaware Revised Uniform Limited Fund Act (6 DEL.C 17-101
et. seq.) as amended or modified from time to time.
"Additional General Partner" means any Person who is admitted as an
Additional General Partner of the Fund, under the provisions of Article VI,
after the date of this Agreement.
"Adjusted Capital Balance" of a Partner or an Investor means the Capital
Contribution of the Partner or the Assignor Limited Partner made on behalf of an
Investor, less any Net Proceeds of Sale or Refinancing actually distributed to
the Partner or Investor (other than that portion, if any, which is payment of an
unpaid Preferred Return), as provided in Article IV herein, at the time of
reference thereto.
"Administrative General Partner" means Brown Healthcare, Inc., a Maryland
corporation, or any Person who is designated as the Administrative General
Partner in the Schedule at the time in question.
"Affiliate" means (i) any Person directly or indirectly controlling,
controlled by or under common control with another Person, (ii) any Person
owning or controlling 10% or more of the outstanding voting securities of such
other Person, (iii) any officer, director or partner of such Person, and (iv) if
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such other Person is an officer, director or partner, any company for which
such Person acts in any such capacity.
"Agreement" means this Limited Partnership Agreement as originally executed
and as amended from time to time, as the context requires. Words such as
"herein", "hereinafter," "hereof," "hereto," "hereby" and "hereunder," when used
with reference to this Agreement, refer to this Agreement as a whole unless the
context otherwise requires.
"Assigned Limited Partnership Interest" means a Partnership Interest which
is credited to the Assignor Limited Partner on the books and records of the Fund
in respect of a purchase of one Unit by an Investor. Each Assigned Limited
Partnership Interest represents a contribution to the capital of the Fund equal
to $25, regardless of any reduction in Selling Commissions.
"Assignee Units" means the ownership interests of an Investor in the Fund
at any particular time, including the right of such Investor to any and all
benefits to which an Investor may be entitled as provided in this Agreement. The
ownership interests of the Investors in the Fund are sometimes referred to
herein as "Units".
"Assignor Limited Partner" means Brown Healthcare Holding Co., Inc. which
will (i) own any Assigned Limited Partnership Interests issued pursuant to
Sections 3.2 and 7.1 hereof, and (ii) transfer and assign to those Persons who
acquire Units all of its rights and interest in Assigned Limited Partnership
Interests in accordance with Sections 3.2 and 7.1 hereof.
"Capital Account" means (i) the separate account maintained and adjusted on
the books and records of the Fund for each Partner and (ii) the separate
subaccount of the Capital Account of the Assignor Limited Partner maintained and
adjusted for each Investor. Each Partner's and Investor's Capital Account is
credited with his Capital Contributions and his distributive share of Fund
Profit (or item thereof). Each Partner's or Investor's Capital Account is
debited with the cash and the fair market value of any property distributed to
him (net of liabilities assumed by such Partner or Investor and liabilities to
which such distributed property is subject), his distributive share of Fund Loss
(and deduction (or item thereof)), and his distributive share of Fund
expenditures described in Section 705(a)(2)(B) of the Code (including losses
disallowed under Section 267(a)(1) or 707(b) of the Code, and Section 709(a)
syndication expenditures applied to reduce the Capital Accounts of the Partners
or Investor's to whom such expenditures are allocable at the time such
expenditures are paid or incurred). Each Partner's and Investor's Capital
Account shall also be adjusted pursuant to Sections 4.4 and 4.5 hereof and as
required by the Income Tax Regulations promulgated under Section 704 of the
Code. Any questions concerning a Partner's or Investor's Capital Account shall
be resolved by the General Partners in their reasonably exercised discretion,
applying principles consistent with this Agreement and the regulations
promulgated under Section 704 of the Code in order to assure that all
allocations herein will have substantial economic effect or will otherwise be
respected for income tax purposes. For purposes of this paragraph, a Partner or
Investor who has more than one Partnership Interest or Unit, as the case may be,
shall have a single Capital Account that reflects all of his Partnership
Interests and Units, regardless of the class of Interests owned (e.g., general
or limited) and regardless of the time or manner in which the Partnership
Interests and Units were acquired.
"Capital Contribution" means the total amount of cash and the fair market
value of any other assets contributed to the Fund by a Partner (net of
liabilities assumed by the Fund and liabilities to which any such contributed
assets are subject) and, with respect to an Investor, the Capital Contribution
of the Assignor Limited Partner made on behalf of such Investor (without regard
to any reduction of Selling Commissions). Any reference in this Agreement to the
Capital Contribution of a then-Partner or Investor shall include a Capital
Contribution previously made by any prior Partner or Investor with respect to
the Interest or Unit of such then-Partner or then-Investor, except to the extent
that all or a portion of the Interest or Unit of any prior Partner or Investor
shall have been terminated and the portion so terminated not transferred to a
successor Partner or Investor. "Cash Flow Deficit Guaranty Agreement" means that
certain agreement to be entered into by the Fund pursuant to which the
Development General Partner will agree to fund, on a monthly basis, up to
$570,000 of the operating deficits generated by the Development Facilities (on a
combined basis)
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in excess of $570,000 of the aggregate operating deficits generated in
respect of such Facilities during the first two years of operations of the
Development Facilities. Payments made by the Development General Partner under
the Cash Flow Deficit Guaranty Agreement will be non-interest bearing until the
first quarter after the Commencement Date that Investors receive distributions
equal to the Preferred Return and will be repaid as provided in Article IV.
"Certificate" means the Certificate of Limited Partnership establishing the
Fund, as filed with the office of the Secretary of State of the State of
Delaware on or about the date of this Agreement, as it may be amended from time
to time in accordance with the terms of this Agreement and the Act. "Code" means
the Internal Revenue Code of 1986, as amended (or any corresponding provision of
succeeding law).
"Commencement Date" means the date Facility V commences operations and the
Fund effectively acquires the Operating Partnership Interest relating to
Facility V under the applicable Development Partnership Interest Acquisition
Agreement.
"Consent of the Investors" shall mean the affirmative vote of Investors
owning more than 50% of the outstanding Units.
"Controlling Person" of any General Partner or Affiliate thereof means any
person who (a) performs functions for a General Partner or Affiliate similar to
those of (i) a Chairman or member of the Board of Directors, (ii) executive
management, such as a President, or a Vice-President, Secretary or Treasurer, or
(iii) senior management; or (b) holds a 5% or more equity interest in the
General Partner or Affiliate, or has the power to direct or cause the direction
of the General Partner, or Affiliate, whether through the ownership of voting
securities, by contract or otherwise.
"Development General Partner" means Meridian Healthcare Investments, Inc.,
or any Person who is designated as the Development General Partner in the
Schedule at the time of reference thereto. "Development Partnership Interest
Acquisition Agreements" means those agreements pursuant to which the Fund will
acquire, subject to raising sufficient proceeds of the Offering, Operating
Partnership Interests of the Operating Partnerships that own Facility V,
Facility VI and Facility VII.
"Due Diligence Expense Reimbursement Fee" means the fee equal to 2% of the
Gross Proceeds of the Offering allowed to the Selling Agent, which may be
re-allowed to Soliciting Dealers, for advisory services, due diligence
activities and the reimbursement of expenses.
"Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, estate, business trust, cooperative, association or other
legal form of organization.
"Escrow Agent" means Mercantile-Safe Deposit & Trust Company, or such other
escrow agent chosen by the General Partners to hold funds from Persons who have
subscribed to become Investors pending the assignment of Assignee Units to them.
"Existing Partnership Interest Acquisition Agreements" means those
agreements pursuant to which the Fund will acquire, subject to raising
sufficient proceeds of the Offering, Operating Partnership Interests relating to
Facility III and Facility IV.
"Facilities" mean the nursing centers described in the Prospectus which are
to be acquired, developed, owned and operated by the Operating Partnerships,
including all replacements thereto and all personal property which is used in
connection therewith. Any one of the Facilities may herein be referred to as a
"Facility". The terms "Facility I" through "Facility VII" shall be defined
by reference to the use of such terms in the Prospectus.
"Front-End Fees" means fees and expenses paid by any Person for any
services rendered during the organization or acquisition phase of the Fund,
including the Offering and Organization Expense Fee, the Due Diligence Expense
Reimbursement Fee, the Selling Commissions, the Acquisition Expenses, the
Acquisition Fees, mortgage placement, financing or refinancing fees and any
other similar fees.
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"Fund" means the limited partnership formed in accordance with this
Agreement by the parties hereto, as said limited partnership may from time to
time be constituted.
"Fund Property" means all or any portion of the assets owned or to be owned
by the Fund, including the Operating Partnership Interests and all incidental
personal property.
"General Partner" means any Person designated as a General Partner in the
Schedule and any Person who becomes a Successor or Additional General Partner as
provided herein, in each such Person's capacity as a General Partner of the
Fund.
"Gross Proceeds of the Offering" means the aggregate of the proceeds from
the sale of Units in the Offering, which amount is equal to the total of all
Capital Contributions of the Investors.
"Increased Maximum Offering Amount" means the total amount of $38,500,000
in Gross Proceeds of the Offering.
"Interest" or "Partnership Interest" means the entire ownership interest
(which maybe segmented into and/or expressed as a percentage of various rights
and/or liabilities) of a Partner in the Fund at any particular time, including
the right of such Partner to any and all benefits to which a Partner may be
entitled as provided in the Agreement and in the Act, together with the
obligations of such Partner to comply with all the terms and provisions of this
Agreement and of the Act.
"Interest Income" means interest income under the Purchase Money Financing
with respect to an installment or other deferred Sale.
"Interest Income Cash" means Net Proceeds from a Sale attributable to an
installment or other deferred Sale.
"Interim Investments" means the short-term investments made with the Net
Proceeds of the Offering until such Net Proceeds of the Offering are disbursed
for acquisition of the Operating Partnership Interests.
"Investor" means (i) any Person who holds an Assignee Unit and is reflected
as an Investor on the books and records of the Fund, and (ii) any Investor who
has been admitted to the Fund as a Substitute Limited Partner pursuant to
Section 7.5 hereof.
"Investment in Properties" means the amount of Capital Contributions used
to make or invest in mortgage loans or the amount actually paid or allocated to
the purchase and development of the Facilities or the Operating Partnership
Interests (including the purchase of properties, working capital reserves
allocable thereto (except that working capital reserves in excess of 5% shall
not be included), and other cash payments such as interest and taxes but
excluding Front-End Fees).
"Limited Partner" means any Person who is designated as a Limited Partner
on the books and records of the Fund at the time of reference thereto, in each
such Person's capacity as a Limited Partner of the Fund.
"Limited Partnership Interest" means the ownership interest of the Assignor
Limited Partner and all other Limited Partners in the Fund.
"Limited Partnership Interest Percentage" in respect of any Investor means
the percentage obtained by converting to a percentage the fraction having the
number of Assignee Units owned by such Investor as its numerator and having the
number of Assignee Units owned by all Investors at the time of reference thereto
as its denominator.
"Majority Vote of the Investors" shall mean the affirmative vote of
Investors owning more than 50% of the outstanding Units.
"Management Agreements" means those certain agreements to be entered into
by the Operating Partnerships and the Nursing Center Manager pursuant to which
the Nursing Center Manager shall manage each of the Facilities for a fee of 6%
of the total revenues of the Facilities, provided however, that one-half of the
management fee (3% of total revenues) payable in respect of a Development
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Facility will be deferred to the extent necessary to support the Investors'
Preferred Return for the first two years after the Commencement Date.
"Maximum Offering Amount" means the total amount of $24,500,000 in Gross
Proceeds of the Offering.
"Minimum Gain" means with respect to each non-recourse liability of the
Fund (including the Fund's share of the non-recourse liabilities of the
Operating Partnerships) and subject to certain adjustments pursuant to Income
Tax Reg. ss.1.704-1(b)(4)(iv)(c), the amount of gain (of whatever character), if
any, that would be realized by the Fund, if the Fund disposed of (in a taxable
transaction) any of the assets subject to such liability in full satisfaction of
the liability. For this purpose, only the portion of the assets' adjusted basis
allocated to non-recourse liabilities of the Fund shall be taken into account.
"Minimum Offering Amount" means the amount of $2,830,000 in Gross Proceeds
of the Offering.
"Net Cash Flow" means, with respect to any fiscal period, the excess, if
any, of (i) all cash funds derived from the operations of the Fund during such
period, including the yield from the Interim Investments and excess cash
reserves deemed distributable by the General Partners pursuant to Section 3.3E
hereof, over (ii) all cash disbursed in the operations of the Fund during such
period, including cash used to pay, or establish reasonable reserves for,
operating expenses, fees, commissions, debt service and loan repayments (except
for repayment of advances under the Cash Flow Deficit Guaranty Agreement),
improvements, repairs, replacements, contingencies and anticipated obligations,
except to the extent any such payment is made out of reserves set aside for such
purpose. Net Cash Flow shall not include amounts distributed or to be
distributed under Section 4.2 hereof.
"Net Proceeds of the Offering" means the Gross Proceeds of the Offering
less the Selling Commis- sions, the Due Diligence Expense Reimbursement Fee, and
the Offering and Organization Expense Fee.
"Net Proceeds from a Refinancing" means the gross proceeds to the Fund of
any Refinancing, less any amounts deemed necessary by the General Partners to be
allocated to the establishment of reserves, the payment of any debts and
liabilities of the Fund to creditors (except for repayment of the Operating
Deficit Loan and the Deferred Management Fee Loans), and the payment of any
reasonable expenses or costs associated with the Refinancing, including but not
limited to, fees, points, or commissions paid to any unaffiliated Persons.
"Net Proceeds from a Sale" means the gross proceeds to the Fund of any
Sale, less any amounts deemed necessary by the General Partners to be allocated
to the establishment of reserves, the payment of any debts and liabilities of
the Fund to creditors (except for repayment of the Operating Deficit Loan and
the Deferred Management Fee Loans), and the payment of any reasonable expenses
or costs associated with the Sale, including but not limited to, fees or real
estate brokerage commissions paid to any unaffiliated Persons and, subject to
Sections 5.2.A(viii) and 9.2.A(vi), fees or real estate brokerage commissions
paid to the General Partners or Affiliates.
"Net Proceeds of sale or Refinancing" means the Net Proceeds from a Sale or
Net Proceeds from a Refinancing, as the case may be.
"Notification" means a writing, containing the information required by this
Agreement to be communicated to any Person, sent or delivered to such Person in
accordance with the provisions of Section 12.3 of this Agreement.
"Nursing Center Manager" means Meridian Nursing Centers, Inc.
"Offering"means the offering and sale of Units for a minimum of $2,830,000
and a maximum of $38,500,000, as more fully described in the Prospectus.
"Offering and Organization Expense Fee" means the fee paid to the
Administrative General Partner equal to 4.35% of the Gross Proceeds of the
Offering, payable at such times as the Investors
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are recognized as such on the books of the Fund, for services rendered and costs
incurred in connection with the Organization of the Fund and the offering of
Units.
