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Exhibit 10.5
EXHIBIT B
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
2
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
INDEX
Page
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1. NAME AND PLACE OF BUSINESS........................................B-1
2. DEFINITIONS.......................................................B-1
3. PURPOSE...........................................................B-8
4. TERM.............................................................B-10
5. GENERAL PARTNERS.................................................B-10
6. LIMITED PARTNERS.................................................B-11
7. PARTNERSHIP CAPITAL..............................................B-12
8. LIABILITY OF LIMITED PARTNERS....................................B-13
9. COMPENSATION TO THE GENERAL PARTNERS AND THEIR
AFFILIATES.......................................................B-13
10. PARTNERSHIP EXPENSES.............................................B-16
11. ALLOCATION OF INCOME AND LOSS AND DISTRIBUTIONS..................B-18
12. TRANSFERABILITY OF UNITS.........................................B-25
13. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS..........................B-24
14. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND
DUTIES OF THE MANAGING GENERAL PARTNER...........................B-26
15. RIGHTS AND POWERS OF THE LIMITED PARTNERS........................B-37
16. REMOVAL, BANKRUPTCY OR DISSOLUTION OF
A GENERAL PARTNER AND TRANSFER OF A
GENERAL PARTNER'S INTEREST.......................................B-40
17. CERTAIN TRANSACTIONS.............................................B-41
18. TERMINATION AND DISSOLUTION OF THE PARTNERSHIP...................B-41
19. SPECIAL POWER OF ATTORNEY........................................B-42
20. LIABILITY AND INDEMNIFICATION....................................B-44
21. MISCELLANEOUS....................................................B-45
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CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
AMENDED AND RESTATED AGREEMENT of LIMITED PARTNERSHIP ("Partnership
Agreement") entered into as of the 31st day of October, 1996, by and among
Captec Franchise Capital Corporation IV, 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, Captec Franchise Capital Partners L.P. IV is a limited
partnership presently existing under Delaware law and governed by a Partnership
Agreement dated as of July 30, 1996 (the "Former Partnership Agreement")." The
Managing General Partner, the Individual General Partner and the Initial Limited
Partners wish to amend and restate the Former Partnership Agreement as set forth
below;
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. IV (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.
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:
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"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, 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, 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.
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"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 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
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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. IV 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, noncompounded
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 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.
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"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 IV
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:
(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 de
minimus 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
determined or adjusted pursuant to subparagraph (i) or
subparagraph (ii) hereof, such Gross Asset Value shall
thereafter 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.
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"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.
"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 IV, or its successors and assigns in its or their capacity as the
managing general partner of the Partnership.
"Minimum Number of Units" shall mean 2,000 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.
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"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.
"Offering" shall mean the offering of Units pursuant to the Prospectus.
"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,
supplementing, 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 Dealers and their registered representatives, (h)
escrow fees and expenses in connection with the Offering, and (i) 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.
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"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.
"Performance Preferred Return" shall mean a cumulative, noncompounded
return equal to ten and one-half percent (10.5%) 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.
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"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 that is not an Affiliate whose only relationship with
the Partnership or the General Partners is that of an asset manager whose only
compensation from 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 (i) Properties and Equipment
which will be leased on a "triple net" basis primarily to operators of national
chain and nationally franchised fast-food, family style and dinner house
restaurants as well as other franchised or chain businesses, and (ii) Properties
which will be leased on a "double net" (with the Partnership being responsible
for maintenance of the roof, exterior walls and/or parking lot) or "triple net"
basis to prominent franchised or chain national retail concerns which are
operating at least ten other
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store locations; and 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 incidental
to the foregoing or are necessary or appropriate to the accomplishment of the
purposes of the partnership. The principal investment objectives of the
Partnership will be: (i) preservation and protection of capital; (ii)
distribution of cash flow generated by the Partnership's leases; (iii) capital
appreciation of Partnership Properties; (iv) generation of increased income and
protection against inflation through required escalations of base rents or
participation in gross revenues of lessees of Partnership Properties; and (v)
deferral of taxation of Partnership cash distributions for Limited Partners. The
Partnership's overall objectives will be to maximize long term returns with its
Properties and to enhance short term returns with its Equipment.
