EXHIBIT 10.7
SECOND AMENDED AND RESTATED
IRVINE APARTMENT MANAGEMENT COMPANY
PARTNERSHIP AGREEMENT
TABLE OF CONTENTS
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ARTICLE I
FORMATION OF PARTNERSHIP
1.1 Defined Terms.......................................................................1
1.2 Formation and Effective Date of Agreement...........................................5
1.3 Name and Principal Place of Business................................................5
1.4 Agreement...........................................................................5
1.5 Business............................................................................5
1.6 Term................................................................................6
ARTICLE II
PARTNERS
2.1 Limited Liability...................................................................6
2.2 Current Partners....................................................................6
2.3 Admission of Substitute Partners....................................................6
2.4 Resignation or Withdrawal of a Partner..............................................6
2.5 Transactions with the Partnership...................................................6
2.6 Partners Are Not Agents; No Management Authority....................................6
ARTICLE III
CONTRIBUTIONS TO CAPITAL
3.1 Capital Contributions...............................................................7
3.2 Additional Contributions............................................................7
3.3 AMC Loan............................................................................7
3.4 Third Party Financing...............................................................7
3.5 Interest............................................................................7
ARTICLE IV
MANAGEMENT OF THE PARTNERSHIP
4.1 Managing General Partner............................................................8
4.2 Certain Actions Requiring Approval of TIC...........................................9
4.3 No Compensation....................................................................10
4.4 Amendment of Filings...............................................................10
4.5 Annual Business Plan and Annual Budget.............................................10
ARTICLE V
NOTICES
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5.1 Notices............................................................................10
5.2 Waiver of Notice...................................................................10
ARTICLE VI
ACCOUNTING AND RECORDS
6.1 Financial and Tax Reporting........................................................11
6.2 Supervision; Inspection of Books...................................................11
6.3 Reliance on Records and Books of Account...........................................11
6.4 Tax Returns........................................................................12
6.5 Bank Accounts......................................................................12
6.6 Accounting Decisions and Reliance on Others........................................12
6.7 Tax Matters for the Partnership Handled by Tax Matters Partner.....................12
ARTICLE VII
ALLOCATIONS
7.1 Allocation of Net Income or Net Loss...............................................12
7.2 Special Tax Provisions.............................................................12
ARTICLE VIII
DISTRIBUTIONS
8.1 Distributions......................................................................13
8.2 Distributions in Kind..............................................................14
8.3 Restriction on Distributions and Withdrawals.......................................14
8.4 No Other Withdrawals...............................................................14
ARTICLE IX
TRANSFER OF PARTNERSHIP INTERESTS
9.1 Transfer...........................................................................15
9.2 Rights of Assignees................................................................15
ARTICLE X
INDEMNIFICATION AND LIMITATION OF LIABILITY
10.1 Indemnification....................................................................15
10.2 Limitation of Liability............................................................16
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ARTICLE XI
TERMINATION; DEFAULT
11.1 Termination........................................................................17
11.2 Authority to Wind Up...............................................................17
11.3 Winding Up and Certificate of Dissolution..........................................17
11.4 Distribution of Assets.............................................................17
11.5 Deficit Capital Account............................................................18
11.6 Default............................................................................18
11.7 No Action for Dissolution..........................................................19
ARTICLE XII
INTENTIONALLY DELETED
ARTICLE XIII
MISCELLANEOUS
13.1 Amendment..........................................................................19
13.2 Withholding Taxes..................................................................19
13.3 Further Assurances.................................................................19
13.4 Binding Effect.....................................................................20
13.5 Governing Law......................................................................20
13.6 Entire Agreement...................................................................20
13.7 Counterparts.......................................................................20
13.8 Parties in Interest................................................................20
13.9 Pronouns; Statutory References.....................................................20
13.10 Headings...........................................................................20
13.11 Interpretation.....................................................................20
13.12 References to this Agreement.......................................................20
13.13 Exhibits...........................................................................20
13.14 Severability.......................................................................20
13.15 Attorney Fees......................................................................21
13.16 Time is of the Essence.............................................................21
13.17 Remedies Cumulative................................................................21
13.18 Confidentiality and Publicity......................................................21
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SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF
IRVINE APARTMENT MANAGEMENT COMPANY
THIS SECOND AMENDED AND RESTATED PARTNERSHIP AGREEMENT (this
"AGREEMENT") is entered into effective as of March 30, 2001, by and between
APARTMENT MANAGEMENT COMPANY, LLC, a Delaware limited liability company ("AMC"),
and THE IRVINE COMPANY, a Delaware corporation ("TIC").
