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Exhibit 10.4
AGREEMENT OF LIMITED PARTNERSHIP
OF
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
2
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
INDEX
Page
1. Name and Place of Business.................................. A-1
2. Definitions................................................. A-2
3. Purpose..................................................... A-10
4. Term........................................................ A-10
5. General Partners............................................ A-10
6. Limited Partners............................................ A-11
7. Partnership Capital......................................... A-12
8. Liability of Limited Partners............................... A-12
9. Compensation to the General Partners and
their Affiliates............................................ A-13
10. Partnership Expenses........................................ A-16
11. Allocation of Income and Loss and Distributions............. A-18
12. Transferability of Units.................................... A-24
13. Books, Records, Accountings and Reports..................... A-27
14. Rights, Authority, Powers, Responsibilities
and Duties of the Managing General Partner................. A-29
15. Rights and Powers of the Limited Partners................... A-42
16. Removal, Bankruptcy or Dissolution of a
General Partner and Transfer of a General
Partner's Interest.......................................... A-45
17. Certain Transactions........................................ A-46
18. Termination and Dissolution of the Partnership.............. A-47
19. Special Power of Attorney................................... A-48
20. Liability and Indemnification............................... A-50
21. Miscellaneous............................................... A-51
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
AGREEMENT OF LIMITED PARTNERSHIP
AGREEMENT of LIMITED PARTNERSHIP ("Partnership Agreement") entered
into as of the_____ day of __________________, 1994, by and among Captec
Franchise Capital Corporation III, a Michigan corporation (the "Managing General
Partner") and Patrick L. Beach (the "Individual General Partner"), as General
Partners and Patrick L. Beach as the Initial Limited Partner (the "Initial
Limited Partner"), with offices at 24 Frank Lloyd Wright Drive, P.O. Box 544,
Ann Arbor, Michigan 48106-0544, and Patrick L. Beach, as the Initial Limited
Partner, with offices at 24 Frank Lloyd Wright Drive, P.O. Box 544, Ann Arbor,
Michigan 48106-0544.
WHEREAS, the Managing General Partner, the Individual General Partner
and the Initial Limited Partner formed a limited partnership under the laws of
the State of Delaware on February 18, 1994 by filing a Certificate of Limited
Partnership (the "Certificate") with the Delaware Secretary of State to be
governed by this Partnership Agreement;
NOW, THEREFORE, in consideration of mutual promises made herein, the
parties hereto hereby agree as follows:
1. NAME AND PLACE OF BUSINESS
The name of the limited partnership to be governed hereby is Captec
Franchise Capital Partners L.P. III (the "Partnership"). Its registered office
in Delaware is The Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801. The Partnership's registered agent at that address is The
Corporation Trust Company. The Managing General Partner shall have full power
and authority to change the Partnership's registered office or registered agent.
The Partnership's principal place of business is 24 Frank Lloyd Wright Drive,
P.O. Box 544, Ann Arbor, Michigan 48106-0544, or such other place as the
Managing General Partner may hereafter determine. The General Partners shall
from time to time execute or cause to be executed the Certificate and all such
certificates (including limited partnership and fictitious name certificates) or
other documents or cause to be done all such filing, recording, publishing or
other acts as may be necessary or appropriate to comply with the requirements
for the formation and the operation of a limited partnership under the laws of
the State of Delaware and for the purpose of establishing and protecting the
limited liability of the Limited Partners, under the laws of any other
jurisdiction in which the Partnership may conduct business.
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2. DEFINITIONS
The following terms used in this Partnership Agreement shall (unless
otherwise expressly provided herein or unless the context otherwise requires)
have the following respective meanings:
"Acquisition Expenses" shall mean expenses, including but not limited
to credit reports, escrow fees, appraisal reports, attorneys' fees and title
insurance, accountants' fees and miscellaneous expenses, and travel and
communication expenses related to selection and acquisition of investments,
whether or not acquired.
"Acquisition Fees" shall mean the total of all fees and commissions
paid by any Person to any Person, including the General Partners and their
Affiliates in connection with the selection, evaluation, acquisition,
construction, and/or development of, Property or Equipment by the Partnership,
whether or not acquired, including but not limited to, real estate commissions,
selection fees, finder's fees, Development Fees, nonrecurring management fees,
consulting fees, payments for covenants not to compete, guarantee fees,
financing fees or other similar fees or commissions, however designated and
however treated for tax or accounting purposes, or any fees of a similar nature,
however designated. As used herein, "Development Fee" shall mean a fee for
packaging of a Partnership's property, including negotiating and approving
plans, and undertaking to assist in obtaining zoning and necessary variances and
necessary financing for the specific property, either initially or at a later
date.
"Act" shall mean the Securities Act of 1933, as amended.
"Additional Closing Date" shall mean each date between the Initial
Closing Date and the Final Closing Date on which a closing for Units sold
pursuant to the Prospectus occurs.
"Adjusted Investment" shall mean the Original Contributions
attributable to a Unit, reduced by the total amount of Net Sale or Refinancing
Proceeds distributed.
"Adjusted Net Asset Value" shall mean the book value of all Assets
minus all liabilities of the Partnership.
"Affiliate" of a Person shall mean: (i) any Person directly or
indirectly controlling, controlled by or under common control with another
Person; (ii) any Person owning or controlling 10% or more of the outstanding
voting securities of such other Person; (iii) any officer, director, trustee, or
partner of such Person; and (iv) if such other Person is an officer, director or
partner, any company for which such Person acts in any such capacity.
Notwithstanding the foregoing, the term Affiliate shall not apply to any Person
who shall serve solely as an independent director,
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trustee or partner of the General Partners or of an Affiliate of the General
Partners nor shall a partner in a partnership or joint venture with (a) the
Partnership or (b) an Affiliate of the General Partners, shall be deemed an
Affiliate of the General Partners solely by virtue of such relationship.
"Appraised Value" shall mean the value of any real property according
to an appraisal made by an independent qualified appraiser who is a member in
good standing of the American Institute of Real Estate Appraisers (an MAI
appraiser).
"Assets" means collectively all Partnership Properties and
Equipment.
"Capital Account" shall mean, with respect to any Partner, the
Capital Account maintained for such Partner in accordance with the following
provisions:
(i) to each Partner's Capital Account there shall be
credited such Partner's Original Contribution, such Partner's
distributive share of Income, and any items in the nature of income
or gain that are specifically allocated to such Partner, and the
amount of any Partnership liabilities that are assumed by such
Partner or that are secured by any Partnership property distributed
to such Partner.
(ii) to each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any
Partnership property distributed to such Partner pursuant to any
provision of this Partnership Agreement, such Partner's distributive
share of losses, and any items in the nature of expenses or losses
that are specifically allocated to such Partner, and the amount of
any liabilities of such Partner that are assumed by the Partnership
or that are secured by any property contributed by such Partner to
the Partnership.
In the event any interest in the Partnership is transferred in
accordance with the terms of this Partnership Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest. In the event the Gross Asset Values of Partnership assets
are adjusted pursuant hereto, the Capital Accounts of all Partners shall be
adjusted simultaneously to reflect the aggregate net adjustment.
The foregoing provisions and the other provisions of this Partnership
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulation Section 1.704-1(b), and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the Managing
General Partner shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits
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thereto, are computed in order to comply with such Regulations, the Managing
General Partner may make such modification. The Managing General Partner shall
adjust the amounts debited or credited to Capital Accounts with respect to (a)
any property contributed to the Partnership or distributed to the Partners; and
(b) any liabilities that are secured by such contributed or distributed property
or are assumed by the Partnership or the Partners in the event the Managing
General Partner shall determine such adjustments are necessary or appropriate
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv). The Managing General
Partner also shall make any appropriate modifications in the event unanticipated
events might otherwise cause this Partnership Agreement not to comply with
Treasury Regulations Section 1.704-1(b).
"Capital Contribution" shall mean the Original Contribution.
"Cash Flow" means, with respect to any period, all cash receipts
derived from payments of all forms of income on Assets held by the Partnership
including all rents from and other revenues paid in connection with Partnership
Assets (as distinguished from Original Contributions and exclusive of any Net
Sale or Refinancing Proceeds), without deduction for depreciation, plus amounts,
if any, from reserves attributable to such cash receipts with respect to any
prior period, if no longer deemed necessary for Partnership operations, less
cash receipts used to pay operating expenses and to repurchase any Units or set
aside from such cash receipts by the Managing General Partner for working
capital reserves.
"Certificate" shall mean the Certificate of Limited Partnership of
Captec Franchise Capital Partners L.P. III as filed with the Secretary of State
of the State of Delaware, and all amendments thereto.
"Closing Date" shall mean each date designated by the General
Partners on which subscribers for Units are admitted as Limited Partners as a
result of purchases occurring during the offering period.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent revenue laws.
"Current Preferred Return" shall mean a cumulative, non-compounded
return equal to ten percent (10%) per annum on a Limited Partner's Adjusted
Investment, calculated to commence on the first day of the month following the
month in which the Limited Partner is admitted to the Partnership as a Limited
Partner.
"Delaware Act" shall mean the Delaware Revised Uniform Limited
Partnership Act as in effect and as it may be amended.
"Depreciation" shall mean, for each fiscal year or other
period, an amount equal to the depreciation, amortization, or other
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cost recovery deduction allowable with respect to an asset for such year or
other period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis.
"Disposition" shall mean any Partnership transaction with respect to
Property or Equipment not in the ordinary course of its business including,
without limitation, sales, exchanges, or other dispositions of Property or
Equipment held by the Partnership, and recoveries of damage awards and insurance
proceeds with respect to Property or Equipment.
"Distributions" shall mean any cash or other property distributed to
the Limited Partners and the General Partners arising from their interests in
the Partnership, but shall not include any payments to the Managing General
Partner under the provisions of Sections 9 or 10.
"Equipment" shall mean any equipment acquired for lease by the
Partnership, whether directly or indirectly through a nominee, agent,
partnership, trust, joint venture or otherwise, but does not include leases.
"Final Closing Date" shall mean the date on which the last closing
for Units sold pursuant to the Prospectus occurs.
"Front-End Fees" shall mean fees and expenses paid by any party for
any services rendered in connection with and during the Partnership's
organizational or acquisition phase including Organizational and Offering
Expenses, Acquisition Fees, Acquisition Expenses and any other similar fees.
"Full Payout Lease" shall mean a lease under which the present value
of non-cancelable rental payments payable during the initial term of the lease
is at least sufficient to permit a lessor to recover the purchase price of
equipment.
"General Partners" shall mean Captec Franchise Capital Corporation
III and Patrick L. Beach in their respective capacities as general partners of
the Partnership, or any other Person, corporation or other entity which succeeds
either of them in such capacity, as well as any additional general partners.
"Gross Asset Value" shall mean, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
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(i) The initial Gross Asset Value of any asset contributed
by a Partner to the Partnership shall be the gross fair market value
of such asset, as determined by the contributing Partner and the
Partnership;
(ii) The Gross Asset Values of all Partnership assets shall
be adjusted to equal their respective gross fair market values, as
determined by the Managing General Partner, as of the following
times: (a) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than
the Original Contribution; (b) the distribution by the Partnership to
a Partner of more than a deminimus amount of Partnership property
other than money, unless all Partners receive simultaneous
distributions of undivided interests in the distributed property in
proportion to their interests in the Partnership; and (c) the
termination of the Partnership for federal income tax purposes
pursuant to Code Section 708(b)(1)(B); and
(iii) If the Gross Asset Value of an asset has been de-
termined or adjusted pursuant to subparagraph (i) or sub paragraph
(ii) hereof, such Gross Asset Value shall there after be adjusted by
the Depreciation taken into account with respect to such asset for
purposes of computing taxable income and loss.
"Gross Proceeds" shall mean the total proceeds from the sale of Units
before deductions for Front-End Fees.
"Individual General Partner" shall mean Patrick L. Beach in
his capacity as the individual general partner of the Partnership.
"Initial Closing Date" shall mean the date on which the first closing
for Units sold pursuant to the Prospectus occurs.
"Initial Limited Partner" shall mean Patrick L. Beach in his
capacity as the initial limited partner.
"Investment in Assets" shall mean the amount of Gross Proceeds used
to invest in Property and/or Equipment, including working capital reserves
allocable thereto and other cash payments, but excluding Front-End Fees.
"Limited Partners" shall mean the Initial Limited Partner and any
other Persons who are admitted to the Partnership as additional or substituted
Limited Partners. Reference to a "Limited Partner" shall refer to any one of
them.
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"Limited Partnership Interests" shall mean the ownership interest of
a Partner in the Partnership from time to time, including the right of such
Partner to any and all benefits to which such Partner may be entitled as
provided in this Partnership Agreement and in the Delaware Act, together with
the obligations of such Partner to comply with all the terms and provisions of
this Partnership Agreement and of the Delaware Act.
"Majority Vote" shall mean the affirmative vote of the holders of
more than 50% of the outstanding Units.
"Managing General Partner" shall mean Captec Franchise Capital
Corporation III, or its successors and assigns in its or their capacity as the
managing general partner of the Partnership.
"Minimum Number of Units" shall mean 1,150 Units.
"Net Income or Loss From Annual Operations" shall mean the income or
loss for the Partnership's calendar year computed under the accrual method of
accounting for purposes of the federal income tax (excluding any income or loss
attributable to a Disposition or involuntary conversion of any of the
Partnership Property).
"Net Income or Loss From Other Than Annual Operations" shall mean the
income or loss for the Partnership's calendar year computed under the accrual
method of accounting for purposes of the federal income tax arising from (i) a
Disposition or (ii) any other transaction not included in the determination of
Net Income or Loss From Annual Operations.
"Net Offering Proceeds" shall mean the total Gross Proceeds
less Organizational and Offering Expenses.