"Operating Deficit Loan" means the funds advanced to the Fund by the
Development General Partner under the terms of the Cash Flow Deficit Guaranty
Agreement.
"Operating Partnerships" means the limited partnerships, each of which will
own and operate a Facility.
"Operating Partnership Interest" means the 98.99% partnership interest of
the Fund in an Operating Partnership.
"Partner" means any General Partner or Limited Partner.
"Partnership Interest Options" means those agreements pursuant to which the
Fund will acquire, subject to raising sufficient proceeds of this Offering,
Operating Partnership Interests in respect of Facility I and Facility II.
"Person" means any individual or Entity.
"Preferred Return" means the cumulative, non-compounded annual return equal
to 10. 125% of the Adjusted Capital Balance of each Investor commencing on the
earlier of (i) the final closing for the sale of Units or (ii) June 30, 1988. At
the time of a Sale or Refinancing, if any portion of the Preferred Return of an
Investor has not been paid from Net Cash Flow, such unpaid portion will be added
to the Investor's priority distribution from the Net Proceeds of Sale or
Refinancing, all as more fully set forth in Article IV.
"Profit" or "Loss" means, for each fiscal year or other period, an amount
equal to the Fund's taxable income or loss for such year or period, with the
following adjustments:
(i) Any income of the Fund that is exempt from federal income tax shall be
added to such taxable income or loss;
(ii) Any expenditures of the Fund described in Section 705(a)(2)(B) of the
Code, or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to
Income Tax Reg. ss.1.704-1(b)(2)(iv)(i), shall be subtracted from such taxable
income or loss; and
(iii) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period for federal
income tax purposes shall be taken into account, except that if the fair market
value on the date that the asset is contributed to the Fund (or if the basis of
such asset for book purposes is adjusted under the Income Tax Regulations, such
adjusted book basis) differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, the depreciation,
amortization and other cost recovery deductions taken into account shall be
equal to an amount which bears the same ratio to such beginning fair market
value (or adjusted book basis) as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis. Except as otherwise provided herein,
each item of income, gain, loss, deduction, preference or recapture entering
into the computation of Profit or Loss hereunder shall be allocated to each
Partner in the same proportion as Profit and Loss are allocated.
"Prospectus" means the Fund's Prospectus contained in the Registration
Statement filed on Form S-1 with the Securities and Exchange Commission for the
registration of the Units under the Securities Act of 1933, in the final form in
which it is filed with the Securities and Exchange Commission and as thereafter
supplemented pursuant to Rule 424 under the Securities Act of 1933. Any
reference herein to "date of the Prospectus" shall be deemed to refer to the
date of the Prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act of 1933.
"Purchase Money Financing" means a purchase money note or other form of
installment sale obligation received by the Fund pursuant to a Sale.
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"Refinancing" means the replacement, increase, consolidation, modification,
extension of all or any component of any loan, debt, obligation or financing of
the Fund or any Operating Partnership.
"Sale" means any transaction entered into by the Fund or an Operating
Partnership resulting in the receipt of cash or other consideration (other than
the receipt of Capital Contributions) not in the ordinary course of its
business, including, without limitation, sales or exchanges or other
dispositions of Facilities, Operating Partnership Interests and real or personal
property of the Fund, condemnations, recoveries of damage awards and insurance
proceeds (other than business or rental interruption insurance proceeds), but
excepting any borrowing, mortgage financings or Refinancings.
"Schedule" means Schedule A annexed hereto as amended from time to time and
as so amended at the time of reference thereto.
"Selling Agent" means Alex. Brown Realty Securities, Inc., an Affiliate of
the Administrative General Partner, which will offer the Units on a best efforts
basis pursuant to the Selling Agent Agreement.
"Selling Agent Agreement" means that certain agreement to be entered into
by the Fund, Alex. Brown Realty Securities, Inc., the Administrative General
Partner, and the Development General Partner, pursuant to which Alex. Brown
Realty Securities, Inc. will offer and sell the Units on a best efforts basis.
"Selling Commissions" means the maximum total (or any portion thereof) of
7.0% of the Gross Proceeds of the Offering paid to the Selling Agent or other
soliciting dealers for their efforts in offering the Units. The 7.0% maximum
Selling Commissions will be reduced for volume purchases and purchases by
certain Affiliates as specified in the Prospectus.
"Sponsor" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Fund or who will manage or participate in the
management of the Fund, and any Affiliate of such Person, but does not include
(a) any Person whose only relationship with the Fund or the General Partner is
that of an independent property manager if such person's only compensation from
the Fund is in the form of fees for the performance of property management
services, or (b) wholly- independent third parties such as attorneys,
accountants and broker-dealers whose only compensation from the Fund is for
professional services rendered in connection with the Offering or the operations
of the Fund.
"Subordinated Limited Partner" means any Person who is designated as a
Subordinated Limited Partner on the books and records of the Fund.
"Substitute Limited Partner" means any Investor who has elected to convert
from an Investor to a Limited Partner pursuant to Section 7.5 of this Agreement.
"Successor General Partner" means any Person who is admitted as a Successor
General Partner to the Fund under the provisions of Article VI after the date of
this Agreement.
"Tax Matters Partner" means the Administrative General Partner designated
in Section 5.1 as the tax matters partner, as defined in Section 6231(a)(7) of
the Code.
"Termination Date of the Offering" means the date upon which the Offering
will terminate, which, if not sooner terminated by the General Partners, will be
one year from the date of the Prospectus.
"Unit" means (i) an Assignee Unit representing the assignment by the
Assignor Limited Partner of one Assigned Limited Partnership Interest, and (ii)
the Partnership Interest attributable to one Unit of any Investor who has become
a Substitute Limited Partner pursuant to Section 7.5 hereof.
"U.S. Person" means a Person who is (i) an individual who is either a
United States citizen or a resident of the United States for federal income tax
purposes, (ii) a corporation, partnership, or other legal entity created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) a corporation that is not created or organized in or under the
laws of the United States or any political subdivision thereof but which has
made an election under Section 897(i) of the Code to
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be treated as a domestic corporation for certain purposes of federal income
taxation, or (iv) an estate or trust whose income from sources without the
United States is includable in its gross income for federal income tax purposes
regardless of its connection with a trade or business carried on in the United
States.
"Working Capital Reserves" means, initially, the portion of the Net
Proceeds of the Offering set aside as working capital reserves pursuant to
Section 3.3E, as increased or decreased from time to time at the discretion of
the General Partners.
ARTICLE II
NAME; PURPOSE; TERM AND CERTIFICATE
Section 2.1 Name; Formation
The Partners hereby form the limited partnership to be known as "Meridian
Healthcare Growth and Income Fund Limited Partnership", and such name shall be
used at all times in connection with the Fund's business and affairs; provided,
however, that the Fund may use trade names in its business operations. The Fund
shall be governed by the Act.
Section 2.2 Place of Registered Office
The address of the registered office in the State of Delaware of the Fund
is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801; the
name of the registered agent for service of process on the Fund in the State of
Delaware at that address is The Corporation Trust Company. The Fund's principal
place of business is 555 Fairmount Avenue, Suite 301, Towson, Maryland 21204, or
such other place(s) as the General Partners may hereafter determine.
Notification of any change in the location of the principal office shall be
given to the Partners and Investors on or before the date of any such change.
Section 2.3 Purpose
The purpose of the Fund is to acquire, own, develop, maintain, finance,
encumber, operate as a business, lease, sell, dispose of and otherwise deal with
the Operating Partnership Interests, and to do all things necessary, convenient
or incidental to the achievement of the foregoing.
Section 2.4 Term
The Fund shall continue until December 31, 2037, unless the Fund is sooner
dissolved in accordance with the provisions of this Agreement.
Section 2.5 Recording of Certificate
The General Partners shall take all necessary action to maintain the Fund
in good standing as a limited partnership under the Act, including, without
limitation, the filing of the Certificate and such amendments and further
certificates as may be necessary under the Act and necessary to qualify the Fund
to do business in such states as the Fund owns property. The General Partners
shall not be required to send a copy of the Fund's filed Certificate to each
Partner and Investor.
ARTICLE III
PARTNERS; CAPITAL
Section 3.1 General Partners; Assignor Limited Partner;
Subordinated Limited Partners
The name, address and Capital Contribution of each General Partner, the
Assignor Limited Partner and the Subordinated Limited Partners are set forth on
the Schedule. Upon the dissolution and termination of the Fund, each General
Partner, within 90 days after the fiscal year in which the dissolution of the
Fund occurs, shall make a Capital Contribution to the Fund in an amount equal to
the lesser of (i) the deficit balance, if any, in its Capital Account or (ii)
its proportionate share of the
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excess of 1.01 % of the Capital Contributions of the Investors and Limited
Partners (excluding capital contributions of the Assignor Limited Partner on
behalf of Investors) over the Capital Contributions previously contributed by
the General Partners.
Section 3.2 Investors
A. The General Partners are authorized to accept orders for Units pursuant
to the Offering. All orders for Units shall be held in trust and deposited in an
escrow account with the Escrow Agent. Orders for Units shall be accepted or
rejected by the General Partners within 30 days after their receipt by the
Escrow Agent.
B. Upon the receipt by the Escrow Agent of orders for an amount equal to
the Minimum Offering Amount, the Escrow Agent shall release the funds in the
escrow account to the Assignor Limited Partner which shall immediately transmit
such funds to the Fund. Subsequent orders for Units that are accepted by the
General Partners shall be released from the escrow account and transmitted to
the Fund or returned to subscribers in accordance with the Prospectus. Upon
release of an Investor's funds from the escrow account to the Fund, an Assigned
Limited Partnership Interest shall be credited to the Assignor Limited Partner
on the books and records of the Fund in respect of such Unit and the Assignor
Limited Partner shall assign all of its rights with respect to such Assigned
Limited Partnership Interest to the Investor to the extent permitted by, and in
accordance with, the Agreement and applicable law. The Assignor Limited Partner
hereby agrees to exercise any and all rights with respect to such Assigned
Limited Partnership Interest as directed by the Investor. At such times as the
General Partners deem practicable and as required by the Act, the Certificate
and this Agreement shall be amended to reflect the ownership by the Assignor
Limited Partner of Assigned Limited Partnership Interests in the amount of such
purchased Units.
C. Any interest earned on moneys paid by Investors during the period such
moneys are held in escrow by the Escrow Agent shall be paid to the Fund
following the release of orders and shall be distributed in accordance with
Section 4.5A hereof. Persons whose orders for Units are rejected by the General
Partners shall be returned their moneys (and interest earned thereon) within10
days after such rejection.
D. No order for Units sold as part of the Offering shall be accepted after
the Termination Date of the Offering. If the General Partners do not accept
orders totalling an amount equal to the Minimum Offering Amount on or before the
Termination Date of the Offering, the Escrow Agent shall promptly return all
moneys deposited by subscribers together with any interest earned on such
moneys.
E. For purposes of this Agreement, an Investor who acquires Units in the
Offering shall be recognized as an Investor with respect to such Units on the
date that the General Partners accept the order for such Units.
Section 3.3 Partnership Capital
A. Each Partner's and Investor's Capital Contribution shall be paid in cash
on or prior to the date of such Partner's admission to the Fund or the date of
the recognition of the Investor on the books and records of the Fund.
B. Except to the extent of any interest income earned on an Investor's
Capital Contribution while it is held in escrow, and later distributed to such
Investor pursuant to Section 4.5A, no Partner or Investor shall be paid interest
on any Capital Contribution.
C. Except as otherwise provided in this Agreement, no Partner or Investor
shall have the right to withdraw, or receive any return of, his Capital
Contribution prior to December 31, 2037.
D. Under circumstances requiring a return of any Capital Contribution, no
Partner shall have the right to receive property other than cash.
E. The Fund shall initially set aside Working Capital Reserves for
contingencies related to ownership of the Operating Partnership Interests in an
amount equal to at least 3.0% of the Gross Proceeds of the Offering; provided,
however, that if only the Minimum Offering Amount is received
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by the Fund, Working Capital Reserves shall be approximately 1.5% of the
Gross Proceeds of the Offering. If in any fiscal quarter, the General Partners
determine that the Working Capital Reserves of the Fund are in excess of the
amount deemed sufficient in connection with the ownership of the Operating
Partnership Interests and that such Working Capital Reserves may be reduced, the
amount of such reduction may be distributed to the Partners and Investors as a
portion of the Fund's Net Cash Flow. If in any fiscal quarter, the General
Partners determine that the Working Capital Reserves are insufficient in
connection with the Fund's operations and that such Working Capital Reserves
shall be increased, the amount of such increase shall reduce Net Cash Flow. Upon
the Sale or disposition of a Facility or Operating Partnership, any Working
Capital Reserves maintained for such Facility or Operating Partnership may be
distributed, in the General Partners' discretion, to Partners and Investors or
applied as Working Capital Reserves for other Facilities.
Section 3.4 Liability of Partners and Investors
A. Except as provided in the Act, the Limited Partners and Investors shall
be liable only to pay their Capital Contributions and no Limited Partner or
Investor will be personally liable for the debts, liabilities, contracts, or
other obligations of the Fund. In accordance with Section 17-608 of the Act, (i)
if a Limited Partner or an Investor has received the return of any part of his
Capital Contribution in violation of the Agreement or the Act, he shall be
liable to the Fund for a period of six years thereafter for the amount of the
Capital Contribution wrongfully returned, (ii) if without violating this
Agreement or the Act, a Limited Partner or an Investor receives a return of any
part of his Capital Contribution, then he shall be liable to the Fund for a
period of one year thereafter for the amount of the returned contribution, but
only to the extent necessary to discharge liabilities to creditors who extended
credit to the Fund during the period the Capital Contribution was held by the
Fund and (iii) a Limited Partner or Investor receives a return of his Capital
Contribution to the extent that a distribution to him reduces his share of the
fair market value of the net assets of the Fund below the agreed value of his
Capital Contribution that has not been distributed to him.
B. Except as set forth in 3.4A, no Limited Partner or Investor shall be
required to lend any funds to the Fund or, after his Capital Contribution has
been fully paid, to make any further capital contribution to the Fund, nor shall
any Limited Partner or Investor be liable for or have any obligation to restore
any negative balance in his Capital Account.
C. Subject to the provisions of Sections 3.1 and 5.9 of this Agreement, no
General Partner shall have any personal liability for the repayment of the
Capital Contribution or the Preferred Return of any Limited Partner or Investor
or be required to repay to the Fund all or any portion of any negative balance
of the Capital Accounts of the Limited Partners or the Investors.
D. The funds advanced by the Development General Partner under the Cash
Flow Deficit Guaranty Agreement shall not constitute a Capital Contribution of
the Development General Partner or be credited to the Capital Account of the
Development General Partner.