4. TERM
The Partnership was formed as of the day of filing of the Certificate
of the Partnership with the Delaware Secretary of State and shall continue until
the 31st day of December 2026, unless previously terminated in accordance with
the provisions of this Partnership Agreement.
5. GENERAL PARTNERS
5.1 CAPITAL CONTRIBUTIONS. Captec Franchise Capital Corporation IV, 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 most of 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.
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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
1/10 Unit. The 1/10 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, whereupon 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 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 30,000 Units (including the 1/10 Unit held by the Initial
Limited Partner, which 1/10 Unit shall be available for sale upon withdrawal of
said Initial Limited Partner). The Persons purchasing such Units shall
contribute the purchase price to the capital of the Partnership. The General
Partners, their Affiliates and Participating Dealers may purchase up to ten per
cent (10%) of the authorized Units net of any selling commissions but otherwise
on the same terms as other purchasers.
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 the Minimum Number of Units is 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
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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.
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 Gross Proceeds attributable to all Units placed by them directly,
subject to volume discounts. An additional amount not exceeding 0.5% of such
Gross Proceeds may be paid to prospective Participating Dealers by the General
Partners from amounts received by them for
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Organizational and Offering Expenses for accountable expenses incurred in
connection with due diligence activities of such prospective Participating
Dealers and their registered representatives.
9.2 NON-ACCOUNTABLE EXPENSE ALLOWANCE. The General Partners and/or
their Affiliates shall receive a non-accountable expense 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 not exceeding 0.5% of Gross Proceeds.
9.4 ACQUISITION FEES AND EXPENSES. The General Partners or an Affiliate
shall receive Acquisition Fees equal to the lesser of (1) 4.0% of Gross Proceeds
plus an additional .0677% ("Debt Fee") 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 shall 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. Although the Debt Fee is included within the
definition of Acquisition Fees in calculating the 5.0% limitation, the Debt Fee
will be paid out of the proceeds of indebtedness rather than from Gross
Proceeds. The General Partners or an Affiliate shall 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 1.0% 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 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 may pay an
Affiliate of the General Partner a liquidation fee for the resale of Equipment
in an amount equal to
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3.0% of the gross sales price of the Equipment.
9.7 REAL ESTATE LIQUIDATION FEES. The Partnership may pay an Affiliate
of the General Partners a liquidation fee for the resale of real estate in an
amount equal to the lesser of (a) fifty percent (50%) of the real estate
commission 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 shall accrue and be subordinated to receipt by the Limited
Partners of aggregate Distributions equal to a 10% 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. The total
compensation paid by the Partnership to all persons and entities as real estate
liquidations fees or commissions in connection with any sale of Partnership
Properties shall not exceed the lesser of (i) six percent (6%) or (ii) that
commission or fee paid for the purchase or sale of property which is reasonable,
customary and competitive in light of the size, type and location of the
Property. In no event shall the Partnership pay, directly or indirectly, a
commission or fee to the General Partners or their Affiliates in connection with
the reinvestment or distribution of Net Sale or Refinancing Proceeds other than
as described in this Section 9.
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 must 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
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least 33% of gross revenues for such goods and services from Persons other than
Affiliates. In addition, any such payment shall 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 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 shall also 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
shall not exceed the lesser of: (l) 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 shall 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 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.
9.11 LIMITATION ON CLAIMS FOR FEES. In no event shall the General
Partners be entitled to collect any fees or reimbursement amounts not requested
within one year of the date they were earned.
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9.12 GUARANTEE OF GENERAL PARTNERS. The General Partners guarantee
payment of Organization and Offering Expenses (including selling commissions and
the Non-Accountable Expense Allowance) which exceed 13% of Gross Proceeds.
Payment of expenses pursuant to this guarantee will be without recourse to, or
reimbursement by, the Partnership.
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.