"Net Sale or Refinancing Proceeds" shall mean receipts from
Dispositions or refinancing of Partnership Properties or Equipment plus amounts,
if any, from reserves attributable to prior Dispositions if no longer deemed
necessary for Partnership operations, less the following:
(i) the amount paid or to be paid in connection with
or as an expense of such Disposition or refinancing;
(ii) the amount necessary for the payment of all debts and
obligations of the Partnership including, but not limited to, fees to
the Managing General Partner or its Affiliates and amounts, if any,
required to be paid to, arising from or otherwise related to the
particular Disposition or refinancing; and
(iii) any amount set aside by the Managing General Partner
for working capital reserves from such receipts.
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"Organizational and Offering Expenses" shall mean all expenditures
classified as syndication expenses pursuant to Code Section 709 and Treasury
Regulation Section 1.709-2(b), including, but not limited to, all those expenses
incurred in connection with the formation, qualification and registration of the
Partnership and in marketing, distributing and processing Units, including any
selling commissions and discounts under applicable federal and state law, and
any other expenses actually incurred and directly related to the offering and
sale of Units, including such expenses as: (a) fees and expenses paid to
attorneys in connection with the offering, (b) securities jurisdictional fees,
filing fees and taxes, (c) the costs of qualifying, printing, amending, sup-
plementing, mailing and distributing the Partnership's Prospectus including
telephone and telegraphic costs, (d) the costs of qualifying, printing,
amending, supplementing, mailing and distributing sales materials used in
connection with the issuance of Units, including telephone and telegraphic
costs, (e) remuneration of officers and employees of the General Partners and
its Affiliates and the Partnership while directly engaged in marketing,
distributing, processing and establishing records of Units and establishing
records and paying selling commissions, (f) accounting and legal fees and
expenses incurred in connection therewith by the General Partners or its
Affiliates, (g) reimbursements for accountable bona fide costs of due diligence
incurred by participating broker-dealers and (h) the 2% non-accountable expense
allowance payable to the General Partners pursuant to Section 9.1 hereof.
"Original Contribution" shall mean the amount of $1,000 for each
Unit, which amount shall be attributed to such Unit in the hands of subsequent
holders thereof, less the return of any amount of uninvested funds returned
pursuant to Paragraph 11.10 hereof.
"Participating Dealers" shall mean those broker-dealers who
as members of the National Association of Securities Dealers, Inc.
who are participating in the public offering of the Units.
"Partners" shall mean collectively the General Partners and the
Limited Partners, and reference to a "Partner" shall be to any one of the
Partners.
"Partnership" shall mean the limited partnership created under this
Partnership Agreement and any successor thereto.
"Partnership Agreement" shall mean this agreement of limited
Partnership, as amended and restated, and all amendments thereto.
"Partnership List" shall mean an alphabetical list of the names,
addresses and business telephone numbers of the Limited Partners along with the
number of units held by each.
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"Performance Preferred Return" shall mean a cumulative,
non-compounded return equal to eleven percent (11%) per annum on a Limited
Partner's Adjusted Investment, calculated to commence on the first day of the
month following the month in which the Limited Partner is admitted to the
Partnership as a Limited Partner.
"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.
"Property" or "Properties" shall mean the real estate, together with
the buildings improvements, fixtures and Personal property associated therewith
(but excluding Equipment), acquired or to be acquired, by the Partnership.
"Prospectus" shall mean the prospectus contained in the registration
statement filed with the Securities and Exchange Commission for the registration
of the Units under the Securities Act of 1933, as amended, in the final form in
which said prospectus is filed with said Commission and as thereafter
supplemented.
"Purchase Prices" shall mean (i) the invoice price or contract price
at which the Partnership acquired Property and/or Equipment from the
manufacturer or a third party seller, or an amount no greater than the invoice
price or contract price, at which an Affiliate of the Partnership, acquired
Property and/or Equipment. The Purchase Price of Equipment and/or Property shall
include Acquisition Fees (except for purpose of the calculation of such Fees)
and all debt secured by liens and security interests on the Property and/or
Equipment, but shall exclude points and prepaid interest.
"Roll-Up Entity" shall mean a partnership, real estate investment
trust, corporation, trust or other entity that would be created or would survive
after the successful completion of a proposed Roll-Up Transaction.
"Roll-Up Transaction" shall mean any transaction or series of
transactions that directly or indirectly, through acquisition or otherwise,
involve the combination, merger or conversion of the Partnership.
"Qualified Plans" shall mean qualified pension, profit sharing and
other employee retirement benefit plans (including Keogh [H.R. 10] plans) and
trusts, bank commingled trust funds for such plans and individual retirement
accounts.
"Sponsor" shall mean any Person directly or indirectly instrumental
in organizing, wholly or in part, the Partnership or who will manage or
participate in the management of the Partnership and any Affiliate of such
Person, but does not include (i) any Person whose only relationship with the
Partnership or the General Partners is that of an asset manager whose only
compensation from
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the Partnership is as such, and (ii) wholly-independent third parties such as
attorneys, accountants and underwriters whose only compensation from the
Partnership is for professional services rendered in connection with the
offering of Units or the operations of the Partnership. A Person may also be a
Sponsor of the Partnership by: (i) taking the initiative, directly or
indirectly, and founding or organizing the business or enterprise of the
Partnership, either alone or in conjunction with one or more other Persons; (ii)
receiving a material participation in the Partnership in connection with the
founding or organizing of the business of the Partnership, in consideration of
services or property, or both the services and property; (iii) having a
substantial number of relationships and contacts with the Partnership; (iv)
possessing significant rights to control Partnership property; (v) receiving
fees for providing services to the Partnership which are paid on a basis that is
not customary in the industry; and (vi) providing goods or services to the
Partnership on a basis which was not negotiated at arms-length with the
Partnership.
"Substantially All of the Assets" shall mean, unless the context
otherwise dictates, assets representing 66-2/3% or more of the net book value of
all of the Partnership's Assets as of the end of the most recently completed
fiscal quarter.
"Tax-Exempt Entities" shall mean Qualified Plans and other entities
exempt from federal income taxation, such as endowment funds and foundations and
charitable, religious, scientific or educational organizations.
"Termination Date" shall mean one year after the effective date of
the Partnership's Prospectus.
"Unit" shall mean the ownership interest of the Limited
Partners in the Partnership.
3. PURPOSE
The principal purpose of the Partnership is to acquire, hold, lease,
mortgage, operate, sell or otherwise dispose of Properties and Equipment which
will be leased on a "triple net" basis primarily to operators of nationally
franchised fast-food, family style and dinner house restaurants as well as other
franchised service-type businesses, to take any and all actions and to engage in
any other business in which a limited partnership may lawfully engage under the
laws of the state which, in the opinion of the Managing General Partner, are
necessary to maintain and protect its interest therein.
4. TERM
The Partnership was formed as of the day of filing of the
Certificate of the Partnership with the Delaware Secretary of State
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and shall continue until the 31st day of December 2025, unless previously
terminated in accordance with the provisions of this Partnership Agreement.
5. GENERAL PARTNERS
5.1 CAPITAL CONTRIBUTIONS. Captec Franchise Capital Corporation III,
and Patrick L. Beach in their capacities as General Partners, have each
contributed $100 in cash to the Partnership. At all times during the existence
of the Partnership, the General Partners shall have a present and continuing
interest in Net Income or Loss From Other Than Annual Operations and
Distributions according to the provisions of Section 11.
5.2 CAPITAL ACCOUNTS. The Partnership shall establish for each
General Partner a Capital Account (to be maintained in accordance with
appropriate provisions of federal income tax law, including Treasury Regulation
Section 1.704-1(b)). In the event any interest in the Partnership is transferred
in accordance with the terms of this Partnership Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest. In the event the Gross Asset Values of Partnership assets
are adjusted for purposes of computing income or loss, the Capital Accounts of
all General Partners shall be adjusted simultaneously to reflect the aggregate
net adjustment as if the Partnership recognized gain or loss equal to the amount
of such aggregate net adjustment. Loans by any General Partner to the
Partnership shall not be considered contributions to the capital of the
Partnership.
5.3 RESERVES. Since the Partnership's leases will be on a "triple
net" basis, it is not anticipated that a permanent reserve for maintenance and
repairs will be established. However, to the extent the Partnership has
insufficient funds for such purposes, the General Partners will advance to the
Partnership an aggregate amount of up to 1% of the Gross Proceeds for
maintenance and repairs.
6. LIMITED PARTNERS
6.1 INITIAL LIMITED PARTNER. The Initial Limited Partner has
contributed the sum of $100 to the capital of the Partnership and has received
.1 Unit. The .1 Unit of the Initial Limited Partner shall be redeemed
immediately following the admission to the Partnership of any other Limited
Partner in return for the sum of $100 and the Initial Limited Partner shall
withdraw as a Limited Partner.
6.2 CAPITAL ACCOUNTS. The Partnership shall establish for each
Limited Partner a Capital Account (to be maintained in accordance with
appropriate provisions of federal income tax law, including Treasury Regulation
Section 1.704-1(b)). In the event
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any interest in the Partnership is transferred in accordance with the terms of
this Partnership Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred interest. In the
event the Gross Asset Values of Partnership assets are adjusted for purposes of
computing income or loss, the Capital Accounts of all Limited Partners shall be
adjusted simultaneously to reflect the aggregate net adjustment as if the
Partnership recognized gain or loss equal to the amount of such aggregate net
adjustment. Loans by any Limited Partner to the Partnership shall not be
considered contributions to the capital of the Partnership.
6.3 AUTHORIZATION OF SALE OF UNITS. The Partnership is authorized to
issue not more than 20,000 Units (including the .1 Unit held by the Initial
Limited Partner, which .1 Unit shall be available for sale upon withdrawal of
said Initial Limited Partner). The proceeds of such offering shall be
contributed in cash to the capital of the Partnership.
6.4 ESCROW OF ORIGINAL CONTRIBUTIONS AND COMMENCEMENT OF PARTNERSHIP
OPERATIONS. All Original Contributions shall be received by the Partnership in
trust, and shall be deposited in an escrow account in any financial institution
designated by the Managing General Partner as escrow agent for the Original
Contributions. If 1,150 Units (the "Minimum Number of Units") are not sold on
or before one year after the effective date of the Partnership's Prospectus (the
"Termination Date"), all monies held in escrow shall be returned to subscribers
with any interest earned thereon (subject to deductions for back-up withholding,
if applicable). If the Minimum Number of Units is sold by the Termination Date,
all monies held in escrow together with any interest earned thereon will be
distributed promptly by the escrow agent to the Partnership on the Initial
Closing Date, and all selling commissions then due and payable shall be paid to
the participating broker-dealers by the Partnership, as agent for the purchasers
of Units, and the Managing General Partner may, in its sole discretion continue
the offering for a period to end not later than (i) the sale of all Units
offered by the Prospectus or (ii) two years after the effective date of the
Prospectus. After the Initial Closing Date, investors shall be admitted as
Limited Partners on at least a monthly basis. Subscriptions shall be accepted or
rejected by the General Partners within thirty (30) days of their receipt; if
rejected, all funds shall be returned to the investor within ten (10) business
days after rejection. Investors whose subscriptions are accepted by the General
Partners shall be admitted to the Partnership at the time their names are shown
on the books and records of the Partnership as Limited Partners.
6.5 NO ASSESSMENTS OR ADDITIONAL CONTRIBUTIONS. The Units
are non-assessable and no Limited Partner shall be required to make
additional contributions to the capital of the Partnership.
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7. PARTNERSHIP CAPITAL
7.1 WITHDRAWAL OF CAPITAL. No Partner shall have the right to
withdraw, or receive any return of, his Capital Contribution, except as
specifically provided herein. Except as provided in Paragraph 6.1, no Limited
Partner shall have priority over any other Limited Partner, as to the return of
his Capital Contribution or as to profits, losses or distributions.
7.2 RETURN OF CAPITAL. Under circumstances requiring a return of any
Capital Contribution, no Partner shall have the right to receive property other
than cash.
8. LIABILITY OF LIMITED PARTNERS
8.1 NO PERSONAL LIABILITY. Limited Partners shall not be bound by,
or be personally liable for, the expenses, liabilities or obligations of the
Partnership, and no Limited Partner shall be required to lend funds to the
Partnership or to make any further Capital Contribution to the Partnership.
8.2 OBLIGATION TO REFUND PRIOR DISTRIBUTIONS. If the Partnership
does not have sufficient assets to discharge its liabilities, and under the
Delaware Act, Limited Partners are liable to the Partnership for previous
Distributions as determined by court of competent jurisdiction, then
notwithstanding the provisions of this Partnership Agreement, such Limited
Partner shall be required to repay all or any part of such Distributions, such
obligation shall be the obligation of such Limited Partner and not the
obligation of the General Partners.
9. COMPENSATION TO THE GENERAL PARTNERS AND THEIR AFFILIATES
The General Partners and their Affiliates will receive compensation
from the Partnership only as specified by Sections 9, 10, 11, and Paragraphs
14.2.7 and 14.2.8 hereof. Front-End Fees shall be reduced to the extent
necessary to comply with Paragraph 14.6 hereof.
9.1 SECURITIES COMMISSIONS. Participating Dealers, including
Affiliates of the General Partners will receive selling commissions in an amount
equal to 8.0% of the purchase price of all Units placed by them directly.
Additionally, an amount of up to .5% may be paid to prospective Participating
Dealers by the General Partners from amounts received by them for Organizational
and Offering Expenses for accountable expenses incurred in connection with due
diligence activities of such prospective Participating Dealers subject to volume
discounts.
9.2 NON-ACCOUNTABLE EXPENSE ALLOWANCE. The General Partners
and/or their Affiliates shall receive a non-accountable expense
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allowance from the Partnership (the "Non-Accountable Expense Allowance"),
aggregating 2.0% of Gross Proceeds.
9.3 ORGANIZATIONAL AND OFFERING EXPENSES. The Managing General
Partner or an Affiliate shall be reimbursed for all Organizational and Offering
Expenses up to a maximum amount equal to 3.0% of Gross Proceeds, (less amounts
paid directly by the Partnership), excluding selling commissions and the
Non-Accountable Expense Allowance referenced in Paragraph 9.2 hereof, but
including amounts paid to participating dealers as accountable bona fide due
diligence expenses in an amount of up to .5% of Gross Proceeds.