ARTICLE IV
ALLOCATIONS, DISTRIBUTIONS AND APPLICABLE RULES
Section 4.1 Allocation of Profit or Loss from a Sale
A. Profit from any Sale (and Profit from any deemed Sale pursuant to
Sections 4.4 or 4.5) shall be allocated in the following order of priority:
(i) First, if one or more Partners or Investors has a negative balance in
his Capital Account, to such Partners and Investors, in proportion to their
negative Capital Accounts, until all such Capital Accounts have zero balances.
(ii) Second, any Profit not allocated pursuant to Section 4.IA(i) shall be
allocated to the Investors until the Capital Account of each Investor is equal
to the sum of his Adjusted Capital Balance plus his unpaid Preferred Return, if
any.
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(iii) Third, any remaining Profit shall be allocated 80.816% to the
Investors, 14.143% to the Development General Partner, 4.041% to Realty
Associates 1988 Limited Partnership, .5% to the Development General Partner and
..5% to the Administrative General Partner. B. Loss from any Sale (and Loss from
any deemed Sale pursuant to Sections 4.4 and 4.5) shall be allocated in the
following order of priority:
(i) First, if one or more Partners or Investors has a positive Capital
Account, to such Partners or Investors, in proportion to their positive Capital
Accounts, until all such positive Capital Accounts have zero balances.
(ii) Any remaining Loss shall be allocated as follows: 80.816% to the
Investors, 14.143% to the Development General Partner, 4.041% to Realty
Associates 1988 Limited Partnership, .5% to the Development General Partner and
..5% to the Administrative General Partner.
Section 4.2 Distribution of Net Proceeds of Sale or Refinancing
A. Upon a Refinancing and upon a Sale that does not constitute a Sale of
all or substantially all of the Facilities or Operating Partnership Interests,
Net Proceeds from a Refinancing or Net Proceeds from a Sale, as the case may be,
shall be distributed, credited and applied in the following order of priority:
(i) First, to the Investors until each Investor has received an amount
equal to his unpaid Preferred Return, if any, and then his Adjusted Capital
Balance.
(ii) Second, to repay accrued and unpaid interest under the Cash Flow
Deficit Guaranty Agreement and the Deferred Management Fee Loans.
(iii) Third, to repay any outstanding principal under the Cash Flow Deficit
Guaranty Agreement and the Deferred Management Fee Loans.
(iv) Fourth, any remaining Net Proceeds of Sale or Refinancing shall be
distributed 80.816% to the Investors 14.143% to the Development General Partner,
4.041% to Realty Associates 1988 Limited Partnership, .5% to the Development
General Partner and .5% to the Administrative General Partner. B. Upon the Sale
of all or substantially all of the Facilities or Operating Partnership
Interests, Net Proceeds from such Sale, if any, shall be distributed, credited
and applied in the following order of priority:
(i) First, to repay accrued and unpaid interest under the Cash Flow Deficit
Guaranty Agreement and the Deferred Management Fee Loans.
(ii) Second, to repay any outstanding principal under the Cash Flow Deficit
Guaranty Agreement and the Deferred Management Fee Loans.
(iii) Third, to the Partners and Investors, in proportion to their
positive Capital Accounts, after the allocation of Profit and Loss pursuant
to Sections 4.lA and 4.1B, until all such Capital Accounts have been reduced to
zero.
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit and Loss
from Operations A. Net Cash Flow, if any, for each year shall be distributed and
applied by the Fund in the following order of priority:
(i) First, 99% to the Investors, .5% to the Development General Partner,
and .5% to the Administrative General Partner, until each Investor has received
an amount equal to his unpaid Preferred Return.
(ii) Second, to repay any accrued but unpaid interest under the Cash Flow
Deficit Guaranty Agreement and the Deferred Management Fee Loans.
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(iii) Third, to repay any outstanding principal under the Cash Flow Deficit
Guaranty Agreement (but, only (i) if less than four years have elapsed since the
Commencement Date, the Development Facilities are at least 95% occupied and at
least 27% of the income therefrom is from private pay sources, or (ii) if four
or more years have elapsed since the Commencement Date, the Development
Facilities are at least 90% occupied and at least 20% of the income therefrom is
from private pay sources, or (iii) if the Development Facilities have been sold
by the Fund), and the Deferred Management Fee Loans.
(iv) Fourth, 99% to the Investors, .5% to the Development General Partner
and .5% to the Administrative General Partner, until each Investor has received
a non-compounded, non-cumulative return for the current year equal to 12.5% of
his Adjusted Capital Balance.
(v) Fifth, 90.918% to the Investors, 8.582% to the Development General
Partner and.5% to the Administrative General Partner. To the extent feasible,
the General Partners will endeavor to distribute any Net Cash Flow on a
quarterly basis.
B. Profit from ordinary operations for each fiscal year shall be allocated
as follows:
(i) First, to the Partners and Investors who have received a distribution
of Net Cash Flow during such fiscal year, an amount of Profit from ordinary
operations equal to the amount of such Net Cash Flow, in proportion to the
amount of such distribution received by each of them.
(ii) Second, if there has been no distribution of Net Cash Flow during such
fiscal year, or to the extent that the Profit from ordinary operations is in
excess of the Net Cash Flow during such fiscal year, Profit from ordinary
operations shall be allocated 99% to the Investors, .5% to the Development
General Partner and .5% to the Administrative General Partner. C. Loss from
ordinary operations for each fiscal year shall be allocated 99% to the
Investors, .5% to the Development General Partner and .5% to the Administrative
General Partner.
Section 4.4 Liquidation or Dissolution
A. If the Fund is liquidated or dissolved, the net proceeds from such
liquidation, as provided in Article VIII, shall be distributed first to
creditors, including Partners who are creditors, to the extent otherwise
permitted by law (whether by payment or by establishment of reserves), other
than liabilities for distributions to Partners and Investors, and any remaining
net proceeds shall be distributed in proportion to the Capital Accounts of the
Partners and Investors, determined after the allocations in Sections 4.1 A and
4.1 B, unless applicable law shall otherwise require, in which event the
allocations set forth in Sections 4.1A and 4.1B shall be modified to the extent
necessary, but only to the extent necessary, to comply with such applicable law.
B. All distributions under this Section 4.4 shall be made by the end of the
taxable year of liquidation of the Fund or, within 90 days of the date of
liquidation, whichever is later.
Section 4.5 General and Special Rules
A. Except as otherwise provided herein, the timing and amount of all
distributions shall be determined by the General Partners. No Partner shall have
the right to demand and receive any distribution of property other than cash.
Notwithstanding any other provision of this Agreement, the General Partners
shall have authority to make the following distributions to certain of the
Investors: First, if the Fund has realized a savings on Selling Commissions
payable by the Fund with respect to the purchase of Units (as more fully set
forth in the Prospectus), the General Partners shall make a distribution to such
Investor equal to the amount of such savings realized by the Fund. Second, if
any interest is earned on an Investors Capital Contribution while it is held in
escrow pending recognition as an Investor under Article VII, such interest shall
be paid by the Fund to such Investor and Profit attributable to such interest
shall be allocated in the same manner.
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B. Subject to all of the special rules of this Section 4.5, if any Fund
Property is distributed to the Partners in kind, such Fund Property first shall
be valued on the basis of the fair market value thereof to determine the Profit
or Loss that would have resulted if such Fund Property had been sold, and then
such Profit or Loss shall be allocated as provided in Section 4.lA and Section
4.1B, and shall be properly credited or charged to the Capital Accounts in
accordance with Income Tax Reg. ss.1.704- l(b)(2)(iv)(e) or any successor
provision thereto. Any Partner entitled to any interest in such assets shall
receive such interest as a tenant-in-common with all other Partners so entitled.
The fair market value of such assets shall be determined by an independent
appraiser who shall be selected by the General Partners.
C. Notwithstanding Sections 4.1 and 4.3 hereof, if an allocation of Loss
(or item thereof) to an Investor or Partner would cause or increase a deficit
balance in his or its Capital Account in excess of: (i) in the case of an
Investor or Partner other than a General Partner, his proportionate share of
Minimum Gain, or (ii) in the case of a General Partner, the sum of the amount
which it is obligated to restore to the Fund pursuant to Section 3.1 hereof and
its proportionate share of Minimum Gain (in each case, such excess being
referred to hereafter as the "Excess Deficit Balance"), then the allocation
shall not be made to such Investor or Partner. Instead, such Loss (or deduction
or item thereof) shall be allocated first to the Partners and Investors having
positive Capital Accounts, in proportion to such positive Capital Accounts,
until all such positive Capital Accounts have been reduced to zero, and any
additional Loss (or deduction or item thereof) shall be allocated to the General
Partners in accordance with their interests in the Fund. For purposes of making
the determination set forth above, each Investor's and each Partner's Capital
Account balance shall be reduced by reasonably expected allocations or
adjustments of loss (or item thereof) including Loss from a Sale under Income
Tax Reg. ss.ss.1.704-l(b)(2)(ii)(a)(4) and (5), and by reasonably expected
distributions to the extent not offset by reasonably expected Capital Account
increases ("Account Reduction Items"). For purposes of calculating reasonably
expected Capital Account increases, the value of the Fund's assets shall be
presumed to be equal to their adjusted basis for federal income tax purposes.
D. Notwithstanding Sections 4.1 and 4.3 hereof, in accordance with Income
Tax Reg. ss.ss.1.704- 1(b)(2)(ii)(d) and 1.704-1(b)(4)(iv)(e), (i) if, in any
fiscal year of the Fund, an Account Reduction Item unexpectedly causes or
increases an Investor's or Partner's Excess Deficit Balance, or (ii) if there is
a net decrease in Minimum Gain during a taxable year, then all Investors or
Partners with an Excess Deficit Balance at the end of such year shall be
specially allocated Profit and, to the extent necessary, gross income (as
defined in Section 61 of the Code) to the extent of such Excess Deficit
Balances, in proportion to the Excess Deficit Balance of each Investor or
Partner. Any remaining Profit or Loss, after adjustment has been made for
allocation of income or gain pursuant to this Section 4.5D, shall be allocated
in accordance with Sections 4.1 and 4.3 hereof. The General Partners shall be
authorized to interpret and apply this Section 4.5D so as to satisfy the
requirements of Income Tax Reg.ss.ss.1.704- l(b)(2)(ii)(d) and
1.704-1(b)(4)(iv)(e) and any successor provisions.
E. Any special allocations of Profit, Loss or gross income under Section
4.5D shall be taken into account in computing subsequent allocations of Profit
or Loss, so that to the extent possible, the aggregate amounts of Profit or Loss
allocated to each Partner or Investor will be equal to the aggregate amounts
that would have been allocated to them in the absence of the unexpected Account
Reduction Items.
F. For each fiscal year, all Profit and Loss allocated pursuant to Section
4.3 hereof to the Investors shall be allocated among the Persons that are
recognized as Investors during such year by determining the Profit and Loss
attributable to each month during such year and by allocating the amount of such
Profit and Loss among Persons who are recognized as Investors on the books of
the Fund on the first business day of such month. The Profit or Loss
attributable to each month of the fiscal year shall be determined by dividing
the Profit or Loss for such year by the number of days in such year, and then
multiplying such per diem amount by the number of days in each month.
G. All Net Cash Flow distributable to the Investors attributable to each
month of a fiscal quarter, if any, pursuant to Section 4.3 hereof, shall be
distributed among the Persons recognized as Investors on the books of the Fund
on the first business day of such month during the fiscal quarter. The Net
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Cash Flow attributable to each month of the fiscal quarter shall be
determined by dividing the amount of Net Cash Flow for such quarter by the
number of days in the quarter, and then multiplying such per diem amount by the
number of days in each month.
H. Notwithstanding Sections 4.5F and 4.5G, the Fund shall adopt the
"interim closing of the books" method of allocating Fund Profit and Loss, in
accordance with a "semi-monthly convention", among persons who become Investors
pursuant to a closing of the sale of the Units on or before the Termination Date
of the Offering. Accordingly, if there is more than one closing of the sale of
the Units, Investors who are recognized on the books of the Fund (i) prior to
the sixteenth day of a calendar month, shall be treated as an Investor on the
books of the Fund on the first business day of the month of recognition, and
(ii) on or after the sixteenth day of a calendar month shall be treated as an
Investor on the books of the Fund on the first day of the month following the
month of recognition.
I. Except as provided in Section 4.5M, for each taxable year, all Profit or
Loss allocated pursuant to Section 4.1 hereof and all Net Proceeds of Sale or
Refinancing, allocable or distributable with respect to any Unit which is
transferred during a taxable year of the Fund, shall be allocated or
distributed, as the case may be, to the Persons recognized (in accordance with
Section 7.4 hereof) as Investors as of the first business day of the month that
includes the date on which the Sale or Refinancing occurs; provided, however,
that all such Profit or Loss which is attributable to, and all Net Proceeds from
a Sale which represent, Net Proceeds from a Sale received by the Fund as a
result of an installment or other deferred Sale, shall be allocated or
distributed, as the case may be, to the Persons recognized (in accordance with
Section 7.4 hereof) as Investors as of the first business day of the month that
includes the date on which the deferred Net Proceeds from a Sale are received by
the Fund, and the allocable cash basis items shall be allocated as required
under Section 706(d) of the Code and the Income Tax Regulations thereunder.
J. In the event that any Investor fails to furnish to the General Partners
evidence, in form and substance satisfactory to the General Partners,
establishing that the General Partners have no obligation under Section 1445 of
the Code with respect to such Investor to withhold and pay over an amount to the
Internal Revenue Service, the General Partners may, in their sole discretion,
withhold with respect to such Investor the amount they would be required to
withhold pursuant to Section 1445 of the Code if such Investor were not a U.S.
Person, and any amount so withheld shall be treated as a distribution under
Sections 4.2 or 4.3 of this Agreement, as the case may be, and shall reduce the
amount otherwise distributable to such Investor thereunder. Alternatively, the
General Partners may at their option loan the Investor an amount equal to the
tax to be withheld (at an interest rate equal to the Escrow Agent's announced
"prime rate" plus two percentage points), such loan to be repaid by retaining
such investor's distributions.
K. Nowithstanding anything to the contrary that may be expressed or implied
in this Agreement, if at any time the allocation provisions of this Article IV
do not result in the allocation to the General Partners of an aggregate of at
least 1% of the Profit or Loss being allocated, the General Partners in the
aggregate, shall be allocated 1% thereof.
L. It is the intent of the General Partners that each Investor's and
Partner's distributive share of Profit and Loss shall be determined and
allocated in accordance with this Article IV to the fullest extent permitted by
Sections 704(b) and 706 of the Code. Therefore, if the Fund is advised by the
Accountants or the Fund's legal counsel, that the allocations provided in
Article IV of this Agreement are unlikely to be respected for federal income tax
purposes, the General Partners have been granted the power in Section 12.2.B
hereof to amend the allocation provisions of this Agreement, on advice of the
Accountants or the Fund's legal counsel, to the minimum extent necessary to
conform to Sections 704(b) and 706 of the Code the plan of allocations and
distributions of Profit and Loss, Net Cash Flow and Net Proceeds of Sale or
Refinancing provided in this Agreement.
