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EXHIBIT 99.21
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CORPORATE PROPERTY ASSOCIATES 9, L.P.,
A DELAWARE LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of
CORPORATE PROPERTY ASSOCIATES 9, L.P., A DELAWARE LIMITED PARTNERSHIP (the
"Partnership"), which amends and restates the Agreement of Limited Partnership
dated as of March 17, 1989 as amended as of ________, 1997, is made and entered
into as of the ___ day of __________, 1997 by and between CAREY DIVERSIFIED LLC,
a Delaware limited liability company, as General Partner and as Limited Partner,
CAREY MANAGEMENT LLC, as Corporate Special Partner, WILLIAM POLK CAREY, as
Individual Special Partner, and NINTH CAREY CORPORATE PROPERTY, INC., a Delaware
corporation, as Limited Partner, those Persons set forth on Schedule A hereto,
as Limited Partners, and all persons and entities admitted as Limited Partners
as provided herein.
ARTICLE I
CONTINUATION OF PARTNERSHIP
The parties hereby continue the Partnership under the provisions of
the Delaware Revised Uniform Limited Partnership Act (6 Del.C. Sections 17-101,
et seq.), as amended from time to time (the "Act") and the rights and
liabilities of the Partners shall be as provided in the Act and as herein
expressly provided. Pursuant to Section 17-211 of the Act, upon the consummation
of the Merger, Carey Diversified LLC shall become the general partner of the
Partnership, and Ninth Carey Corporate Property, Inc. shall become the limited
partner of the Partnership. In the event that it shall be necessary for the
Partnership to exist in or qualify to do business under the laws of any state or
states other than or in addition to the State of Delaware, the parties hereby
agree that the Partnership shall take such action as may be necessary to exist
or qualify to do business in any state in which such existence or qualification
shall be required, provided that in any such event the Partnership shall at all
times continue to be a limited partnership formed under and governed by the
provisions of the Act.
ARTICLE II
NAME
The name of the Partnership shall be "Corporate Property Associates
9, L.P., a Delaware limited partnership." The business of the Partnership shall
be conducted under the name "Corporate Property Associates 9, L.P., a Delaware
limited partnership" or under "Corporate Property Associates 9, L.P." in any
state or other jurisdiction which does not permit the term
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"limited" to be part of the Partnership's name or under such other name as the
General Partner shall hereafter designate in writing to the other Partners.
ARTICLE III
DEFINITIONS
"Acquisition Expenses" means the expenses of the Partnership related
to the selection and acquisition of properties by the Partnership, whether or
not such properties are acquired, including but not limited to legal fees and
expenses, travel and communications expenses, costs of appraisals and fairness
letters, non-refundable option payments on property not acquired, accounting
fees and expenses, costs of title reports and title insurance, transfer and
recording taxes and miscellaneous expenses. Acquisition Expenses shall not
include Acquisition Fees.
"Acquisition Fees" means the total of all fees and commissions paid
by any party in connection with the purchase or development of property by the
Partnership including compensation paid in the form of stock or other interests
in, or warrants or other rights to purchase the stock of or other interests in
the stock of tenants or their affiliates, provided, however, that the percentage
calculated by dividing the number of warrants or other stock rights received by
the General Partner or its Affiliates (excluding the Partnership) by the total
warrants or other stock rights granted by the seller in any transaction cannot
exceed that percentage calculated by dividing the portion of the Acquisition Fee
paid in cash by the total cash purchase price of the real estate purchased by
the Partnership in such transaction, and except a development fee paid to a
Person not an Affiliate of the General Partner in connection with the actual
development of a project after the Partnership's acquisition of the land.
Included in the computation of such fees or commissions shall be any real estate
commission, selection fee, development fee (other than as described above),
nonrecurring management fee, or any fee of a similar nature, however designated.
Acquisition Fees shall not include Acquisition Expenses.
"Act" means the Delaware Revised Uniform Limited Partnership Act
(6 Del.C. Sections 17-101, et seq.) as amended from time to time.
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, (ii) any Person owning or controlling 10% or more of the
outstanding voting securities of such Person, (iii) any officer, director or
partner of such Person or of any Person specified in (i) or (ii) above and (iv)
any company in which any officer, director or partner of any Person specified in
(iii) above is an officer, director or partner.
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"Agreement" means this Amended and Restated Agreement of Limited
Partnership as hereafter amended from time to time.
"Appraisal Date" means December 31, 2002.
"Appraised Value" means the value according to an appraisal made by
an independent qualified appraiser. Such qualification may be demonstrated by
membership in a nationally recognized appraisal society such as American
Institute of Real Estate Appraisers ("M.A.I."), Society of Real Estate
Appraisers ("S.R.E.A.") or their equivalent, but is not limited thereto.
"Capital Account" means, in respect of any Partner, the account
maintained for such Partner in accordance with Article XII.
"Cash From Financings" means, the net cash proceeds realized by the
Partnership from the financing of Partnership property or the refinancing of any
Partnership indebtedness.
"Cash From Sales" means the net cash proceeds realized by the
Partnership from the sale, exchange or other disposition of any of its assets.
Cash From Sales shall not include net cash proceeds realized from the financing
of Partnership property or the refinancing of any Partnership indebtedness.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any similar law or provision enacted in lieu thereof, unless the
context indicates otherwise.
"Consolidation and Offering Expenses" means all expenses incurred in
connection with the formation and qualification of the Subsidiary Partnership,
the Merger and in offering the Shares to the former limited partners of the
Partnership in exchange for their Partnership Interests under applicable Federal
and state law, and any other expenses actually incurred and directly related to
the offering of the Shares, including such expenses as: (i) the preparing,
printing, filing and delivering of the Registration Statement and the Prospectus
(including any amendments thereof or supplements thereto), (ii) the preparing
and printing of this Agreement, other solicitation material and related
documents and the filing and/or recording of such certificates or other
documents necessary to comply with the laws of the State of Delaware for the
formation of a limited partnership, the merger of a limited partnership into
another limited partnership and for the continued good standing of a limited
partnership, (iii) the qualification or registration of the limited liability
company interests under state securities or "Blue Sky" laws, (iv) any escrow
arrangements, including any compensation to an escrow agent, (v) the filing fees
payable to the United States Securities and Exchange Commission and to the
National Association of Securities Dealers, Inc. and any costs payable to the
NYSE for the listing of the Listed Shares, (vi) the fees of the Partnership's
counsel, (vii) all advertising expenses incurred in connection therewith,
including the cost of all sales literature and the costs related to investor and
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broker/dealer sales and information meetings and marketing incentive programs
and (viii) selling commissions and wholesaling expenses incurred in connection
with the sale of the Shares.
"Contribution" means any money, property or services rendered, or a
promissory note or other obligation to contribute money or property, or to
render services as permitted by the Act, which a Partner contributes to the
Partnership as capital in that Partner's capacity as Partner pursuant to this
Agreement.
"Corporate Special Partner" means Carey Management LLC, a Delaware
limited liability company.
"CPA Partnership" means Corporate Property Associates, a California
limited partnership, Corporate Property Associates 2, a California limited
partnership, Corporate Property Associates 3, a California limited partnership,
Corporate Property Associates 4, a California limited partnership, Corporate
Property Associates 5, a California limited partnership, Corporate Property
Associates 6, a California limited partnership, Corporate Property Associates 7,
a California limited partnership, Corporate Property Associates 8, L.P., a
Delaware limited partnership, the Partnership and any other real estate limited
partnerships sponsored by W.P. Carey & Co., Inc. or its Affiliates with
investment objectives substantially similar to the Partnership's.
"Distributable Cash From Operations" means cash receipts from the
ordinary day-to-day operations of the Partnership (including all interest on
Partnership investments and mortgages held by the Partnership) without deduction
for depreciation and amortization of intangibles such as organization,
underwriting and debt placement costs but after deducting all other expenses,
debt amortization and provisions for reserves established by the General Partner
which it deems to be reasonably required for the proper operation of the
business of the Partnership. Distributable Cash From Operations shall not
include cash proceeds realized from the sale, exchange or other disposition of
assets of the Partnership or from financing of Partnership property or the
refinancing of any Partnership indebtedness.
"Distribution" means any transfer of money or property by the
Partnership to a Partner without consideration.
"Fiscal Quarter" means the three-month period ending on the last day
of the third, sixth, ninth and twelfth calendar months of each Fiscal Year of
the Partnership.
"Fiscal Year" means the Fiscal Year specified in Article XIII.
"Front-End Fees" means all fees and expenses paid by any party for
any services rendered in connection with the organizational or acquisition phase
of the Partnership, including Consolidation and Offering Expenses, Acquisition
Fees,
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Acquisition Expenses and any other similar fees, however designated.
"General Partner" means any Person in his, her or its capacity as a
general partner of the Partnership (except as otherwise expressly provided
herein) and whose name and address are set forth in Article V, or any successor
thereto appointed or elected hereunder.
"Independent Advisor" means a long established, nationally
recognized investment banking firm, accounting firm, mortgage banking firm,
bank, real estate financial consulting firm or advisory firm which has a staff
of real estate professionals, whose compensation is determined and embodied in a
written contract before an opinion is rendered and who, directly or indirectly,
has no interest in, nor any material business or professional relationship with,
the Partnership, the General Partner, a borrower, or any of their Affiliates. No
more than 6% of the aggregate annual gross income of the Independent Advisor or
its Affiliates may be attributable to compensation paid to the Independent
Advisor by the Partnership pursuant to the advisory agreement. The compensation
of the Independent Advisor will be paid by the Sponsor and the Sponsor may not
claim reimbursement from the Partnership for such expenses.
"Independent Director" means a director of the General Partner who,
in the opinion of the board of directors of the General Partner, is free from
any relationship that would interfere with the exercise of independent judgment.
A director of the General Partner who is an Affiliate of the General Partner or
an officer or employee of the General Partner or its subsidiaries or Affiliates
would not qualify as an Independent Director.
"Individual Special Partner" means William Polk Carey.
"Investment in Properties" means the amount of gross proceeds of the
Offering paid or allocated to the purchase, development, construction or
improvement of real property and personal or mixed property connected therewith,
acquired by the Partnership, including the purchase of properties, working
capital reserves (except that working capital reserves in excess of 5% of the
gross proceeds of the Offering shall not be included) and other cash payments
such as interest and taxes, but excluding Front-End Fees.
"Limited Partner" means any Person in his, her or its capacity as a
limited partner of the Partnership and whose name and address are set forth on
the books and records of the Partnership.
"Mandatory Distribution Event" means the sale or disposition of a
Partnership property to a third party unaffiliated with the Partnership or the
General Partner, not including the pledge, mortgage or encumbrance of a
property, or of any interest therein, in connection with the financing,
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refinancing or other leveraging of such property or otherwise or any assignment
of any leases or rents related to such property or (b) the mandatory
distribution to holders of Partnership Interests following the Appraisal Date.
"Merger" means the merger of the Subsidiary Partnership into the
Partnership.
"Merger Agreement" means the Agreement of Merger pursuant to which
the Subsidiary Partnership is merged with and into the Partnership.
"Minimum Gain" shall mean and refer to, at any time, the excess, if
any, of the outstanding principal balance of all nonrecourse debt of the
Partnership that is secured by an interest in Partnership assets, over the
adjusted basis of such assets to the Partnership for Federal income tax
purposes. For purposes of the preceding sentence, the term "nonrecourse debt"
shall mean a liability of the Partnership with respect to which no Partner has
any personal liability.
"Net Lease" means a lease in which the tenant undertakes to pay all
or substantially all the cash expenses, excluding debt service, related to the
leased property.
"Nonrecourse Deductions" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Treasury Regulations.