9.4 ACQUISITION FEES AND EXPENSES. The General Partners or an
Affiliate shall be entitled to receive Acquisition Fees equal to the lesser of
(1) 4.0% of Gross Proceeds plus an additional .0624% for each 1% of indebtedness
(calculated as the aggregate amount of Partnership indebtedness secured by
Partnership Assets as a percentage of the aggregate Purchase Prices of such
Assets) incurred in acquiring Properties and/or Equipment, but in no event will
Acquisition Fees exceed 5.0% of the aggregate Purchase Prices of Properties
and/or Equipment; or (2) compensation customarily charged in arm's-length
transactions by others rendering similar services as an on-going activity in the
same geographic location for property or equipment comparable to the Property or
Equipment to be purchased by the Partnership. The General Partners or an
Affiliate will pay all Acquisition Expenses from amounts received as Acquisition
Fees.
9.5 ASSET MANAGEMENT FEES. The Managing General Partner or an
Affiliate shall receive an asset management fee equal to the lesser of
competitive fees for similar services in the same geographic location or 1% of
gross rental revenues from Partnership Properties and Equipment. Such asset
management fee shall be payable on a monthly or quarterly basis as determined by
the Managing General Partner, provided however, that such fees will accrue and
be subordinated to receipt by the Limited Partners of their Current Preferred
Return. Notwithstanding the foregoing, in the event of a default under a triple
net lease which requires the Partnership to assume operations of a Property
and/or Equipment, such operations will be managed by an Affiliate of the General
Partners. In such event, the Affiliate will be entitled to an unsubordinated
management fee equal to 5% of gross revenues generated by the Property and/or
Equipment plus reimbursement for on-site expenses.
9.6 EQUIPMENT LIQUIDATION FEES. The Partnership will pay an
Affiliate for the resale of Equipment an amount equal to three
percent (3%) of the contract sales price of the Equipment.
9.7 REAL ESTATE LIQUIDATION FEES. The Partnership will pay an
Affiliate of the General Partner an amount equal to the lesser of (a) fifty
percent (50%) of the real estate commission
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customarily charged for similar services in the locale of the Property being
sold or (b) three percent (3%) of the gross sales price of a Property. Such fees
will accrue and be subordinated to receipt by the Limited Partners of aggregate
Distributions equal to a 12% per annum cumulative, non-compounded return on
their Adjusted Investment plus aggregate distributions of Net Sale or
Refinancing Proceeds equal to 100% of their Original Contributions.
Notwithstanding anything to the contrary herein, neither the General Partners
nor any of their Affiliates shall have an exclusive listing in connection with
the sale of a Property by the Partnership. There is neither limitation nor
subordination as to any real estate commission paid to entities unaffiliated
with the General Partners.
9.8 PAYMENT OF FEES. Should a General Partner be removed from the
Partnership, any portion of any of the foregoing fees or any other fee or
reimbursement payable under this Partnership Agreement which is then due but not
yet paid, shall be paid by the Partnership to the General Partner or their
Affiliates, as the case may be, in cash within thirty (30) days of the date of
removal as stated in the written notice of removal, unless such amount is
included in the purchase price of the General Partners' interest in the
Partnership as determined under Paragraph 16.3 hereof.
9.9 OTHER GOODS AND SERVICES. In extraordinary circumstances, the
General Partners and their Affiliates may provide other goods and services to
the Partnership if all of the following criteria are met: (i) the goods or
services must be necessary to the prudent operation of the Partnership; (ii) the
compensation, price or fee must be equal to the lesser of 90% of the
compensation, price or fee the Partnership would be required to pay to
unaffiliated parties who are rendering comparable services or selling or leasing
comparable goods on competitive terms in the same geographic location, or 90% of
the compensation, price or fee charged by the General Partners or their
Affiliates for rendering comparable services or selling or leasing comparable
goods on competitive terms; or (iii) if at least 95% of gross revenues
attributable to the business of rendering such services or selling or leasing
such goods are derived from Persons other than Affiliates, the compensation,
price or fee charged by an unaffiliated Person who is rendering comparable
services or selling or leasing comparable goods on competitive terms in the same
geographic location; (iv) the goods and services will be provided pursuant to a
written contract which may be modified in any material respect only by the vote
of a majority in interest of the Limited Partners and shall be terminable
without penalty on 60 days notice; and (v) the General Partners must receive at
least 33% of gross revenues for such goods and services from Persons other than
Affiliates. In addition, any such payment will be subject to the further
limitation described in Paragraph 10.2 below. Extraordinary circumstances shall
be presumed only when in the good faith belief of the General Partners there is
an emergency
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situation requiring immediate action by the General Partners or their Affiliates
and the goods or services are not immediately available from unaffiliated
parties. Services which may be performed in such extraordinary circumstances
include emergency maintenance of Partnership assets, janitorial and other
related services due to strikes or lock-outs, emergency tenant evictions and
repair services which require immediate action.
The Partnership or an Affiliate may provide insurance brokerage
services in connection with obtaining insurance on the Property so long as the
cost of providing such service, including the cost of the insurance, is no
greater than the lowest quote obtained from two unaffiliated insurance agencies
and the coverage and terms are likewise comparable. In no event may such
services be provided by the Partnership or an Affiliate unless they are
independently engaged in the business of providing such services to other than
Affiliates and at least 75% of their insurance brokerage service gross revenue
is derived from other than Affiliates.
The General Partners will not provide construction services to the
Partnership. The Partnership will obtain either a payment and performance bond
or a guaranty of performance for any Property which has not been constructed at
the time the Partnership acquires a particular Property.
9.10 REIMBURSEMENTS. The General Partners also will receive
reimbursement for (i) the actual cost to the General Partners or their
Affiliates of goods and materials used for and by the Partnership if obtained
from unaffiliated parties; and (ii) administrative services (as hereinafter
defined) necessary for the prudent operation of the Partnership. The amounts
charged to the Partnership for services performed pursuant to clause (ii) above
will 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 unaffiliated
parties for comparable services. The Partnership's annual report to the Limited
Partners, will include an itemized breakdown of the services performed and the
amount reimbursed to the General Partners or their Affiliates pursuant to clause
(ii) above, which information shall be verified by the independent public
accountants retained by the Partnership. "Administrative services" for purposes
of this Paragraph 9.10 include only ministerial services such as typing, record
keeping, preparation and dissemination of Partnership reports, preparation and
maintenance of records regarding Limited Partners, preparation and dissemination
of responses to investor inquiries and other communications with investors and
any other record keeping required for Partnership purposes. Notwithstanding the
foregoing, the General Partners and their Affiliates also may be reimbursed for
actual expenses incurred when extraordinary on site action is required.
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10. PARTNERSHIP EXPENSES
10.1 PARTNERSHIP OBLIGATIONS. Except as otherwise
contemplated by Section 9 hereof, the Partnership shall pay
all expenses of the Partnership (which expenses may be billed
directly to the Partnership) which may include, but are not
limited to:
10.1.1 all costs of personnel employed by the Partnership;
10.1.2 all costs of borrowed money, taxes and assessment
on Partnership assets and other taxes applicable to the
Partnership;
10.1.3 except as otherwise provided in Paragraph 15.2.4,
fees and expenses of professionals retained by the
Partnership in connection with any of the foregoing,
including without limitation, attorneys, accountants,
consultants and appraisers;
10.1.4 printing, engraving and other expenses and taxes
incurred in connection with the issuance, distribution,
transfer, registration and recording of documents
evidencing ownership of an interest in the Partnership or
in connection with the business of the Partnership;
10.1.5 fees and expenses paid to independent contractors,
appraisers, mortgage bankers, brokers and servicers,
leasing agents, consultants, on-site managers, real estate
brokers, insurance brokers, consultants and other agents;
10.1.6 expenses in connection with the acquisition,
disposition, alteration, repair, remodeling, refurbishment,
leasing, initial financing, refinancing and operation of
Partnership Properties (including the costs and expenses of
insurance premiums, real estate brokerage and leasing
commissions and of maintenance of such Property as and if
necessary); provided, however, that nothing contained herein
shall be construed to permit payment of construction or
Development Fees to the General Partners or their
Affiliates;
10.1.7 the cost of insurance as required in connection with
the business of the Partnership; provided, however, that
nothing contained herein shall be construed to permit
payment of insurance costs of Affiliates or employees of the
General Partners;
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10.1.8 expenses of organizing, revising, amending,
converting, modifying or terminating the Partnership;
10.1.9 the cost of preparation and dissemination of
the informational material and documentation relating to
Partnership operations;
10.1.10 the cost incurred in connection with any litigation
in which the Partnership is involved, as well as in the
examination, investigation or other proceedings conducted by
any regulatory agency of the Partnership, including legal
and accounting fees incurred in connection therewith;
10.1.11 the cost of any computer equipment or services
used for or by the Partnership; and
10.1.12 the cost of any accounting, statistical or
bookkeeping equipment necessary for the maintenance of
the books and records of the Partnership.
10.2 Notwithstanding anything herein and except as contemplated by
Paragraph 9.3 hereof, to the contrary, neither the General Partners nor their
Affiliates shall be entitled to reimbursement for:
10.2.1 rent or depreciation, utilities, capital
equipment, other administrative items;
10.2.2 services for which the General Partners or
their Affiliates are entitled to be compensated by way
of a separate fee; and
10.2.3 salaries, fringe benefits, travel expenses, and
other administrative items incurred or allocated to any
controlling Persons of the General Partners or their
Affiliates.
10.2.3.1 Controlling Persons, for purposes
of this Paragraph 10.2 includes but is not
limited to any Person, whatever his title,
who performs functions for a General Partner
similar to those of:
10.2.3.1.1 Chairman or
member of the Board of
Directors;
10.2.3.1.2 Executive
Management, such as the
10.2.3.1.2.1 President,
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10.2.3.1.2.2 Vice-President or
Senior Vice-President,
10.2.3.1.2.3 Corporate Secre-
tary;
10.2.3.1.2.4 Treasurer;
10.2.3.1.2.5 Senior Manage-
ment, such as the Vice-President
of an operating division who
reports directly to Executive
Management; or
10.2.3.1.2.6 Those holding 5%
or more equity interest in the
General Partners or a Person
having the power to direct or
cause the direction of the
General Partners, whether
through the ownership of voting
securities, by contract, or
otherwise.
11. ALLOCATION OF INCOME AND LOSS AND DISTRIBUTIONS
11.1 ALLOCATION OF INCOME AND LOSS. The income and loss of the
Partnership for purposes of the federal income tax shall be allocated among the
Partners in accordance with this Paragraph 11.1. For purposes of this Section
11, Limited Partners shall mean and include all Limited Partners, other than the
Initial Limited Partner.
11.1.1 NET INCOME OR LOSS FROM ANNUAL OPERATIONS. Net Income
or Loss From Annual Operations shall be allocated 99% to the
Limited Partners and 1% to the General Partners.
11.1.2 NET INCOME FROM OTHER THAN ANNUAL OPERATIONS. Net Income From
Other Than Annual Operations shall be allocated to the Capital
Accounts of the Partners prior to the distribution of Net Sale or
Refinancing Proceeds and cash from reserves deemed no longer
necessary for Partnership operations as follows:
11.1.2.1 First, Net Income in an amount equal to the
aggregate deficit in the Partners' Capital Accounts, if
any, shall be allocated to each Partner in the same ratio
as the deficit in such Partner's Capital Account bears to
the aggregate of all such Partners' deficit Capital
Accounts;
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11.1.2.2 Second, to and among the Limited Partners until
each Limited Partner's Capital Account balance equals the
sum of his Performance Preferred Return and his Original
Contribution and subtracting from such sum the aggregate
amount of Distributions to each Limited Partner;
11.1.2.3 Third, to the General Partners in such amounts as
are necessary to cause the aggregate Capital Account
balances of the General Partners to be in a percentage
ratio of 10% of all Partnership Capital Account balances
of all Partners;
11.1.2.4 Fourth, to the Limited Partners in such amounts
as are necessary to cause the aggregate Capital Account
balances of the Limited Partners to be in a percentage
ratio of 90% of all Partnership Capital Account balances
of all Partners;
11.1.2.5 Fifth, to the General Partners in an amount
equal to their contributions of capital to the Partner
ship;
11.1.2.6 Thereafter, the balance of the Net Income, if
any, shall be allocated 90% to the Limited Partners and
10% to the General Partners.
11.1.3 NET LOSS FROM OTHER THAN ANNUAL OPERATIONS. Net Loss From
Other Than Annual Operations shall be allocated to the Capital
Accounts of the Partners prior to the distribution of Net Sale or
Refinancing Proceeds and cash from reserves deemed no longer
necessary for Partnership operations as follows:
11.1.3.1 First, to the Partners having positive Capital
Accounts in proportion to and to the extent of their
positive Capital Account balances, until all positive
Capital Account balances shall be reduced to zero;
11.1.3.2 Second, the balance of such losses shall be
allocated to those Partners bearing the ultimate risk of
law related to such losses in accordance with Treasury
Regulations promulgated pursuant to Code Section 704.
11.1.4 UNEXPECTED ALLOCATIONS. In the event any Partner unexpectedly
receives any adjustments, allocations, or distributions described in
Treasury Regulation Section 1.704- 1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d) (5), or 1.704- 1(b)(2)(ii)(d)(6), which causes
or increases a deficit balance in such Partner's Capital Account
shall be specially allocated items of income and gain in an amount
and manner
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sufficient to eliminate such deficit balance as quickly as
possible.