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M. Notwithstanding any other provisions of this Agreement other than
Section 4.5K to the contrary, "Interest Income" shall be allocated for federal
income tax purposes, and "Interest Income Cash" shall be distributed, among the
Investors and Partners as follows:
(1) Profit or Loss from the Sale to which the Interest Income relates shall
be calculated as if the Fund had made an election out of installment sale
treatment under Section 453 of the Code, and such Profit or Loss shall be
hypothetically allocated among the Investors and the Partners and hypothetically
credited or charged to their Capital Accounts as provided in Section 4.1. The
Capital Accounts of the Investors and the Partners, as hypothetically adjusted,
shall be referred to as the "Hypothetical Capital Accounts." The Hypothetical
Capital Accounts shall be decreased from time to time by distributions to the
Investors and the Partners and shall be adjusted from time to time as a result
of any adjustment in the principal amount of the Purchase Money Financing (e.g.,
as a result of purchase price adjustments) to which the Interest Income relates.
The Hypothetical Capital Accounts as so adjusted shall be referred to as the
"Adjusted Hypothetical Capital Accounts."
(2) Interest Income shall be allocated among the Investors and the Partners
for federal income tax purposes in proportion to their Adjusted Hypothetical
Capital Accounts and the Capital Accounts of the Investors and the Partners
shall be increased accordingly.
(3) Interest Income Cash shall be distributed among the Investors and the
Partners in the same proportion that Interest Income was allocated above for
federal income tax purposes. Such distributions shall decrease the Capital
Accounts accordingly.
(4) The foregoing allocations and distributions shall be made as of the
last day of each taxable year of the Fund during which the Fund has Purchase
Money Financing, based upon the per diem weighted average Adjusted Hypothetical
Capital Accounts of the Investors and the Partners during each such taxable
year.
N. Notwithstanding any other provision of this Agreement, the General
Partners may, after giving 90 days' prior Notification to the Investors, (i)
adopt any other method for determining, in the event of transfers of Units, the
Investors entitled to distributions of Net Cash Flow or Net Proceeds of Sale or
Refinancing that the General Partners, subject to the review and approval of the
Accountants, determine is reasonable, and (ii) allocate Profit or Loss among the
Investors during the taxable year in any other manner that the General Partners,
determine satisfies the requirements of Section 706 of the Code, but only to the
extent such allocation of Profit and Loss incorporates the minimum changes
required to comply with such section and is supported by an opinion of counsel
to the Partnership.
0. Allocations and distributions to Investors as a class shall be made to
each Investor entitled to such allocation or distribution based upon the ratio
of the number of Units owned by each such Investor to the number of Units owned
by all Investors entitled to such allocation or distribution.
P. In accordance with Section 704(c) of the Code and the Income Tax
Regulations thereunder, income, gain, loss, and deduction (including
depreciation) with respect to any property contributed to the capital of the
Fund shall be allocated among the Investors and Partners so as to take account
of any variation between the adjusted basis of such property to the Fund for
federal income tax purposes and its fair market value on the date of
contribution. In the event the value at which Fund assets are carried on its
balance sheet maintained under the terms of this Agreement are adjusted pursuant
to Income Tax Reg. ss.1.704-1(b)(2)(iv)(f), subsequent allocations of income,
gain, loss and deduction with respect to such assets shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and the value carried on such balance sheet in the same manner as under
Section 704(c) of the Code and the Income Tax Regulations thereunder. Any
elections or other decisions relating to such allocations shall be made by the
General Partners in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section are solely for
purposes of federal, state and local taxes and shall not affect, or in any way
be taken into account in computing, any Investor's or Partner's Capital Account
or share of Profit, Loss, Net Cash Flow, Net Proceeds from a Sale, Net Proceeds
from a Refinancing, or other distributions pursuant to any provision of this
Agreement.
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ARTICLE V
RIGHTS, POWERS AND DUTIES OF PARTNERS
Section 5.1 Management and Control of the Partnership; Tax Matters Partner
A. Subject to the Consent of the Investors when required by this Agreement,
the General Partners shall have the exclusive right to manage and control the
business of the Fund. Except as otherwise provided herein, decisions to be made
by the General Partners shall be made by the joint agreement of the
Administrative General Partner and the Development General Partner.
B. Except as otherwise provided herein, the Fund shall be bound by the
signature of any General Partner.
C. No Limited Partner or Investor (except one who may also be a General
Partner, and then only in his capacity as General Partner) shall have the right
to participate in the control of the business of the Fund, or have any authority
or right to act for or bind the Fund.
D. The Administrative General Partner is hereby designated to serve as the
Fund's Tax Matters Partner and shall have all of the powers and responsibilities
of such position as provided in Sections 6221 et seq. of the Code. No income tax
returns will be filed until the Development General Partner has had the
opportunity to review such returns. All third party costs and expenses incurred
by the Administrative General Partner in performing its duties as Tax Matters
Partner shall be borne by the Fund, as shall all expenses incurred by the Fund
and/or the Tax Matters Partner in connection with any tax audit or tax-related
administrative or judicial proceeding. Each Partner and Investor shall be
responsible for all costs incurred by such Partner or Investor with respect to
any tax audit or tax related administrative or judicial proceeding in connection
with such Partner's or Investor's tax returns and all costs incurred by any such
Partner or Investor who participates in any tax audit or tax- related
administrative or judicial proceeding of or against the Fund or any Partner.
Each Partner and Investor hereby (i) expressly authorizes the Tax Matters
Partner to enter into any settlement with the Internal Revenue Service with
respect to any tax matter, tax item, tax issue, tax audit, or judicial
proceeding, which settlement shall be binding on all Partners and Investors;
(ii) waives the right to participate in any administrative or judicial
proceeding in which the tax treatment of any Fund item is to be determined; and
(iii) agrees to execute such consents, waivers or other documents as the Tax
Matters Partner may determine are necessary to accomplish the provisions of this
Section 5.1D. The Tax Matters Partner shall have no liability to any Partner or
Investor or the Fund, and shall be indemnified by the Fund to the full extent
provided by law, for any act or omission performed or omitted by it within the
scope of the authority conferred on it by this Agreement, except for acts of
negligence or for damages arising from any misrepresentation or breach of any
other agreement with the Fund. The liability and indemnification of the Tax
Matters Partner shall be determined in the same manner as is provided in
Sections 5.9 and 5.10 hereof.
E. Anything herein to the contrary notwithstanding, if the Development
General Partner or its Affiliates shall be in Default (as defined) under an
agreement with the Fund at any time during the term hereof, then all decisions
to be made by the General Partners shall be made solely by the Administrative
General Partner, provided that such Default shall not have been caused solely or
primarily by any act or omission of the Administrative General Partner. If a
Default shall not have been cured within the cure period (if any) applicable
thereto, then for a period of 45 days the Administrative General Partner shall
have the option to purchase the Interests of the Development General Partner in
the Fund at a price determined and payable in accordance with Section 6.5
hereunder, and if such Interests are purchased, it shall constitute a voluntary
withdrawal of the Development General Partner.
Section 5.2 Authority of General Partners
A. Except to the extent otherwise provided herein, including, without
limitation, Sections 5.3A, 5.4 and 5.5, the General Partners for, and in the
name of, and on behalf of, the Fund are hereby authorized:
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(i) to enter into any kind of activity and to perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to the
accomplishment of the purposes of the Fund, so long as said activities and
contracts may be lawfully carried on or performed by a limited partnership under
applicable laws and regulations;
(ii) to engage Persons, including the Sponsors as provided in Article IX,
to provide services or goods to the Fund and the Operating Partnerships, upon
such terms as the General Partners deem fair and reasonable and in the best
interest of the Fund, provided, however, that, as to services or goods provided
by a Sponsor, (a) the compensation for such services or goods must be comparable
and competitive with that of any other Person who provides comparable services
or goods and shall be on competitive terms, and will not exceed 90% of the
competitive price that would be charged by non-affiliated persons or entities
rendering similar types and quality of services in the same or comparable
geographic locations; (b) the compensation and other terms of such contracts
shall be fully disclosed to the Investors in the reports of the Fund, (c) the
Sponsor must have been previously engaged in the business of providing such
services or goods, independent of the Fund and as an ongoing business, (d) all
such transactions shall be embodied in a written contract that describes the
services or goods to be provided and the compensation to be paid, which contract
may only be modified by the Majority Vote of the Investors, and which contract
shall permit termination without penalty on sixty (60) days notice, and (e)
except for those services to be provided under agreements referred to in this
Agreement or the Prospectus, any services provided by a Sponsor will be provided
only under extraordinary circumstances where services are not available
elsewhere;
(iii) to acquire by lease or purchase, develop, own, sell, convey, finance,
improve, assign, mortgage, lease or exchange incident to a tax-free swap any
real estate and any personal property necessary, convenient or incidental to the
accomplishment of the purposes of the Fund;
(iv) to develop, construct, maintain, finance, improve, own, grant options
with respect to, sell, convey, assign, mortgage or lease any Fund Property or
any other real estate or personal property necessary, convenient or incidental
to the accomplishment of the purposes of the Fund;
(v) to execute any and all agreements, contracts, documents, certifications
and instruments necessary or convenient in connection with the development,
construction, management, maintenance and operation of any Fund Property,
including without limitation, necessary easements to public or quasi-public
bodies or public utilities;
(vi) to borrow money and issue evidences of indebtedness in furtherance of
any or all of the purposes of the Fund, and to secure the same by deed of trust,
mortgage, security interest, pledge or other lien or encumbrance on any Property
or any other assets of the Fund and to borrow money on the general credit of the
Fund for use in the business of the Fund and to take any action and enter into
any agreement necessary or advisable in connection with such borrowing;
(vii) to repay in whole or in part, negotiate, refinance, recast, increase,
renew, modify or extend any secured, or other indebtedness affecting any Fund
Property and in connection therewith to execute any extensions, renewals or
modifications of any evidences of indebtedness secured by deeds of trust,
mortgages, security interests, pledges or other encumbrances covering any Fund
Property;
(viii) to engage a real estate agent (including a Sponsor) to sell any Fund
Property or portions thereof upon such terms and conditions as are deemed fair
and reasonable by the General Partners and to be in the best interest of the
Fund, and to pay reasonable compensation for such services; provided, however,
that any real estate commission paid shall not exceed the lesser of the
competitive real estate commission for like properties located in the same
geographic area or six percent (6%) of the contract price for the Sale of any
Fund Property, and, in addition, if a Sponsor provides substantial services in
such regard, to pay the Sponsor up to one-half of such real estate commission,
provided, however, that the payment of such real estate commission to the
Sponsor shall be subordinated to the payment to Investors of their Adjusted
Capital Balance plus the unpaid portion, if any, of their Preferred Return.
A-19
(ix) to recognize transferees of Units as Investors and to admit substitute
Limited Partners in accordance with the terms described in the Prospectus and
Article VII of this Agreement;
(x) to invest Working Capital Reserves and, pending the investment of the
Fund's assets in the Operating Partnerships, to invest the Fund's assets
(excluding Working Capital Reserves), in interest-bearing accounts and
short-term investments, including obligations of federal, state and local
governments and their agencies, mutual funds, regulated investment companies,
commercial paper and certificates of deposit of federally-insured commercial
banks, savings banks or savings and loan associations; provided, however, that
such investments are short-term, highly-liquid and provide appropriate safety of
principal;
(xi) to purchase, cancel or otherwise retire or dispose of the Partnership
Interests of Units of any Partner or Investor according to the provisions of
this Agreement;
(xii) to execute and deliver all documents necessary or appropriate for the
sale of Units, including the Prospectus and filings under the Securities Act of
1933 and any other federal and state laws relating to the sale of securities;
(xiii) to require Investors to become Limited Partners (in which case the
General Partners shall have the power to amend this Agreement without the
Consent of the Investors) and to take such other action with respect to the
manner in which Units are being or may be transferred or traded as may be
necessary or appropriate to preserve the tax status of the Fund as a partnership
for federal income tax purposes and the tax treatment of the Investors as
Partners (but such action shall be taken only to the minimum extent required by
an opinion of Counsel and only with the Consent of Investors if the changes
would adversely affect the Investors);
(xiv) to take such steps (including amendment of this Agreement) as the
General Partners determine are advisable or necessary and will not result in any
material adverse effect on the economic position of a majority in interest of
the Investors with respect to the Fund in order to preserve the tax status of
the Fund as a partnership for federal income tax purposes and the tax treatment
of the Investors as Partners, including, without limitation, removing the Units
from public trading markets and imposing restrictions on transfers of Units or
Interests (provided such restrictions on transfers do not cause the Fund's
assets to be deemed "plan assets" within the meaning of ERISA) (but such action
shall be taken only to the minimum extent required by an opinion of Counsel and
only with the Consent of Investors if the changes would adversely affect the
Investors);
(xv) to establish and maintain the Working Capital Reserves described in
Section 3.3E; (xvi) to pay or reimburse any reasonable out-of-pocket expenses
incurred by any Affiliate of the General Partners in connection with any report
pursuant to Section 10.3, provided that no fee shall be paid to any Affiliate in
connection with any such report; and (xvii) after obtaining the Consent of the
Investors to the matters set forth in Sections 5.4A(xvii), 5.4A(xviii) or
5.4A(xix), to take any actions which they deem appropriate to the extent
authorized by the Investors to facilitate the purposes described in such
sections, including, without limitation, amendments to this Agreement to change
the dates upon which transfers of Units will be recognized, and the General
Partners shall give prior written notice to the Investors of any such amendment.
B. Any person dealing with the Fund or the General Partners may rely upon a
certificate signed by any General Partner, as to:
(i) the identity of any General Partner or any Limited Partner;
(ii) the existence or non-existence of any fact or facts that constitute
conditions precedent to acts by the General Partners or in any other manner are
germane to the affairs of the Fund;
(iii) the Persons who are authorized to execute and deliver any instrument
or document of the Fund; or
A-20
(iv) any act or failure to act by the Fund or as to any other matter
whatsoever involving the Fund or any Partner.