Controlling Persons, for purposes of this Paragraph 10.3
includes but is not limited to any Person, whatever his title,
who performs functions for a General Partner similar to those
of:
(a) Chairman or member of the Board of Directors;
(b) President;
(c) Executive Vice-President;
(d) Those Persons holding 5% or more of the
stock of the Managing General Partner;
or
(e) A Person having the power to direct or cause
the direction of the Managing General
Partner, whether
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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:
(a) 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;
(b) 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 less the aggregate
amount of Distributions to each Limited Partner;
(c) 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;
(d) 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;
(e) Fifth, to the General Partners in an amount
equal to their contributions of capital to the
Partnership;
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(f) 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:
(a) 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;
(b) 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
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 1.704-2(d)(1) of the Regulations) during a
Partnership taxable year, all Partners with deficit Capital
Account balances shall 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 1.704-2(f) 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 those Persons owning Units at any time during each calendar
month in proportion to allocation factors calculated by multiplying their
respective Units by the number of days in such calendar month that they were the
owners of record of such Units. 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
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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 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 Grass Asset
Value.
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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 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 made to the Partners in the following order of priority and in the
following amounts:
(i) First, to the Limited Partners in an amount up to the amount
necessary so as to cause the aggregate amount of distributions
to the Limited Partners pursuant to this Section 11.5 to be
equal to their Current Preferred Return as of the last day of
the preceding month;
(ii) Second, to the General Partners in an amount up to that amount
necessary so as to cause the aggregate amount of distributions
to the General Partners pursuant to this Section 11.5 to be
equal to 1% of the aggregate amount of distributions to all of
the Partners pursuant to this Section 11.5; and
(iii) Third, 99% to the Limited Partners and 1% to the General
Partners
Such distributions of Cash Flow shall 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 shall be paid no less frequently than quarterly.
Limited Partners owning at least ten (10) Units may elect to receive their
quarterly distributions on a monthly basis, in which event their quarterly
distributions shall be paid in three (3) consecutive equal monthly installments
commencing on the quarterly distribution date. Such installment shall be paid to
Limited Partners of record as of the record date for quarterly distributions.
Cash Flow shall not be reinvested in Properties or Equipment.
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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 made to the Partners in the following order
of priority:
(i) First, to the Limited Partners in an amount up to the amount
necessary so as to cause the aggregate amount of distributions
to the Limited Partners pursuant to this Section 11.6 and
Section 11.5 to be equal to the sum of (A) their Performance
Preferred Return as of the last day of the preceding month,
and (B) their Original Contributions;
(ii) Second, to the General Partners in an amount up to that amount
necessary so as to cause the aggregate amount of distributions
to the General Partners pursuant to this Section 11.6(ii) to
be equal to 10% of the aggregate amount of distributions to
all of the Partners pursuant to this Section 11.6; and
(iv) Third, 90% to the Limited Partners and 10% to the General
Partners.
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 balances. 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 is 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
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purposes of this Paragraph 11.10, funds shall 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 Partners, the Managing General Partner may, if
deemed to be in the best interests of the Partnership, cause such amounts to be
redistributed pro rata 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
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 nondeductible 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, including (but not limited to) 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 shall pay such funds on behalf of such Limited Partner, and such
payment shall constitute a loan to such Limited Partner bearing interest at the
First Chicago NBD Bank prime rate and 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.
11.14 DISTRIBUTION REINVESTMENT PLAN. The Partnership has adopted
a Distribution Reinvestment Plan pursuant to which Limited Partners may elect to
have their distributions of Cash Flow, together with distributions from
Affiliates of the General Partner and other sources, applied to the purchase of
Units after sale of the Minimum Number of Units and
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prior to termination of the offering of Units. The Distribution Reinvestment
Plan is set forth in Exhibit 2 attached hereto.
12. TRANSFERABILITY OF UNITS
12.1 RESTRICTIONS ON TRANSFERS OF UNITS BY LIMITED PARTNERS. A Limited
Partner may assign his Units only 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 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 might 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 to
such transferee, 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
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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 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 Partnership
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
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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.