"Nonrecourse Liabilities" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
"Offering" means the offering of the Shares made pursuant to the
Prospectus.
"Partner" means the General Partner, the Corporate Special Partner,
the Individual Special Partner and any Limited Partner where no distinction is
required by the context in which the term is used.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2), and the amount of Partner
Nonrecourse Debt for the Partnership taxable year shall be determined in
accordance with the rules of Treasury Regulations Section 1.704-2(i)(2).
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"Partnership" means Corporate Property Associates 9, L.P., a
Delaware limited partnership.
"Partnership Interest" or "Interest" means the interest of each
Partner in the profits, losses, distributions, capital and assets of the
Partnership.
"Partnership Minimum Gain" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum Gain, for a
Partnership taxable year shall be determined in accordance with the rules of the
Treasury Regulations.
"Person" means any natural person, partnership, corporation, limited
liability company, association or other legal entity.
"Prospectus" means the final prospectus of the General Partner
pursuant to which the General Partner will offer up to 23,654,898 Shares, as the
same may at any time and from time to time be amended or supplemented after the
effective date of the Registration Statement.
"Proxy" means a written authorization signed by a Partner or the
Partner's duly authorized attorney-in-fact giving another Person the power to
vote with respect to the Partnership Interest of that Partner. "Signed," for the
purpose of this paragraph, means the placing of the Partner's name on the proxy
(whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the Partner or the Partner's duly authorized attorney-in-fact.
"Purchase Price of Property" means the price paid upon the purchase
or sale of a particular property, including the amount of Acquisition Fees and
all liens and mortgages on the property, but excluding points and prepaid
interest.
"Registration Statement" means the General Partner's Registration
Statement on Form S-4 filed with the Securities and Exchange Commission in the
form in which it becomes effective, as the same may at any time and from time to
time thereafter be amended or supplemented.
"Shares" means the Shares of the General Partner.
"Special Partners" means the Corporate Special Partner and the
Individual Special Partner.
"Sponsor" means any Person directly or indirectly instrumental in
organizing wholly or in part, a limited or general partnership or any Person who
will manage or participate in the management of a limited or general
partnership, and any Affiliate of any such Person, but does not include a Person
whose only relation with the Partnership is as that of an independent property
manager and whose only compensation is as such. Sponsor
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does not include wholly independent third parties such as attorneys, accountants
and underwriters whose only compensation is for professional services rendered
in connection with the offering of syndicated interests.
"Subsidiary Partnership" means Ninth Subsidiary, L.P., a Delaware
limited partnership, which is a subsidiary of the General Partner.
ARTICLE IV
PURPOSE
The business and purpose of the Partnership is to carry on any
business that a Delaware partnership without limited partners may carry on
(except the business of granting policies of insurance, assuming insurance risks
or banking), and more particularly to invest in and own real property or
interests therein (including leasehold estates) as well as personal or mixed
property connected therewith which is income producing or capable of becoming
income producing within a reasonable time after acquisition. The Partnership may
enter into ventures, partnerships and other business arrangements with respect
to real property and personal or mixed property connected therewith or interests
therein as deemed prudent by the General Partner in order to achieve successful
operations for the Partnership. Operations of the Partnership may be conducted
wherever, in the opinion of the General Partner and not in violation of the
general restrictions described in Paragraph H of Article X, the factors involved
appear to be favorable for the Partnership and the Partners.
ARTICLE V
NAMES AND ADDRESSES OF PARTNERS
The General Partner shall be Carey Diversified LLC, a limited
liability company having an office at 50 Rockefeller Plaza, New York, New York
10020. The names and addresses of the Limited Partners shall be as set forth on
the books and records of the Partnership which shall be kept at the principal
place of business of the Partnership.
ARTICLE VI
PRINCIPAL PLACE OF BUSINESS; REGISTERED OFFICE AND AGENT
The principal place of business of the Partnership shall be 50
Rockefeller Plaza, New York, New York 10020. The Partnership shall also maintain
a registered office in the State of Delaware at 229 South State Street, Dover,
Delaware 19901. The General Partner may from time to time change the principal
place of business of the Partnership or its registered office and, in
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either such event, the General Partner shall notify the Partners in writing
within ten days after the effective date of such change; provided, however, that
no such change shall be effected unless the General Partner determines that such
change is in the best interests of the Partnership after giving consideration to
any material adverse state or local income, estate or inheritance tax
consequences to the Partners, or any adverse effect on the limited liability of
the Limited Partners, as a result of such change and provided further that the
Partnership shall always maintain a registered office in the State of Delaware.
The General Partner may establish additional places of business of the
Partnership when and where required by the business of the Partnership. The
Partnership at all times shall maintain in the State of Delaware a registered
agent for service of process upon the Partnership.
ARTICLE VII
CAPITAL CONTRIBUTIONS
The Partnership is authorized to issue and sell up to 100,000
limited partner interests.
No interest shall be paid on any contribution to the capital of the
Partnership.
Loans by a Partner to the Partnership shall not be considered
contributions to the capital of the Partnership. Any Partner, including any
additional or substituted Partner, who shall acquire a Partnership Interest or
whose Partnership Interest is increased by means of a transfer to him of all or
a part of the Partnership Interest of another Partner, shall succeed to the
Capital Account, or portion thereof, in respect of the Partnership Interest
received.
ARTICLE VIII
PROFITS AND LOSSES
A. Determination of Profits and Losses. The Partnership presently
intends to keep its books on the accrual method of accounting and to report for
federal, state and local income tax purposes using the same method by making
such adjustments as are necessary to include other items of income, expense,
deduction and allowance as are permitted or required under the Code and the
regulations promulgated thereunder. The Partnership may report its activities to
the Limited Partners in accordance with generally accepted accounting
principles. Except as otherwise provided herein, whenever a proportionate part
of the Partnership profit or loss is credited or charged to a Partner's Capital
Account, every item of income, gain, loss or deduction entering into the
computation of such profit or loss shall be considered either credited or
charged, as the case may
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be, to such Partner's Capital Account and every item of credit or tax preference
related to such profit or loss and applicable to the period during which such
profit or loss was realized shall be allocated to such Partner in the same
proportion. Every recapture of deduction or credit shall be allocated among the
Partners in the same proportion as the items of deduction or credit subject to
recapture were allocated among the Partners. Any increase or decrease in the
amount of any item of income, gain, loss or deduction attributable to an
adjustment to the basis of Partnership assets made pursuant to a valid election
under Sections 734, 743 and 754 of the Code and pursuant to corresponding
provisions of applicable state and local income tax laws shall be charged or
credited, as the case may be, and any increase or decrease in the amount of any
item of credit or tax preference attributable to any such adjustment shall be
allocated to the Partners entitled thereto under such laws. Profits and losses
allocated to a particular class of Partnership Interests shall be allocated
among the holders of record of such class of Partnership Interests at the end of
each Fiscal Year (or such shorter period as may be provided herein) of the
Partnership in proportion to their respective Partnership Interests; provided,
however, that any such profits and losses attributable to a limited partner
interest assigned during a Fiscal Year of the Partnership shall be allocated
among the Persons who were the holders of such limited partner interests during
such Fiscal Year in proportion to the number of months (for purposes of such
allocation, ownership of limited partner interests for each month will be
determined as of the fifteenth day of each month) that each such holder was
recognized as the owner of such limited partner interest during such Fiscal
Year, without regard to the results of Partnership operations during the period
in which each such holder was recognized as the owner thereof and without regard
to the date, amount or recipient of any distributions which may have been made
with respect to such limited partner interest.
B. Allocation of Profits and Losses.
1. Except as provided in subparagraph 4 of this paragraph B, the
profits and losses of the Partnership (other than gains or losses from the sale,
exchange or other disposition of Partnership assets) shall be allocated to the
Partners as follows and in the following order of priority:
a. An amount of net income equal to the excess, if any, of the
aggregate negative balance of the Capital Accounts of the Partners over the
Minimum Gain (determined as of the end of such year or fraction thereof), shall
first be allocated among the Partners whose Capital Accounts are negative as a
result of nonrecourse debt in proportion to the negative amounts attributable to
such nonrecourse debt.
b. Any remaining balance of net income shall be allocated 1%
to the General Partner, 9% to the Corporate Special Partner, 1% to the
Individual Special Partner and 89% to the Limited Partners.
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c. Net losses of the Partnership shall be allocated 1% to the
General Partner, 9% to the Corporate Special Partner, 1% to the Individual
Special Partner and 89% to the Limited Partners.
2. Except as provided in subparagraph 4 of this Paragraph B, net
losses arising from sales, exchanges or other dispositions of Partnership assets
shall be allocated 1% to the General Partner, 1% to the Individual Special
Partner and 98% to the Limited Partners. For purposes of this subparagraph 2,
Capital Accounts shall be determined after applying the allocations provided in
subparagraphs 1 and 5 of this Paragraph B, and after applying subparagraphs 6
and 7 of this Paragraph B.
3. Net gains arising from sales, exchanges or other dispositions of
Partnership assets shall be allocated to the Partners as follows and in the
following order of priority:
a. An amount of such gains equal to the excess, if any, of the
aggregate negative balance of the Capital Accounts of the General Partner over
the Minimum Gain;
b. If each Partner's Capital Account is negative and the gains
are less than the aggregate negative amounts in the Capital Accounts, in the
ratio that the Capital Accounts bear to each other;
c. If each Partner's Capital Account is negative and the gains
are greater than the aggregate negative amounts in the Capital Accounts (i)
first in an amount sufficient to bring each Partner's Capital Account to zero,
and (ii) then to the Partners in the percentage by which Cash From Sales and
Cash From Financings are then being distributed pursuant to the provisions of
Paragraph E of Article IX hereof;
d. If certain Partners' Capital Accounts are positive and
other Partners' Capital Accounts are negative (i) first in an amount sufficient
to bring the Capital Account of each Partner whose Capital Account is negative
to zero (or if the gains are less than the aggregate negative amounts of the
Capital Accounts which are negative, to such Partners in the ratio that such
negative Capital Accounts bear to each other), and (ii) then to the Partners in
the percentage by which Cash From Sales and Cash From Financings is then being
distributed pursuant to the provisions of Paragraph E of Article IX hereof; or
e. If each Partner's Capital Account is positive, in the percentages
by which Cash From Sales and Cash From Financings are then being distributed
pursuant to the provisions of Paragraph E of Article IX hereof. For purposes of
this subparagraph 3, Capital Accounts shall be determined after applying the
allocations provided first in subparagraph 5 and then in subparagraphs 1 and 2
of this Paragraph B and after applying subparagraphs 6 and 7 of Paragraph B.
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4. No loss or deduction or item thereof under subparagraph 1 or 2 of
this Paragraph B shall be allocated to the General Partner if, or to the extent,
such allocation would create or increase a deficit in the General Partner's
Capital Account, unless:
a. Such allocation of loss or deduction is attributable to
nonrecourse debt of the Partnership; and
b. Such allocation does not cause the deficit Capital Account of the
General Partner to exceed the amount of Minimum Gain attributable to such
nonrecourse debt, determined as of the last day of the taxable year to which
such allocation is attributable.
5. To the extent that any amount paid to a Limited Partner or its
Affiliates pursuant to the provisions of Paragraphs G(2),(4),(5),(6) or (7) of
Article X hereof, or as Front-End Fees, is treated as a distributive share of
Partnership income to the Limited Partner for Federal income tax purposes, the
Limited Partner affected shall be allocated gross income of the Partnership at a
time and in an amount equal to the amount of such payment, and the Capital
Account of the Limited Partner so affected shall be adjusted to reflect such
allocation and payment. If the Partnership's gross income for a Fiscal Year is
less than the amount of such payment, the Limited Partner affected shall be
allocated gross income in each succeeding Fiscal Year until the total amount so
allocated equals the total amount of such payment.