R E C I T A L S
WHEREAS, AMC and WESTERN NATIONAL SECURITIES d/b/a WESTERN
NATIONAL PROPERTY MANAGEMENT, a California corporation ("WNPM") are parties to
that certain Partnership Agreement of Irvine Apartment Management Company dated
as of March 12, 1998, as amended by that certain First Amendment to Partnership
Agreement of Irvine Apartment Management Company dated as of June 21, 1999
between AMC and WNPM (as amended, the "ORIGINAL PARTNERSHIP AGREEMENT").
WHEREAS, AMC and WNPM are parties to that certain Amended and
Restated Partnership Agreement of Irvine Apartment Management Company dated as
of January 1, 2000, (the "RESTATED PARTNERSHIP AGREEMENT") which amended and
restated the Original Partnership Agreement in its entirety.
WHEREAS, pursuant to that certain Purchase and Sale Agreement for
Partnership Interest dated as of March 30, 2001, TIC shall purchase on the
Effective Date (as hereafter defined) a twenty-five percent (25%) Partnership
Interest (as hereafter defined) in the Partnership (as hereafter defined) from
WNPM, constituting all of WNPM's Partnership Interest in the Partnership.
WHEREAS, AMC and TIC desire to amend and restate the Restated
Partnership Agreement in its entirety to provide for the governance, management
and operation of the Partnership from and after the date of this Agreement, and
to provide for certain other matters, all as more particularly described in this
Agreement, which amendment and restatement will be effective as of March 30,
2001 (the "EFFECTIVE DATE").
NOW, THEREFORE, with reference to and in reliance on the
foregoing Recitals, which Recitals are hereby incorporated into this Agreement,
and in consideration of the respective covenants and agreements of the parties
set forth herein, the parties hereby amend and restate in its entirety the
Restated Partnership Agreement as of the Effective Date and, from and after the
Effective Date, the Partnership shall be governed by the following provisions:
ARTICLE I
FORMATION OF PARTNERSHIP
1.1 DEFINED TERMS: When used in this Agreement, the following
terms have the meanings set forth below:
"ACT" means the general partnership laws of the State of
California, as amended from time to time.
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"ACCOUNTING PERIOD" means the period beginning on the 1st of
January and ending on the 31st of December; provided, however, a new Accounting
Period will commence on any date on which an additional or Substitute Partner is
admitted to the Partnership or a Partner ceases to be a Partner for any reason.
"AFFILIATE" means any Person directly or indirectly controlling,
controlled by, or under common control with another Person. The term "control,"
as used in the immediately preceding sentence, means, with respect to a
corporation or limited liability company the right to exercise, directly or
indirectly, fifty percent (50%) or more of the voting rights attributable to the
controlled corporation or limited liability company, and, with respect to any
other Person, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled entity
whether by contract or otherwise.
"AGREEMENT" means this Amended and Restated Partnership
Agreement, as the same may be amended from time to time.
"ASSETS" means all apartment projects owned by IAC or TIC during
the term of the Property Management Agreements and located in California, and,
at the respective election of IAC or TIC, in each's sole and absolute discretion
and without any obligation to do so, any other apartment projects owned by IAC
or TIC during the term of the Property Management Agreements.
"ASSIGNEE" means a transferee of all or any portion of a
Partner's Partnership Interest who has not been admitted as a Substitute
Partner.