12.6 RIGHT TO TENDER UNITS FOR PURCHASE. Commencing in 1998 or the
closing of the offering of Units for sale, whichever occurs later, the
Partnership shall repurchase any part or all of a Limited Partner's Units at his
written request, upon the following terms and subject to the following
restrictions:
12.6.1 The repurchase price shall be an amount equal to (i)
85% of the tendering Limited Partner's Adjusted Investment, if
the repurchase occurs in 1998, (ii) 90% of the tendering
Limited Partner's Adjusted Investment, if the repurchase
occurs in 1999, or (iii) 100% of the tendering Limited
Partner's Adjusted Investment less (A) any Net Sale or
Refinancing Proceeds previously distributed in respect of such
Units and not applied to a reduction of Adjusted Investment
and (B) one-half of all prior distributions of Net Cash Flow
in respect of such Units, if the repurchase occurs in 2000 or
thereafter; distributions of Net Cash Flow in respect of Units
purchased in the secondary market after the closing of the
Offering shall be calculated as if such Units had been issued
at the mid-point of the offering of Units;
12.6.2 Limited Partners desiring to have their Units
repurchased must submit to the General Partners notification
of the number of Units for which they are requesting
repurchase, on a form supplied by the General Partners; the
notification must be postmarked either after February 1 but
before March 1 (the "February Redemption Period") or after
August 1 but before September 1 (the "August Redemption
Period"; collectively, the "Redemption Periods") in the year
of repurchase;
12.6.3 During 1998, no more than 1/2% of the outstanding Units
(as of January 1, 1998) will be redeemed during either
Redemption Period, and thereafter no more than 1% of the
outstanding Units (as of January 1 for the relevant year) will
be redeemed during any Redemption Period;
12.6.4 Repurchase requests with the earliest postmarks will be
honored first; Units tendered during the February Redemption
Period and August Redemption Period will be repurchased on the
April 1 and October 1, respectively, thereafter; any such
Units tendered during a Redemption Period which are not
repurchased will not be eligible for repurchase following a
subsequent Redemption Period unless re-tendered in such
Redemption Period;
12.6.5 The Partnership shall not be obligated to repurchase
any Units if the Partnership's annualized Net Cash Flow for
the three (3) months
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prior to the Redemption Period, calculated on an annualized
basis, is less than 10% of the Adjusted Investment at the
beginning of such period;
12.6.6 The Partnership shall not be obligated to repurchase
any Units unless the Managing General Partner determines in
his sole discretion that funds are available for that purpose
from Partnership revenues otherwise distributable to Limited
Partners or Partnership borrowings and that such repurchase
will not impair the capital or the operations of the
Partnership.
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
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interest in the F Partnership. The remedies provided hereunder to Limited
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 containing: (1) the location and a description of the general
character of the Property acquired during the quarter; (2) the present or
proposed use of such Property and its suitability and adequacy for such use; (3)
the terms of any material lease affecting the Property; (4) the proposed method
of financing, if any, including estimated down payment, leverage ratio, prepaid
interest, balloon payment(s), prepayment penalties, "due-on-sale" or encumbrance
clauses and possible adverse effects thereof and similar details of the proposed
financing plan; and (5) a statement that title insurance has been or will be
obtained on the Property acquired, unless the seller has agreed to provide
indemnification to the Partnership substantially equivalent to that which would
be available under a title policy and the seller has represented to the General
Partners that it has a rating by Moody's of AA or better or by Standard and
Poor's of AA or better.
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 interested 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 reserves; (c) cash from
initial working capital reserves; (d) annual net rental revenues on a per
Property basis; 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
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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 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 financial highlight report of the Partnership's
performance that shall be distributed to each Limited Partner within sixty (60)
days after the close of the quarterly period covered by such report. Upon
request, unaudited quarterly reports containing information required by Form
10-Q will be mailed to a Limited Partner not later than 60 days after the close
of each of the first three fiscal quarters of each fiscal year.