Section 5.3 Authority of Investors A. By the Majority Vote of the
Investors, the Investors, without the consent of the General Partners, may:
(i) amend this Agreement; provided that such amendment (a) shall not in any
manner allow the Investors to take part in the control of the Fund's business in
a manner which would subject them to liability as general partners under the Act
or any other applicable law, and (b) shall not, without the consent of any
General Partner affected, alter the rights, powers, or duties of the affected
General Partner or its interest in Profit and Loss, Net Cash Flow, Net Proceeds
of Sale or Refinancing, or alter any of the provisions of Section 8.2 hereof;
(ii) dissolve or terminate the Fund prior to the expiration of its term; (iii)
remove a General Partner and elect a new General Partner; or (iv) approve or
disapprove of the Sale of all or substantially all of the Fund Property. If a
General Partner is removed pursuant to Section 5.3A(iii) hereof, such General
Partner shall voluntarily withdraw as a general partner of the Operating
Partnerships. B. Any action taken pursuant to Section 5.3A hereof shall be void
ab initio, if prior to or within 15 days after such vote either (i) the Fund
shall have received an opinion of counsel, which counsel is approved by the
Consent of Investors, that such action may not be effected without subjecting
the Investors to liability as general partners under the Act or under the laws
of such other jurisdiction in which the Fund owns properties or is doing
business, or
(ii) a court of competent jurisdiction shall have entered a final judgment
to the foregoing effect. For purposes of this paragraph, counsel will be deemed
approved by the Consent of the Investors if proposed by the General Partners and
affirmatively approved in writing within 45 days; provided that if the holders
of 10% or more of the outstanding Units propose counsel for this purpose, such
proposed counsel, and not counsel proposed by the General Partners, shall be
submitted for such approval by the Investors. The existence of such an opinion
of counsel or court judgment with respect to a particular contemplated Fund
action shall not affect the rights of the Investors to vote on other future
actions or the existence of such rights. If the opinion of counsel or court
judgment referred to above has not been obtained the vote shall proceed as
scheduled and it shall not be delayed or postponed for any reason except as
otherwise permitted by the Act.
Section 5.4 Restrictions on Authority
A. With respect to the Fund and Fund Property, the General Partners and
their Affiliates shall have no authority to perform any act in violation of any
applicable laws or regulations thereunder, nor shall the General Partners as
such have any authority:
(i) without the Consent of the Investors, to voluntarily dissolve or
terminate the Fund prior to the expiration of its term;
(ii) to purchase or acquire property other than as described in the
Prospectus;
(iii) except as permitted in this Agreement, to do any act required to be
approved by the Investors under the Act;
(iv) to reinvest any Net Proceeds of Sale or Refinancing, except in
short-term securities pursuant to Section 10.2B;
(v) except with respect to the Interim Investments, to invest in or
underwrite securities of any type or kind for any purpose, or make investments
other than in the Properties and the operations related and incidental thereto;
(vi) to do any act in contravention of this Agreement;
A-21
(vii) to do any act that would make it impossible to carry on the ordinary
business of the Fund;
(viii) to confess a judgment against the Fund;
(ix) to offer Interests or Units in exchange for property;
(x) to possess the Fund Property, or assign the Fund's rights in same, for
other than the exclusive use of the Fund;
(xi) to operate in such a manner as to be classified as an "investment
company" under the meaning of the Investment Company Act of 1940;
(xii) to purchase or lease any property from or sell or lease property to
the General Partners or their Affiliates (with the exception of the purchase of
the Operating Partnership Interests in the Operating Partnerships that own the
Facilities or sales under the Management Agreement as described in the
Prospectus at the time the Registration Statement is declared effective by the
Securities and Exchange Commission);
(xiii) to admit a Person as a General Partner, except as provided in this
Agreement;
(xiv) to admit a Person as an Investor or Limited Partner, except as
provided in this Agreement;
(xv) without the Consent of the Investors, to sell all or substantially all
of the Fund Property;
(xvi) to create or suffer to exist any lien, security interest or other
charge or encumbrance upon or with respect to any portion of the Operating
Partnership Interests or Facilities if the sum of the principal amount of such
debt and the principal amount of all other debts of the Fund which are secured
by all or part of the Fund Property, would exceed approximately 60% of the fair
market value of all of the Fund Property, as determined by an independent
appraisal; provided, however, that the General Partners shall have the authority
to create or suffer to exist any lien, security interest or other charge or
encumbrance upon or with respect to an Operating Partnership Interest or
Facility with a debt in excess of such limitation, but not in excess of
approximately 75% of the then fair market value of such asset, as determined by
an independent appraiser;
(xvii) without the Consent of the Investors, to cause or facilitate the
merger or consolidation of the Fund with other partnerships, including, but not
limited to, mergers or consolidations in which the Investors receive in exchange
for their Units interests in the surviving entity, with the objective of listing
the interests of the surviving entity on a national or regional securities
exchange or NASDAQ;
(xviii) subject to Section 7.2.B, without the Consent of the Investors, to
list the Units on a securities exchange or enable the Units to be traded in the
over-the-counter market, or otherwise facilitate the establishment of a market
for the trading of Units, or (except as set forth in Section 5.2A(xiv)) to
withdraw the Units from such listing; or
(xix) without the Consent of the Investors, to restructure the Fund as a
real estate investment trust for federal income tax purposes.
B. The General Partners shall not take any action which, for federal tax
purposes, shall cause the Fund to terminate or to be treated as an association
taxable as a corporation.
Section 5.5 Authority of Partners and AffiliatedPersons to Deal with Partnership
A. The General Partners may, for, in the name of, and on behalf of, the
Fund, acquire property from, borrow money from, enter into agreements, contracts
or the like (in addition to those set forth herein) with, or reimburse for
reasonable out-of-pocket expenses incurred in connection with the preparation of
reports by, any Sponsor in an independent capacity, as distinguished from such
capacity (if any) as a Sponsor, as if such Sponsor were an independent
contractor; provided, however, that any such agreement shall be subject to the
conditions set forth in Section 5.2A(ii) herein.
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B. Neither the General Partners nor any Affiliate thereof shall have the
authority:
(i) to cause the Fund to invest in any program, partnership or other
venture (other than the purchase of the Operating Partnership Interests in the
Operating Partnerships that own or will own the Facilities as set forth in the
Prospectus at the time the Registration Statement is declared effective by the
Securities and Exchange Commission);
(ii) to receive any compensation, fee or expense not otherwise permitted to
be paid to it under the terms of this Agreement or the Prospectus;
(iii) to cause the Fund to acquire an Operating Partnership Interest in an
Operating Partnership that owns a Facility without first having obtained an
appraisal with respect to the value of the Facility, rendered by an independent
appraiser who is a member of a nationally recognized society of appraisers, in
which the appraised value equals or exceeds the purchase price paid by the Fund;
(iv) to commingle the Fund's funds with those of any other person or
entity, or to invest any of the Net Proceeds of the Offering in junior
mortgages, junior deeds of trust or other similar obligations, except that funds
of the Fund may be temporarily retained by agents of the Fund pursuant to
contracts for the rendering of services to the Fund by such agents or held in
accounts established and maintained for the purpose of making the Interim
Investments and/or computerized disbursements;
(v) to cause the Fund to lend money or other assets to the General Partners
or any Affiliates thereof;
(vi) to grant to the General Partners or any Affiliates thereof an
exclusive listing for the Sale of Fund Property;
(vii) to receive any rebate or give-up, or to participate in any reciprocal
business arrangement with any General Partner or an Affiliate thereof;
(viii) to cause the Fund to acquire a Facility that is under construction
without completion bonds, fixed price guarantees or other satisfactory
arrangements; or
(ix) to cause the Fund to acquire a Facility that is owned or under
development by a Sponsor or a program, partnership or other venture in which the
Sponsor has an interest, other than the seven Facilities specifically identified
in the Prospectus.
Section 5.6 Duties and Obligations of the General Partners
A. The General Partners shall take all action that may be necessary or
appropriate (i) for the continuation of the Fund's existence as a limited
partnership under the Act (and under the laws of each other jurisdiction in
which such existence is necessary to protect the limited liability of the
Investors and the Limited Partners or to enable the Fund to conduct the business
in which it is engaged), and (ii) for the acquisition, maintenance, preservation
and operation of the Operating Partnerships and the Facilities in accordance
with the provisions of this Agreement and applicable laws and regulations. The
General Partners shall devote to the Fund such time as may be necessary for the
proper performance of their duties hereunder, but neither the General Partners
nor any of their Affiliates shall be expected to devote their full time to the
performance of such duties. The General Partners or their Affiliates may act as
general or managing partners for other partnerships engaged in businesses
similar to that conducted by the Fund. Nothing herein shall limit the General
Partners or their Affiliates from engaging in any such business activities, or
any other activities which may be competitive with the Fund, and the General
Partners or their Affiliates shall not incur any obligation, fiduciary or
otherwise, to disclose or offer any interest in such activities to any party
hereto.
B. The General Partners shall at all times conduct their affairs, the
affairs of all their Affiliates and the affairs of the Fund in such a manner
that no Limited Partner or Investor (except a Limited
A-23
Partner or Investor who is also a General Partner) will have any personal
liability for Fund debts except as otherwise set forth herein and in the
Prospectus.
C. The General Partners from time to time shall prepare and file such
certificates (or amendments thereto) and other similar documents as are required
by the Act, and in the proper office or offices in each other jurisdiction in
which the Fund is formed or qualified, any certificates and other documents
required by the applicable statutes, rules or regulations of any such
jurisdiction.
D. The General Partners shall prepare or cause to be prepared, and shall
file, on or before the due date (or any extension thereof), any federal, state
or local tax returns required to be filed by the Fund. The General Partners
shall cause the Fund to pay any taxes payable by the Fund to the extent same are
not payable by any other party.
E. The General Partners shall obtain and keep in force, or cause to be
obtained and kept in force during the term hereof, fire and extended coverage,
workmen's compensation, and public liability insurance in favor of the Fund and
the Operating Partnerships with such insurers and in such amounts as the General
Partners deem advisable, but in amounts not less (and with deductible amounts
not greater) than those customarily maintained with respect to nursing centers
comparable to the Facilities.
F. The General Partners shall be under a fiduciary duty to conduct the
affairs of the Fund in the best interests of the Fund, including the safekeeping
and use of all Fund funds and assets, whether or not in the General Partners'
possession or control, and the use thereof for the benefit of the Fund. The
General Partners shall not enter into any contract or agreement relieving them
of their common law fiduciary duty. The General Partners shall at all times act
in good faith and exercise due diligence in all activities relating to the
conduct of the business of the Fund. The General Partners shall treat the
Investors as a group and shall not favor the interests of any particular
Investor.
G. The General Partners shall cause the Fund to commit a percentage of the
Gross Proceeds of the Offering to investment in the Facilities which is equal to
the greater of. (i) 86.5% of the Gross Proceeds of the Offering reduced by.1625%
for each 1% of financing of the Fund; or (ii) 73.5% of the Gross Proceeds of the
Offering. For the purpose of this Section 5.6G, the percent of financing of
Facilities owned by the Fund shall be determined by dividing the amount of
financing of the Facilities by the purchase price of the Facilities, excluding
Front-End Fees. The proceeds of the Offering will be invested in Facilities
within two years of the date of the Prospectus.
H. Except for payment of the Selling Commissions and the re-allowance of
the Due Diligence Expense Reimbursement Fee, the General Partners shall not
directly or indirectly pay or award any commission or other compensation to any
Person engaged by a potential Investor for investment advice as an inducement to
such advisor to advise the purchase of Units.
I. On loans made available to the Fund by a General Partner, the General
Partner may not receive interest or similar charges or fees in excess of the
amount which would be charged by unrelated lending institutions on comparable
loans for the same purpose, in the same locality of the property if the loan is
made in connection with a particular property. No prepayment charge or penalty
shall be required by the General Partner on a loan to the Fund secured by either
a first or a junior or all-inclusive trust deed, mortgage or encumbrance on the
property, except to the extent that such prepayment charge or penalty is
attributable to the underlying encumbrance. In no event shall any loans provided
by a General Partner to the Fund provide for scheduled principal payments over a
period of 48 or more months or provide that less than 50% of the principal
amounts of such loan is scheduled to be paid during the first 24 months.
J. The General Partners shall not reinvest Net Cash Flow or Net Proceeds of
Sale or Refinancing.
K The General Partners in their capacity as such or in their capacity as
general partners of the Operating Partnerships which may hold title to a
Facility shall not do or cause such Operating Partnership to do any act which
would not be permitted under this Partnership Agreement to be done by it as the
General Partner if title to the Facility were held directly by the Fund and
shall in general
A-24
act and cause the Operating Partnership to act in such capacity in the same
manner as if title to the Facility were held directly by the Fund.
Section 5.7 Compensation of General Partners
Except as expressly provided in Articles IV and IX herein, the General
Partners shall receive no fees, salaries, profits, distributions, reimbursement
or other compensation for serving as General Partners.
Section 5.8 Other Businesses of Partners
Neither the Fund nor any Partner or Investor shall have any rights or
obligations, by virtue of this Agreement, in or to any independent ventures of
any nature or description, or the income or profits derived therefrom, in which
a Partner or Investor may engage, including, without limitation, the ownership,
operation, management, syndication and development of other real estate
projects, even if in competition with the Facilities.
Section 5.9 Liability of General Partners and Affiliates to Limited Partners
or Investors
The General Partners and the Affiliates of the General Partners performing
certain services on behalf of the Fund shall not be liable, responsible, or
accountable, in liabilities, damages or otherwise, to any Investor, Limited
Partner or the Fund for any loss, judgment, liability, expense or amount paid in
settlement of any claims sustained which arise out of any act or omission
performed or omitted by them within the scope of the authority conferred on them
by this Agreement, provided that the General Partners determine, in good faith,
that such act or omission was in the best interests of the Fund, except for acts
of negligence or misconduct or for damages arising from any misrepresentation or
breach of an agreement with the Fund. The Fund shall not incur the cost of that
portion of any liability insurance which insures a General Partner or the
Affiliates of the General Partners performing certain services on behalf of the
Fund against any liability as to which a General Partner or Affiliate may not be
indemnified under Section 5.10 herein.
Section 5.10 Indemnification
A. The General Partners and the Affiliates of the General Partners
performing certain services on behalf of the Fund shall be indemnified to the
full extent provided by law for any loss, judgment, liability, expense or amount
paid in settlement of any claims sustained by them which arise out of any act or
omission performed or omitted by any or all of them within the scope of the
authority conferred on them by this Agreement, if the General Partners
determine, in good faith, that such act or omission was in the best interests of
the Fund and that such act or omission did not constitute negligence or
misconduct or breach of any other agreement with the Fund, provided that any
indemnity under this Section shall be provided out of and to the extent of Fund
assets only, and no Investor or Limited Partner shall have any personal
liability on account thereof.
B. Notwithstanding Section 5. 10A, the General Partners and the Affiliates
of the General Partners performing certain services on behalf of the Fund and
any person acting as a Broker-Dealer shall not be 'indemnified by the Fund for
any liability, loss or damage incurred by any or all of them in connection with
(i) any claim or settlement arising under federal or state securities laws
unless (a) there has been a successful adjudication on the merits of each count
involving such securities laws violations as to the particular indemnities and
the court approves indemnification of the litigation costs, (b) such claims have
been dismissed with prejudice on the merits by a court of competent jurisdiction
as to the particular indemnities and the court approves indemnification of the
litigation costs, or (c) a court of competent jurisdiction approves a settlement
of the claims and finds that indemnification of the settlement and related costs
should be made, after being advised as to the current position of the Securities
and Exchange Commission, the Massachusetts Securities Division, the California
Commissioner of Corporations, the Pennsylvania Securities Commission, the
Tennes- see Securities Commission and such other state securities
administrators, as shall be required by such court, regarding indemnification
for violations of securities law; or (ii) any liability imposed by law,
including liability for negligence or misconduct.