"BANKRUPTCY" means with respect to any Person: (a) the filing of
an application by a Partner for, or such Partner's consent to, the appointment
of a trustee, receiver, or custodian of such Partner's other assets; (b) the
entry of an order for relief with respect to a Partner in proceedings under the
United States Bankruptcy Code, as amended or superseded from time to time; (c)
the making by a Partner of a general assignment for the benefit of creditors;
(d) the entry of an order, judgment, or decree by any court of competent
jurisdiction appointing a trustee, receiver, or custodian of the assets of a
Partner unless the proceedings and the person appointed are dismissed within
ninety (90) days; or (e) the failure by a Partner generally to pay such
Partner's debts as the debts become due within the meaning of Section 303(h)(1)
of the United States Bankruptcy Code, as determined by a bankruptcy court, or
the admission in writing of such Partner's inability to pay its debts as they
become due.
"BUDGET" means an operating budget for the Partnership prepared
by the officers of the Partnership and approved by the Managing General Partner,
and any revisions thereto approved by the Managing General Partner.
"BUSINESS PLAN" means the annual business plan for the
Partnership prepared by Managing General Partner and any revisions thereto.
"CAPITAL ACCOUNT" means a capital account for each Partner which
is equal to the:
(i) the amount of such Partner's capital contributions as
of the Effective Date; increased by
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(ii) the aggregate capital contributions made, or deemed
to be made, by such Partner after the Effective Date; increased by
(iii) all items of income and gain allocated to such
Partner; decreased by
(iv) the amount of cash (or agreed value of property) of
cash or property distributions made, or deemed to be made, to such
Partner; and decreased by
(v) all items of deduction or loss allocated to such
Partner.
"CERTIFICATE" means the Statement of Partnership recorded as
Instrument No. 19980152318 in the Official Records of Orange County, California
and as Instrument No. 1998-6752629 in the Official Records of San Diego County,
California, as amended by that certain First Amendment to Certificate of
Partnership (Orange County) and by that certain First Amendment to Certificate
of Partnership (San Diego), each recorded respectively in the Official Records
of Orange and San Diego Counties, and as amended from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
"FISCAL YEAR" means the period from July 1st to June 30th of each
year, or as otherwise required by law. The tax returns shall be filed on a
calendar year basis, unless otherwise required by law or determined by the Tax
Matters Partner.
"IAC" means Irvine Apartment Communities, L.P., a Delaware
limited partnership.
"MANAGING GENERAL PARTNER" means AMC, or any successor appointed
in accordance with the terms of this Agreement.
"NET CASH FLOW FROM OPERATIONS" means, for any period, the gross
revenue actually received by the Partnership during such period, minus (1) all
costs of operation of the Partnership actually incurred during such period, (2)
such reserves as are necessary to meet future obligations, including, without
limitation, contingent obligations, and (3) amounts then due and payable with
respect to any loans made to the Partnership by third Persons.
"NET INCOME OR NET LOSS" means for any Accounting Period the
amount computed on an accrual basis as of the last day thereof of the net income
or loss computed under federal income tax principles and as adjusted pursuant to
the Treasury Regulations promulgated under Section 704(b) of the Code.
"PARTNER" means each Person who (a) is an initial signatory to
this Agreement, has been admitted to the Partnership as a Partner in accordance
with the Certificate or this Agreement or is a Substitute Partner and (b) has
not resigned, withdrawn, been expelled or dissolved.
"PARTNERSHIP" means the California general partnership formed by
the Original Partnership Agreement as amended and restated.
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"PARTNERSHIP INTEREST" means the rights of a Partner in the
Partnership, including the Partner's economic interest, any right to vote or
participate in management, and any right to information concerning the business
and affairs of the Partnership. All Partnership Interests are personal property.
"PARTNERSHIP PERCENTAGE" means the percentage ownership of a
Partner in the Partnership. As of the Effective Date, the Partnership Percentage
of AMC is seventy-five percent (75%) and the Partnership Percentage of TIC is
twenty-five percent (25%).
"PERSON" means a natural person, partnership (whether general or
limited), limited liability company, trust, estate, association, corporation,
custodian, nominee or any other individual or entity in its own or
representative capacity.
"PRIME RATE" means a rate of interest equal to the "prime rate"
announced, from time to time, by Bank of America NT & SA. For purpose of
calculating interest under this Agreement, the Prime Rate will change when and
as Bank of America announces a change in its prime rate.