11.1.5. MINIMUM GAIN. Notwithstanding the foregoing, if there is a
net decrease in the Partnership's "minimum gain" (as defined in
Section 1.704-1(b)(4)(iv)(c) of the Regulations) during a Partnership
taxable year, all Partners with deficit Capital Account balances,
following an adjustment for items described in Section 1.704-
1(b)(4)(iv)(e) at the end of such year, will be allocated, before any
other allocation is made under Code Section 704(b), items of income
and gain for such years (and, if necessary, subsequent years) in the
amount and in the proportions needed to eliminate such deficits as
quickly as possible. Such allocation shall be interpreted in a manner
to conform with Section 1.704-1(b)(4)(iv) of the Regulations.
11.2 APPORTIONMENT OF INCOME AND LOSS. That portion of Net Income and
Loss From Annual Operations allocated to the Limited Partners shall be
apportioned among the Limited Partners in the ratio for any calendar month in
which the number of Units owned by each Limited Partner on the last day of such
calendar month bears to the total number of Units owned by all Limited Partners
as of that date, without regard to Capital Accounts. With respect to any
calendar month during which a Closing Date occurs, investors who purchase Units
on or prior to the last day of such month will be treated as having owned the
Units as of the last day of such month. Net Income and Loss From Annual
Operations will be apportioned monthly in the ratio of Limited Partnership
Interests owned as of the last day of such month. To the extent that any
discrepancies in Capital Accounts (as determined on a per Unit basis) arise
among the Limited Partners during the offering period, then, in the sole
discretion of the Managing General Partner, allocations of Net Income and Loss
From Annual Operations and/or Distributions shall first be made at the close of
the offering period or as soon as possible thereafter so as to equalize the
Capital Accounts of each Limited Partner on a per Unit basis, with any excess
allocated in the manner described herein.
11.3 COMPLIANCE WITH ALLOCATION LAWS. It is the intent of the
Partners that each Partner's distributive share of income, gain, loss,
deduction, or credit (or item thereof) shall be determined and allocated in
accordance with this Section 11 to the fullest extent permitted by Section
704(b) of the Code. In order to preserve and protect the determinations and
allocations provided for in this Section 11, the Managing General Partner is
authorized and directed to allocate income, gain, loss, deduction, or credit (or
any item thereof) arising in any year differently than otherwise provided for in
this Section 11 to the extent that allocating income, gain, loss, deduction, or
credit (or any item thereof) in the manner provided for in this Section 11 would
cause the determinations and allocations of each Partner's distributive
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share of such items not to be permitted by Section 704(b) of the Code and
Treasury Regulations promulgated thereunder. Any allocation made pursuant to
this Paragraph 11.3 shall be deemed to be a complete substitute for any
allocation otherwise provided for in this Section 11 and no amendment of this
Partnership Agreement or approval of any Partner shall be required.
In making any allocation (the "New Allocation") under this Paragraph
11.3, the Managing General Partner is authorized to act only after having been
advised by counsel to the Partnership that, under Section 704(b) of the Code and
the Treasury Regulations thereunder (i) the New Allocation is necessary, and
(ii) the New Allocation is the minimum modification of the allocations otherwise
provided for in this Section 11 necessary in order to assure that, either in the
then current year or in any preceding year, each Partner's distributive share of
income, gain, loss, deduction, or credit (or any item thereof) is determined and
allocated in accordance with this Section 11 to the fullest extent permitted by
Section 704(b) of the Code and the Treasury Regulations thereunder.
If the Managing General Partner is required by this Paragraph 11.3 to
make any New Allocation in a manner less favorable to the Limited Partners than
is otherwise provided for in Section 11, then the Managing General Partner is
authorized and directed, insofar as he is permitted to do so by Code Section
704(b), to allocate income, gain, loss, deduction or credit (or any item
thereof) arising in later years in such manner so as to bring the proportion of
income, gain, loss, deduction, or credit (or any item thereof) allocated to the
Limited Partners as nearly as possible to the proportion otherwise contemplated
by this Section 11.
11.4 TAX ALLOCATION: CODE SECTION 704(c). In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value.
In the event the Gross Asset Value of any Partnership property is
adjusted, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value in
the same manner as under Code Section 704(c) and the Treasury Regulations
thereunder.
In the event of a combined taxable disposition of property pursuant
to which gain is to be allocated under this Paragraph 11.4 and other property
the gain from which is not allocated under this
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Paragraph 11.4, the gain to be allocated under this Paragraph 11.4 in any
calendar year shall bear the same relationship to the total gain to be
recognized in such year as the total gain to be allocated under this Paragraph
11.4 from the disposition of the properties bears to the total gain to be
allocated from the disposition of the properties.
Any elections or other decisions relating to such allocations shall
be made by the Managing General Partner in any manner that reasonably reflects
the purpose and intention of this Partnership Agreement. Allocations pursuant to
this Paragraph 11.4 are solely for purposes of federal, state and local taxes
and shall not affect, or in any way be taken into account in computing, any
Partner's capital account or share of Income, Losses, other items or
distributions pursuant to any provision of this Partnership Agreement.
11.5 DISTRIBUTIONS OF CASH FLOW. Distributions of Cash Flow shall be
apportioned 99% to the Limited Partners and 1% to the General Partners,
provided, however, in each calendar year, to the extent distributions of Cash
Flow to the Limited Partners are insufficient to provide them with their Current
Preferred Return, then the General Partners' distribution amounts will be paid
over to the Limited Partners and will accrue and be payable to the General
Partners in a subsequent year after Limited Partners have received distributions
of Cash Flow in an amount equal to their Current Preferred Return, or if there
are insufficient distributions of Cash Flow, then the General Partners' accrued
amount shall be deemed to be fees owed to the General Partners for purposes of
determining Net Sale or Refinancing Proceeds. Such distributions of Cash Flow
will be apportioned quarterly among the Limited Partners of record as of a
record date declared within thirty (30) days after the end of each quarter and
will be paid no less frequently than quarterly. Cash Flow shall not be
reinvested in Properties or Equipment.
11.6 NET SALE OR REFINANCING PROCEEDS AND RESERVES. Distributions of
Net Sale or Refinancing Proceeds shall be apportioned among the Limited Partners
in the same manner as Cash Flow and will be distributed 90% to the Limited
Partners and 10% to the General Partners; provided, however, that the General
Partners' 10% of Net Sale or Refinancing Proceeds shall be subordinated to
receipt by the Limited Partners of Distributions from all sources in an amount
equal to their Performance Preferred Return plus aggregate distributions of Net
Sale or Refinancing Proceeds in an amount equal to Limited Partners' Original
Contributions.
11.7 LIQUIDATING DISTRIBUTIONS. Unless otherwise required by the
Delaware Act, the net cash proceeds of a sale, exchange or other disposition of
all or Substantially All of the Assets of the Partnership constituting a
dissolution of the Partnership shall be distributed in accordance with the
Partners Capital Account bal-
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ances. Notwithstanding anything herein to the contrary, the Partnership shall
not distribute assets in kind.
11.8 GENERAL PARTNERS' INTEREST. In no event will the General
Partners be allocated less than 1% of Net Income or Loss From Annual Operations
for tax purposes. To the extent that the Partnership shall be entitled to any
deduction for federal income tax purposes as a result of any interest in Net
Income, Net Loss and Distributions granted to the General Partners, such
deduction shall be allocated for federal income tax purposes to the General
Partners. As among the General Partners, the allocations of profit and loss and
Distributions of Cash Flow and Net Sale or Refinancing Proceeds, shall be
divided as they may mutually agree from time to time, without the need for
consent of the Limited Partners.
11.9 CONSENT TO ALLOCATION METHOD. The methods hereinabove set forth
by which Distributions and allocations of Net Income and Loss From Annual
Operations and Net Income and Loss From Other Than Annual Operations are made
and apportioned are hereby expressly consented to by each investor as an express
condition to becoming a Partner.
11.10 UNUTILIZED NET PROCEEDS. In the event that any portion of the
Net Proceeds are not invested or committed for investment within the later of
twenty-four (24) months from the date of the Prospectus or twelve (12) months
after the offering has terminated (except for any amounts set aside for
operating expenses or reserves), such portion of the Net Proceeds shall be
distributed to the investors who purchased Units as a return of capital without
reduction for Front-End Fees which would have been payable to the General
Partners or their Affiliates if such funds had been committed to investment. For
purposes of this Paragraph 11.10, funds will be deemed to have been committed to
investment and will not be returned to the extent written agreements in
principle or letters of understanding were at any time executed, regardless of
whether any such investment may or may not be consummated, and to the extent any
funds have been reserved to make contingent payments in connection with any
Asset regardless of whether any such payments may or may not be made.
11.11 ESCHEAT OF DISTRIBUTIONS. If, upon the termination and
dissolution of the Partnership, there remains outstanding on the books of the
Partnership a material amount of Distribution checks which have not been
negotiated for payment by Limited Partner, the Managing General Partner may, if
deemed to be in the best interests of the Partnership, cause such amounts to be
redistributed prorata to Limited Partners of record on such final distribution
date who have previously cashed all of their Distribution checks; provided,
however, that the Partnership shall not be liable for any subsequent claims for
payment of such redistributed Distributions. The Managing General Partner is
not required to make such a redistribution, in which case such amounts will
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eventually escheat to the state or as otherwise required in accordance with
appropriate statutory authority. Notwithstanding the foregoing, unclaimed funds
of Persons who, for purposes of the Partnership's records are Ohio residents,
shall be distributed in accordance with the Ohio unclaimed funds statute in
effect as of the date on which the Partnership shall have unclaimed funds.
11.12 SECTION 709 EXPENSES. Syndication and other non-deductible and
non-amortizable expenses, as defined in Code Section 709, shall be allocated to,
and under the capital account maintenance rules reduce, the Capital Accounts of
the Partners actually incurring such expense.
11.13 WITHHOLDING TAXES. In the event that the Partnership is
required to pay any withholding tax or other liability or obligation to any
state, federal or foreign taxing authority that arises because of any act or
status of any Limited Partner particularly including the status of a Limited
Partner (or the Person owning such Unit), as a foreign Person under the Code,
and such tax or liability attributable to any year is in excess of the
distributions attributable to such Limited Partner for such year, the
Partnership will pay such funds on behalf of such Limited Partner and will treat
such payment as a loan to such Limited Partner which will bear interest at the
prime rate of First National Bank of Chicago payable in full from the next
distribution of Net Sale or Refinancing Proceeds. Each Partner hereby grants the
Partnership a security interest in all Net Sale or Refinancing Proceeds
distributable to such Limited Partner or with respect to such Units in the
amount of the loan discussed in this Paragraph 11.13 and the Partnership shall
have a right of set-off against any such distributions of Net Sale or
Refinancing Proceeds. Any tax required to be withheld with respect to a Limited
Partner will be charged to that Limited Partner's Capital Account as if such tax
had been distributed to such Partner.
12. TRANSFERABILITY OF UNITS
12.1 RESTRICTIONS ON TRANSFERS OF UNITS BY LIMITED PARTNERS. A
Limited Partner may only assign his Units by a duly executed, written instrument
of assignment, the terms of which are not in contravention of any of the
provisions of this Partnership Agreement. The Partnership need not recognize
for any purpose any assignment of the Units of a Limited Partner unless there
shall have been filed with the Partnership and recorded on the Partnership's
books a duly executed and acknowledged counterpart of such written instrument of
assignment, and such instrument evidences the written acceptance by the assignee
of all of the terms and provisions of this Partnership Agreement, represents
that such assignment was made in accordance with all applicable laws and
regulations and in all other respects is satisfactory in form and substance to
the Managing General Partner. Notwithstanding the
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foregoing, no Limited Partner may sell, assign, transfer or
exchange any Units:
12.1.1 if in the opinion of counsel for the Partnership such sale,
assignment, transfer or exchange may result, when considered with all
other sales, assignments, transfers and exchanges of Units in the
Partnership within the previous twelve (12) months, in the
Partnership being considered to have been terminated within the
meaning of Code Section 708 unless the Partnership and the
transferring holder shall have received a ruling by the Service that
the proposed sale or exchange will not cause such termination;
12.1.2 if counsel for the Partnership shall be of the opinion that
such sale, assignment, transfer or exchange would cause a violation
of applicable federal and state securities laws. In connection
therewith, Limited Partners may be required to furnish an opinion of
counsel satisfactory to counsel to the Partnership that such sale,
assignment, transfer or exchange complies with applicable federal and
state securities laws;
12.1.3 if the transferor or the transferee would hold Units
representing an Original Contribution of less than $5,000 unless 100%
of the transferor's Units are being transferred, except for transfers
by gift or inheritance, intra-family transfers, transfers resulting
from family dissolutions and transfers to Affiliates; or
12.1.4 if the Managing General Partner determines in its sole
discretion that such assignment would prevent the Partnership from
being able to satisfy either the 2% or 5% "safe harbors" contained in
Service Advance Notice 88-75 or in corresponding regulations or the
Partnership has received an opinion of counsel or a favorable service
ruling that such transfer would not result in the Partnership being
classified as a "publicly-traded partnership" for federal income tax
purposes.
Any attempted sale, assignment, transfer or exchange in contravention
of the provisions of this Paragraph shall, in the sole discretion of the
Managing General Partner, be voided and deemed ineffectual and shall not bind or
be recognized by the Partnership.
12.2 SPECIAL EXERCISE OF THE RIGHTS OF A LIMITED PARTNER. If a
Limited Partner dies, his executor, administrator or trustee, or, if he is
adjudicated incompetent, his committee, guardian or conservator, or if he
becomes bankrupt, the trustee or receiver of his estate, shall have all the
rights of a Limited Partner for the purpose of settling or managing his estate
and such power as the decedent or incompetent possessed to assign all or any
part of his
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Units and to join with the assignee thereof in satisfying conditions precedent
to such assignee becoming a substituted Limited Partner. The death, dissolution,
adjudication of incompetence or bankruptcy of a Limited Partner shall not
dissolve the Partnership.