6. For purposes of subparagraphs 1(a), 2 and 3 of this Paragraph B,
distributions to the Partners pursuant to Paragraphs A and E of Article IX
hereof shall be treated as having been made and charged to the Capital Accounts
of the Partners prior to the allocations of income, gains and losses provided
therein.
7. Solely for purposes of this Paragraph B, the Capital Accounts of
each Partner shall be reduced by such Partner's share of any Partnership
expenditure which would be treated as if it were an expenditure described under
Section 705(a)(2)(B) of the Code, and shall be reduced or increased by any other
amount required by the then applicable regulations under Section 704 of the
Code.
8. Notwithstanding anything to the contrary in this Article VIII, if
any Partner receives an adjustment, allocation or distribution described in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), such Partner
shall be specially allocated a pro rata portion of each item of Partnership
income, including gross income, and gain in an amount and manner sufficient to
eliminate, as quickly as possible, any deficit balance in such Partner's Capital
Account created by such adjustment, allocation or distribution in excess of the
sum of (i) the amount such Partner is obligated to restore pursuant to any
provision of this Agreement and (ii) the amount such Limited
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Partner is deemed to be obligated to restore pursuant to the penultimate
sentence of Treasury Regulations Section 1.704-1(b)(2)(iv)(f) (as amended in
1986). This subparagraph 8 of Paragraph B is intended to constitute a "qualified
income offset" within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(3).
9. Except as otherwise provided in Section 1.704-2(f) of the
Treasury Regulations, if there is a net decrease in Partnership Minimum Gain for
any Partnership fiscal year, each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary subsequent years)
in an amount equal to such Partner's share of the net decrease in Partnership
Minimum Gain to the extent required by Treasury Regulations Section 1.704-2(f).
The items to be so allocated shall be determined in accordance with Section
1.704-2(f) and (i) of the Treasury Regulations. This subparagraph is intended to
comply with the minimum gain chargeback requirement in said section of the
Treasury Regulations and shall be interpreted consistently therewith.
Allocations pursuant to this subparagraph shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant hereto.
10. Except as otherwise provided in Section 1.704-2(i)(4) of the
Treasury Regulations, if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any fiscal year, each Partner
who has a share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Treasury Regulations, shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an amount equal
to that Partner's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the manner
required by Section 1.704-2(i) of the Treasury Regulations. The items to be so
allocated shall be determined in accordance with Sections 1.704-2(i) of the
Treasury Regulations. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i)(4) and (j)(2) of the Treasury Regulations.
This subparagraph is intended to comply with the minimum gain chargeback
requirement with respect to Partner Nonrecourse Debt contained in said section
of the Treasury Regulations and shall be interpreted consistently therewith.
Allocations pursuant to this subparagraph shall be made in proportion to the
respective amounts to be allocated to each Partner pursuant hereto.
11. To the extent any Partner has an Adjusted Capital Account
Deficit at the end of any Partnership Fiscal Year, each such Partner shall be
specially allocated items of Partnership income (including gross income) and
gain in the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Paragraph 8(B)(11) shall be made if and only to the
extent that such Partners would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Section have been tentatively made as
if this Paragraph 8(B)(11) were not in the Agreement.
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12. Partner Nonrecourse Deductions for any fiscal year or other
applicable period with respect to a Partner Nonrecourse Debt shall be specially
allocated to the Partners that bear the economic risk of loss for such Partner
Nonrecourse Debt (as determined under Sections 1.704-2(b)(4) and 1.704-2(i)(1)
of the Treasury Regulations).
C. Power of the General Partner to Vary Allocations of Profits and
Losses. It is the intent of the Partners that each Partner's distributive share
of income, gains, losses, deductions and credits shall be determined and
allocated in accordance with this Article VIII to the fullest extent permitted
by Section 704(b) of the Code. If the Partnership is advised that the
allocations provided in this Article VIII are unlikely to be respected for
Federal income tax purposes, the General Partner has been granted the power in
Paragraph B(2)(a) of Article XVI of this Agreement to amend the allocation
provisions of this Agreement, on advice of accountants and legal counsel, to the
minimum extent necessary to effect the plan of allocations and distributions
provided in this Agreement.
D. Allocations of Profits and Losses Among Limited Partners. Except
as otherwise provided in this Article VIII, all profits and losses shall be
allocated among the Limited Partners in the same manner as distributions are
allocated in Paragraph D of Article IX hereof.
E. Approval of Partners to Allocation of Profits and Losses. The
methods hereinabove set forth by which profits and losses of the Partnership are
determined and allocated are hereby approved by each Partner as a condition to
becoming a Partner.
ARTICLE IX
DISTRIBUTIONS
A. Distributable Cash From Operations. The General Partner shall
distribute as soon after the close of each Fiscal Quarter as is reasonably
feasible all of the Distributable Cash From Operations for such Fiscal Quarter
in the following manner: 1% to the General Partner, 9% to the Corporate Special
Partner, 1% to the Individual Special Partner and 89% to the Limited Partners.
B. Cash From Sales. The General Partner shall distribute, as soon
after the close of each Fiscal Quarter as is reasonably feasible, all Cash From
Sales realized by the Partnership during such Fiscal Quarter in accordance with
the provisions of Paragraph E of this Article IX.
C. Cash From Financings. The General Partner shall distribute, as
soon after the close of each Fiscal Quarter as is reasonably feasible, all of
the Cash From Financings realized by
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the Partnership during such Fiscal Quarter in accordance with the provisions of
Paragraph E of this Article IX.
D. Allocation of Distributions Among Limited Partners. Distributions
of Distributable Cash From Operations to the Limited Partners shall be
apportioned among the holders of record of limited partner interests (as
determined in accordance with Paragraph A of Article VIII) in the ratio in which
the number of limited partner interests held of record by each of them bears to
the number of limited partner interests held of record by all the Limited
Partners as of the last month of the Fiscal Quarter with respect to which such
distribution is made. Distributions of Cash From Sales and Cash From Financings
shall be made to holders of record (as determined in accordance with Paragraph A
of Article VIII) for the month in which the transaction giving rise to the
distribution was completed.
E. Distributions of Cash From Sales and Cash From Financings. The
General Partner shall distribute Cash From Sales and Cash From Financings in the
following manner: 1% to the General Partner, 1% to the Individual Special
Partner and 98% to the Limited Partners.
F. No Distributions Under Certain Circumstances. Not withstanding
any other provision of this Article IX, no distribution shall be made to the
extent that at the time of the distribution, after giving effect to the
distribution, all liabilities of the Partnership, other than liabilities to
Partners on account of their partnership interests and liabilities for which the
recourse of creditors is limited to specified property of the Partnership,
exceed the fair value of the assets of the Partnership, except that the fair
value of property that is subject to a liability for which the recourse of
creditors is limited shall be included in the assets of the Partnership only to
the extent that the fair value of that property exceeds that liability. No
Partner shall have the right to receive property other than money upon any
distribution. No Partner may be compelled to accept a distribution of any asset
in kind in lieu of a proportionate distribution of money being made to other
Partners. Except for distributions to a trust as set forth in the last sentence
of paragraph B of Article XVIII, all distributions shall be made only in the
form of cash.
G. Approval of Partners to Allocation of Distributions. The methods
hereinabove set forth by which Cash From Operations, Cash From Sales and Cash
From Financings are allocated and distributed are hereby approved by each
Partner as a condition to becoming a Partner.
ARTICLE X
MANAGEMENT AND OPERATION OF BUSINESS
A. Management of Business. The Partnership shall be managed by the
General Partner and the conduct of the
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Partnership's business shall be controlled and conducted by the General Partner
in accordance with this Agreement. The approval of only the General Partner is
needed for decisions concerning the Partnership's investments.
B. Authority of the General Partner. In addition to and not in
limitation of any rights and powers conferred by law or other provisions of this
Agreement, the General Partner shall have and may exercise on behalf of the
Partnership all powers and rights necessary, proper, convenient or advisable to
effectuate and carry out the purposes, business and objectives of the
Partnership. Such powers shall include, without limitation, the following
powers:
1. To acquire, hold and dispose of any real property (or any
interests therein, including leasehold estates) as well as personal or mixed
property connected therewith, including the purchase, lease, development,
improvement, maintenance, exchange, trade or sale of such property at such
price, rental or amount, for cash, securities or other property and upon such
terms, as the General Partner deems to be in the best interests of the
Partnership;
2. Subject to the provisions of paragraph H(10) of this Article X,
to borrow money and, if required therefor, to mortgage or subject to any other
security device any portion of the assets of the Partnership, to obtain
replacements of any mortgage or other security device, and to prepay, in whole
or in part, refinance, increase, modify, consolidate or extend any mortgage or
other security device, provided, however, that loans from Affiliates of the
General Partner shall be made in accordance with the provisions of Paragraphs
G(2) and G(6) of this Article X;
3. To invest the Partnership's funds in United States Government
securities, certificates of deposit or other time or demand deposits of banks,
savings banks, savings and loan associations or similar institutions which have
a net worth of at least $100,000,000 or in which such certificates or deposits
are fully insured by any Federal or state government agency, United States
dollar deposits in foreign branches of banks, which banks have a net worth of at
least $100,000,000, bank repurchase agreements covering securities of the United
States Government or governmental agencies, bankers' acceptances, public money
market funds, or other similar short-term highly liquid investments; to invest
any working capital or other reserves retained by the General Partner for the
operation of the Partnership in like manner; and to deposit, withdraw, invest,
pay, retain and distribute the Partnership's funds in any manner consistent with
the provisions of this Agreement;
4. To bring and defend actions at law or in equity;
5. To employ persons in the operation and management of the
Partnership's business, including but not limited to
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supervisory managing agents, building management agents, real property
developers and real estate brokers;
6. To place record title to, or the right to use, Partnership assets
in the name or names of a non-operating nominee or nominees, including an
Affiliate of the General Partner, for any purpose convenient or beneficial to
the Partnership;
7. To perform all acts and file all documents, including tax returns
and registration statements, necessary to comply with Federal, state and local
laws, rules and regulations applicable to the Partnership or the conduct of the
Partnership's business;
8. To enter into and carry out contracts and agreements and any or
all documents and instruments and to do and perform all such other things as may
be in furtherance of Partnership purposes or necessary or appropriate to the
conduct of Partnership activities;
9. To cause the Partnership to make or revoke any of the elections
required or permitted to be made by the Partnership under the Code;
10. To determine the appropriate accounting method or methods to be
used by the Partnership (the Partnership intends initially to utilize the
accrual method of accounting in reporting its profits and losses for Federal,
state and local income tax purposes);
11. To designate Carey Diversified LLC, the General Partner, as the
"Tax Matters Partner" in accordance with Section 6231(a)(7) of the Code and, as
such, the General Partner shall have all powers necessary to so perform
including, without limitation, the power to retain attorneys and accountants of
its choice and the right to settle any audits without the approval of the
Limited Partners, except as otherwise required by the Code. The designation
provided for herein is hereby expressly approved by each Partner as an express
condition to becoming a Partner; and
12. To execute, acknowledge, deliver, seal, file, record and vote
any and all instruments which may be deemed necessary or convenient to effect
the foregoing.