"PROPERTY MANAGEMENT AGREEMENTS" means collectively, (i) that
certain Amended and Restated Property Management Agreement between IAC and the
Partnership providing for the management and operation of the Assets owned by
IAC, as amended from time to time, and (ii) that certain Property Management
Agreement between TIC and the Partnership providing for the management and
operation of the Assets owned by TIC, as amended from time to time.
"SUBSTITUTE PARTNER" means an Assignee who has been admitted to
all the rights of membership pursuant to this Agreement.
"TAX MATTERS PARTNER" is AMC or any successor appointed in
accordance with the terms of this Agreement.
"TREASURY REGULATIONS" means regulations issued pursuant to the
Code.
1.2 FORMATION AND EFFECTIVE DATE OF AGREEMENT. The Partners have
formed a general partnership pursuant to the provisions of the Act. The Partners
agree to execute all documents and to undertake all other acts, as reasonably
may be deemed necessary by any Partner, in order to comply with the requirements
of the laws of the State of California (and all other applicable jurisdictions)
for the formation, continuation, registration, qualification and operation of a
partnership in accordance with and subject to the terms of this Agreement. The
rights and liabilities of the Partners will be determined pursuant to the Act
and this Agreement. To the extent the rights or obligations of any Partner are
different by reason of any provision of this Agreement than they would be in the
absence of such provision, this Agreement will control to the extent permitted
by the Act. The relationship of the parties under this Agreement shall commence
on the effective date hereof, and the Partnership shall dissolve and terminate
in accordance with the provisions of this Agreement.
1.3 NAME AND PRINCIPAL PLACE OF BUSINESS. Unless and until
amended in accordance with this Agreement and the Act, the name of the
Partnership is "IRVINE APARTMENT MANAGEMENT COMPANY" The business of the
Partnership may be conducted under that name or, upon compliance with applicable
laws, any other name that the Managing General Partner
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deems appropriate or advisable. The principal place of business of the
Partnership in California is 43 Discovery, Xxxxxx, Xxxxxxxxxx 00000, or in such
other place or places as the Managing General Partner from time to time
determines. Upon the effective date of the Original Partnership Agreement, the
Partners signed, filed and published in the appropriate manner a Certificate of
Fictitious Name as required by Sections 17900 and 17930 of the California
Business and Professions Code, and signed, acknowledged and recorded a
Certificate of Partnership in the Official Records of Orange County, San Diego
County and in every other County in which the Partnership does business. The
Managing General Partner shall file any other filings, and any amendments
thereto, that it considers appropriate or advisable.
1.4 AGREEMENT. For and in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Partners executing this
Agreement hereby agree to the terms and conditions of this Agreement, as it may
from time to time be amended. It is the express intention of the parties hereto
that this Agreement be the sole statement of agreement between or among them
with respect to the Partnership from and after the Effective Date. The Restated
Partnership Agreement shall govern the rights, obligations and liabilities of
the Partners for the period prior to the Effective Date, and any
indemnifications provided for in the Restated Partnership Agreement (and any
guaranties thereof) with respect to claims that accrued prior to the Effective
Date shall survive the amendment and restatement of the Restated Partnership
Agreement.
1.5 BUSINESS. The sole purpose of the Partnership is to manage,
operate and lease the Assets for the benefit of IAC and TIC, as the owners of
the Assets, pursuant to the terms of the Property Management Agreements, and to
do any and all acts and things necessary, appropriate, proper, advisable,
incidental to or convenient for the furtherance and accomplishment of the
business, objectives, and purposes herein set forth. The Partnership shall
conduct no other business.
1.6 TERM. The Partnership was formed on March 12, 1998. Unless
the Partners otherwise agree and absent a termination by a Partner upon the
occurrence of an Event of Default, the term of the Partnership will continue
until the expiration or earlier termination of the term of the Property
Management Agreements and for so long thereafter as the Partners may determine,
in their reasonable discretion, is in the best interests of the Partnership and
its Partners, but in no event beyond December 31, 2018, unless all of the
Partners otherwise agree.