12.3 SUBSTITUTED LIMITED PARTNER. No Person shall have the right to
become a substituted Limited Partner in place of his assignor unless all of the
conditions set forth in Paragraph 12.1 are satisfied and:
12.3.1 the Limited Partner and his assignee shall execute and
acknowledge such other instruments as the Managing General Partner
may deem necessary or desirable to effect such substitution,
including (a) the written acceptance and adoption by the assignee of
the provisions of this Partner ship Agreement, as the same may be
amended and his execution, acknowledgment; (b) delivery to the
Managing General Partner of a special power of attorney, the form and
content of which are described herein; and (c) a statement that the
assignee is acquiring the Units for investment purposes only and not
with an intent of further distribution of the Units.
12.3.2 a transfer fee of $100 (which may be increased in the
discretion of the Managing General Partner) shall have been paid to
the Partnership to cover all reasonable expenses connected with such
substitution.
12.4 CONSENT. By executing or adopting this Partnership Agreement,
each Limited Partner hereby consents to the admission of substituted Limited
Partners by the Managing General Partner, in accordance with the foregoing.
12.5 EFFECTIVE DATE; RECORDS. No attempted transfer of Units or
substitution shall be effective, and the Partnership and the Managing General
Partner shall be entitled to treat the assignor of such Units as the absolute
owner thereof in all respects, and shall incur no liability for allocations of
Net Income, Net Loss or Distributions or transmittal of reports and notices
required to be given to Limited Partners hereunder which are made in good faith
to such assignor, until the "effective date", which shall be the first day of
the calendar month following completion (no later than five (5) days prior to
the beginning of such month) of the requirements set forth in Paragraphs 12.1
and 12.3 above. The Managing General Partner shall cause the records of the
Partnership and this Partnership Agreement to be amended to reflect the
admission and/or substitution of substituted Limited Partners as of the first
day of any month following the satisfaction of the conditions set forth in
Paragraph 12.3.
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13. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS
13.1 LOCATION OF RECORDS; COPIES. The Partnership's books and
records, the Partnership Agreement and any amendments thereto and any separate
certificate of limited partnership and any amendments thereto shall be
maintained at the principal office of the Partnership or such other place as the
Managing General Partner may determine and shall be open to inspection and
examination of Limited Partners or their duly authorized representatives at all
reasonable times. The Limited Partners shall receive copies of this Partnership
Agreement and any amendments hereto and the certificate of limited partnership
and any amendments thereto, upon a request in writing to the Managing General
Partner and payment of any necessary duplication fees.
An alphabetical list of the names, addresses, and business telephone
numbers of the Limited Partners along with the number of Units held by each of
them (the "Partnership List") shall be maintained as part of the books and
records of the Partnership and shall be available for inspection by any Limited
Partner or its designated agent at the principal office of the Partnership upon
the request of the Limited Partner. The Partnership List shall be updated at
least quarterly to reflect changes in the information contained therein. A copy
of the Partnership List shall be mailed to any Limited Partner requesting the
Partnership List within ten days after receipt of the request. The copy of the
Partnership List shall be printed in alphabetical order, on white paper, and in
a readily readable type size (in no event smaller than ten-point type). A
reasonable charge for copy work may be charged by the Partnership. The purposes
for which a Limited Partner may request a copy of the Partnership List include,
without limitation, matters relating to the Limited Partner's voting rights
under the Partnership Agreement, and the exercise of the Limited Partner's
rights under federal proxy laws. If the General Partners, or an Affiliate having
charge of the Partnership List, neglect or refuse to exhibit, produce or mail a
copy of the Partnership List as requested, the General Partners or the Affiliate
shall be liable to any Limited Partner requesting the list for the costs,
including attorneys' fees, incurred by that Limited Partner for compelling the
production of the Partnership List, and for actual damages suffered by any
Limited Partner by reason of such refusal or neglect. It shall be a defense that
the actual purpose and reason for the request for inspection or for a copy of
the Partnership List is to secure such list of Limited Partners or other
information for the purpose of selling such list or copies thereof, or of using
the same for a commercial purpose other than in the interest of the applicant as
a Limited Partner relative to the affairs of the Partnership. The Managing
General Partner may require that the Limited Partner requesting the Partnership
List to represent that the Partnership List is not requested for a commercial
purpose unrelated to the Limited Partner's interest in the Partnership. The
remedies provided hereunder to Limited
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Partners requesting copies of the Partnership List are in addition to and shall
not in any way limit, other remedies available to Limited Partners under federal
laws or the laws of any state. The Partnership shall maintain a record of the
information obtained to indicate that a Limited Partner meets the suitability
standards employed in connection with the offer and sale of Units and a
representation that the purchaser is purchasing for his own account, or, in lieu
of such representation, information indicating that the party for whose account
the purchase is made meets such suitability standards.
13.2 REPORTS ON ACQUISITIONS. Within sixty (60) days after the end of
each quarter and until Net Offering Proceeds shall be fully invested, the
Managing General Partner shall cause to be prepared and distributed to each
Person who was a Limited Partner at any time during the quarter then ended, a
special report of all acquisitions describing the terms of such investment, and
the amount of Net Offering Proceeds which then remains unexpended, stated in
terms of both dollar amount and percentage.
13.3 TAX INFORMATION. Within seventy-five (75) days after the end of
each fiscal year, the Managing General Partner shall send to each Person who was
a Limited Partner on the first day of any month during the year then ended, such
tax information as shall be necessary for the preparation by such Person of his
federal income tax return. A reconciliation between generally accepted
accounting principles and income tax information will not be provided to the
Limited Partners, however, such reconciliation will be available in the office
of the Partnership for inspection and review by any interest Limited Partner.
13.4 ANNUAL REPORTS. Within one hundred twenty (120) days after the
end of each fiscal year, the Managing General Partner shall send to each Person
who was a Limited Partner on the last day of the year then ended: (i) audited
financial statements of the Partnership, and (ii) an audited report showing
Distributions per Unit during such year, which report shall separately identify
Distributions from: (a) Cash Flow generated during the year; (b) Cash Flow
generated during prior periods which had been held as re serves; (c) cash from
initial working capital reserves; (d) annual net rental revenues on a per
Property bases; and (e) Net Sale or Refinancing Proceeds. The annual report
shall also include a break-down of the costs reimbursed to the General Partners,
which report shall have been verified by the Partnership's accountants to ensure
that the allocation of costs to the Partnership is appropriate, which
verification shall at a minimum provide for (i) a review of the time records of
individual employees, the cost of whose services were reimbursed; and (ii) a
review of the specific nature of the work performed by each such employee. The
annual report shall also include, at Partnership expense, commencing with the
Partnership's first fiscal year of operations or portion thereof, a statement of
compensation and fees paid by the
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Partnership to the General Partners and their Affiliates, including an itemized
presentation of expense reimbursements to the General Partners and their
Affiliates or any other transactions between the Partnership and the General
Partners or their Affiliates, which information shall be verified by the
independent public accountants retained by the Partnership. The method of
verification shall at a minimum provide: (i) a review of the time records of
individual employees the costs of whose services are reimbursed; and (ii) a
review of the specific nature of the work performed by each such employee during
such year.
13.5 QUARTERLY REPORTS. The Managing General Partner shall prepare,
at Partnership expense, commencing with the first fiscal quarter after the
Initial Closing Date, a quarterly report covering each of the first three
quarterly fiscal year periods of partnership operations in each fiscal year,
unaudited financial statements and containing the information regarding the
Partnership and its activities required by Form 10-Q. Copies of such statements
and other pertinent information shall be distributed to each Limited Partner
within sixty (60) days after the close of the quarterly period covered by the
report of the Partnership.
14. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND DUTIES OF THE
MANAGING GENERAL PARTNER
14.1 SERVICES OF MANAGING GENERAL PARTNER. The Managing General
Partner shall only be responsible for the following services to the
Partnership:
14.1.1 supervising the organization of the Partnership and the
offering and sale of Units;
14.1.2 arranging for (a) the identification of suitable investments
for the Partnership; (b) a review of the significant factors in
deciding whether or not to make a particular investment; and (c) the
making of such final investment decision;
14.1.3 supervising Partnership management, which includes: (a)
establishing policies for the operation of the Partnership; (b)
causing the Partnership's agents or employees to arrange for the
provision of services necessary to the operation of the Partnership
(including any necessary property management, accounting and legal
services and services relating to distributions by the Partnership);
(c) when necessary or appropriate, approving actions to be taken by
the Partnership; (d) providing advice, consultation, analysis and
supervision with respect to the functions of the Partnership in
making or acquiring investments (including compliance with federal,
state and local regulatory requirements and procedures); (e)
executing documents on
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behalf of the Partnership and (f) making all decisions as to
accounting matters; and
14.1.4 approving the terms of Dispositions, including
establishing the terms of, and arranging for, any such transactions.
14.2 POWERS OF MANAGING GENERAL PARTNER. The conduct of the
Partnership's business shall be controlled solely by the Managing General
Partner in accordance with this Partnership Agreement. The Managing General
Partner shall have the fiduciary responsibility for the safekeeping and use of
all funds and assets of the Partnership, whether or not in the Managing General
Partner's possession or control. The Managing General Partner shall have all
authority, rights and powers conferred by law and those required or appropriate
to the management of the Partnership's business which, by way of illustration
but not by way of limitation, shall, subject only to the provisions of Paragraph
14.4 following, include the right, authority and power:
14.2.1 to offer and sell Units to the public directly or through any
Affiliate of the Managing General Partner or any other broker-dealer
who is a member of the National Association of Securities Dealers,
Inc. and is authorized to sell Units and to employ personnel, agents
and dealers for such purpose;
14.2.2 to invest Net Offering Proceeds temporarily prior to
investment in Assets in short-term, highly liquid investments
determined by the Managing General Partner, in its sole discretion,
to have appropriate safety of principal;
14.2.3 to make or purchase Assets or interests therein in its own
name or in the name of a nominee, a trust or otherwise and
temporarily hold title thereto for the purpose of facilitating such
origination or acquisition or for any other purpose related to the
business of the Partnership; provided that in the event of the
acquisition of such Assets by the Partnership from the Managing
General Partner or its Affiliates, (i) the purchase price paid by the
Partnership may not exceed the cost of the Assets to the Affiliated
seller thereof plus all closing costs and Acquisition Fees paid by
the Partnership and (ii) no compensation or other benefit may accrue
to the Managing General Partner or its Affiliates except as otherwise
permitted herein and except that they may be reimbursed for the cost
of carrying the investment; accordingly, all income generated and
expenses associated with Assets so acquired shall be treated as
belonging to the Partnership; in no event shall the Partnership
purchase Assets from the Managing General Partner or its Affiliates
if the Managing General Partner or its Affiliates have held the
Assets for a period in excess of
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twelve (12) months prior to commencement of the Partnership's
offering; furthermore, the General Partners or their Affiliates may
not sell Assets to the Partnership pursuant to this subparagraph if
the cost of the Assets exceeds the funds reasonably anticipated to be
available to the Partnership to purchase the Assets. Notwithstanding
the foregoing, no assets or interests therein may be purchased from
affiliated Programs. As used herein, "Program" shall be defined as: a
limited or general partnership, joint venture, unincorporated
association or similar organization other than a corporation formed
and operated for the primary purpose of investment in and the
operation of or gain from a interest in real property including such
entities formed to make or invest in mortgage loans.
14.2.4 to originate, acquire, hold, lease, exchange, foreclose on,
sell, dispose of and otherwise deal with all or any part of
Partnership Assets (including the grant of easements or servitudes
thereon) in such amounts and upon such terms, including by private
contract or at public sale, as the Managing General Partner deems in
its sole discretion to be in the best interests of the Partnership;
14.2.5 on behalf of the Partnership, to employ Persons in the
operation and management of the business of the Partner ship
including, but not limited to, agents, employees, managers,
accountants, attorneys, consultants and others, on such terms and for
such compensation as the Managing General Partner shall determine,
subject, however, to the limitations with respect thereto as set
forth in Section 9, and provided that agreements with the Managing
General Partner or its Affiliates for the services set forth in
Section 9 shall contain the terms and limitations as to fees and
expenses as set forth in Section 9 and provided further that any of
such agreements shall be terminated immediately upon dissolution of
the Partnership under Paragraph 18.1;
14.2.6 to open accounts and deposit and maintain funds in the name
of the Partnership in banks or savings and loan associations;
14.2.7 to allow the Partnership to borrow money from the General
Partners or their Affiliates on a short-term basis, at any time and
from time to time and in connection there with to pay interest and
other financing charges or fees which shall not exceed the interest
and other financing charges or fees which would be charged by
unrelated lending institutions on comparable loans for the same
purpose. Except as permitted by this Paragraph 14.2.8, the General
Partners and their Affiliates shall be prohibited from providing
financing to the Partnership. Furthermore, on loans made available by
a General Partner or its Affiliates,
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the General Partner and its Affiliates shall not receive interest or
similar charges or fees in excess of those charged by unrelated
lending institutions on comparable loans for the same purpose in the
locality. There shall be no prepayment penalty on any loan by the
General Partners to the Partnership. Nothing herein shall be
construed as prohibiting a bona fide prepayment provision in the
financing agreement. An "all-inclusive" or "wraparound" note and deed
of trust (the "all-inclusive note" herein) may be used to finance the
purchase of property by the Partnership only if the following
conditions are complied with: (i) the General Partners or their
Affiliates under the all-inclusive note shall not receive interest on
the amount of the underlying encumbrance included in the all
inclusive note in excess of that payable to the lender on that
underlying encumbrance; (ii) the Partnership shall receive credit on
its obligation under the all-inclusive note for payments made
directly on the underlying encumbrance; and (iii) a paying agent,
ordinarily a bank, escrow company or savings and loan association,
shall collect payments (other than any initial payment of prepaid
interest or loan points not to be applied to the underlying
encumbrance) on the all-inclusive note and make disbursement
therefrom to the holder of the underlying encumbrance prior to making
any disbursement to the holder of the all-inclusive note, subject to
the requirements of subparagraph (i) above, or, in the alternative,
all payments on the all-inclusive and underlying note shall be made
directly by the Partnership. In no event, however, shall the General
Partners or any of their Affiliates provide permanent financing to
the Partnership for any of the Partnership's Properties.