C. Restrictions on Authority of General Partner. In addition to
other acts expressly prohibited or restricted by this Agreement or by law, the
General Partner shall have no authority to act on behalf of the Partnership with
respect to, and is expressly prohibited from undertaking, the following:
1. Doing any act in contravention of this Agreement;
2. Except as provided in this Agreement and except in connection
with the liquidation and winding up of the business of
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the Partnership upon its dissolution, doing any act which would make it
impossible to carry on the ordinary business of the Partnership;
3. Confessing a judgment against the Partnership in connection with
any threatened or pending legal action;
4. Possessing Partnership property or assigning the rights of the
Partnership in specific Partnership property for other than a Partnership
purpose;
5. Admitting a Person as a Limited Partner except as provided in
this Agreement;
6. Except as provided in this Agreement and except in connection
with the liquidation and winding up of the business of the Partnership upon its
dissolution or a Mandatory Distribution Event, selling substantially all the
assets of the Partnership at a single sale or in multiple sales in the same
12-month period without the prior written approval of Limited Partners holding
more than fifty percent (50%) of the then outstanding Limited Partner Interests,
with the same relative vote as provided in paragraph (d) of Article XI;
7. Pledging or encumbering substantially all the properties of the
Partnership at one time or from time to time in a series of related
transactions, unless the lien of such pledge or encumbrance arises in connection
with the acquisition or improvement of properties or the initial financing of
properties acquired free and clear of encumbrances or the refinancing of
previous obligations and such lien is limited to the properties so acquired,
improved, financed or refinanced;
8. Obtaining any loan or any mortgage loan on any residential
property made or guaranteed by any Federal, state or local government or
municipality or any agency of any Federal, state or local government or
municipality;
9. Performing any act (other than an act required by this Agreement)
which would, at the time such act occurred, subject any Limited Partner to
liability as a general partner in any jurisdiction;
10. Prepaying any interest on any Partnership indebtedness; provided
that the payment of any amount commonly referred to as "points" shall not be
deemed a prepayment of interest; or
11. Assessing any Partner for an additional capital contribution.
D. Fiduciary Obligations of General Partner. The General Partner
shall have fiduciary responsibility for the safekeeping and use of all funds and
assets of the Partnership, whether or not such funds or assets are in their
possession or control. The General Partner will not employ, or permit another
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to employ, such funds or assets in any manner except for the exclusive benefit
of the Partnership.
E. Obligations of the General Partner. The General Partner shall:
1. Devote such of its time to the business of the Partnership as it
shall, in its discretion, exercised in good faith, determine to be necessary to
conduct the business of the Partnership for the benefit of the Partnership and
the Limited Partners;
2. File and publish all certificates, statements or other
instruments required by law for formation, qualification and operation of the
Partnership and for the conduct of its business in all appropriate
jurisdictions;
3. Use its best efforts to cause the Partnership and the Partners to
be protected by adequate public liability, directors and officers liability,
property damage and other insurance; however, no Partnership funds may be used
to purchase any liability insurance for which the indemnified person would be
prohibited from being indemnified by the Partnership under Article X(F) of this
Agreement;
4. Employ attorneys to represent the Partnership, which attorneys
may also serve as counsel to the General Partner and any of its Affiliates; and
5. Use its best efforts to maintain the status of the Partnership as a
"partnership" for Federal income tax purposes.
F. Limitation on Liability of General Partner; Indemnification.
1. Neither the General Partner nor any of its Affiliates shall have
liability to the Partnership or to any Partner for any loss suffered by the
Partnership which arises out of any action or inaction of the General Partner or
its Affiliates if the General Partner or its Affiliates in good faith determined
that such course of conduct was in the best interest of the Partnership and such
course of conduct did not constitute negligence or misconduct of the General
Partner or its Affiliates and provided, with respect to Affiliates, such
Affiliates were acting within the scope of the authority of the General Partner.
To the fullest extent permitted by law, the General Partner and its Affiliates
(other than broker-dealers) shall be indemnified by the Partnership for any
losses, judgments, liabilities, expenses and amounts paid in settlement of any
claim sustained by them in connection with the Partnership, provided that the
same were not the result of negligence or misconduct on the part of the General
Partner or its Affiliates, that the General Partner or its Affiliates, as the
case may be, in good faith determined that their course of conduct was in the
best interest of the Partnership and that, with respect to Affiliates, such
Affiliates
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were acting within the scope of the authority of the General Partner.
2. The General Partner and its Affiliates and any Person acting as a
broker dealer shall not be indemnified for any losses, liabilities or expenses
arising from or out of an alleged violation of federal or state securities laws
unless (a) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee 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 indemnitee and the court approves indemnification of the
litigation costs or (c) a court of competent jurisdiction approves a settlement
of the claims against a particular indemnitee and finds that indemnification of
the settlement and related costs should be made. In any claim for
indemnification for Federal or state securities law violations, the party
seeking indemnification shall place before the court the position of the
Securities and Exchange Commission, the Arizona Corporations Commission, the
Massachusetts Securities Division, the Missouri Securities Division, the
Pennsylvania Securities Division and other state securities commissioners with
respect to the issue of indemnification for securities law violations.
3. The Partnership shall not incur the cost of that portion of any
insurance which insures any party against any liability the indemnification of
which is herein prohibited.
4. The Partnership shall not make any advances to the General
Partner or its Affiliates for legal expenses and other costs incurred as a
result of a legal action unless the following three conditions are satisfied:
(a) the legal action relates to the performance of duties or services by the
General Partner or its Affiliates on behalf of the Partnership, (b) the legal
action is initiated by a party other than the Partnership or a Limited Partner
and (c) the General Partner or its Affiliates undertake to repay the advanced
funds to the Partnership in cases in which they would not be entitled to such
indemnification.
5. For purposes of this Section (F) of Article X, the term Affiliate
shall mean any Person performing services on behalf of the Partnership (i) who
directly or indirectly controls, is controlled by, or is under common control
with the General Partner, (ii) who owns or controls 10% or more of the
outstanding voting securities of the General Partner, (iii) who is an officer,
director or partner of the General Partner or (iv) which is a company for which
the General Partner acts as an officer, director, partner or trustee.
6. Any payments made by the Partnership to the General Partner or
its Affiliates as a result of any indemnification or hold harmless agreement
shall be paid out of the assets of the Partnership (and any insurance proceeds)
and not from the separate assets of the Limited Partners.
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G. Specific Transactions Authorized. The General Partner is hereby
authorized to enter into, on behalf of the Partnership, the following specific
transactions:
1. The Partnership may purchase property from any Affiliate of the
General Partner provided (i) the property was acquired by such Affiliate for the
purpose of facilitating its purchase by the Partnership, facilitating the
borrowing of money or the obtaining of financing for the Partnership or any
other purpose related to the business of the Partnership, (ii) the property is
purchased by the Partnership for a price no greater than the Appraised Value,
(iii) there is no adverse difference in the interest rates of the loans secured
by the property at the time acquired by such Affiliate and at the time purchased
by the Partnership nor any other benefit arising out of such transaction to the
General Partner and (iv) no compensation is paid by the Partnership or by any
non-affiliated person to any Affiliate of the General Partner in connection with
the purchase of the property by the Partnership.
2. The Partnership may take a loan, the principal amount of which is
scheduled to be paid over a period of not less than 48 months and not more than
50% of the principal amount of which is scheduled to be paid during the first 24
months, from an Affiliate of the General Partner provided that such Affiliate is
a program formed for the purpose of, among other things, making mortgage loans
and further provided that (i) the terms of any such loan are fair and at least
as favorable to the Partnership as could be obtained from a non-Affiliate in
similar circumstances, (ii) the Partnership obtains a letter of opinion from a
qualified Independent Advisor to such effect and (iii) the Partnership is
represented, with respect to such mortgage loan, by legal counsel different from
the legal counsel retained for such transaction by the Affiliated lender.
3. An officer or director of the General Partner may serve as a
director of a tenant of the Partnership after a lease with the Partnership has
been executed, provided that the purpose of such service as a director is for
monitoring tenant activity on behalf of the Partnership and provided that the
Partnership shall not incur, directly or indirectly, any costs relating to such
service. Any tenant having such an officer or director serving as a director
shall not be deemed an Affiliate of the Partnership for purposes of this
Agreement so long as such tenant would not otherwise be an Affiliate for
purposes of this Agreement except by reason of such service. An officer or
director serving as a director of the tenant may not vote as a member of the
board of directors of the tenant on matters relating to the Partnership or any
Affiliate of the Partnership.
4. The Partnership may contract (i) with Affiliates of the General
Partner to serve as real estate brokers and mortgage placement brokers in
connection with the investment of the Partnership assets and (ii) with
Affiliates of the General Partner to serve as real estate brokers in connection
with the
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sale of property by the Partnership. The amount of real estate commissions
payable to Affiliates of the General Partner upon a sale of property by the
Partnership where such Affiliates have provided a substantial amount of services
in the sales effort may not exceed the lesser of (i) 3% of the contract price
for the sale of the property or (ii) 50% of the reasonable, customary and
competitive rate for similar services in light of the size, type and location of
the property; provided, however that the total real estate commissions payable
to such Affiliates and to other Persons may not exceed the lesser of (a) 6% of
the contract price for the sale of the property or (b) the reasonable, customary
and competitive rate for similar services in light of the size, type and
location of the property. No Affiliate of the General Partner may receive
payment of a real estate commission with respect to the sale of any property by
the Partnership unless the total consideration received by the Partnership upon
such sale exceeds the amounts actually paid by the Partnership for the purchase,
development, construction or improvement of the Property and any fees and
commissions paid by the Partnership in connection therewith.
5. Affiliates of the General Partner may receive insurance premiums
and brokerage commissions with respect to insurance on property owned by the
Partnership only when the cost of such insurance is paid by tenants who net
lease such properties from the Partnership. No such net lease shall provide that
the lessee is required to purchase insurance through an Affiliate of the General
Partner.
6. At any time, the Partnership may borrow funds from Affiliates of
the General Partner or third parties on a short term basis to provide the debt
portion of the purchase price of any property if (i) the Partnership is unable
to obtain a permanent loan or, in the judgment of the General Partner, it is not
in the best interests of the Partnership to obtain a permanent loan at the
interest rates then prevailing and (ii) the General Partner has reason to
believe that the Partnership will be able to obtain a permanent loan on or prior
to the end of the loan term. Any such short-term loans may be fully or partially
amortized, may provide for the payment of interest only during the term of the
loan or may provide for the payment of principal and interest only upon
maturity. Any such short-term loans may be secured by a pledge of or security
interest in the net assets of the Partnership or, if the loan is obtained to pay
or provide the debt or equity portion of the purchase price of a property, by a
first or junior mortgage on the property to be acquired. Any short-term loans
from Affiliates of the General Partner will bear interest at a rate equal to the
lesser of (A) 1% above the prime interest rate at The Bank of New York or (B)
the rate that would be charged to the Partnership by unrelated lending
institutions on comparable loans for the same purpose in the locality of the
property but in no event greater than the maximum amount permitted by law. Such
borrowings shall be nonrecourse to the Partnership, unless the General Partner
shall otherwise consent in writing. No prepayment charge or penalty shall be
required by a General Partner on a loan to the Partnership from the General
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Partner secured by either a first or a junior or all inclusive trust deed,
mortgage or encumbrance on the property; except to the extent such prepayment
charge or penalty is attributable to the underlying encumbrance.
7. All of the Partnership's expenses shall be billed directly to and
paid by the Partnership. The Partnership shall reimburse the General Partner or
its Affiliates for: (a) the actual cost to the General Partner or their
Affiliates of goods and materials used for and by the Partnership and obtained
from unaffiliated parties and (b) the costs incurred by the General Partner or
its Affiliates in performing administrative services necessary to the prudent
operation of the Partnership; provided, however, that the amounts charged to the
Partnership for services performed pursuant to this clause (b) shall not exceed
the lesser of (1) the actual cost of such services, or (2) 90% of the amount
which the Partnership would be required to pay to independent parties for
comparable services in the same geographic location. No reimbursement shall be
made to the General Partner or its Affiliates for: (x) services for which the
General Partner or its Affiliates are entitled to compensation by way of a
separate fee or (y) any of the salaries, fringe benefits, travel expenses and
other administrative items incurred by or allocated to any controlling person
(as defined herein) of the General Partner or its Affiliates; provided, however,
that the Partnership may reimburse the General Partner or its Affiliates for the
travel expenses of controlling persons if such travel expenses are incurred by
such controlling persons in connection with the evaluation of properties being
considered for acquisition or visits to executives of potential tenants of
properties being considered for acquisition to discuss current financial
results. The Partnership's annual report to the Partners shall contain a
breakdown of the costs reimbursed to the General Partner or its Affiliates.