ARTICLE II
PARTNERS
2.1 LIMITED LIABILITY. Except as required under the Act or as
expressly set forth in this Agreement, no Partner is personally liable for any
debt, obligation, or liability of the Partnership, whether that liability or
obligation arises in contract, tort, or otherwise.
2.2 CURRENT PARTNERS. The Current Partners of the Partnership are
AMC and TIC.
2.3 ADMISSION OF SUBSTITUTE PARTNERS. Notwithstanding any other
provision of this Agreement, no Assignee of a Partnership Interest may be
admitted as a Substitute Partner without the prior written consent of all of the
Partners. If so admitted, the Substitute Partner will have all the rights and
powers and will be subject to all the restrictions and liabilities of the
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Partner that originally assigned the Partnership Interest. The admission of a
Substitute Partner does not release any Partner from liability to the
Partnership that may have existed prior to such substitution.
2.4 RESIGNATION OR WITHDRAWAL OF A PARTNER. Except as otherwise
specifically required by the Act or this Agreement, and subject to the
provisions for transfer contained in Article X, no Partner may resign or
withdraw from membership in the Partnership or withdraw its interest in the
capital of the Partnership.
2.5 TRANSACTIONS WITH THE PARTNERSHIP. A Partner may not lend
money to or transact business with the Partnership except in accordance with the
terms of this Agreement.
2.6 PARTNERS ARE NOT AGENTS; NO MANAGEMENT AUTHORITY. Pursuant to
this Agreement and the Certificate, the sole and exclusive right and authority
to manage the business and affairs of the Partnership is vested in the Managing
General Partner. Except as expressly authorized by this Agreement or expressly
required by the Act, no Partner shall be an agent of the Partnership nor shall
any Partner have the power or authority to bind or execute any instrument on
behalf of the Partnership. The Partners have no power to participate in the
management of the Partnership except as expressly authorized by this Agreement
or the Certificate and except as expressly required by the Act.
ARTICLE III
CONTRIBUTIONS TO CAPITAL
3.1 CAPITAL CONTRIBUTIONS. As of the Effective Date, AMC's
Capital Contributions total Seventy-Five Thousand Dollars ($75,000) and TIC's
Capital Contributions total Twenty-Five Thousand Dollars ($25,000).
3.2 ADDITIONAL CONTRIBUTIONS. No Partner is required to
contribute or loan additional capital to the Partnership. No third party shall
have the right under any circumstances to require a Partner to make any
additional capital contributions to the Partnership.
3.3 PARTNER LOAN. If additional capital is needed in order to
enable the Partnership to meet its existing or anticipated obligations, or if
excess capital is available, AMC or TIC may elect, in its sole and absolute
discretion and without any obligation to do so, to make a loan (a "PARTNER
LOAN") to the Partnership, or the Partnership may make a loan to the Partner, on
such terms and conditions as are reasonably acceptable to AMC or TIC. Each
Partner Loan must be repaid prior to any distributions to the Partners pursuant
to this Agreement.
3.4 THIRD PARTY FINANCING. If AMC and TIC elect not to make a
Partner Loan, subject to the provisions of Section 4.2, the Partnership may
obtain third party financing on such terms and conditions as are acceptable to
the Managing General Partner.
3.5 INTEREST. Except as provided in this Article III, no Partner
is entitled to any interest with respect to any contributions to the
Partnership.
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ARTICLE IV
MANAGEMENT OF THE PARTNERSHIP
4.1 MANAGING GENERAL PARTNER. The Managing General Partner has
the sole and exclusive power, authority and control of all management powers
relating to the operations of the Partnership. Without in any way limiting the
foregoing and for purposes of illustration and not limitation, the Managing
General Partner has the sole power and authority to authorize and approve the
following matters:
(a) The organizational structure of the Partnership, including,
without limitation, the number of staff positions and general job descriptions
for each position.