Additionally, to the extent that the Partnership has insufficient
funds to fund working capital reserves, the General Partners will
advance to the Partnership an aggregate amount of up to 1% of the
offering proceeds for this purpose, with interest and other financing
charges or fees to be paid consistently with the foregoing;
14.2.8 to prepare or cause to be prepared reports, statements and
other relevant information for distribution to the Limited Partners,
including annual and quarterly reports. The Partnership shall, upon
request, provide to the state securities administrator any report or
statement required to be distributed to the Limited Partners;
14.2.9 to require in all Partnership obligations that the General
Partners shall not have any personal liability thereon and that the
Person or entity contracting with the Partnership is to look solely
to the Partnership and its assets for satisfaction, and in the event
that any such obligations have personal liability, the General
Partners may require their satisfaction prior to contracts without
such personal liability; provided, however, that the inclusion of
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the aforesaid provisions shall not materially affect the cost of the
service or material being supplied and all Partnership obligations
are satisfied in accordance with prudent business practices as to
time and manner of payment;
14.2.10 to cause the Partnership to make or revoke any of the
elections permitted by the Code;
14.2.11 to select as its accounting year a calendar year or such
fiscal year as approved by the Internal Revenue Service;
14.2.12 to determine the appropriate accounting method or methods to
be used by the Partnership in maintaining its books and records;
14.2.13 to cause the Partnership to repurchase Units upon request
from a Limited Partner, at 90% of the Adjusted Net Asset Value per
Unit as of the end of the prior fiscal year, to the extent that there
are funds available, commencing not less than one year after the
offering of Units has concluded, in the Managing General Partner's
absolute discretion, but only to the extent that such repurchase will
not impair the capital or the operations of the Partnership;
14.2.14 to assure any Person dealing with the Partnership or the
General Partners that he may rely upon a certificate signed by the
Managing General Partner as authority with respect to: (a) the
identity of the General Partners or any Limited Partners; (b) the
existence or nonexistence of any fact or facts which constitute a
condition precedent to acts by the General Partners or in any other
manner germane to the affairs of the Partnership; (c) the Persons who
are authorized to execute and deliver any instrument or document of
the Partnership; or (d) any act or failure to act by the Partnership
or as to any other matter whatsoever involving the Partnership or any
Partner;
14.2.15 (a) to take such steps as the Managing General Partner
determines are advisable or necessary in order to preserve the tax
status of the Partnership as a pass-through entity for federal income
tax purposes including, without limitation, imposing additional
restrictions on transfers of Units (provided such restrictions on
transfers do not cause the Partnership's assets to be deemed to be
"plan assets" with respect to investors which are Qualified Plans) or
(b) to compel a dissolution and termination of the Partnership or
restructuring of the Partnership's activities to the extent necessary
(i) to comply with any exemption in final plan asset regulations
adopted by the Department of Labor, including, but not limited to,
establishing a fixed percent age of Units permitted to be held by
Qualified Plans or other
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tax-exempt investors or discontinuing sales to such entities after a
given date, in the event that either (A) the assets of the
Partnership constitute "plan assets" for purposes of ERISA or (B) the
transactions contemplated hereunder constitute prohibited
transactions under ERISA or the Code and an exemption for such
transactions is not obtainable from the Department of Labor or (ii)
to obtain a prohibited transaction exemption from the Department of
Labor.
14.2.16 in addition to any amendments otherwise authorized herein,
to amend this Partnership Agreement from time to time without the
approval of the Limited Partners,
(a) to add to the representations, duties or obligations
of the Managing General Partner or its Affiliates or
surrender any right or power granted to the Managing
General Partner or its Affiliates herein, for the benefit
of the Limited Partners;
(b) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with law or
with any other provision herein, or to add any other
provisions with respect to matters or questions arising
under this Partnership Agreement which will not be
inconsistent with law or with the provisions of this
Partnership Agreement;
(c) to delete or add any provision of this Partnership
Agreement required to be so deleted or added by the staff
of the Securities and Exchange Commission or by a state
securities commissioner or similar such official, which
addition or deletion is deemed by such commission or
official to be for the benefit or protection of the
Limited Partners;
(d) to change the name of the Partnership to any lawful
name which it may select;
(e) to reflect the addition or substitution of Limited
Partners or the reduction of capital accounts upon the
return of capital to Partners or to reflect the admission
of additional General Partners (who may be admitted
without the consent of the Limited Partners);
(f) to amend the provisions of Section 11 of this
Partnership Agreement or any other provisions of this
Partnership Agreement if, in the opinion of counsel to the
Partnership and the General Partners, such modification
is necessary to (i) cause the allocations and
Distributions contained in Section 11 to have substantial
economic effect in accordance with the most recently
proposed or final regulations relating to Section
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704 of the Code or any other statutory provision or
regulation relating to such allocations or (ii) cause the
periodic allocations to be respected, such as on a monthly
basis, under Section 706 of the Code or any other statute
or provision or regulation relating to such periodic
allocations or (iii) cause the provisions of this
Partnership Agreement to comply with any applicable
federal legislation enacted after the date of this
Partnership Agreement; provided, however, no such
amendment shall be effected unless, in the opinion of
counsel, such amendment does not adversely affect the
rights or interests of any of the Limited Partners;
(g) to make any amendments that the Managing General
Partner reasonably believes are appropriate to lessen the
possibility that Units would be "plan assets," as that
term is used in ERISA, and to maintain the status of the
Partnership as a pass-through entity for federal income
tax purposes;
(h) to alter the division of profit and loss allocations
among the General Partners and of Distribution rights
among the General Partners in accordance with Paragraph
11.5 hereof; and
(i) to substitute any entity for the Individual General
Partner, provided such substituted General Partner either
(a) in the opinion of counsel to the Partner ship,
complies with Paragraph 14.9 hereof, or (b) has a liquid
net worth of at least 10% of the Adjusted Investments, as
of the date of such substitution or the general partner(s)
of such substituted General Partner (if a partnership) or
the substituted General Partner (if an individual), shall
have a net worth, independent of any investment in the
Partnership of at least 10% of the Adjusted Investments as
of the date of such substitution.
14.2.17 to borrow money from banks and other financial institutions
and for sums so borrowed issue a promissory note (or any other
evidence of indebtedness) as a General Partner of this Partnership,
and secure repayment thereof by pledging, mortgaging or granting a
security interest in all or any part of the Partnership assets. No
such Person loaning money to the Partnership shall be bound to verify
the validity, expediency or propriety of such borrowing.
14.2.18 to execute, acknowledge and deliver any and all instruments
to effectuate all of the foregoing, and to take all such action in
connection therewith as the Managing General Partner shall deem
necessary or appropriate.
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14.3 GENERAL RIGHTS AND POWERS. The General Partners shall, except as
otherwise provided in this Partnership Agreement, have all the rights and powers
and shall be subject to all the restrictions and liabilities of a partner in a
partnership without limited partners.
14.4 LIMITATIONS. Neither the General Partners nor any of
their Affiliates shall have the authority to:
14.4.1 enter into contracts with the Partnership which would bind the
Partnership after the removal, adjudication of bankruptcy or
insolvency of the last remaining General Partner or continue the
business with Partnership assets after the occurrence of such event;
14.4.2 alter the primary purpose of the Partnership as set
forth in Section 3;
14.4.3 cause the Partnership to invest in any Assets through joint
ventures or general partnerships with a publicly registered Affiliate
unless: (a) the affiliated program has investment objectives and
policies substantially identical to those of the Partnership; (b) no
duplicate management fees are paid; (c) the compensation paid to the
Sponsor by the Partnership and the Affiliate is substantially
identical with regard to each program; (d) the Affiliated program
makes its investments on substantially the same terms and conditions
as the Partnership, although the amounts invested do not have to be
comparable; and (e) the Partnership has a right of first refusal to
purchase the investment if the other program wishes to sell the
investment;
14.4.4 cause the Partnership to invest in any Asset with unaffiliated
parties through joint ventures or general partnerships except on
substantially the same terms and conditions (although not
necessarily the same percentage interest) as such unaffiliated
parties; provided, however, that no such investment shall be entered
into by the Partnership (i) if it involves the payment of duplicative
property management or other fees which would have the effect of
circumventing any of the restrictions on and prohibited transactions
involving conflicts of interest contained in this Partnership
Agreement, and (ii) unless the Partnership acquires a controlling
interest in such joint venture or partnership. For purposes of the
above, "controlling interest" means an equity interest possessing the
power to direct or cause the direction of the management and policies
of the partnership or joint venture, including the authority to: (a)
review all contracts entered into by the partnership or joint venture
that will have a material effect on its business or assets; (b) cause
a sale or refinancing of the property or its interest therein subject
in certain cases where required by
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the partnership or joint venture agreement, to limits as to time,
minimum amounts and/or a right of refusal by the joint venture
partner or consent of the joint venture partner; (c) approve budgets
and major capital expenditures, subject to a stated minimum amount;
(d) veto any sale or refinancing of the property, or alternatively,
to receive a specified preference on sale or refinancing proceeds;
and (e) exercise a right of first refusal on any desired sale or
refinancing by the joint venture partner of its interest in the
assets except for the transfer to an Affiliate of the joint venture
partner.
14.4.5 cause the Partnership to exchange Units for Partner
ship Property;
14.4.6 cause the Partnership to invest in limited partner ships,
unless such investment is as a general partner and is substantially
identical to a direct purchase of the underlying property (i.e.,
where the investment includes the purchase of substantially all of
the interests of such partnership) or the investment is in a joint
venture. In both cases such investment must (i) be on terms which
entail the acquisition of a "controlling interest" as defined
elsewhere herein; (ii) prohibit the payment of duplicative fees and
otherwise limit compensation to that permitted by Section 9 hereof;
and (iii) otherwise comply with the limitations on dealings with
Affiliated parties as set forth in this Partnership Agreement;
14.4.7 invest in junior trust deeds or similar obligations, except
that junior trust deeds or similar obligations may be taken back from
purchasers of Properties and/or Equipment in connection with the sale
thereof by the Partnership;
14.4.8 take any action with regard to any property owned through
another entity or partnership which they would not have been
empowered to take had the Partnership owned the property directly;
14.4.9 do any act in contravention of this Partnership Agreement or
which would, in the opinion of the Managing General Partner, make it
impossible to carry on the ordinary business of the Partnership;
14.4.10 perform any act (other than an act required by this
Partnership Agreement or any act taken in good faith reliance upon
counsel's opinion) which would, at the time such act occurred,
subject any Limited Partner to liability as a general partner in any
jurisdiction;
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14.4.11 employ, or permit the employment of, the funds or
assets of the Partnership in any manner except for the exclusive
benefit of the Partnership;
14.4.12 commingle Partnership funds with those of any other
Person or entity;
14.4.13 operate the Partnership in such a manner as to have the
Partnership classified as an "investment company" for purposes of the
Investment Company Act of 1940;
14.4.14 except as specifically provided for in this Partner ship
Agreement, cause the Partnership to invest in or under write the
securities of other issuers for any purposes;
14.4.15 cause the Partnership to invest in real estate contracts of
sale unless such contracts of sale are in record able form and are
appropriately recorded in the chain of title;
14.4.16 cause the Partnership to invest in Property unless it first
obtains an owner's title insurance policy or commitment as to the
condition of title or its equivalent and an appraisal prepared by an
independent MAI appraiser;
14.4.17 cause the Partnership to invest in unimproved real property
(except that such prohibition will not apply to an interest in
unimproved, non-income-producing real estate acquired as part of an
investment so long as such unimproved real property constitutes less
than 10% of Gross Proceeds);
14.4.18 give an exclusive right to sell or exclusive employment to
sell any property for the Partnership to a General Partner or any
Affiliate;
14.4.19 permit receipt by a General Partner or any Affiliate of any
rebates or "give-ups" or permit a General Partner or any Affiliate to
participate in any reciprocal business arrangements which would have
the effect of circumventing any of the provisions of this Partnership
Agreement;
14.4.20 make loans to a General Partner or any Affiliate;
14.4.21 directly or indirectly pay or award any finder's fee,
commission, or other compensation to any Person engaged by a
potential investor for investment advice as an inducement to such
advisor to advise the purchase of Units; provided, however, that this
provision shall not prohibit payment by the Partnership of normal
sales commissions to registered broker-dealers or other properly
licensed Persons (including an Affiliate of a General Partner) in
connection with the offering and sale of Units;
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14.4.22 purchase or lease property from or sell or lease property to
the General Partners or any of their Affiliates except as
contemplated by Paragraphs 14.2.3 and 14.4.3 hereof;
14.4.23 permit the Limited Partners to contract away the
fiduciary duty owed to the Limited Partners under common
law; or
14.4.24 following the termination of the Offering, allow the total
amount of secured indebtedness with respect to a particular Property
or Equipment package to exceed 80% of the Purchase Price thereof. In
no event will such indebtedness exceed an amount equal to 30% of the
sum of Gross Proceeds plus the aggregate amount of Partnership
indebtedness secured by Partnership Assets (approximately 35% of the
aggregate Purchase Price of Assets) on a portfolio basis when
incurred.
14.4.25 enter into any "Roll-Up Transaction" without the consent of
Limited Partners owning at least two-thirds of the Units then
outstanding. As used herein, "Roll-Up Transaction" shall mean any
transaction or series of transactions that directly or indirectly,
through acquisition or otherwise, involve the combination, merger, or
conversion of the Partnership. This paragraph 14.4.25. cannot be
amended or deleted from the Partnership Agreement without the consent
of the Limited Partners owning at least two-thirds of the Units then
outstanding.
14.4.25.1. In connection with a proposed Roll-Up
Transaction, an appraisal of all Partnership assets shall
be obtained from a competent "independent expert."