Within the scope of the annual audit of the General Partner's (or such
Affiliate's) financial statement, the independent certified public accountant
shall verify the allocation of such costs to the Partnership. The method of
review shall at minimum provide (1) a review of time records of individual
employees, the costs of whose services were reimbursed; and (2) a review of the
specific nature of the work performed by each such employee. The methods of
review shall be in accordance with generally accepted auditing standards and
shall accordingly include such tests of the accounting records and such other
auditing procedures which the General Partner's (or such Affiliate's)
independent certified public accountants consider appropriate in the
circumstances. The additional costs of such review shall be itemized by such
accountants on a partnership by partnership basis and may be reimbursed to the
General Partner (or such Affiliate) in accordance with this Paragraph only to
the extent that such reimbursement, when added to the cost for administrative
services rendered, does not exceed the competitive rate for such services as
determined in this Paragraph G(7).
As used herein, the term "controlling person" shall mean any Person,
whatever his title, who performs executive or
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senior management functions for the General Partner or such Affiliate similar to
those of executive or senior management officers, directors or partners, or
those holding 5% or more equity interest in the General Partner or such
Affiliate or a Person having the power to direct or cause the direction of the
management and/or policies of the General Partner or such Affiliate, whether
through the ownership of voting securities, by contract or otherwise. For the
purposes of this Paragraph G(7), not every Person who carries a title such as
vice president, corporate secretary or treasurer shall be considered a
controlling person, unless such Person performs the functions or has the powers
described above, and even in the absence of a specific title, an executive in a
senior management position shall be considered a controlling person.
8. The Partnership may invest in unimproved or non-income producing
real property and the stock of or other interests in, or warrants or other
rights to purchase the stock of or other interests in, any tenant of the
Partnership or the parent or controlling person of any tenant. The Partnership
may not borrow funds to make investments in such stock, interests, warrants or
other rights. The Partnership will not exercise warrants or other rights to
purchase the stock of or other interests in a tenant or the parent or
controlling person of a tenant unless the Partnership will immediately liquidate
the stock or interest purchased at a price in excess of the exercise price.
Under such circumstances, payment of the exercise price shall not be deemed an
investment subject to the above limitations respecting the amount of net
proceeds derived from the sale of limited partner interests which the
Partnership may invest in unimproved or non-income producing real property or
stock, interests, warrants or other rights. The Partnership may borrow funds on
a short-term basis to pay the exercise price on warrants or other rights or may
pay such exercise price from funds held in the working capital reserve and will
repay the loan or replenish the reserve upon the sale of the securities or
interests purchased before it makes distributions to the Partners respecting the
proceeds of sale or reinvests such proceeds in properties.
9. The Partnership may incur indebtedness in connection with the
purchase, improvement, repair, development and financing or refinancing of
properties and the operation of the Partnership, including the funding of
operating deficits and obtaining Cash From Sales and Cash From Financings for
distribution to Partners. Such indebtedness may not exceed 80% of the total
purchase price of the Partnership's properties and may be in the form of
purchase money obligations to the sellers of properties or in the form of loans
from banks, institutional investors and other lenders, which indebtedness may be
secured by mortgages or other interests in the property owned by the Partnership
(including "wrap-around" or "all-inclusive" mortgages to the extent provided in
Paragraph H(9) of this Article X) and may involve final or interim principal
payments substantially greater than the regular monthly payments. The
Partnership may also from time to time borrow additional funds for the purchase
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of property, which indebtedness may be secured by the general assets of the
Partnership.
H. General Restrictions.
1. The Partnership shall obtain a written evaluation report
specifying an Appraised Value signed by an independent appraiser prior to the
purchase of any property by the Partnership and shall not purchase any such
property if the purchase price and all Acquisition Fees paid by the Partnership
in connection with the acquisition exceed the Appraised Value set forth in such
report. All such appraisals, whether or not the property which is the subject of
such appraisal is purchased by the Partnership, shall be at the Partnership's
expense or at the expense of the seller, shall be retained for five years and
shall be available for inspection and duplication by the Limited Partners upon
reasonable notice to the Partnership for a purpose reasonably related to their
interest as limited partners in the Partnership.
2. The Partnership may not sell any property in a transaction in
which an Affiliate of the General Partner acts as a real estate broker unless
the provisions of Paragraph G(4) of this Article X are complied with.
3. The Partnership shall not own any land where the buildings and
improvements thereon are owned by an Affiliate of a General Partner unless (i)
such Affiliate is a public program formed for the purpose of investing in real
estate, (ii) the terms of such transaction are at least as favorable as the
terms of any comparable transactions made on an arm's length basis and known to
the General Partner, and (iii) payments to the General Partner and its
Affiliates for services rendered in a capacity other than that as General
Partner may only be made upon a determination that (a) the compensation is not
in excess of the compensation paid to them by third parties for any comparable
services and (b) the compensation is not greater than the charges for comparable
services available from others who are competent and not affiliated with any of
the parties involved and the Partnership has obtained a letter of opinion of a
qualified Independent Advisor to such effect prior to effecting such
transaction.
4. The Partnership shall not give an Affiliate of a General Partner
the exclusive right to sell property for the Partnership.
5. The aggregate borrowings of the Partnership shall not exceed 80%
of the purchase price of all properties purchased by the Partnership on a
combined basis. The foregoing restriction may be waived or lessened by the
General Partner without the approval of the Limited Partners, but only with the
prior written consent of the Commissioner of Corporations of the State of
California or pursuant to a change in the published Rules of the Commissioner.
In no event, however, shall the aggregate borrowings of the Partnership exceed
the sum of 85% of the
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purchase price of all properties which have not been refinanced and 85% of the
aggregate fair market value of all refinanced properties.
6. Except as set forth in paragraph G(7) of this Article X, all
expenses of the Partnership shall be billed directly to and paid by the
Partnership.
7. Except as disclosed in the Prospectus, the General Partner shall
not receive from the Partnership a rebate or give up or participate in any
reciprocal business arrangement which would enable them or any Affiliate of the
General Partner to receive such rebate or give-up or to circumvent any
restrictions contained herein upon dealings with Affiliates.
8. The Partnership funds shall not be commingled with the funds of
any other Person.
9. The Partnership shall not finance the purchase of property by use
of a wraparound note and mortgage ("all-inclusive" note and deed of trust)
unless (a) the General Partner and any Affiliate of the General Partner receives
interest on the amount of the underlying encumbrance in excess of that payable
to the lender on such underlying encumbrance, (b) the Partnership receives
credit on its obligation under the all-inclusive note for payments made directly
on the underlying encumbrance and (c) all payments on the underlying encumbrance
shall be made by the Partnership or, in the alternative, payments by the
Partnership on the wrap-around note are made to a third party collecting agent
which in turn disburses such payment, first to the holder of such underlying
encumbrance, and thereafter to the holder of the wrap-around note.
10. The Partnership shall not create or assume any indebtedness for
borrowed money unless the documents pursuant to which such indebtedness is
created or assumed provide, and the General Partner shall cause any and all such
documents assumed or entered into by or on behalf of the Partnership to provide,
that the parties thereto other than the Partnership (including any Affiliates of
the General Partner) shall look only to the assets of the Partnership for
satisfaction of the liabilities and obligations of the Partnership under such
documents (including without limitation those arising from representations,
warranties, covenants and agreements made in or in connection with such
documents) and that such other parties shall have no recourse to the Partners or
the separate assets of the Partners for the satisfaction of such liabilities and
obligations. The Partnership shall not incur any indebtedness wherein the lender
will have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profit, capital or property of the Partnership other
than as a creditor.
11. The Partnership shall not enter into any contracts with the
General Partner or with any Affiliates of the General Partner to construct or
develop Partnership properties or to
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render any services in connection with such construction or development.
12. The Partnership shall not acquire any property which is under
construction unless completion of the improvements on the property is guaranteed
at the contracted price by an adequate completion bond or other satisfactory
arrangement.
13. Unimproved or non-income producing property shall not be
acquired except in amounts and upon terms which can be financed by Distributable
Cash From Operations.
14. No Partnership assets may be invested in junior mortgages or
deeds of trust; provided, however, that the acquisition of a junior mortgage or
deed of trust in connection with the sale, financing or refinancing of real
property shall not be deemed to be investing in junior mortgages or deeds of
trust.
15. Any agreement entered into between the Partnership and the
General Partner or its Affiliates, other than a mortgage with a program
sponsored by W.P. Carey & Co., Inc. or an Affiliate of W.P. Carey & Co., Inc.
under which such General Partner or its Affiliates are compensated for the
provision of goods or services to the Partnership, must be terminable by the
Partnership, without penalty, upon 60 days' notice and any such agreement must
be embodied in a written contract which precisely describes the services to be
rendered and all compensation to be paid and which agreement shall be fully
disclosed in the Prospectus and no such agreement shall be permitted unless the
General Partner or such Affiliate has been previously engaged in the business of
rendering such services or selling or leasing such goods independently of the
Partnership and as an ordinary and ongoing business and unless the cost to the
Partnership does not exceed the lesser of the cost of such goods or 90% of the
cost to the Partnership of any other Person who is rendering comparable services
or selling or leasing comparable goods which could reasonably be made available
to the Partnership and the agreement is on competitive terms. If the General
Partner or such Affiliate purchases goods or materials from an independent third
party which are used by the Partnership, the General Partner or Affiliate may be
reimbursed at its cost. "Cost", as that term is used in this paragraph, includes
the price of goods and materials paid to independent third parties and direct
costs incurred by the General Partner or Affiliate providing the service,
including overhead directly attributable to the transaction but excluding
general or administrative overhead (which term includes but is not limited to
salaries, rent, travel expenses and other items generally falling under the
category of overhead). Agreements with the General Partner and its Affiliates
for other than administrative services and other than leases and mortgages may
be modified only by a vote of the majority of Limited Partners.
16. Neither the General Partner nor its Affiliates may acquire stock
or other interests in, or warrants or other rights
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to purchase the stock of or other interests in, any tenant of the Partnership or
the parent or controlling person of any tenant unless such securities are (i)
received as payment of an Acquisition Fee for services provided in connection
with the acquisition of the property occupied by such tenant (subject to the
limitation included in the definition of "Acquisition Fees") or (ii) available
to the general public.
I. Compensation of General Partner. The General Partner shall not,
in its capacity as General Partner, receive any salary, fees, profits or
distributions from the Partnership except profits, distributions, fees and
allocations to which they may be entitled under Articles VIII, IX and X.
J. Other Business of Partners. Except as otherwise specifically
provided herein, any of the Partners and any shareholder, officer, director,
employee or other Person holding a legal or beneficial interest in an entity
which is a Partner may engage in or possess an interest in other business
ventures of every nature and description, independently or with others,
including, but not limited to, the ownership, financing, leasing, operation,
management, syndication, brokerage and development of real, personal or mixed
property and neither the Partnership nor the Partners shall have any right by
virtue of this Agreement in and to such independent ventures or to the income or
profits derived therefrom.