A-25
ARTICLE VI
TRANSFERABILITY OF A GENERAL PARTNER'S INTEREST
Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General Partner;
Transfer of Interests
A. A General Partner may be removed in the manner specified in Section 5.3A
herein.
B. No General Partner may voluntarily withdraw or retire from its position
as a General Partner of the Fund unless another General Partner (including any
Additional or Successor General Partner admitted pursuant to Section 6.2)
remains, and unless (i) counsel for the Fund is of the opinion that such
voluntary retirement or withdrawal from the Fund win not cause the Fund: (a) to
be dissolved under the Act; (b) to be classified other than as a partnership for
federal income tax purposes; or (c) to terminate for federal income tax
purposes; and (ii) the approval of the remaining General Partner(s) and the
Consent of the Investors to such voluntary retirement or withdrawal is obtained.
C. A General Partner who voluntarily retires or withdraws from the Fund in
violation of this Section 6.1 shall be and remain liable to the Fund and the
Partners for damages resulting from the General Partner's breach of this
Agreement, and, without limitation of remedies, the Fund may offset such damages
against the amounts otherwise distributable to the retiring or withdrawing
General Partner.
D. No General Partner shall have the right to sell, exchange, or otherwise
dispose of all or any portion of its Interest unless the proposed assignee or
transferee of all or a portion of the Interest of such General Partner is
admitted as a Successor or Additional General Partner to the Fund pursuant to
the provisions of Section 6.2 prior to any such sale, exchange or other
disposition.
E. The voluntary retirement or withdrawal of a General Partner shall become
effective only upon (i) receipt by the Fund of the opinions of counsel referred
to in Section 6.1(B)(i); (ii) receipt by the Fund of the approval and consent
referred to in Section 6.1B(ii); and (iii) the amendment of the Fund's
Certificate to reflect such withdrawal or retirement and its filing for
recordation.
Section 6.2 Election and Admission of Successor or Additional General Partners
A. By the Majority Vote of the Investors, a Successor General Partner may
be elected to replace a General Partner removed in the manner described in
Section 5.3A herein.
B. Except as otherwise expressly provided herein, no Person shall be
admitted as a Successor or Additional General Partner unless (i) counsel for the
Fund is of the opinion that the admission of such Successor or Additional
General Partner will not cause the Fund to be classified other than as a
partnership for federal income tax purposes or cause the Fund to terminate for
federal income tax purposes; (ii) the consent of the then existing General
Partner(s) is obtained; and (iii) the Consent of the Investors to such admission
has been obtained.
C. The admission of such Successor or Additional General Partner shall
become effective upon (i) receipt by the Fund of the opinion referred to in
Section 6.2B(i); (ii) receipt by the Fund of the consents referred to in Section
6.2B(ii) and (iii), if applicable; and (iii) the amendment of the Certificate to
reflect the admission of the Successor or Additional General Partner and its
filing for recordation.
Section 6.3 Events of Withdrawal of a General Partner
A. In addition to a voluntary withdrawal of a General Partner pursuant to
Section 6.lE or Section 5. 1E, a General Partner shall be deemed to withdraw (i)
if the General Partner assigns all of his Interest in the Fund, (ii) if the
General Partner is removed pursuant to Section 5.3A; and (iii) upon the
following acts or events: (a) if a natural person, upon his death or the entry
by a court of competent jurisdiction that such General Partner is incompetent to
manage his person or his property; (b) if a corporation, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; and (c) if a partnership, the dissolution and
commencement of winding up of the General Partner. To the maximum extent
permitted by the Act, no other act or
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event shall be deemed an event of withdrawal of a General Partner or serve
to convert a General Partner to a Limited Partner.
B. In the event of the withdrawal of a General Partner who is not then the
sole General Partner, the remaining General Partner or General Partners may
elect to continue the Fund, and if such election is made, shall promptly give
Notification of such event and shall make and file such amendments to the
Certificate as are required by the Act to reflect the fact that the withdrawn
General Partner has ceased to be a General Partner of the Fund.
C. In the event of the withdrawal of a General Partner and the remaining
General Partner does not elect to continue the Fund or in the event of the
withdrawal of a sole General Partner, the withdrawn General Partner, or its
successors, representatives, heirs or assigns shall promptly give Notification
of such withdrawal to all remaining Partners and Investors. In such event, the
Fund shall be dissolved unless, within 90 days after the withdrawal of the
General Partner, the Investors, by the Majority Vote of the Investors, agree in
writing to continue the business of the Fund and to the appointment, effective
as of the date of withdrawal of the sole General Partner, of one or more
Additional General Partners. If the Investors elect to reconstitute the Fund and
agree to admit a substitute General Partner, the relationship of the Investors
and of substitute General Partner in the Fund shall be governed by this
Agreement.
Section 6.4 Liability of a Withdrawn General Partner
A. Any General Partner who withdraws from the Fund shall be, and remain,
liable for all obligations and liabilities incurred by it as General Partner'
prior to the time such withdrawal becomes effective. In addition, a General
Partner who voluntarily withdraws in violation of this Agreement shall be
subject to the liability described in Section 6.l C.
B. Upon the withdrawal of a General Partner, such General Partner shall
immediately cease to be a General Partner, and, unless a Successor General
Partner has acquired the Interest of the withdrawing General Partner pursuant to
Section 6.5, the withdrawn General Partner's Interest shall be converted to a
limited partner Interest of a new class. Such conversion shall not affect any
rights or liabilities of the withdrawn General Partner, except that such General
Partner shall no longer participate in the management of the Fund.
C. The personal representatives, heirs, successors or assigns of any
General Partner who with- draws from the Fund shall be, and remain, liable for
all obligations and liabilities incurred by the General Partner prior to, or in
connection with, its withdrawal. Section 6.5 Valuation of Partnership Interest
of General Partner Upon the voluntary or involuntary withdrawal of a General
Partner, the Fund or a Successor General Partner may purchase the Fund Interest
of the withdrawn General Partner at any time subsequent to withdrawal. The price
of the withdrawn General Partner's Interest shall be determined by two (2)
independent appraisers, one selected by the withdrawn General Partner and one
selected by the remaining General Partner, or if none is remaining, by the
Investors. If the two appraisers are unable to agree on the value of the General
Partner's Interest, they shall jointly appoint a third independent appraiser
whose determination shall be final and binding. The Fund shall then pay the
withdrawn General Partner the price of its Interest as a General Partner as so
determined. The expense of the appraisals shall be borne equally by the
terminated General Partner and the Fund. If the withdrawal is involuntary,
payment shall be made by delivery of a promissory note bearing interest payable
semiannually at a floating rate of interest equal to the lowest rate permitted
under the Code to avoid the imputation of interest income to the withdrawn
General Partner, payable in five equal annual installments, the first
installment to be paid as soon as practicable after the appraisal, and
prepayable at any time. If the withdrawal is voluntary, payment shall be made by
delivery of a promissory note bearing no interest, with principal payable only
from distributions which the withdrawn General Partner would have received under
this Agreement had the General Partner not withdrawn. Immediately upon receiving
the note, the withdrawn General Partner shall cease to be a Partner of the Fund
for all purposes, except that the withdrawn General Partner shall continue to be
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subject to Section 6.4 hereunder. All amounts received pursuant to this
Section 6.5 shall constitute complete and full discharge for all amounts owing
to the withdrawn General Partner on account of its Interest in the Fund. Any
disputes regarding valuation or payment pursuant to this Section which are not
resolved in a binding manner by the provisions of this Section shall be resolved
by arbitration in accordance with the then current rules of the American
Arbitration Association. The expense of arbitration shall be borne equally by
the terminated General Partner and the Fund.
ARTICLE VII
ASSIGNMENT OF ASSIGNEE UNITS TO INVESTORS;
TRANSFERABILITY OF LIMITED PARTNER INTERESTS AND UNITS
Section 7.1 Assignment of the Assignee Units to Investors
A. Pursuant to Sections 3.2 and 7.1C hereof, the Assignor Limited Partner
shall assign to each Investor Assignee Units equal to the number of Units
purchased by each Investor in the Offering.
B. Except as provided in Section 7.1.A above, the Assignor Limited Partner
may not transfer a Limited Partnership Interest without the prior written
consent of the General Partners. The Assignor Limited Partner shall have no
right to vote or consent with respect to Units owned by the Assignor Limited
Partner for its own account and such Units shall not be considered outstanding
Units for purposes of determining whether the Majority Vote of the Investors or
the Consent of the Investors has occurred. The Assignor Limited Partner, by the
execution of this Agreement, acknowledges and agrees that the Assignor Limited
Partners management will have fiduciary responsibility for the safekeeping and
use of all funds and assets of the Investors, whether or not in the Assignor
Limited Partners management's possession or control, and that the management of
the Assignor Limited Partner will not employ, or permit another to employ, such
funds or assets in any manner except for the exclusive benefit of the Investor.
The Assignor Limited Partner agrees not to contract away the fiduciary duty owed
to the Investors by the Assignor Limited Partner's management under the common
law of agency.
C. Except as set forth in Section 7.1G, the Assignor Limited Partner, by
the execution of this Agreement, irrevocably transfers and assigns to the
Investors all of the Assignor Limited Partner's rights and interest in and to
the Assigned Limited Partnership Interests, as of the time that payment for such
Assigned Limited Partnership Interests is received by the Fund and such Assigned
Limited Partnership Interests are credited to the Assignor Limited Partner on
the books and records of the Fund. The rights and interest so transferred and
assigned shall include, without limitation, the following:
(i) all rights to receive distributions of uninvested Capital Contributions
pursuant to Sec- tions 3.2 and 3.3;
(ii) all rights to receive cash distributions pursuant to Article IV;
(iii) all rights in respect to allocations of Profit and Loss pursuant to
Article IV;
(iv) all other rights in respect of determinations of allocations and
distributions pursuant to Article IV;
(v) all rights to consent to the admission of successor or additional
General Partners pursu- ant to Sections 6.1 and 6.2;
(vi) all rights to receive any proceeds of liquidation of the Fund pursuant
to Section 8.2;
(vii) all rights to inspect books and records and to receive reports
pursuant to Article X;
(viii) all voting rights, rights to attend or call meetings and other such
rights; and
(ix) all rights which the Limited Partners have, or may have in the future,
under the Act.
D. The General Partners, by the execution of this Agreement, irrevocably
consent to and acknowledge that (i) the foregoing transfer and assignment
pursuant to Section 7.1 by the Assignor
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Limited Partner to the Investors of the Assignor Limited Partner's rights
and interest in the Assigned Limited Partnership Interests is effective, and
(ii) the Investors are intended to be and shall be third party beneficiaries of
all rights and privileges of the Assignor Limited Partner in respect of the
Assigned Limited Partnership Interests. The General Partners covenant and agree
that, in accordance with the foregoing transfer and assignment, all the Assignor
Limited Partner's rights and privileges in respect of Assigned Limited
Partnership Interests may be exercised by the Investors including, without
limitation, those cited in Section 7.l.
E. In accordance with the transfer and assignment described in Section 7.1,
Investors shall have the same rights that the Limited Partners have under this
Agreement and under the Act.
F. The General Partners shall amend the Certificate to reflect the
crediting of the Assignor Limited Partner with the Capital Contributions made by
Investors on a monthly basis or at such other intervals as may be required by
the Act.
G. Notwithstanding the assignment of the Assigned Limited Partnership
Interests referred to in this Section 7.1, the Assignor Limited Partner shall
retain legal title to and be and remain a Limited Partner of the Fund.
Section 7.2 Transferability of Units
A. Transfers or assignments of Units are subject to the consent of the
General Partners.
B. The General Partners shall consent to a transfer of a Unit except the
General Partners shall not consent if one or more of the following transfer
restrictions applies:
(i) No sale or exchange of any Units shall be made if the Units sought to
be sold or exchanged, when added to the total of all other Units sold or
exchanged within a period of 12 consecutive months prior thereto, would, in the
opinion of counsel for the Fund, result in the Fund being considered to have
terminated within the meaning of Section 708 of the Code. The General Partners
shall give Notification to all Investors in the event that sales or exchanges
should be suspended for this reason. All deferred sales or exchanges shall be
made (in chronological order to the extent practicable) as of the first day of
the fiscal year beginning after the end of any such 12-month period, subject to
the provisions of this Article VII.
(ii) No transfer or assignment of any Unit shall be made if a counsel for
the Fund is of the opinion that the particular transfer or assignment would be
in violation of any federal or state securities laws (including any investment
suitability standards) applicable to the Fund or would cause the Fund to be
classified other than as a partnership for federal income tax purposes.
(iii) No transfer or assignment of any Unit shall be made if, in the
opinion of counsel to the Fund, such transfer would cause the Fund to be treated
as a "publicly traded partnership" under Sections 7704 and 469(k) of the Code.
(iv) No transfer or assignment of Units shall be made after which any
transferor or transferee would hold (a) less than 200 Units, unless such
transferor would own zero Units or (b) a number of Units not evenly divisible by
four.
(v) No transfer or assignment of any Unit shall be made if it would result
in the assets of the Fund being treated as "plan assets" or the transactions
contemplated hereunder to be prohibited transactions under ERISA or the Code.
(vi) No transfer or assignment of a Unit shall be made to a foreign person
under the Code or a minor or incompetent (unless such transfer or assignment
shall be made to a legal guardian on such person's behalf).
(vii) No transfer or assignment shall be made if such transfer or
assignment would result in the Fund being disqualified to participate in any
government program involving the business of the Fund or in the opinion of the
General Partners would otherwise adversely impact upon the business or
operations of the Fund.
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C. In order to record a trade on its books and records, the Fund may
require such evidence of transfer or assignment and authority of the transferor
or assignor (including signature guarantees), an opinion of counsel to the
effect that there has been no violation of federal or state securities laws in
the assignment or transfer, evidence of the transferee's suitability under state
securities laws, and the written acceptance and adoption by the transferee of
the provisions of this Agreement, as the General Partners may determine. The
Administrative General Partner may charge a transfer fee (not to exceed $100)
sufficient to cover all reasonable expenses connected with such transfer.
D. In no event shall an Investor be permitted to transfer a fraction of a
Unit.
Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an
Investor or a Limited Partner
Upon the death of an Investor or a Limited Partner, his executor,
administrator, or trustee, or, if he is adjudicated incompetent or insane, his
committee, guardian, or conservator, or, if he becomes bankrupt, the trustee or
receiver of his estate, shall have all the rights of an Investor or a Limited
Partner for the purpose of settling or managing his estate and shall have
whatever power the deceased or incompetent Investor or Limited Partner possessed
to assign all or any part of his Units or Interest. The death, dissolution,
adjudication of incompetence, or bankruptcy of an Investor or a Limited Partner
shall not dissolve the Fund.