"Independent expert", as used herein, shall mean a Person
with no material current or prior business or personal
relationship with the Sponsor or its Affiliates who is
engaged to a substantial extent in the business of
rendering opinions regarding the value of assets of the
type held by the Partnership, and who is qualified to
perform such work. If the appraisal will be included in a
prospectus used to offer the securities of a "Roll-Up
Entity," the appraisal shall be filed with the Securities
and Exchange Commission, and with such states as may
require, an exhibit to the registration statement of the
"Roll-Up Entity." A "Roll-Up Entity" shall mean a
partnership, real estate investment trust, corporation,
trust or other entity that would be created or would
survive after the successful completion of a proposed
Roll-Up Transaction. The Partnership's assets shall be
appraised on a consistent basis. The appraisal shall be
based on a evaluation of all relevant information, and
shall indicate the value of the Partnership's
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assets as of the date immediately prior to the
announcement of the proposed Roll-Up Transaction. The
appraisal shall assume an orderly liquidation of the
Partnership's assets over a 12 month period. The terms of
the engagement of the independent expert shall clearly
state that the engagement is for the benefit of the
Partnership and its Limited Partners. A summary of the
appraisal, indicating all material assumptions underlying
the appraisal, shall be included in a report to the
Limited Partners in connection with a proposed Roll-Up
Transaction. Accordingly, if such appraisal is included in
the Partnership's prospectus, the Partnership shall be
subject to liability for violation of Section 11 of the
Securities Act of 1933, as amended and comparable
provisions under state laws for any material
misrepresentations or material omissions in the appraisal.
14.4.25.2. In connection with a proposed Roll-Up Trans-
action, the Person sponsoring the Roll-Up Transaction
shall offer to the Limited Partners who vote "no" on the
proposal the choice of: (i) accepting the securities of
the Roll-Up Entity offered in the proposed Roll-Up
Transaction; or (ii) one of the following: (A) remaining
as Limited Partners in the Partnership and preserving
their interest therein on the same terms and conditions as
existed previously; or (B) receiving cash in an amount
equal to the Limited Partner's pro-rata share of the
appraised value of the net assets of the Partnership.
14.4.25.3. The Partnership shall not participate in any
proposed Roll-Up Transaction which would result in Limited
Partners having democracy rights in the Roll- Up Entity
which are less than those provided for under paragraph
15.1. If the Roll-Up Entity is a corporation, the voting
rights of the Limited Partners shall correspond to the
voting rights provided for in paragraph 15.1. to the
greatest extent possible.
14.4.25.4. The Partnership shall not participate in any
proposed Roll-Up Transaction which includes provisions
that would operate to materially impede or frustrate the
accumulation of shares by any purchaser of the securities
of the Roll-Up Entity (except to the minimum extent
necessary to preserve the tax status of the Roll-Up
Entity). The Partnership shall not participate in any
proposed Roll-Up Transaction which would limit the ability
of a Limited Partner to exercise the voting rights of its
securities of the Roll-Up Entity on the basis of the
number of Units held by that Limited Partner.
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14.4.25.5. The Partnership shall not participate in any
proposed Roll-Up Transaction in which the Limited Part-
ner's rights of access to the records of the Roll-Up
Entity would be less than those provided for under
paragraph 13.1.
14.4.25.6. The Partnership shall not participate in any
proposed Roll-Up Transaction in which any of the cost of
the Roll-Up Transaction would be borne by the Partnership
if the Roll-Up Transaction is not approved by the Limited
Partners.
14.5 NO PERSONAL LIABILITY. The General Partners shall have no
personal liability for the repayment of the Original Contributions of any
Limited Partner or to repay the Partnership any portion or all of any negative
balance in its capital account, except as otherwise provided in Section 20.
14.6 ACCOUNTING MATTERS. The Managing General Partner shall make all
decisions as to accounting matters in connection with the accounting methods
adopted by the Partnership in accordance with generally accepted accounting
principles and procedures applied on a consistent basis and shall make all
decisions with respect to tax accounting matters in accordance with tax
accounting principles. The Managing General Partner may rely on the
Partnership's independent certified public accountants to determine whether such
decisions are in accordance with generally accepted accounting principles.
14.7 TAX MATTERS PARTNER. The Managing General Partner is hereby
designated as the "Tax Matters Partner" in accordance with Section 6231(a)(7) of
the Code and, in connection therewith and in addition to all other powers given
thereunder, shall have all other powers needed to fully perform hereunder
including, without limitation, the power to retain all attorneys and accountants
of its choice and the right to settle any audits without the consent of the
Limited Partners. The designation made in this Paragraph 14.7 is hereby
expressly consented to by each Partner as an express condition to becoming a
Partner.
14.8 FUNDS AND ASSETS. The Managing General Partner shall have a
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Partnership, whether or not in its immediate possession or control, and
shall not employ, or permit another to employ, such funds or assets in any
manner except for the exclusive benefit of the Partnership.
14.9 NET WORTH OF INDIVIDUAL GENERAL PARTNER. The Individual General
Partner and any successor Individual General Partner shall use his best efforts
to meet the requirements, necessary to assure that the Partnership will be
classified as a partnership for federal income tax purposes, of the Code, as
interpreted from time
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to time by the Internal Revenue Service, including the capitalization
requirements presently contained in Revenue Procedure 72-13, or any successor
thereto, any other agency of the federal government or courts of law.
14.10 PRESERVATION OF TAX STATUS. The Managing General Partner shall
use its best efforts to take such actions as are necessary to preserve the
Partnership's status as a partnership or other pass-through entity for tax
purposes in light of any amendments to the Code or administrative or judicial
interpretations thereof.
15. RIGHTS AND POWERS OF THE LIMITED PARTNERS
15.1 VOTING RIGHTS.
15.1.1 The Limited Partners by Majority Vote may, without
the concurrence of the General Partners, vote to:
(a) remove a General Partner (provided that the
General Partners, insofar as they may act as Limited
Partners due to the ownership of Units of the
Partnership, will abstain from voting Units held by
them with regard to removal of a General Partner);
(b) elect a new General Partner;
(c) terminate and dissolve the Partnership pursuant
to Section 18;
(d) amend the Partnership Agreement, provided such
amendment is not for any of the purposes set forth
in Paragraph 14.2.16 of the Partnership Agreement;
(e) sell all or Substantially All of the Assets of
the Partnership in a single sale, or in multiple
sales in the same twelve-month period, except in the
liquidation and winding-up of the business of the
Partnership upon its termination and dissolution or
in the ordinary course of business and except that
the Managing General Partner may sell Assets in any
twelve-month period without a vote, provided the
aggregate book value amount of such Asset does not
exceed 66-2/3% of the Original Contributions of the
Limited Partners;
(f) materially change the Partnership's investment
objectives or policies;
(g) approve the assignment of a General Partner's
interest in the Partnership, except as otherwise
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provided in Paragraph 16.5 of the Partnership
Agreement; and
(h) extend the term of the Partnership.
In determining the existence of the requisite percentage in interest
of Units necessary to approve the foregoing matters, Units owned by
the General Partners or their Affiliates will not be included.
15.1.2 A Limited Partner shall be entitled to cast one vote for each
Unit which he owns, as at a meeting, in person, by written proxy or
by a signed writing directing the manner in which he desires that his
votes be cast, which writing must be received by the Managing General
Partner prior to such meeting, or (b) without a meeting, by a signed
writing directing the manner in which he desires that his votes be
cast, which writing must be received by the Managing General Partner
prior to the date upon which the votes of Limited Partners are to be
counted. Units owned by the General Partners and their Affiliates may
not be voted by, nor may the General Partners and their Affiliates
consent with respect to such Units, on matters submitted to the
Limited Partners regarding the removal of a General Partner or
regarding any transaction between the Partnership and the General
Partners and their Affiliates. In determining the existence of the
requisite percentage and interest of Units necessary to approve a
matter on which the General Partners and their Affiliates may not
vote or consent, any Units owned by the General Partners and their
Affiliates shall not be included.
15.2 MEETINGS. Meetings of the Limited Partners for any purpose may
be called by the Managing General Partner at any time and shall be called by the
Managing General Partner within ten (10) days after receipt of a written request
for such a meeting signed by ten percent (10%) or more in interest of the
Limited Partners as of the date of receipt of such written request. Any such
request shall state the purpose of the proposed meeting and the matters proposed
to be acted upon thereat. Meetings shall be held at the principal office of the
Partnership or at such other place as may be designated by the Managing General
Partner so long as such meeting is held at a time and place convenient to
Limited Partners.
15.3 CONSENT WITHOUT A MEETING. The Managing General Partner may and,
upon receipt of a request in writing signed by ten percent (10%) or more in
interest of the Limited Partners, the Managing General Partner shall, submit any
matter upon which the Limited Partners are entitled to act, to the Limited
Partners for a vote by written consent without a meeting. For purposes of
obtaining a written vote under this Partnership Agreement, the Managing General
Partner may require a written response within a specified time, but
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not less than fifteen (15) days and no more than sixty (60) days from receipt of
said request, and the failure of a Limited Partner to file such a written
response within such time shall constitute a vote which is consistent with the
Managing General Partner's recommendation with respect to such proposal so long
as a quorum is otherwise obtainable.
15.4 NOTICE OF MEETING. Notification of any meeting to be held
pursuant to Paragraph 15.3 shall be given not less than fifteen (15) days nor
more than sixty (60) days after receipt of a request in writing signed by ten
percent (10%) or more in interest of the Limited Partners by the Managing
General Partner, to each Limited Partner at its record address, or at such other
address which he may have furnished in writing to the Managing General Partner.
Such notification shall state the place, date and hour of the meeting, and shall
indicate that the notification is being issued at or by the direction of the
Partner or Partners calling the meeting. The notification shall state the
purpose or purposes of the meeting. For the purpose of determining the Limited
Partners entitled to vote at any meeting of the Limited Partners, or any
adjournment thereof, or to vote by written consent without a meeting, the
Managing General Partner or the Limited Partners requesting such meeting or vote
may fix, in advance, a date as the record date for any such determination of
Limited Partners. Such date shall not be more than sixty (60) days nor less than
ten (10) days before any such meeting or submission of a matter to the Limited
Partners for a vote by written consent. If a meeting is adjourned to another
time or place, and if an announcement of the adjournment of time or place is
made at the meeting, it shall not be necessary to give notification of the
adjourned meeting. The presence in person or by proxy of a majority in interest
of the Limited Partners shall constitute a quorum at meetings of the Limited
Partners; provided, however, that if there be no such quorum, holders of a
majority in interest of the Units so present or so represented may adjourn the
meeting from time to time without further notification, until a quorum shall
have been obtained. No notification of the time, place or purpose of any meeting
of Limited Partners need be given to any Limited Partner who attends in person
or is represented by proxy, except for a Limited Partner attending a meeting for
the express purpose of objecting at the beginning of the meeting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened, or to any Limited Partner entitled to such notification who,
in writing, executed and filed with the records of the meeting, either before or
after the time thereof, waives such notification.
15.5 PROXIES. The laws of the State of Delaware pertaining to the
validity and use of corporate proxies shall govern the validity and use of
proxies given by Limited Partners.
15.6 CONDUCT OF MEETING. At each meeting of Limited Partners, the
Managing General Partner shall appoint such officers and
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adopt such rules for the conduct of such meeting as the Managing General Partner
shall deem appropriate.
15.7 LIMITATIONS. No Limited Partner shall have the right or power
to: (i) bring an action for partition against the Partnership or (ii) cause the
termination and dissolution of the Partnership by court decree or otherwise,
except as set forth in this Partnership Agreement or as provided by law. Other
than upon the termination and dissolution of the Partnership as provided by this
Partnership Agreement, there has been no time agreed upon when the contribution
of each Limited Partner may be returned.
16. REMOVAL, BANKRUPTCY OR DISSOLUTION OF A GENERAL PARTNER AND
TRANSFER OF A GENERAL PARTNER'S INTEREST
16.1 REMOVAL. The General Partners may be removed from the
Partnership upon a Majority Vote. Written notice of the removal of the General
Partners shall be served either by certified or by registered mail, return
receipt requested, or by personal service. Such notice shall set forth the date
upon which the removal is to become effective.
16.2 SALE OF INTEREST. Upon the removal, adjudication of bankruptcy,
dissolution or other cessation to exist of either of the General Partners
("Terminated Partner"), the interest of such Terminated Partner in the Net
Income, Net Loss and Distributions of the Partnership may be purchased by a
successor General Partner (elected by Majority Vote of the Limited Partners) for
a purchase price determined according to the provisions of Paragraph 16.3.
Effective as of the removal, withdrawal, dissolution or other departure of the
Managing General Partner from the Partnership, should the Individual General
Partner remain as a General Partner of the Partnership, the Individual General
Partner shall assume all rights, obligations and responsibilities of the
Managing General Partner.
16.3 PURCHASE PRICE. The Terminated Partner shall receive the fair
market value of its interest in the Partnership, deter mined by agreement
between the Terminated Partner and the successor General Partner or, if they
cannot agree, by arbitration in accordance with the then current rules of the
American Arbitration Association in Detroit, Michigan. The cost of any such
required arbitration shall be borne equally by the Terminated General Partner
and the Partnership. For this purpose, the fair market value of the interest of
the Terminated Partner shall be deemed to be the amount the Terminated Partner
would receive upon dissolution and termination of the Partnership under
Paragraph 18.2.1 assuming such dissolution or termination occurred on the date
of the dissolving event and assuming the assets of the Partnership were sold for
their then fair market value without compulsion of the Partnership to sell such
assets. Payment shall be made by a promissory note at the announced prime rate
of interest of the bank
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at which the majority of the Partnership's cash is on deposit as of the date of
determination of the fair market value of the Terminated Partner's interest in
the Partnership. Such promissory note shall be for a term of not less than five
(5) years, shall be secured by the acquiring Partner's assignment of the future
Distributions by the Partnership to the acquiring Partner. The principal amount
of said promissory note together with accrued interest shall be payable in equal
fully amortizing installments until such time as the principal amount together
with accrued interest is paid in full. Notwithstanding anything to the contrary
herein, said promissory note, if not previously paid in full, shall become due
and payable in full by the acquiring Partner at such time as the Partnership is
finally wound up and liquidated.