ARTICLE XI
STATUS OF LIMITED PARTNERS AND SPECIAL PARTNERS
The Limited Partners and Special Partners shall not participate in
the management or control of the Partnership's business nor shall they transact
any business for the Partnership nor shall they have the power to sign for or
bind the Partnership, said powers being vested solely and exclusively in the
General Partner. Except as described herein and in the Act, Limited Partners and
Special Partners have no liability in excess of their obligation to make
contributions to the Partnership and their share of the Partnership's assets and
undistributed profits. The Partnership Interest owned by a Limited Partner or
Special Partner shall be fully paid and nonassessable except as described herein
and in the Act.
In addition to those described elsewhere in this Agreement, the
Limited Partners and Special Partners shall have the following rights, powers,
privileges, duties and liabilities:
(a) The Limited Partners and Special Partners shall have the right
to have full and true information of all things affecting the Partnership and
shall be entitled to such reports as are set forth in Article XII hereof for a
purpose reasonably related to such Partner's interest as a partner in the
Partnership.
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(b) The Limited Partners and Special Partners shall receive from the
Partnership the share of the distributions provided for in this Agreement in the
manner and at the times provided for in this Agreement.
(c) A Limited Partner or a Special Partner shall have the right to
demand the return of his Capital Account only on the dissolution and winding up
of the Partnership in accordance with Article XVIII hereof. No Limited Partner
shall have priority over any other Limited Partner either as to the return of
capital or as to profits, losses or distributions. No Limited Partner or Special
Partner shall have the right to bring an action for partition against the
Partnership.
(d) Limited Partners holding more than 50% of the outstanding
Limited Partner Interests may (1) remove the General Partner and (2) in the
event that a vacancy shall occur in the office of General Partner, continue the
business of the Partnership and elect a successor General Partner upon the
withdrawal, removal, death, adjudication of incompetence to manage his person or
his property, adjudication of bankruptcy under Chapter 7 of the Federal
Bankruptcy Code (or any similar law or provision enacted in lieu thereof),
assignment by the General Partner of all of the General Partner's Interest or
other cessation to exist as a General Partner under the Act.
(e) Upon written request to the Partnership for a purpose reasonably
related to such Partner's interest as a partner in the Partnership, each Limited
Partner and Special Partner shall have the right to be mailed, at such Partner's
expense, a complete list of names and addresses and interests of all Limited
Partners as set forth in the books and records of the Partnership, copies of the
Certificate of Limited Partnership and all amendments thereto and copies of this
Agreement and all amendments thereto and powers of attorney pursuant to which
this Agreement was executed. A reasonable charge for copy work may be charged by
the Partnership.
ARTICLE XII
BOOKS OF ACCOUNT AND REPORTS
Proper books of account shall be kept by the General Partner wherein
shall be entered all transactions, matters and things relating to the
Partnership's business as are usually entered into books of account kept by
Persons engaged in a business of a like character. The books of account shall be
kept at the principal place of business of the Partnership and each Partner (or
any duly constituted designee of a Partner) shall at all times during reasonable
business hours have free access to and the right to inspect and copy the same
for a purpose reasonably related to such Partner's interest as a partner in the
Partnership. The Partnership shall also maintain the following: a current
alphabetical list of the Partners' names, addresses, Contributions and Capital
Accounts; copies of the Certificate of
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Limited Partnership and all amendments thereto; copies of the Partnership's
Federal, state and local income tax or information returns and reports for the
six most recent tax years; copies of this Agreement and all amendments thereto
and powers of attorney pursuant to which this Agreement was executed and the
Partnership's financial statements for the six most recent fiscal years.
There shall be established for each Partner on the books and records
of the Partnership a Capital Account which shall be maintained in accordance
with Federal income tax accounting principles and which shall show the amount of
each capital contribution made by such Partner (or his, her or its predecessor
in the case of an assignment of a Partnership Interest), adjusted to reflect
such Partner's proportion of profits and losses (determined according to Article
VIII) and of withdrawals and distributions and other items to the extent
properly creditable to or chargeable against such Capital Account.
Within 75 days after the end of each Fiscal Year, the General
Partner shall deliver to each Limited Partner adequate information to enable
each Limited Partner to complete and file his Federal tax return.
Copies of each report distributed to the Limited Partners shall, to
the extent required by applicable law, be filed concurrently with relevant state
"Blue Sky" authorities. If the Partnership engages an Independent Advisor who is
not the Independent Advisor engaged to render a current fairness opinion or the
fairness opinion preceding it, the General Partner shall inform the Limited
Partners (by no later than the next annual report) of the date when such new
Independent Advisor was engaged, and whether there were any disagreements with
the former Independent Advisor on any matters of valuation, assumptions,
methodology, accounting principles and practice, or disclosure, which
disagreements, if not resolved to the satisfaction of the former Independent
Advisor, would have caused him to make reference, in connection with the
fairness opinion, to the subject matter of the disagreement or decline to give
an opinion.
ARTICLE XIII
FISCAL YEAR
The Fiscal Year of the Partnership shall begin on the first day of
January and end on the thirty-first day of December in each year. Should the
General Partner decide to change the Fiscal Year of the Partnership, it will
seek to obtain any required approvals from the Internal Revenue Service for such
change. If such approval is obtained (or not then required), the General Partner
will give prompt notice to the Limited Partners of the change in Fiscal Year.
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ARTICLE XIV
PARTNERSHIP FUNDS
The funds of the Partnership shall be deposited in such account or
accounts as shall be designated by the General Partner and all withdrawals
against such accounts shall be made only by the General Partner or by its
properly delegated agents.
ARTICLE XV
TRANSFER OF PARTNERSHIP INTEREST
A. In General. A Limited Partner or Special Partner may not sell,
assign, transfer or otherwise dispose of, or pledge, hypothecate or in any
manner encumber, his interest in the Partnership or any part thereof except as
permitted in this Article, and any act in violation of this Paragraph A shall
not be binding upon or recognized by the Partnership regardless of whether the
General Partner shall have knowledge thereof.
B. General Partner.
1. Upon the vote of Limited Partners holding more than fifty percent
(50%) of the then outstanding Limited Partner Interests pursuant to Paragraph
(d) of Article XI and with the same proportionate vote as provided therein, may
remove a General Partner from the Partnership. Written notice of the removal of
such General Partner shall be served upon the General Partner either by
certified or by registered mail, return receipt requested, or by personal
service. Said notice shall set forth the day upon which the removal is to become
effective. Upon receipt of notice, the General Partner shall cause an accounting
to be prepared covering the transactions of the Partnership since the end of the
previous Fiscal Year and, it shall not thereafter sell or dispose of or allow
the sale or disposition of any Partnership asset unless such sale or disposition
was the subject of a contract entered into by and binding upon the Partnership
prior to the date upon which the notice was received by the General Partner.
2. Until the dissolution of the Partnership otherwise occurs, the
General Partner shall not voluntarily take any steps to dissolve itself nor
shall the General Partner voluntarily withdraw; provided, however, that nothing
in this Agreement shall be deemed to prevent the merger or reorganization of
Carey Diversified LLC into or with any other entity organized under the laws of
the United States or any state thereof or the transfer of all the limited
liability company interests of Carey Diversified LLC and the assumption of the
rights and duties of the General Partner by, in the case of a merger,
reorganization or consolidation, the surviving entity by operation of law
provided that the surviving entity shall be admitted to the Partnership
immediately prior to such event and such successor shall continue
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the business of the Partnership as the General Partner without dissolution.
3. Upon the removal, adjudication of bankruptcy under Chapter 7 of
the Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof), assignment by the General Partner of its General Partner's Interest
(other than by operation of law as a result of a merger or reorganization
permitted by Paragraph B(2) of this Article XV) or other cessation to exist as
the General Partner under the Act, the General Partner's Partnership Interest
and interest in Distributable Cash From Operations and its interest in Cash From
Sales and Cash From Financings shall be purchased by the Partnership for a
purchase price equal to the fair market value thereof determined pursuant to the
provisions of Section 4 of this Paragraph B. The purchase price of such interest
shall be paid by the Partnership to the General Partner by the promissory note
of the Partnership, payable to the General Partner or its order, having a face
amount equal to such purchase price, containing provisions as would be usual and
customary in a commercial promissory note, bearing interest at a rate per annum
equal to the lesser of 1% above the prime interest rate at The Bank of New York
or the maximum rate permitted by law, payable annually in equal installments of
principal and interest over a period of no less than five years from the date of
the General Partner's removal, adjudication of bankruptcy under Chapter 7 of the
Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof), assignment by the General Partner of its General Partner's Partnership
Interest (other than by operation of law as a result of a merger or
reorganization permitted by Paragraph (2) of this Article XV) or other cessation
to exist as a General Partner under the Act. The Partnership shall also pay to
the General Partner all amounts then accrued and owing to the General Partner.
4. The fair market value of the General Partner's Partnership
Interest purchased by the Partnership pursuant to Section 3 of this Paragraph B
shall be determined by agreement between the General Partner and the Partnership
(which agreement shall require the approval of the Limited Partners holding more
than fifty percent (50%) of the outstanding Limited Partner Interests, with the
same proportionate vote as provided in paragraph (d) of Article XI. If the
General Partner and the Partnership cannot agree upon the fair market value of
such Partnership Interest within 30 days after the occurrence of the event upon
which such interest of the General Partner is to be purchased by the
Partnership, the fair market value thereof shall be determined by arbitration in
accordance with the then current rules of the American Arbitration Association.
The results of such arbitration shall be final and binding and may be enforced
by legal proceedings. The expense of arbitration shall be borne equally by the
General Partner and the Partnership. The fair market value of the General
Partner's Partnership Interest shall be the amount the General Partner would
receive upon dissolution and termination of the Partnership assuming that such
dissolution or termination occurred on the date of the occurrence of the
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event upon which such Partnership Interest of the General Partner is to be
purchased by the Partnership and the assets were sold for their then fair market
value without any compulsion on the part of the Partnership to sell such assets.
C. Limited Partners and Special Partners.
1. The General Partner may, pursuant to this Article XV, (a) admit
as a substituted Limited Partner or Special Partner any successor in interest to
a Limited Partner or Special Partner either deceased or under legal disability,
and (b) admit as substituted Limited Partners or Special Partners assignees of
Limited Partners or Special Partners.
2. A substituted Limited Partner or Special Partner is a Person
admitted to all the rights of a Limited Partner or Special Partner. An assignee
is a Person to whom a Limited Partner or Special Partner has assigned his
interest in the Partnership but who has not become a substituted Limited Partner
or Special Partner. An assignee shall have no right to require any information
or account of the Partnership's transactions or to inspect the Partnership's
books and records but shall only be entitled to receive the share of the
profits, or the return of the capital contribution, to which his assignor would
otherwise be entitled as set forth in Section 5 of this Paragraph C.
3. No assignee of the whole or any portion of a Limited Partner's or
Special Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner or Special Partner in place of his assignor unless
all of the following conditions are satisfied:
(a) The duly executed written instrument of assignment setting forth
the intention of the assignor that the assignee become a substituted Limited
Partner or Special Partner in his place shall have been filed with the
Partnership;
(b) The interests in the Partnership being acquired by the assignee
shall consist of at least five percent of the limited partner or special partner
interest (two percent of the limited partner or special partner interest for an
Individual Retirement Account) and, if the assignor shall retain any limited
partner interest, such retention shall consist of at least five percent of the
limited partner or special partner interests (two percent of the limited partner
or special partner interests for an Individual Retirement Account);
(c) The assignor and assignee shall execute and acknowledge such
other instruments as the General Partner may deem necessary or desirable to
effect such assignment and admission, including the written acceptance and
adoption by the assignee of the provisions of this Agreement and his execution,
acknowledgment and delivery to the General Partner of a Power of Attorney, the
form and content of which are more fully described in Article XIX hereof; and
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(d) The assignee shall pay a transfer fee not to exceed $50.00 per
transaction to the Partnership. The written consent of the General Partner to
such substitution or a notice of denial of consent shall be given to the
assignee not later than the last day of the calendar month following the month
the General Partner actually receives the instrument of assignment.