13.6 VALUATION REPORTS. Commencing with the year ended December 31,
1997, the Partnership shall provide Qualified Plans with an annual valuation of
Units within 120 days after the end of each fiscal year of the Partnership which
is intended to satisfy the requirements of ERISA. Such reports will be based
upon the Managing General Partner's estimate of the amount which would be
received if the Partnership's Properties and Equipment were sold as of the close
of the Partnership's fiscal year and if such proceeds (without reduction for
selling expenses), together with other Partnership funds, were distributed in
liquidation of the Partnership. Absent significant increases or decreases in the
value of assets, the net asset value of each Unit will be reported at cost and
deemed to be $1,000 for the first three annual statements of value following
termination of the Offering; thereafter, the value of the Units will be based on
an annual valuation, subject to quarterly adjustment in the General Partners'
discretion.
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 a final
investment decision;
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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 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
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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
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 Partnership
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 therewith to
pay interest and other
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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,
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 from the General
Partners or their Affiliates 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 shall 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
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obligations have personal liability, the General Partners may
require their satisfaction prior to contracts without such
personal liability; provided, however, that the inclusion of
the aforesaid provisions shall not materially affect the cost
of the service or material being supplied and all Partnership
obligations are satisfied in accordance with prudent business
practices as to time and manner of payment;
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 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;
14.2.14 (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 percentage of Units
permitted to be held by Qualified Plans or other 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.
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14.2.15 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 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
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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
Partnership, 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.
14.2.16 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.
14.2.17 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.
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.
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14.4 LIMITATIONS. Neither the General Partners nor any of their
Affiliates shall have the authority to:
14.4.1 cause the Partnership to enter into contracts with the
General Partners or their Affiliates 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
cotenancy arrangements, 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 Assets through
co-tenancy arrangements, joint ventures or general
partnerships with Affiliates other than publicly registered
Affiliates unless: (a) the investment is necessary to relieve
the General Partners from any commitment to purchase a
property entered into in compliance with Section 14.2.3 prior
to the closing of the Offering (b) the affiliated program has
investment objectives and policies substantially identical to
those of the Partnership; (c) no duplicate management fees are
paid; (d) the compensation paid to the Sponsor by the
Partnership and the Affiliate is substantially identical with
regard to each program; (e) 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 (f) the Partnership has a right of first
refusal to purchase the investment if the other program wishes
to sell the investment.
14.4.5 cause the Partnership to invest in any Asset with
unaffiliated parties through co-tenancy arrangements, 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
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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 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.
14.4.6 cause the Partnership to exchange Units for Partnership
Property;
14.4.7 cause the Partnership to invest in limited
partnerships, 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;
14.4.8 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;
14.4.9 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;
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14.4.10 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;
14.4.11 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;
14.4.12 employ, or permit the employment of, the funds or
assets of the Partnership in any manner except for the
exclusive benefit of the Partnership;
14.4.13 commingle Partnership funds with those of any other
Person or entity;
14.4.14 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;
14.4.15 except as specifically provided for in Section 14.2.2
or another provision of this Partnership Agreement, cause the
Partnership to invest in or underwrite the securities of other
issuers for any purposes;
14.4.16 cause the Partnership to invest in real estate
contracts of sale unless such contracts of sale are in
recordable form and are appropriately recorded in the chain of
title;
14.4.17 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 (the
Partnership shall retain the appraisal for at least five (5)
years and such appraisal shall be available for inspection and
duplication (at the Limited Partner's expense) by the Limited
Partners);
14.4.18 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);
14.4.19 give an exclusive right to sell or exclusive
employment to sell any property for the Partnership to a
General Partner or any Affiliate;
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14.4.20 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;
14.4.21 make loans to a General Partner or any Affiliate or
other Person;
14.4.22 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;
14.4.23 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, 14.4.3, and