16.4 NO VOLUNTARY DISSOLUTION OR WITHDRAWAL. Until the dissolution of
the Partnership, the General Partners shall not take any voluntary steps to
dissolve themselves or to voluntarily withdraw from the Partnership. Nothing in
this Partnership Agreement shall be deemed to limit the ability of the Managing
General Partner to pledge or hypothecate its interest in the Partnership to
third parties.
16.5 NO LIMITATION ON MERGER OR REORGANIZATION. Nothing in this
Partnership Agreement shall be deemed to prevent the merger or reorganization of
the Managing General Partner into or with any other corporation, partnership or
other entity, or the transfer of all the capital stock or partnership interests
of the Managing General Partner and the assumption of the rights and duties of
the Managing General Partner by, in the case of a merger, reorganization or
consolidation, the surviving corporation or partnership or by operation of law.
17. CERTAIN TRANSACTIONS
The General Partners, any Limited Partner, any Affiliates, any
shareholder, officer, director, partner or employee thereof, or any Person
owning a legal or beneficial interest therein, may engage in or possess an
interest in any other business or venture of every nature and description,
independently or with others including, but not limited to, the ownership,
financing, leasing, operation, management, brokerage and development of real
property. Except as set forth in the Prospectus, neither the General Partners
nor any Affiliate of the General Partners shall be obligated to present any
particular investment opportunity to the Partnership, even if such opportunity
is of a character which, if presented to the Partnership, could be taken by the
Partnership and each of them shall have the right to make for its own account
(individually or as trustee) or to recommend to others any such particular
investment opportunity. The General Partners shall not be required to devote all
of their time or business efforts to the affairs of the Partnership, but shall
devote so much of such time and
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attention to the Partnership as is reasonably necessary and advisable to manage
the affairs of the Partnership to the best advantage of the Partnership.
18. TERMINATION AND DISSOLUTION OF THE PARTNERSHIP
18.1 TERMINATING EVENTS. The Partnership shall be terminated
and dissolved upon the earliest to occur of the following:
18.1.1 the withdrawal, removal, adjudication of bankruptcy,
insolvency, dissolution or other cessation of existence as a legal
entity (collectively, the "Withdrawal") of the last remaining General
Partner unless, within ninety (90) days of the date of such event,
the Limited Partners by a majority vote (unless a unanimous vote is
required under the Delaware Act) elect to continue the business of
the Partnership and elect a successor General Partner as of the date
of the Withdrawal;
18.1.2 a Majority Vote (which may, but need not be solicited by the
General Partner) in favor of dissolution and termination of the
Partnership;
18.1.3 the expiration of the term of the Partnership; or
18.1.4 the disposition of all assets held by the Partnership and
receipt of final payment with respect to all investments.
18.2 LIQUIDATION AND DISTRIBUTION OF ASSETS. Upon a dissolution and
termination of the Partnership for any reason, the Managing General Partner
shall take full account of the Partnership's assets and liabilities, shall
liquidate the assets as promptly as is consistent with obtaining the fair value
thereof, and shall apply and distribute the proceeds therefrom in the following
order:
18.2.1 first, to the payment of creditors of the Partnership but
excluding secured creditors whose obligations will be assumed or
otherwise transferred on the liquidation of Partnership assets; and
18.2.2 second, after allowance for the expenses of liquidation and
the setting up of any reserves for contingencies which the Managing
General Partner considers necessary, to the Partners in proportion to
and to the extent of the positive balances in their Capital
Accounts, after Net Income arising from a Disposition and Net Loss
has been allocated in accordance with Paragraph 11.1 hereof.
18.2.3 notwithstanding anything to the contrary, the Managing General
Partner has the right to defer liquidation if, in the opinion of the
Managing General Partner, the sale of
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Partnership assets in liquidation would result in a material
underrealization on the Partnership's assets.
18.2.4 notwithstanding anything herein to the contrary, the
Partnership shall not make any distributions in kind.
18.3 ADDITIONAL TERMINATING EVENT. In addition to the events
described in Paragraph 18.1, the Managing General Partner may also compel a
termination and dissolution of the Partnership, upon notice to all Limited
Partners but without the consent of any Limited Partner, if, in the opinion of
counsel to the Partnership, either (i) the Partnership's assets constitute "plan
assets," as such term is defined for purposes of ERISA, or (ii) any of the
transactions contemplated hereunder constitute "prohibited transactions" under
ERISA and no exemption for such transactions is obtainable from the United
States Department of Labor.
19. SPECIAL POWER OF ATTORNEY
19.1 By completing and signing the Partnership's Subscription
Documents or any transfer form, each Limited Partner grants to the General
Partners and to each officer of the Managing General Partner and their designees
and each of them a power of attorney irrevocably making, constituting and
appointing each of them with full power of substitution and resubstitution, as
its or their attorney-in-fact with full power and authority to act in its or
their name on its or their behalf to execute complete and/or correct in a manner
consistent with the Prospectus and the Partnership Agreement and to execute,
acknowledge, swear to and file the following documents, subject to all of the
provisions of the Partnership Agreement:
19.1.1 the Partnership Agreement, the Certificate, and any separate
certificates of limited partnership to be filed in the appropriate
public offices in the State of Delaware (and any other state for
which the General Partners shall deem it advisable to file, upon
advice of counsel) and in such form as shall be necessary under the
laws of such state to give effect to the provisions of the
Partnership Agreement and to preserve the character of the
Partnership as a limited partnership, and any amended Certificate,
including any amendment to the Certificate or to the Partnership
Agreement to reflect the admission of additional Limited Partners in
accordance with the terms of the Partnership Agreement or the
substitution of a Limited Partner or General Partner in accordance
with the provisions of the Partnership Agreement;
19.1.2 any other instrument or document which the General Partners
deem to be in the best interests of the Partnership to file and which
is not inconsistent with this Partnership Agreement;
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19.1.3 any document which may be required in connection with
borrowings by the Partnership, including, without limitation,
documents required by any financial institution;
19.1.4 any documents which may be required in connection with any
filings with state securities commissions or other state authorities;
19.1.5 any amendment to this Partnership Agreement which in the
opinion of the General Partners does not adversely impact the
interests of the Limited Partners, or is necessary to clarify any
ambiguities, misstatements or omissions from this Partnership
Agreement;
19.1.6 any instruments or other documents necessary to effect any of
the amendments to this Partnership Agreement in accordance with
Paragraph 14.2.16 hereof.
19.2 The power of attorney granted by each Limited Partner:
19.2.1 is a special power of attorney coupled with an interest which
is irrevocable and shall survive and not be affected by the death,
incompetency, disability or incapacity of the granting Limited
Partner;
19.2.2 may be exercised by the attorney-in-fact appointed as set
forth in Paragraph 19.1 hereof either by signing separately as
attorney-in-fact for the Limited Partners or, after listing all of
the Limited Partners executing any instrument, by a single signature
of such attorney-in-fact for all of them; and
19.2.3 shall survive the delivery of an assignment by a Limited
Partner of the whole or any portion of his Units except that, where
the assignee thereof has been approved by the Managing General
Partner for admission to the Partnership as a substituted Limited
Partner, this power of attorney given by the assignor shall survive
the delivery of such assignment for the sole purpose of enabling the
General Partners and each officer of the Managing General Partner and
their designees and each of them to execute, acknowledge, swear to
and file any instrument or document necessary to effect such
substitution.
19.3 Each Limited Partner is fully aware that he and each other
Limited Partner have executed this power of attorney, and that each Limited
Partner will rely on the effectiveness of such powers with a view to the orderly
administration of the Partnership's affairs.
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20. LIABILITY AND INDEMNIFICATION
20.1 The General Partners and their Affiliates shall have no
liability to the Partnership or to any Partner for any loss suffered by the
Partnership which arises out of any action or inaction of a General Partner or
the Affiliate of a General Partner if the General Partners or the Affiliates, in
good faith, determined that such course of conduct was in the best interests of
the Partnership and such course of conduct did not constitute negligence or
misconduct of the General Partner or the Affiliate. The General Partners shall
not be liable because of any taxing authorities disallow or adjust any income,
nor shall the General Partners be liable for actions taken or not taken in
accordance with the provisions of this Partnership Agreement, provided that the
same were not the result of negligence, breach of contract or misconduct.
Furthermore, the General Partners shall not have any liability for the repayment
of Capital Contributions of the Limited Partners except as provided in this
Partnership Agreement, nor shall the General Partners be obligated, except as
required by law, to make additional Capital Contributions or advances to the
Partnership. The General Partners and their Affiliates shall be indemnified by
the Partnership against any losses, judgments, liabilities, expenses and amounts
paid in settlement of any claims 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 Partners or their Affiliates, provided
however, that such indemnification shall be recoverable only out of the assets
of the Partnership and not from the Limited Partners, provided further, that the
General Partners or their Affiliates, in good faith, determine that their course
of conduct was in the best interest of the Partnership.
20.1.1 Notwithstanding the above, the General Partners and their
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 (i) there has been a successful adjudication on the merits of
each count involving alleged securities law violations as to the
particular indemnitee, or (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction as to
the particular indemnitee or (iii) 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.
20.1.2 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 and the positions of certain state securities divisions,
including California, Oklahoma and Tennessee, and in such other
states in which the claimants
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allege Units were offered or sold, with respect to the issue of
indemnification for securities law violations.
20.1.3 The Partnership shall not pay for any insurance covering
liability of the General Partners and their Affiliates for actions or
omissions for which indemnification is not permitted hereunder;
provided, however, that nothing contained herein shall preclude the
Partnership from purchasing and paying for such types of insurance,
including extended coverage liability and casualty and workers
compensation, as would be customary for any Person owning comparable
assets and engaged in a similar business from naming the General
Partners and their Affiliates as additional insured parties
thereunder, provided that such addition does not add to the premiums
payable by the Partnership.
20.1.4 The provision of advances from Partnership funds to the
General Partners or their Affiliates for legal expenses and other
costs incurred as a result of any legal action initiated against a
General Partner by a Limited Partner of the Partnership is
prohibited.
20.1.5 The provision of advances from Partnership funds to the
General Partners or their Affiliates for legal expenses and other
costs incurred as a result of a legal action is permissible if the
following three conditions are satisfied: (1) the legal action
relates to acts or omissions with respect to the performance of
duties or services by General Partners or their Affiliates on behalf
of the Partnership; (2) the legal action is initiated by a third
party who is not a Limited Partner of the Partnership; and (3) the
General Partners or their Affiliates undertake to repay the advanced
funds to the Partnership in cases in which they would not be entitled
to indemnification under Paragraph 20.1 hereof.
21. MISCELLANEOUS
21.1 COUNTERPARTS. This Partnership Agreement may be executed in
several counterparts and as so executed shall constitute one Partnership
Agreement, binding on all of the parties hereto, notwithstanding that all of the
parties are not signatories to the original or the same counterpart.
21.2 BINDING PROVISIONS. The terms and provisions of this
Partnership Agreement shall be binding upon and shall inure to the benefit of
the successors and assigns of the respective Partners.
21.3 SEVERABILITY. In the event any phrase, sentence or paragraph of
this Partnership Agreement is declared by a court of competent jurisdiction to
be void, such phrase, sentence or
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paragraph shall be deemed severed from the remainder of the Partnership
Agreement and the balance of the Partnership Agreement shall remain in effect.
21.4 NOTICE. All notices under this Partnership Agreement shall be in
writing and shall be given to the party entitled thereto by personal service or
by mail, posted to the address maintained by the Partnership for such Person or
at such other address as he may specify in writing.
21.5 HEADINGS. Titles or captions contained in this Partnership
Agreement are inserted only as a matter of convenience and for reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Partnership Agreement nor the intent of any provision hereof.
21.6 MEANINGS. Whenever required by the context hereof, the singular
shall include the plural, and vice-versa; the masculine gender shall include the
feminine and neuter genders, and vice-versa; and the word "Person" shall include
a corporation, partnership, firm or other form of association.
21.7 LIST OF PARTNERS. The names, addresses and Original
Contributions of the Partners are set forth on Exhibit l attached hereto, which
exhibit shall be maintained at the principal place of business of the
Partnership.
21.8 GOVERNING LAW. Notwithstanding the place where this Partnership
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed under the laws
of the State of Delaware and that the Delaware Act, as amended, shall govern the
partnership aspects of this Partnership Agreement.
21.9 OTHER JURISDICTIONS. In the event the business of the
Partnership is carried on or conducted in states in addition to the State of
Delaware, then the parties agree that this Partnership shall exist under the
laws of each state in which business is actually conducted by the Partnership,
and they severally agree to execute such other and further documents as may be
required or requested in order that the Managing General Partner legally may
qualify this Partnership in such states. The power of attorney granted to the
Managing General Partner in Section 20 shall constitute the authority of the
Managing General Partner to perform the ministerial duty of qualifying this
Partnership under the laws of any state in which it is necessary to file
documents or instruments of qualification. A Partnership office or principal
place of business in any state, including the State of Michigan, may be
designated from time to time by the Managing General Partner.
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21.10 POWER TO RECONSTITUTE. In the event that the State of Delaware
amends its Revised Uniform Limited Partnership Act in any manner which precludes
the Partnership, at any time, from obtaining an opinion of tax counsel to the
effect that the Partnership will be treated as a pass-through entity for federal
income tax purposes and not as an association taxable as a corporation, then the
Managing General Partner may, in its sole discretion, reconstitute the
Partnership under the laws of another state.
IN WITNESS WHEREOF, the parties hereto have executed this Partnership
Agreement of Limited Partnership as of the date first above written.
GENERAL PARTNERS:
CAPTEC FRANCHISE CAPITAL CORPORATION III
By: ____________________________________
Patrick L. Beach
President and
Chief Executive Officer
____________________________________
Patrick L. Beach
INITIAL LIMITED PARTNER:
By: ____________________________________
Patrick L. Beach
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