4. Any Person admitted to the Partnership as a Partner shall be
subject to all of the provisions of this Agreement as if originally a party to
it.
5. Subject to the provisions of Section 11 of this Paragraph C,
compliance with the suitability standards imposed by the Partnership, applicable
"Blue Sky" laws and the applicable rules of any other governmental authority, a
Limited Partner or Special Partner shall have the right to assign the whole or
any portion of its limited partner or special partner interest (but not less
than five percent of the limited partner or special partner interests (two
percent of the limited partner interests for an Individual Retirement Account))
and, if he shall retain any limited partner or special partner interest, subject
to his retaining not less than five percent of the limited partner or special
partner interests (two percent of the limited partner or special partner
interests for an Individual Retirement Account) of his Partnership Interest by a
written assignment the terms of which are not in contravention of any of the
provisions of this Agreement, which assignment has been executed by the assignor
and received by the Partnership and recorded on the books and records thereof.
Any assignment in contravention of any of the provisions of this Section 5 shall
be of no force and effect and shall not be binding upon or recognized by the
Partnership.
(a) Except as provided in Subsection (e) below, Paragraph A of
Article VIII hereof and Paragraph D of Article IX hereof, an assignee of a
Partnership Interest shall be entitled to receive distributions from the
Partnership of Distributable Cash From Operations for any quarter attributable
to the interest acquired by reason of such assignment beginning in the Fiscal
Quarter in which the assignee is recognized as the owner of such Partnership
Interest. For purposes of such distribution, ownership of a Partnership Interest
for each Fiscal Quarter will be determined as of the fifteenth day of the last
month of each Fiscal Quarter.
(b) Except as provided in Subsection (e) below, Paragraph A of
Article VIII hereof and Article IX hereof, an assignee of a Partnership Interest
shall be entitled to receive distributions from the Partnership of Cash From
Sales and Cash From Financings beginning in the month in which the assignee is
recognized as the owner of such Partnership Interest. For purposes of such
distributions, ownership of a Partnership Interest for each month will be
determined as of the fifteenth day of each month.
(c) The net profits and net losses attributable to an interest in
the Partnership assigned during any year shall be
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divided among and allocated in accordance with the provisions of Paragraph A of
Article VIII hereof.
(d) The effective date of an assignment of an interest in the
Partnership as used in this Section shall be the day on which the written
instrument of assignment, in form and substance satisfactory to the General
Partner, is accepted by the General Partner.
(e) Notwithstanding the other provisions of this Article XV and
subject to the limitations of Article X(F), both the Partnership and the General
Partner shall be entitled to treat the assignor of such interest as the absolute
owner thereof in all respects, and shall incur no liability for distributions
made in good faith to him, until such time as the written assignment has been
received by, and recorded in the books and records of, the Partnership.
6. The General Partner may elect to treat an assignee who has not
become a substituted Limited Partner or Special Partner as a substituted Limited
Partner or Special Partner in the place of his assignor should the General
Partner deem, in its absolute discretion, that such treatment is in the best
interests of the Partnership for any of its purposes or for any of the purposes
of this Agreement.
7. No approval of any of the Limited Partners or Special Partners is
required to effect the substitution of a Limited Partner or Special Partner,
except that a Limited Partner or Special Partner who assigns his interest in the
Partnership must evidence his intention that his assignee be admitted as a
substituted Limited Partner or Special Partner in his place and must execute
such instruments as the General Partner may in its absolute discretion determine
to be necessary or desirable in connection therewith.
8. Upon the admission of a Limited Partner or Special Partner
(whether as a result of his purchase of limited partner interest from the
Partnership or his admission as a substituted Limited Partner or Special
Partner), the General Partner shall make an appropriate entry on the books and
records of the Partnership.
9. Upon the death or adjudication of incompetence to manage his
person or his property of an individual Limited Partner or Special Partner, his
personal representative shall have all of the rights of a Limited Partner or
Special Partner for the purpose of settling or managing his estate, and such
power as the decedent or incompetent possessed to constitute a successor as an
assignee of its interest in the Partnership and to join with such assignee in
making application to substitute such assignee as a Limited Partner or Special
Partner. However, such personal representative shall not have the right to
become a substituted Limited Partner or Special Partner in the place of his
predecessor in interest unless the conditions of Section 3 of
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this Paragraph C (other than the requirement that the assignor execute and
acknowledge instruments) are first satisfied.
10. Upon the adjudication of bankruptcy under Chapter 7 of the
Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof) or other cessation to exist as a legal entity of a Limited Partner or
Special Partner not an individual, the authorized representative of such entity
shall have all of the rights of a Limited Partner or Special Partner for the
purpose of effecting the orderly winding up and disposition of the business of
such entity and such power as such entity possessed to constitute a successor as
an assignee of its interest in the Partnership and to join with such assignee in
making application to substitute such assignee as a Limited Partner or Special
Partner. However, such authorized representative shall not have the right to
become a substituted Limited Partner or Special Partner in the place of his
predecessor in interest unless the conditions of Section 3 of this Paragraph C
(other than the requirement that the assignor execute and acknowledge
instruments) are first satisfied.
11. (a) No assignment or transfer of an interest in the Partnership
may be made which would result in Limited Partners or Special Partners and
assignees of Limited Partners or Special Partners owning, directly or
indirectly, individually or in the aggregate, more than twenty percent (20%) of
the equity interests of a General Partner or any Affiliate of a General Partner
as defined in Section 1504(a) of the Code. If any such assignment or transfer
would otherwise be made by bequest, inheritance or operation of law, the
transferee shall not become a Partner and the interest in the Partnership
transferred shall be automatically redeemed by the Partnership in the same
manner as provided in Subsection (b)(4) of this Section 11.
(b) Anything to the contrary contained herein notwithstanding:
(1) Except in the case of the Merger, in any twelve (12) consecutive
month period no assignment or transfer of a limited partner interest may be made
if as a result thereof the aggregate total of limited partner interests assigned
and/or transferred in such period would exceed forty percent (40%) of the
outstanding limited partner interests. This limitation is hereinafter referred
to as the "forty percent (40%) limitation."
(2) A Limited Partner may assign or transfer his Partnership
Interest to: (i) his spouse (unless legally separated), child or ancestor, or
(ii) a corporation, partnership, trust or other entity, fifty-one percent (51%)
of the equity interest of which is owned by such Limited Partner and/or any of
the Persons specified in clause (i) so related to such Limited Partner,
provided, however, that such transfers are subject to the forty percent (40%)
limitation.
(3) Subsection (b)(1) of this Section 11 shall not apply to a
transfer by gift, bequest or inheritance, or a
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transfer to the Partnership and, for purposes of the forty percent (40%)
limitation, any such transfer shall not be treated as such.
(4) If, after the forty percent (40%) limitation is reached in any
consecutive twelve (12) month period, a transfer of a Partnership Interest would
otherwise take place by operation of law (but not including any transfer
referred to in Subsection (b)(3) of this Section 11), then the transferee shall
not become a Limited Partner and such Partnership Interest shall be
automatically redeemed by the Partnership for a price equal to the fair market
value of said interest on such date of transfer. The price shall be paid within
ninety (90) days after the date of the transfer and redemption. If the
Partnership and the transferor do not agree upon the fair market value of the
Partnership Interest, the purchase price shall be determined by arbitration. The
purchase price shall be paid in cash within ten (10) days after such
determination.
(c) No transfer or assignment of any limited partner interest shall
be made if it would result in the Partnership's being treated as an association
taxable as a corporation for tax purposes. The General Partner, in its sole
discretion, may, on behalf of the Partnership, impose any restrictions on
transfers or assignments of limited partner interests it may deem appropriate to
give effect to the preceding sentence. The General Partner shall incur no
liability to any Limited Partner, prospective investor or assignee for any
action or inaction in connection with the foregoing, provided that the General
Partner acted in good faith and such course of conduct did not constitute
negligence or misconduct of the General Partner.
12. The General Partner will cause the Partnership to make the
election referred to in Section 754 of the Code, and any similar election
provided by state or local law, or any similar provision enacted in lieu
thereof.
13. No Limited Partner or Special Partner shall be entitled to
withdraw from the Partnership except on transfer of all his partner interest
pursuant to this Article XV.
14. Each Limited Partner or Special Partner shall immediately notify
the Partnership of any assignment of any partner interest in the Partnership and
shall provide the name, address and identification number of the assignee.
D. Opinions Regarding Taxation. In the event that the tax status of
the Partnership changes and, notwithstanding any other provision of this
Agreement, the requirement, as a condition to any action proposed to be taken
under this Agreement, that the Partnership be furnished an opinion of counsel
for the Partnership to the effect that the proposed transaction would not result
in the Partnership being treated as an association taxable as a corporation for
federal income tax purposes, shall not be applicable if the Partnership is at
such
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time treated in all material respects as an association taxable as a corporation
for federal income tax purposes.
ARTICLE XVI
MEETINGS AND AMENDMENT OF LIMITED PARTNERSHIP
CERTIFICATE AND AGREEMENT
A. Amendment of Limited Partnership Certificate. The General Partner
shall amend the Certificate of Limited Partnership of the Partnership, and shall
file the same, without additional approval of Limited Partners when, pursuant to
the terms of this Agreement:
1. There is a change in the name of the Partnership;
2. The General Partner withdraws, is removed, is adjudicated
bankrupt under Chapter 7 of the Federal Bankruptcy Code (or any similar law or
provision enacted in lieu thereof), assigns its General Partner's Interest, is
adjudicated incompetent to manage his person or his property or dies or
otherwise ceases to exist as a General Partner under the Act or a Person is
admitted as a General Partner;
3. There is a false or erroneous statement in the Certificate;
4. The Partners desire to make a change in any other statement in
the Certificate in order that it shall be accurate; or
5. There is a change in the address of the Partnership's principal
place of business or registered office, or a change in the name or address of
the Partnership's registered agent.
If the General Partner is required to file a certificate of
amendment and fails after demand to do so within 30 days of such demand or if it
refuses to do so, any other Person who is adversely affected by such failure or
refusal, may petition the Court of Chancery in the State of Delaware to direct
the execution of the certificate.
B. Amendments to the Agreement.
1. Amendments to this Agreement may be proposed by the General
Partner or by Limited Partners Shares holding ten percent (10%) or more of the
then outstanding Limited Partner Interests, with the same proportionate vote as
provided in paragraph (d) of Article XI. Following such proposal, the General
Partner shall submit to the Limited Partners a verbatim statement of any
proposed amendment and an opinion of counsel, who may be counsel to the
Partnership, as to the legality of such amendment and the effect of such
amendment on the liability of Limited
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Partners for the debts of the Partnership. The General Partner shall include in
any such submission the General Partner's recommendations as to the proposed
amendment. The amendment shall become effective only upon the written approval
or affirmative vote of Limited Partners holding more than fifty percent (50%) of
the then outstanding Limited Partner Interests, with the same proportionate vote
as provided in paragraph (d) of Article XI.