14.4.4 hereof;
14.4.24 permit the Limited Partners to contract away the
fiduciary duty owed to the Limited Partners under common law;
or
14.4.25 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 35% of the sum of Gross Proceeds
plus the aggregate amount of Partnership indebtedness secured
by Partnership Assets (approximately 40% of the aggregate
Purchase Price of Assets) on a portfolio basis when incurred;
14.4.26 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;
(a) 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
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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 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;
(b) in connection with a proposed Roll-Up
Transaction, 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;
(c) the Partnership shall not participate in any
proposed Roll-Up Transaction which would result in
Limited Partners having democracy rights in the
Roll-Up
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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;
(d) 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;
(e) the Partnership shall not participate in any
proposed Roll-Up Transaction in which the Limited
Partner's rights of access to the records of the
Roll-Up Entity would be less than those provided
for under paragraph 13.1;
(f) 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;
14.4.27 issue Units in exchange for Property or Equipment or
in ways other than pursuant to the terms set forth in the
Prospectus;
14.4.28 issue securities senior to the Units except notes to
banks and other financial institutions;
14.4.29 invest in real estate mortgages except in connection
with the disposition of one or more of the Properties;
14.4.30 engage in the purchase and sale (or turnover) of
investments other than as set forth in the Prospectus;
14.4.31 repurchase the Units, except as provided in Paragraph
12.6;
14.4.32 cause the Partnership to invest less than 83% of the
Original Contributions in Assets; or
14.4.33 cause the Partnership to reinvest Net Sale or
Refinancing Proceeds received more than four years after the
date on which the Partnership terminates the Offering.
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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 to time by the Internal Revenue Service, or any successor
thereto, any other agency of the federal government or courts of law.
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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 in accordance with
Section 16 (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 14.2.15 of the Partnership Agreement;
and
(e) approve or disapprove the sale of all or
Substantially All of the Assets of the Partnership
in a single sale, or in multiple sales in the same
twelve-month period, except in the liquidation and
winding-up of the business of the Partnership upon
its termination and dissolution or in the ordinary
course of business.
15.1.2 The General Partners must obtain the approval
of the Limited Partners by Majority Vote prior
to:
(a) effecting a material change in the
Partnership's investment objectives;
(b) assigning a General Partner's interest in the
Partnership, except as otherwise provided in
Paragraph 16.5 of this Agreement;
(c) extending the term of the Partnership; or
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(d) selling 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.
15.1.3 In determining the existence of the requisite
percentage in interest of Units necessary to approve the
matters set forth in Sections 15.1.1 and 15.1.2, Units owned
by the General Partners or their Affiliates shall not be
included.
15.1.4 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 not less
than fifteen (15) days and no more than sixty (60) days from receipt of said
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request, and, provided such notice was sent by U.S. mail, return receipt
requested and the Limited Partner's receipt of such notice was confirmed, 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 15.2 shall be given within ten (10) 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 (which shall be held not less than fifteen (15) nor more than
sixty (60) days after receipt of written request), 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 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
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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. If a successor General Partner is elected as
provided in Section 16.2, the Partnership shall acquire the interest of the
Terminated Partner for a purchase price equal to the fair market value of the
Terminated Partner's interest in the Partnership, determined by agreement
between the Terminated Partner and the Partnership or, if they cannot agree, by
arbitration in accordance with the then current rules of the American
Arbitration Association in 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 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 five (5) years, or such other period as may be agreed upon between
the Terminated Partner and the Partnership and shall be a full recourse
obligation of the Partnership. 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.
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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 a General
Partner to transfer, pledge or hypothecate its interest in the Partnership to
third parties and no such action shall constitute a withdrawal from the
Partnership.
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 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;
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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
receipt of final payment with respect to all investments.
Further, if the Partnership has not been liquidated within ten (10)
years of the date the Partnership last purchased a Property or an Equipment
package, the General Partners are required to call for a vote of the Limited
Partners as to whether they wish to liquidate the Partnership.
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
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"
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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 General or 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;
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 document necessary or appropriate in order to
qualify the Partnership to transact business in any state, or
to reconstitute the Partnership as provided in Paragraph
21.10.