Section 7.4 Effective Date
The Fund shall recognize the transferee of a Unit as an Investor on the
Fund's books and records on the first business day of the next calendar month
after the month in which the Fund receives all necessary documentation and
consents required to effect the transfer of his Units.
Section 7.5 Substitute Limited Partners
Any Investor may elect to become a Substitute Limited Partner upon (i)
signing a counterpart of this Agreement and any other instrument or instruments
deemed necessary by General Partners, including a Power of Attorney in favor of
the General Partners as described in Section 12.l.A hereof, and (ii) paying a
fee equal to the actual costs and expenses incurred by the Administrative
General Partner for legal and administrative costs and recording fees. Investors
who elect to become Substitute Limited Partners will receive one Limited
Partnership Interest for each Unit they convert and will not be able to
re-exchange their Limited Partnership Interests for Units. The Capital Account
of the former Investor attributable to transferred Units shall be credited to
the Capital Account of the Substitute Limited Partner. The Fund's Certificate
will be amended no less often than quarterly, if required by applicable law, to
reflect the Substitution of Limited Partners.
Section 7.6 Retirement or Withdrawal of an Investor
A. No Investor shall have the right to voluntarily retire or withdraw from
the Fund unless the General Partners shall have consented to such voluntary
retirement or withdrawal by an Investor. Upon the retirement or withdrawal of an
Investor: (i) the Interest of such retiring or withdrawing Investor shall
thereafter belong to the Fund; (ii) such retiring or withdrawing Investor shall
not be entitled to receive distributions with respect to any periods after the
time of such retirement of withdrawal; and (iii) such retiring or withdrawing
Investor shall not be entitled to receive any amount for the fair value of his
Units as of the date of his retirement or withdrawal, other than as agreed to by
the General Partners and the withdrawing Investor. The General Partners shall
not consent to the voluntary retirement or withdrawal of an Investor if the
General Partners receive an opinion of counsel to the Fund that such retirement
or withdrawal would cause the Fund to be classified other than as a partnership
for federal income tax purposes, or cause the Fund to terminate for federal
income tax purposes.
B. At any time after the Termination Date of the Offering, the Fund may, in
its sole discretion, in response to the request of an Investor, repurchase any
or all of the Units of such Investor upon mutually agreeable terms, provided
that such repurchase does not materially impair the capital or operation of the
Fund. The determination to repurchase Units will be made in the sole discretion
of
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the General Partners. The determination of the value of the repurchased
Units will be based upon, among other factors, the current fair market value of
the Facilities and the Fund Property, less all Fund debts and obligations. The
Fund will not repurchase Units prior to the Termination Date of the Offering and
is not obligated to repurchase Units at any time. Units acquired by the General
Partners and their Affiliates or by the Assignor Limited Partner will not be
eligible for repurchase by the Fund. Units purchased by the Fund during any
month shall be deemed canceled effective as of the first day of the month
following the effective date of such purchase.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE FUND
Section 8.1 Events Causing Dissolution
A. The Fund shall dissolve and its affairs shall be wound up upon the first
to occur of the following events:
(i) the expiration of its term;
(ii) the withdrawal of a General Partner, unless the Fund is continued
pursuant to Sections 6.3B or 6.3C;
(iii) the Sale of all or substantially all Fund Property (excepting (a) a
disposition thereof which, in the opinion of counsel to the Fund, qualifies, in
whole or in part, under Section 1031 or Section 1033 of the Code or (b) a Sale
in which the Fund receives Purchase Money Financing, in which case the Fund
shall dissolve upon receipt of the final payment thereunder);
(iv) the election by the General Partners, with the Consent of the
Investors, to dissolve the Fund;
(v) by the Majority Vote of the Investors pursuant to Section 5.3A to
dissolve the Fund; or (vi) the happening of any other event causing the
dissolution of the Fund under applicable law.
B. Dissolution of the Fund shall be effective on the day on which the event
occurs giving rise to the dissolution. A certificate of cancellation shall be
filed under the Act upon the dissolution and the commencement of winding up of
the Fund; provided, however, that the Fund shall not terminate until the Fund
Property has been distributed as provided in Section 8.2. Notwithstanding the
dissolution of the Fund, prior to the termination of the Fund, the business of
the Fund and the affairs of the Partners, as such, shall continue to be governed
by this Agreement.
Section 8.2 Liquidation
A. As soon as practical after the dissolution of the Fund, the General
Partners, or if there are no General Partners, any Limited Partner or the
liquidating trustee under the Act, as the case may be, shall give Notification
to all the Limited Partners and Investors of such fact and shall prepare a plan
as to whether and in what manner the Fund Property shall be liquidated. By the
Majority Vote of the Investors, the assets of the Fund, subject to its
liabilities (and the establishment of reserves, if necessary, for such
liabilities), may be transferred to a successor Entity, upon such terms and
conditions as are then agreed upon.
B. Unless the Investors agree to transfer the assets of the Fund, subject
to its liabilities, to a successor Entity pursuant to Section 8.2A, upon
dissolution of the Fund, the General Partners, any Limited Partner or the
liquidating trustee under the Act, as the case may be, shall liquidate the Fund
Property, and apply and distribute the proceeds thereof in accordance with
Section 4.4. A Partner or an Affiliate of a Partner may purchase such assets
with the Consent of the Investors.
C. Notwithstanding the provisions of Section 8.2B, in the event the General
Partners, any Limited Partner, or the liquidating trustee under the Act, as the
case may be, shall determine that an immediate sale of all or a portion of the
Fund Property would cause undue loss to the Partners and
A-31
Investors, the General Partners, any Limited Partner, or the liquidating
trustee under the Act, as the case may be, in order to avoid such loss, may,
after having given Notification to all the Investors and Limited Partners,
either defer liquidation of, and withhold from distribution for a reasonable
time, any assets of the Fund, or distribute the assets in kind to a liquidating
trust to be held for the benefit of the Investors and Partners.
Section 8.3 Capital Contribution Upon Dissolution
Subject to the provisions of Section 5.9 of this Agreement, each Investor
and Partner shall look solely to the assets of the Fund for all distributions
with respect to the Fund and his Capital Contribution and shall have no recourse
(upon dissolution or otherwise) against any Partner or Investor; provided,
however, that upon the dissolution and termination of the Fund, the General
Partners will make the Capital Contributions referred to in Section 3.1. All
amounts so contributed by the General Partners shall be distributed first to the
Fund's creditors entitled thereto, and the balance to the Investors and Partners
in proportion to the positive balances in their Capital Accounts at the time of
dissolution and termination of the Fund.
ARTICLE IX
CERTAIN PAYMENTS TO THE GENERAL PARTNERS AND AFFILIATES
Section 9.1 Reimbursement of Certain Costs and Expenses of the General Partners
and Affiliates
A. Subject to the provisions of Article V hereof, the Fund shall be
permitted to reimburse the General Partners for the actual cost to the General
Partners or any of their Affiliates of the Fund's operating expenses. In
determining the actual cost to a General Partner or an Affiliate of a General
Partner of goods and materials and administrative services, actual cost means
the actual cost to a General Partner or an Affiliate of a General Partner of
goods and materials used for or by the Fund and obtained from entities not
affiliated with a General Partner, and actual cost of administrative services
means the pro rata cost of personnel as if such persons were employees of the
Fund. The cost for administrative services to be reimbursed to a General Partner
or an Affiliate shall be at the lower of the General Partner's or Affiliate's
actual cost or the amount the Fund would be required to pay to independent
parties for comparable administrative services in the same geographic location.
The General Partners shall use their best efforts to cause all of the Fund's
expenses to be billed directly to and paid by the Fund to the extent
practicable.
B. Subject to the foregoing, the Fund shall pay all expenses (which
expenses shall be billed directly to the Fund) of the Fund which may include but
are not limited to: (a) all costs of personnel (excluding rent or depreciation,
utilities, capital equipment, and other administrative items) employed full- or
part-time by the Fund and involved in the business of the Fund and allocated pro
rata to their administrative services performed on behalf of the Fund, including
Persons who may also be officers or employees of the General Partners or their
Affiliates (other than Controlling Persons); (b) all costs of borrowed money,
taxes and assessments on Facilities and other taxes applicable to the Fund; (c)
legal, audit, accounting, brokerage and other fees; (d) 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 or Unit or in connection with the business of the Fund; (e) fees and
expenses paid to independent contractors, mortgage bankers, brokers and
servicers, leasing agents, consultants, on-site property managers and other
property management personnel (other than Controlling Persons and other officers
of the General Partners or their Affiliates), real estate brokers, insurance
brokers and other agents; (f) expenses in connection with the disposition,
replacement, alteration, repair, remodeling, refurbishment, leasing, refinancing
and operating of the Facilities (including the costs and expenses of
foreclosures, insurance premiums, real estate brokerage and leasing commissions
and of maintenance of such Facilities); (g) expenses of organizing, revising,
amending, converting, modifying or terminating the Fund; and (h) the cost of
preparation and dissemination of the informational material and documentation
relating to potential sale, or other disposition of Facilities or in connection
with any meetings or votes if the Investors.
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C. Notwithstanding any other provision of this Agreement, no reimbursement
shall be permitted for services for which the General Partners are entitled to
compensation by way of a separate fee.
Section 9.2 Fees and Other Payments
A. The Fund shall cause the following payments and fees to be paid to the
General Partners or their Affiliates:
(i) to the Selling Agent, the Selling Commissions and the Due Diligence
Expense Reimbursement Fee.
(ii) to the Administrative General Partner, the Offering and Organization
Expense Fee.,
(iii) to the Administrative General Partner, the Acquisition Fees and the
prepaid terms and fees related to the acquisition of the Facilities and paid by
the Administrative General Partner.
(iv) to certain Affiliates of the Development General Partner and the
Administrative Part- ner, payments pursuant to the Partnership Interest Options,
the Existing Partnership Interest Acquisition Agreements and the Development
Partnership Interest Acquisition Agreements.
(v) to the Nursing Center Manager on behalf of the Operating Partnerships,
payments pursuant to the Management Agreements, provided that such payments do
not exceed the lesser of (a) the fees which are competitive for similar types
and quality of services in the geographic area of the Facility or (b) 6% of the
gross revenues from the Facility to which the Management Agreement relates.
Included in such management fee shall be bookkeeping services and fees paid to
any party.
(vi) to the Administrative General Partner, the Development General Partner
or their Affiliates, real estate brokerage commissions, payable upon the Sale of
any Facility, provided that the General Partners or their Affiliates actually
render real estate brokerage services in connection with such Sale. Any
commissions paid to the General Partners and their Affiliates will be limited to
one-half of the competitive real estate commission for like properties located
in the same geographic area not to exceed 3% of the contract price for the Sale
of the Facility, and will be subordinated to the payment to Investors of their
Adjusted Capital Balance plus the unpaid portion, if any, of their Preferred
Return. If more than one of the General Partners or their Affiliates is involved
in rendering real estate brokerage services to the Fund, the commission will be
divided between them commensurate with actual services rendered.
(vii) to First Meridian Mortgage Corporation a Mortgage Placement Fee equal
to .5% of the financing obtained to facilitate the acquisition of Operating
Partnership Interests.
(viii) to the Administrative General Partner a fee for 1988 equal to (i)
$12,500 if the Operating Partnership Interest relating to Facility I is
acquired, (ii) $25,000 if the Operating Partnership Interests relating to
Facilities I and II are acquired, (iii) $37,500 if the Operating Partnership
Interest relating to Facilities I, II and III are acquired or (iv) $50,000 if
the Operating Partnership Interests relating to all of the Existing Facilities
are acquired; and after 1988, a fee equal to the greater of $75,000 per year or
..5% of the Fund's annual revenues for routine and recurring accounting and
clerical services, communications, services and reports to Investors, and
routine and recurring reports made to regulatory authorities. B. The total of
the fees owed to the General Partners and their Affiliates, as set forth in
subsection A. (i), (ii) and (iii) above, shall in no event exceed 16.6% of the
Gross Proceeds of the Offering.
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ARTICLE X
BOOKS AND RECORDS; BANK ACCOUNTS; REPORTS
Section 10.1 Books and Records
A. Unless otherwise directed by the Administrative General Partner, the
books and records of the Fund shall be maintained by the General Partners at the
Fund's principal place of business. In all cases, said books and records shall
be available for examination and copying by any Limited Partner, Investor or his
duly authorized representatives, for any purpose related to the Limited
Partner's or Investor's interest as a Limited Partner or Investor, at the
expense of such Limited Partner or Investor, at any and all reasonable times.
The Fund shall keep at its principal place of business, without limitation, the
following records: true and full information regarding the status of the
business and financial condition of the Fund; -promptly after becoming
available, a copy of the Fund's federal, state and local income tax returns for
each year; a current list of the names and last known business, residence or
mailing addresses of each Partner and Investor; a copy of this Agreement and the
Certificate and all amendments thereto; and other information regarding the
affairs of the Fund as is just and reasonable. The current list of the names and
last known business, residence or mailing addresses of each Partner and Investor
shall be mailed to any Investor upon payment of a reasonable charge for copy
work.
B. The Fund shall keep its books and records in accordance with the
accounting methods followed for federal income tax purposes, which shall reflect
all Fund transactions and shall be appropriate and adequate for the Fund's
business. The Fund's taxable year shall be a calendar year.
Section 10.2 Bank Accounts
A. The General Partners shall have fiduciary responsibility for the
safekeeping and use of an funds and assets of the Fund, whether or not in their
immediate possession or control. The General Partners shall not employ, or
permit any other Person to employ, such funds in any manner except for the
benefit of the Fund.
B. The bank accounts of the Fund shall be maintained in such banking
institutions as the General Partners shall determine, and withdrawals shall be
made only in the regular course of Fund business on the signature of a General
Partner or such other signature or signatures as the General Partners may
determine. All deposits and other funds may be deposited in interest bearing or
non-interest bearing accounts guaranteed by federal authorities, invested in
short-term United States Government or municipal obligations, or deposited with
a banking institution selected by the General Partners.
Section 10.3 Reports
A. No later than 75 days after the end of each calendar year, the General
Partners will furnish each Person who was an Investor or Limited Partner at any
time during the fiscal year with all tax information relating to the Fund's
performance for the preceding calendar year that is required to be set forth in
the Investors and Limited Partner's federal and state income tax return.
B. Within 60 days after the end of each of the first three fiscal quarters
of each fiscal year of the Fund, the General Partners will furnish to each
Person who was an Investor or Limited Partner at any time during the fiscal
quarter then ended, a report setting forth information with respect to the
progress of the Fund's business, which report shall include:
(i) an unaudited balance sheet of the Fund;
(ii) an unaudited statement of income for the quarter;
(iii) an unaudited cash flow statement for the quarter;
(iv) an unaudited statement setting forth the services rendered to, and
fees received from, the Fund by any Sponsor; and
(v) other pertinent information concerning the Fund and its activities
during the quarter.