2. Any provision to the contrary herein notwithstanding, the General
Partner may, without the approval of the Limited Partners, make the following
amendments to this Agreement:
a. Any amendments to Article VIII and/or Article IX of this
Agreement if the Partnership is advised by its accountants or legal counsel at
any time that the allocations provided in those Articles are not likely to be
respected for Federal income tax purposes, either because of the promulgation of
Treasury Regulations under Section 704 of the Code or other developments in the
law. The General Partner is empowered to amend such provisions to the minimum
extent necessary in accordance with the advice of the accountants and counsel to
effect the allocations provided in this Agreement. New allocations made by the
General Partner in reliance upon the advice of the accountants or counsel
described above shall be deemed to be made pursuant to the fiduciary obligation
(as described herein) of the General Partner to the Partnership and the Limited
Partners, and no such new allocation shall give rise to any claim or cause of
action by any Limited Partner, provided that the General Partner acted in good
faith; and
b. In the event that the State of Delaware amends the Delaware
Revised Uniform Limited Partnership Act in any manner and, as a result of such
amendment, counsel to the Partnership is unable to give the Partnership an
opinion to the effect that the Partnership will be treated as a partnership for
Federal income tax purposes and not as association taxable a corporation, then
the General Partner may decide in its sole discretion to reconstitute the
Partnership under the laws of another state.
3. Any provision to the contrary contained herein notwithstanding,
the General Partner may, without the approval of the Limited Partners, amend
this Agreement (a) to add to the representations, duties or obligations of a
General Partner or to surrender any right or power granted to a General Partner
herein, for the benefit of the Limited Partners, (b) to cure any ambiguity, to
correct or supplement any provision herein which may be inconsistent with any
other provision herein or to make any other provision with respect to matters or
questions arising under this Agreement which will not be inconsistent with the
provisions of this Agreement, (c) to delete any provision from this Agreement or
to add any provision to this Agreement required to be so deleted or added by the
Staff of the Securities and Exchange Commission or by a State "Blue Sky"
Commissioner or similar such official, which addition or deletion is deemed by
such Commission or official to be for the benefit or protection
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of the Limited Partners, and (d) to change administrative or other provisions of
this Agreement in a manner which, in the opinion of the General Partner, will
permit the most profitable and/or efficient operation of the Partnership;
provided, however, that no amendment shall be adopted pursuant to this Section 3
unless the adoption thereof (i) is for the benefit of, or not adverse to, the
interests of the Limited Partners, (ii) is consistent with Article IV and
Paragraph A of Article X hereof, (iii) does not affect the distribution of
Distributable Cash From Operations, Cash From Sales or Cash From Financings or
the allocation of profits and losses among the Limited Partners or between the
Limited Partners and the General Partner and (iv) does not affect the limited
liability of the Limited Partners or the status of the Partnership as a
partnership for Federal income tax purposes.
4. Upon amendment of this Agreement, the Certificate of Limited
Partnership shall also be amended if necessary to reflect such change.
5. Any amendment to this Agreement which modifies the compensation
or distributions to which a General Partner is entitled or which affects the
duties of a General Partner must be consented to by such General Partner before
becoming effective.
6. In the event there is a change in the Federal income tax laws or
regulations which results in the Partnership being taxed as an association
taxable as a corporation, the General Partner may take all steps necessary to
cause the Partnership to conduct its business so as to be treated as a real
estate investment trust for Federal income tax purposes, provided, however, that
Limited Partners, holding more than fifty percent (50%) of the then outstanding
Limited Partner interests, with the same proportionate vote as provided in
paragraph (d) of Article XI, approve such action either prior to or within six
months after such action is taken.
C. Meetings of the Partnership. Meetings of the Partnership may be
called by the General Partner and shall be called by it upon the written request
of Limited Partners holding ten percent (10%) or more of the then outstanding
Limited Partner Interests, with the same proportionate vote as provided in
paragraph (d) of Article XI. Upon receipt of such a written request, stating the
purpose of the proposed meeting, the General Partner shall provide each Partner,
within 10 days of such request, written notice (either by personal service or
certified mail or by express or other overnight delivery service) of a meeting
and the purpose of such meeting. Such meeting shall be held not less than 15
days nor more than 60 days after the receipt of such request at a time and place
convenient to the Limited Partners as specified in the written notice of the
meeting. Included with the notice shall be a detailed statement of the action
proposed, including a verbatim statement of the wording of any resolution
proposed for adoption by the Limited Partners and of any proposed amendment to
this Agreement. The Partnership will provide for Proxies or written approvals
which
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specify a choice between approval and disapproval of each matter to be acted
upon at the meeting. Holders of a majority of the limited partner interests
entitled to vote, represented in person or by Proxy, shall constitute a quorum
at a meeting of the Limited Partners. The General Partner may establish a record
date for any meeting.
ARTICLE XVII
TERM
The term for the Partnership shall terminate on December 31, 2050,
unless the Partnership is sooner dissolved pursuant to the provisions of Article
XVIII hereof or as otherwise provided by law.
ARTICLE XVIII
DISSOLUTION
A. Events Requiring Dissolution. The Partnership shall be dissolved
upon the happening of any of the following events:
1. The withdrawal, removal, adjudication of bankruptcy under Chapter
7 of the Federal Bankruptcy Code (or any similar law or provision enacted in
lieu thereof) of the General Partner, the assignment by the General Partner of
its General Partner's Interest (other than by operation of law as a result of a
merger or reorganization permitted by Paragraph B(2) of Article XV) or other
cessation to exist as a General Partner under the Act unless within 90 days of
such event all remaining Partners agree in writing to continue the business of
the Partnership and to admit one or more General Partner effective as of the
date of such event.
2. The Partnership is adjudicated bankrupt under Chapter 7 of the
Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof).
3. The vote of Limited Partners, holding more than fifty percent
(50%) of the then outstanding limited partner interests held by all Limited
Partners, with the same proportionate vote as provided in paragraph (d) of
Article XI.
4. The disposition of all interests in the real, personal and mixed
property and other assets of the Partnership.
5. The entry of a decree of judicial dissolution under Section
17-802 of the Act.
6. December 31, 2050.
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B. Distributions on Dissolution. Upon the dissolution of the
Partnership the General Partner who has not wrongfully dissolved the Partnership
shall wind up the affairs of the Partnership. If there is no such General
Partner, a majority of Limited Partners shall elect a party to wind up the
affairs of the Partnership. The party winding up the affairs of the Partnership
shall take full account of the Partnership assets and liabilities and all assets
shall be liquidated as promptly as is consistent with obtaining the fair value
thereof, and the proceeds therefrom shall be applied and distributed in the
following order: (1) to creditors (including Partners who are creditors to the
extent permitted by law), in satisfaction of liabilities of the Partnership
(whether by payment or by the making of reasonable provision for the payment
thereof), in the order of priority as provided by law, (2) to the Partners in
accordance with their respective Capital Accounts, determined after the
application of Articles VIII and IX hereof and (3) to the Partners in accordance
with the provisions of Paragraph E of Article IX hereof. Notwithstanding
anything to the contrary, in the event the Partnership is "liquidated" within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), liquidating
distributions shall be made pursuant to the previous sentence by the end of the
taxable year in which the Partnership is liquidated, or, if later, within 90
days after the date of such liquidation. Distributions pursuant to the preceding
sentence may be made to a trust for the purposes of an orderly liquidation of
the Partnership by the trust in accordance with the Act.
C. Contributions by the General Partner. In the event that, upon the
liquidation of the Partnership, a General Partner shall have a negative balance
in such General Partner's Capital Account then such General Partner shall
contribute to the capital of the Partnership an amount equal to such negative
balance in such General Partner's Capital Account.
ARTICLE XIX
POWER OF ATTORNEY
Each Limited Partner and Special Partner hereby constitutes and
appoints the General Partner as the attorney-in-fact for such Limited Partner or
Special Partner with power and authority to act in his name and on his behalf in
the execution, acknowledgment and filing of documents, which will include but
not be limited to a Certificate of Limited Partnership, as well as amendments
thereto, under the laws of the State of Delaware and under the laws of any other
state in which the General Partner deems it advisable to file such a
certificate; this Agreement and any amendments hereto, any other instrument
which may be required to be filed by the Partnership under the laws of any state
or by any governmental agency, or which the General Partner deems it advisable
to file; and any documents which may be required to effect the continuation of
the Partnership, the admission of an additional or substituted Limited Partner,
Special Partner or General Partner or the dissolution and
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termination of the Partnership, provided such continuation, admission or
dissolution and termination are in accordance with the terms of this Agreement.
The Power of Attorney so granted by each Limited Partner and Special
Partner to the General Partner is a Special Power of Attorney coupled with an
interest, is irrevocable and shall survive and not be affected by the subsequent
death, incapacity or disability of the Limited Partner or Special Partner; may
be exercised by the General Partner for each Limited Partner or Special Partner
by a facsimile signature of one of its officers or with a single signature of
one of its officers acting as attorney-in-fact for all of them; shall be
retained by the General Partner; and shall survive the delivery of any
assignment by a Limited Partner or Special Partner of the whole or any portion
of his interest in the Partnership; except that where the assignee thereof has
been approved by the General Partner for admission to the Partnership as a
substituted Limited Partner or Special Partner, the Power of Attorney shall
survive the delivery of such assignment for the sole purpose of enabling the
General Partner to execute, acknowledge and file any instrument necessary to
effect such substitution.
The Power of Attorney so granted by each Limited Partner to the
General Partner shall not authorize the General Partner to act on behalf of
Limited Partners in any situation in which this Agreement requires the approval
of Limited Partners unless such approval is obtained.
ARTICLE XX
LITIGATION
The General Partner is hereby authorized to prosecute, defend,
settle or compromise actions or claims at law or in equity at the Partnership's
expense as may be necessary or proper to enforce or protect the Partnership's
interests. The General Partner shall satisfy any judgment, decree or decision of
any court, board or authority having jurisdiction or any settlement of any suit
or claim prior to judgment or final decision thereon first, out of any insurance
proceeds available therefor, next out of the Partnership's assets and income and
finally out of the assets and income of the General Partner.
ARTICLE XXI
MISCELLANEOUS
All notices under this Agreement shall be in writing and shall,
except as otherwise expressly provided herein, be given to the Partner entitled
thereto by personal service or by certified or registered mail or express mail
or other overnight delivery service, return receipt requested, to the address
set
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forth in the books and records of the Partnership for such Partner or at such
other address as he may specify in writing.
Article titles or captions contained in this Agreement are inserted
only as a matter of convenience and for reference and in no way define, limit,
extend or describe the scope of this Agreement or the intent of any provision
hereof.
Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural, and the masculine
gender shall include the feminine and neuter genders and the word persons shall
include individuals, corporations, firms, partnerships, trusts or other forms of
associations.
This Agreement may be executed in several counterparts, and all so
executed shall constitute one agreement, binding on all of the parties hereto,
notwithstanding that all the parties are not signatory to the original or the
same counterpart.
Subject to the provisions of Article XV, the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and assigns of the respective Partners.
Whenever the vote of the Limited Partners is referred to in this
Agreement, the General Partner may vote on behalf of such Limited Partners who
have by written proxy authorized the General Partner so to do.
This Agreement and all amendments hereof shall be governed by the
laws of the State of Delaware.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their
respective hands as of the day and year first above written.
GENERAL PARTNER:
CAREY DIVERSIFIED LLC
By:_________________________________________
CORPORATE SPECIAL PARTNER:
CAREY MANAGEMENT LLC
By:_________________________________________
INDIVIDUAL SPECIAL PARTNER:
____________________________________________
William Polk Carey
LIMITED PARTNERS:
CAREY DIVERSIFIED LLC
By: ________________________________________
NINTH CAREY CORPORATE PROPERTY, INC.
By: ________________________________________
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All Limited Partners now and hereafter admitted as
limited partners of the Partnership pursuant to
powers of attorney and authorizations now and
hereafter executed in favor of and granted and
delivered to the General Partner
By: CAREY DIVERSIFIED LLC,
General Partner
By:______________________________________
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