19.1.6 any amendment to this Partnership Agreement which in
the opinion of the General Partners does not adversely impact
the interests of
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the Limited Partners, or is necessary to clarify any
ambiguities, misstatements or omissions from this Partnership
Agreement;
19.1.7 any instruments or other documents necessary to effect
any of the amendments to this Partnership Agreement in
accordance with Paragraph 14.2.15 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.
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
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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
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
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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 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.
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21.7 LIST OF PARTNERS. The names, addresses and Original Contributions
of the Partners shall be set forth on Exhibit 1 attached hereto, which exhibit
shall be updated by the Managing General Partner as Partners are admitted to or
withdraw from the Partnership, by amendments to this Agreement. A current copy
of Exhibit 1 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.
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 Amended and
Restated Agreement of Limited Partnership as of the date first above written.
GENERAL PARTNERS:
CAPTEC FRANCHISE CAPITAL CORPORATION IV
By:
----------------------------------------
Patrick L. Beach
President and
Chief Executive Officer
----------------------------------------
Patrick L. Beach
INITIAL LIMITED PARTNER:
By:
----------------------------------------
Patrick L. Beach
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EXHIBIT 1
NAMES, ADDRESSES AND ORIGINAL INVESTMENTS OF THE PARTNERS
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EXHIBIT 2
---------
DISTRIBUTION REINVESTMENT PLAN
Capitalized terms contained herein shall have the same meanings set
forth in the Agreement unless otherwise defined or the context otherwise
indicates.
1. As agent for the participants in the Distribution Reinvestment Plan
(the "Participants"), the Partnership or an unaffiliated third party will apply
all distributions of Cash Flow during the offering period paid with respect to
Units (the "Distributions"), including distributions paid with respect to any
full or fractional Units acquired under the Distribution Reinvestment Plan, to
the purchase of Units for said Participants directly, if permitted under state
securities laws and, if not, through participating dealers registered in the
Participant's state of residence (either being referred to herein as the
"Reinvestment Agent") as hereunder described.
A participating dealer, or in the event there is no
participating dealer, the Partnership, assumes the responsibility for Blue Sky
compliance and performance of due diligence responsibilities and will ascertain
whether the Participants continue to meet the suitability standards of their
state of residence with respect to each reinvestment. Additionally, the
Participating Dealers involved in the Distribution Reinvestment Plan must obtain
in writing an agreement from the client by which the client agrees to the
payment of compensation to the Participating Dealer in connection with said
client's reinvestment.
Units will be purchased at the public offering price and
commissions equal to 8% of the Unit purchase price will be paid to the
Participating Dealer who originated the Participant's investment in the
Partnership. In addition, the General Partners or an Affiliate will be paid the
Non-Accountable Expense Allowance. In connection with the receipt of such
commissions, Participating Dealers will be required, at least annually, to
review the performance of the Partnership, the General Partners and their
affiliates to determine whether continued participation in the Plan is
consistent with their clients' investment intent and to affirmatively determine
whether continued participation is suitable for their clients.
Subsequent to the sale of the Minimum Number of Units and
prior to the Termination Date, Distributions paid by the Partnership will be
reinvested in Units for the Participants promptly following the payment date
with respect thereto and in no event later than 60 days from such receipt to the
extent such Distributions are available or distributed to the Limited Partners
at the public offering price to the extent Units are available. All such
investments of Distributions in Units will be effected by amendment of the
Partnership Agreement to reflect the issuance of additional Units to
Participants. Distributions, if any, will be timed to coordinate with scheduled
amendments of the Partnership Agreement such that no Distributions are held
pending investment in Units pursuant to the Distribution Reinvestment Plan. If a
Participant's Distribution is not large enough to buy a full Unit, he will be
issued a fractional Unit, computed to five decimal places. Participants will not
be permitted to contribute amounts in excess of their Distributions to purchase
Units under the
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Distribution Reinvestment Plan. If sufficient Units for all Participants are not
available, the Partnership will allocate available Units (or fractional Units)
to Participants' accounts on a pro rata basis.