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The various reports required pursuant to this Section 10.3.B may be sent
earlier than or separately from any of the other reports required pursuant to
this Section 10.3.B, and the information required to be contained in any of the
reports required pursuant to this Section 10.3.B may be contained in more than
one report.
C. Within 120 days after the end of each fiscal year, the General Partners
will furnish an annual report to each Person who was a Limited Partner or an
Investor as of the last business day of the fiscal year then ended. Such annual
report will include:
(i) a balance sheet as of the end of the Fund's fiscal year, statements of
income, Partners' equity and changes in financial position, which shall be
prepared in accordance with generally accepted accounting principles and
accompanied by an auditor's report containing an opinion of the Accountants;
(ii) the breakdown of any Fund costs reimbursed to a Sponsor and a
statement setting forth in detail the services rendered to, and fees received
from, the Fund by any Sponsor as verified by a review of the time records of,
and the specific nature of the work performed by, individual employees, the cost
of whose services were reimbursed (and within the scope of the annual audit by
the Accountants shall be the obligation to verify the allocations of the costs
reimbursed to a General Partner or Affiliate);
(iii) a cash flow statement; and
(iv) a report of the activities of the Fund during the fiscal year. The
annual report shall also set forth distributions to the Investors for the period
covered thereby and shall separately identify distributions from (a) Net Cash
Flow during the period, (b) Net Cash Flow during a prior period which had been
held as reserves, (c) Net Proceeds of Sale or Refinancing, and (d) Working
Capital Reserves.
D. Within 45 days after the end of each fiscal quarter in which a Sale or
Refinancing occurs, the General Partners shall send to each Person who was an
Investor as of the close of business on the first business day of the month that
includes the date of occurrence of the Sale or Refinancing, a report as to the
nature of the Sale or Refinancing and as to the Profit or Loss arising from the
Sale or Refinancing.
E. The General Partners will prepare and timely file with appropriate
federal and state regulatory authorities all reports required to be filed with
such entities under then-applicable laws, rules and regulations. Such reports
shall be prepared on the accounting or reporting basis required by such
regulatory authorities. Upon request, copies of such reports will be furnished
to any Investor or Limited Partner for any purpose reasonably related to the
Investor's or Limited Partner's interest as an Investor or a Limited Partner. In
the event that any regulatory authority promulgates rules or amendments thereto
that would permit a reduction in any of the reporting requirements to which the
Fund is subject under this Agreement at the time of the execution hereof, the
Fund may cease to prepare and file any such reports in accordance with such
rules or amendments.
F. The Administrative General Partner will maintain, (i) for a period of at
least four (4) years, a record of the information obtained to indicate that an
Investor has met the suitability standards set forth in the Prospectus; and (ii)
for a period of at least five (5) years, records of the appraisals made of the
Properties, which appraisal records shall be available for inspection and
copying by any Investor or Limited Partner for any purpose reasonably related to
the Investor's or Limited Partner's interest as an Investor or a Limited
Partner.
Section 10.4 Federal Tax Elections
The Fund, in the sole discretion of the General Partners, may make
elections for federal tax purposes as follows:
(i) In case of a transfer of a Unit, the Fund, in the sole discretion of
the General Partners, may timely elect pursuant to Section 754 of the Code (or
corresponding provisions of future law)
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and pursuant to similar provisions of applicable state or local income tax
laws, to adjust the basis of the assets of the Fund.
(ii) The General Partners may elect accelerated depreciation methods under
the Code, or may elect straight-line depreciation over a period as long as 40
years if, in their sole discretion, the determination of the percentage of
tax-exempt Investors becomes too cumbersome.
(iii) All other elections required or permitted to be made by the Fund
under the Code shall be made by the General Partners in such manner as will, in
their sole opinion, be most advantageous to a Majority of the Investors. The
Fund shall, to the extent permitted by applicable law and regulations, elect to
treat as an expense for federal income tax purposes all amount's. incurred by it
for real estate taxes, interest and other charges which may, in accordance with
applicable law and regulations, be considered as expenses.
ARTICLE XI
MEETINGS OF INVESTORS
Section I 1.1 Calling Meetings
Meetings of the Investors for any purpose may be called by the General
Partners and shall be called by the General Partners upon receipt of a request
in writing signed by Investors having in the aggregate more than 10% of the
outstanding Units. Upon receipt of a written request stating the purpose(s) of
the meeting, the General Partners shall provide all Investors within IO days
after receipt of such request with notice as described in Section 11.2. The
meeting shall be held at a time and place convenient to the Investors.
Section 11.2 Notice, Procedure
Notice of any meeting shall be given either personally or by certified
mail, not less than 15 days nor more than 60 days before the date of the
meeting, to each Investor at his record mailing address. The notice shall be in
writing, and shall state the place, date, hour, and purpose of the meeting, and
shall indicate that it is being issued at or by the direction of the Partners or
Investors calling the meeting. If a meeting is adjourned to another time or
place, and if any announcement of the adjournment of time or place is made at
the meeting, it shall not be necessary to give notice of the adjourned meeting.
The presence in person or by proxy of the holders of more than 50% of the
outstanding Units shall constitute a quorum at all meetings of the Investors;
provided, however, that if there is no quorum present, holders of a majority in
interest of the Investors present or represented may adjourn the meeting from
time to time without further notice until a quorum is obtained. No notice of the
time, place or purpose of any meeting of Investors need be given to any Investor
who attends in person or is present by proxy (except when an Investor attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened), or to any Investor entitled to notice who, in a writing
executed and filed with the records of the meeting, either before or after the
time of the meeting, waives the notice requirement.
Section 11.3 Right to Vote
For the purpose of determining the Investors entitled to vote at any
meeting of the Fund, the General Partner or the Investors requesting the meeting
may fix a date, in advance, as the record date for the determination of
Investors entitled to vote. This date shall be not more than 50 days nor less
than 10 days before any meeting.
Section 11.4 Proxies, Rules
Each Investor may authorize any person or persons to act for him by proxy
in all matters in which an Investor is entitled to participate, whether by
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Investor or his attorney-in-fact. No proxy shall be
valid after the expiration of 11 months from the date thereof unless otherwise
provided
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in the proxy. Every proxy shall be revocable at the pleasure of the
Investor executing it. At each meeting of Investors the General Partners shall
appoint officers and adopt rules as they deem appropriate for the conduct of the
meeting.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Appointment of Administrative General Partner as
Attorney-in-Fact
A. Each Limited Partner and Investor hereunder hereby irrevocably appoints
and empowers the Administrative General Partner his attorney-in-fact to consent
to or ratify any act listed in Subsections 5.4A(i) through (xix) of this
Agreement after the Consent of the Investors thereto has been obtained, and to
execute, acknowledge, swear to and deliver all agreements and instruments and
file all documents requisite to carrying out the intentions and purposes
contemplated in this Agreement, including, without limitation, the execution and
delivery of this Agreement and all amendments hereto, the filing of all business
certificates and necessary certificates of limited partnership and amendments
thereto from time to time in accordance with all applicable laws and any
certificates of cancellation. This power of attorney shall be deemed coupled
with an interest, and shall not be affected by the subsequent disability or
incapacity of the principal.
B. The appointment by all Limited Partners and Investors of the
Administrative General Partner as attorney-in-fact shall be deemed to be a power
coupled with an interest and shall survive the assignment by any Limited
Partners or Investors of the whole or any part of his Interests or Units in the
Fund.
C. The power of attorney granted by this Section 12.1 shall be governed by
the laws of the State of Delaware.
Section 12.2 Waiver of Partition
Each Partner and Investor, on behalf of himself, his successors,
representatives, heirs and assigns hereby waives any right of partition or any
right to take any other action which otherwise might be available to him for the
purpose of severing his relationship with the Fund or his interest in the assets
held by the Fund from the interest of the other Partners or Investors.
Section 12.3 Notification
Any Notification, in order to be effective, shall be sent by registered or
certified mail, postage prepaid, if to a Partner or Investor, to the address of
the Partner or Investor set forth in the books and records of the Fund, and if
to the Fund, to the principal place of business of the Fund set forth in Section
2.2 (unless Notification of a change of the principal office is given), the date
of registry thereof or the date of the certification thereof being deemed the
date of receipt of Notification; provided, however, that any written
communication sent to a Partner or Investor or to the Fund and actually received
by such Person shall constitute Notification for all purposes of this Agreement.
Section 12.4 Word Meanings
In this Agreement, the singular shall include the plural and the masculine
gender shall include the feminine and neuter and vice versa, unless the context
otherwise requires.
Section 12.5 Binding Provisions
The covenants and agreements contained herein shall be binding upon, and
inure to the benefit of, the heirs, personal representatives, successors and
assigns of the respective parties hereto.
Section 12.6 Applicable Law
This Agreement shall be construed and enforced in accordance with the laws
of the State of Delaware, without regard to principles of conflict of laws.
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Section 12.7 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same instrument.
This Agreement shall become binding upon the date hereof. Each Additional or
Successor General Partner shall become a signatory hereof by signing such number
of counterparts of this Agreement and such other instrument or instruments, and
in such manner as the General Partners shall determine, and by so signing, shall
be deemed to have adopted and to have agreed to be bound by all the provisions
of this Agreement; provided, however, that no such counterpart shall be binding
until it shall have been signed by the Administrative General Partner.
Section 12.8 Separability of Provisions
Each provision of this Agreement shall be considered separable, and if for
any reason any provision or provisions hereof are determined to be invalid or
contrary to any existing or future law, such invalidly shall not impair the
operation of or affect those portions of this Agreement which are valid.
Section 12.9 Paragraph Titles
Paragraph titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text.
Section 12.10 Entire Agreement
This Agreement and the exhibits and documents referred to herein constitute
the entire understanding and agreement among the parties hereto with respect to
the subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings, inducements or conditions, express or implied,
oral or written, except as herein contained. This Agreement may not be modified
or amended other than by an agreement in writing.
Section 12.11 Amendments
A. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partners with the
Consent of the Investors; provided, however, that without the consent of the
Partners or Investors to be adversely affected by the amendment, this Agreement
may not be amended so as to (i) convert an Investor's interest into a General
Partner's interest; (ii) modify the limited liability of an Investor; (iii)
alter the interest of a Partner or Investor in Net Cash Flow, Profit or Loss, or
Net Proceeds of Sale or Refinancing; (iv) increase the amount of the Capital
Contributions required to be paid by the Investors; or (v) extend the
termination date specified in Section 2.4, except as provided in Section 12.11B.
B. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partners, without
the consent of any of the Investors, (i) to add to the duties or obligations of
the General Partners or surrender any right or power granted to the General
Partners herein, for the benefit of the Investors; (ii) to cure any ambiguity,
to correct or supplement any provision herein which may be inconsistent with any
other provision herein, or to make any other provisions with respect to matters
or questions arising under this Agreement which will not be inconsistent with
the provisions of this Agreement; (iii) to delete or add any provision of this
Agreement required to be deleted or added by the Staff of the Securities and
Exchange Commission or other federal agency or by a state securities
commissioner or similar official and deemed by the commission, agency,
commissioner, or official to be for the benefit or protection of the Investors;
(iv) to take any actions necessary to cause the assets of the Fund to come
within the exclusions from the definition of "plan assets" contained in Section
2550.40lb-1 of Title 29 of the Code of Federal Regulations; and (v) to give
effect to any action permitted pursuant to Section 5.2; provided, however, that
no amendment shall be adopted pursuant to this Section 12.2.B unless its
adoption (1) is for the benefit of or not adverse to the, interests of the
Investors; (2) is consistent with Section 5.2;
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(3) does not affect the distribution of Net Cash Flow or Net Proceeds of
Sale or Refinancing or the allocation of Profit or Loss among the Investors as a
class and the General Partners as a class, except as provided in clause (y)
below; and (4) does not affect the limited liability of the Investors or the
status of the Fund as a partnership for federal income tax purposes. In addition
to the amendments otherwise authorized herein, amendments may be made to this
Agreement (x) prior to or in connection with the initial closing of the sale of
Units pursuant to the Offering, so long as purchasers are given notice of the
amendment prior to the closing, and (y) to amend provisions of Article IV of
this Agreement relating to the allocations of Profit or Loss and to
distributions of Net Cash Flow or Net Proceeds of Sale or Refinancing among the
Partners and Investors if the Fund is advised at any time by the Fund's
Accountants and counsel that the allocations provided in Article IV of this
Agreement are unlikely to be respected for federal income tax purposes. The
General Partners are empowered to amend the distribution and allocation
provisions of Article IV pursuant to Section 12.11B(y) to the minimum extent
necessary in accordance with the advice of the Fund's Accountants and counsel to
effect the plan of distribution of Net Cash Flow and Net Proceeds of Sale or
Refinancing, and, consistent therewith, the allocations of Profit and Loss
provided in this Agreement. New allocations made by the General Partners in
reliance upon the advice of the Fund's Accountants and counsel shall be deemed
to be made pursuant to the fiduciary obligation of the General Partners to the
Fund and the Investors, and no such new allocations shall give rise to any claim
or cause of action by any Investor. This Section 12.11 shall be subject to the
provisions of Section 5.9 of this Agreement.
C. If this Agreement is amended as a result of adding or substituting a
Limited Partner or increasing the investment of a Limited Partner, the amendment
shall be signed by the General Partners and by the Person to be substituted or
added, or the Limited Partner increasing his investment in the Fund, and, if a
Limited Partner is to be substituted, by the assigning Limited Partner. If this
Agreement is amended to reflect the designation of an additional General
Partner, the amendment shall be signed by the other General Partner or General
Partners and by the additional General Partner. If this Agreement is amended to
reflect the withdrawal of a General Partner when the business of the Fund is
being continued, the amendment shall be signed by the withdrawing General
Partner and by the remaining or successor General Partner or General Partners.
D. In making any amendments, there shall be prepared and filed for
recordation by the General Partners all documents and certificates required to
be prepared and filed under the Act and under the laws of the other
jurisdictions under the laws of which the Fund is then formed or qualified.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
GENERAL PARTNERS:
ATTEST: MERIDIAN HEALTHCARE INVESTMENTS, INC.
(the Development General Partner)
By: (SEAL)
ATTEST: BROWN HEALTHCARE, INC.
(the Administrative General Partner)
By: (SEAL)
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SUBORDINATED LIMITED PARTNERS:
ATTEST: MERIDIAN HEALTHCARE INVESTMENTS, INC.
By: (SEAL)
REALTY ASSOCIATES 1988 LIMITED PARTNERSHIP
By: RESIDUAL INVESTMENT ASSOCIATES,
A MARYLAND LIMITED PARTNERSHIP,
General Partner
ATTEST: By: A.B. RESIDUAL, INC.,
General Partner
By: (SEAL)
ASSIGNOR LIMITED PARTNER:
ATTEST: BROWN HEALTHCARE HOLDING CO., INC.
By: (SEAL)
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