2. Limited Partners may become Participants in the Distribution
Reinvestment Plan at any time by completing the appropriate authorization form
available from the Partnership. Participation in the Distribution Reinvestment
Plan will start with the next Distribution payable after receipt of a
Participant's authorization, provided it is received before the record date for
that Distribution.
3. The Partnership shall have no responsibility or liability as to the
value of the Partnership's Units or may change the value of the Units acquired
for a Participant's account or as to the rate of return or value of the
interest-bearing accounts or securities in which a Participant's Distributions
may be invested.
4. The Partnership will distribute to Participants proxy solicitation
materials, if any, which relate to Units held in the Distribution Reinvestment
Plan and the voting procedures will comply with the Partnership Agreement.
5. The Partnership will mail to each Participant a statement and
accounting showing the Distributions received, the number of Units purchased, as
soon as practicable after all Distributions paid on any payment date with
respect thereto have been invested. Tax information for income earned on Units
and the investment of funds under the Distribution Reinvestment Plan for the
calendar year will be sent to each Participant by the Partnership.
6. No Participant shall have any right to draw checks or drafts against
his account or to give instructions to the Partnership except as expressly
provided herein.
7. Participants will be charged for ministerial services incurred
in connection with the administration of the Distribution Reinvestment Plan.
8. Taxable Participants may incur a tax liability for Partnership
income allocated to them even though they have elected not to receive their
Distributions in cash but rather to have their Distributions held in their
account under the Distribution Reinvestment Plan.
9. A Participant may terminate an account at any time, without charge,
by written notice to the Partnership at 24 Frank Lloyd Wright Drive, P.O. Box
544, Ann Arbor, Michigan 48106-0544, or such other address as may be specified
by the Partnership. To be effective for any Distribution, such notice must be
received at least 10 days before the record date for such payment. The
Partnership may terminate a Participant's individual participation in the
Distribution Reinvestment Plan or the Distribution Reinvestment Plan itself at
any time by written notice mailed to a Participant, or to all Participants, as
the case may be, at the address or addresses shown on their account. Upon
termination of the Distribution Reinvestment Plan, or upon termination of an
individual Participant's involvement in the Distribution Reinvestment Plan, the
Partnership will send to each Participant certificates evidencing the Units in
such Participant's account.
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If a Participant disposes of all Units registered on the books
of the Partnership in his name, the Partnership will, by written notice mailed
to the Participant, determine from the Participant the disposition to be made of
the Units in the Participant's account with the Partnership. If the Partnership
does not receive instructions from the Participant within 60 days of such
notice, it may, in its discretion, terminate the Participant's further
participation in the Distribution Reinvestment Plan or continue to reinvest the
Distributions paid in respect of the Units in the account until otherwise
notified in writing.
10. The Partnership shall not be liable for any act done in good faith,
or for any good faith omission to act, including, without limitation, any claims
of liability: (a) arising out of failure to terminate a Participant's account
upon such Participant's death prior to receipt of notice in writing of such
death and (b) with respect to the time and the prices at which Units are
purchased or sold for a Participant's account.
11. Each Participant agrees to notify the Partnership promptly in
writing of any change of address. Notices to the Participant may be given by
letter addressed to the Participant at his last address of record with the
Partnership.
12. These terms and conditions of the Distribution Reinvestment Plan
may be amended or supplemented by the General Partners in their sole discretion
at any time by mailing an appropriate notice at least 30 days prior to the
effective date thereof to each Participant at his last address of record. Such
amendment or supplement shall be deemed conclusively accepted by each
Participant except those Participants from whom the Partnership receives written
notice of termination prior to the effective date thereof.
13. This Distribution Reinvestment Plan and a Participant's election to
participate in the Distribution Reinvestment Plan shall be governed by the laws
of the State of Delaware. The Partnership may terminate the Distribution
Reinvestment Plan by giving 10 days prior written notice to each Participant at
his last address of record. Notwithstanding the foregoing, the Distribution
Reinvestment Plan will terminate concurrently with the Offering.
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