(b) Hiring and firing of the president or any vice president of
the Partnership;
(c) Compensation (including annual bonuses, if any) for the
president and any vice president or any area manager of the Partnership and
payroll schedules reflecting a range of compensation for all other positions;
(d) Any subcontract with a Partner or an Affiliate of a Partner
entered into pursuant to the Property Management Agreements and any annual
renewal of any such subcontract;
(e) Any determination to accept a Partner Loan;
(f) Any Business Plan;
(g) Intentionally Deleted;
(h) Adjusting, settling or compromising any claim against the
Partnership;
(i) The sale, transfer or other conveyance of any Partnership
property unless contemplated in the then current Business Plan;
(j) The incurrence, directly or indirectly, of any non-recourse
debt;
(k) Entering into any contracts other than the Property
Management Agreements and contracts contemplated in the current Budget or
Business Plan;
(l) Instituting any litigation other than as contemplated in the
Property Management Agreements;
(m) Filing Bankruptcy or otherwise seeking relief under any
insolvency laws; and
(n) The termination and liquidation of the Partnership following
a termination or expiration of the Property Management Agreements.
4.2 CERTAIN ACTIONS REQUIRING CONSENT OF TIC. Notwithstanding the
provisions of Section 4.1, the Managing General Partner may not take any of the
following actions without the approval of TIC:
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(a) The incurrence, directly or indirectly, of any recourse debt;
(b) The admission of new Partners and Substitute Partners; and
(c) A change in the business purpose of the Partnership as set
forth in Section 1.6 or ceasing to do business prior to the expiration of the
Property Management Agreements.
4.3 NO COMPENSATION. No Partner, including, without limitation,
the Managing General Partner, is entitled to any compensation or overhead in
connection with any services provided to the Partnership by such Partner.
4.4 AMENDMENT OF FILINGS. The Managing General Partner has the
duty and authority to amend all filings of the Partnership as and to the extent
necessary to reflect any and all changes or corrections necessary or appropriate
as a result of any action taken in accordance with the terms of this Agreement.
4.5 ANNUAL BUSINESS PLAN AND ANNUAL BUDGET. At least sixty (60)
days before the beginning of each Fiscal Year, the Managing General Partner
shall prepare a proposed draft Business Plan and the officers shall prepare and
submit to the Managing General Partner for its review and approval a proposed
draft operating Budget. The draft Budgets must be consistent with the proposed
Business Plan submitted by the Managing General Partner. If for whatever reason
the Managing General Partner has not, by the beginning of a Fiscal Year,
approved a Budget for such Fiscal Year, then the officers of the Partnership
shall continue the operation of the Partnership in the ordinary course pending
approval of a Budget for the then current Fiscal Year. For this purpose, the
"ordinary course" means taking such actions and making such necessary
expenditures as, in the good faith judgment of such officers, are necessary in
order to preserve and protect the Partnership's assets and honor existing
commitments of the Partnership.
ARTICLE V
NOTICES
5.1 NOTICES. Whenever, under the provisions of the Act or this
Agreement, notice is required to be given to any Partner, such notice shall be
given in writing addressed to the Partner at its address as it appears on the
records of the Partnership, and will be deemed effectively given upon personal
delivery, confirmation of receipt of delivery by facsimile, or three (3) days
after deposit in the United States mail, by registered or certified mail, return
receipt requested.
5.2 WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the Act or this Agreement, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, will be deemed equivalent thereto.
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ARTICLE VI
ACCOUNTING AND RECORDS
6.1 FINANCIAL AND TAX REPORTING. The Managing General Partner
shall prepare financial statements in accordance with generally accepted
accounting principles as from time to time in effect and shall prepare the
Partnership's income tax information returns using such methods of accounting
and tax year as Managing General Partner and Tax Matters Partner deem necessary
or appropriate under the Code and Treasury Regulations. Managing General Partner
shall submit for the review and approval by AMC (and Tax Matters Partner if
other than AMC) a draft of the Partnership's income tax information returns no
later than March 15th of the following year and a final version of the
Partnership's income tax information returns incorporating any comments that AMC
(and Tax Matters Partner, if other than AMC) may have no later than March 31st
of the following year.
6.2 SUPERVISION; INSPECTION OF BOOKS.
(a) Proper and complete books of account and records of the
business of the Partnership shall be kept under the supervision of the Managing
General Partner at the Partnership's principal office and at such other place as
designated by the Managing General Partner. The Managing General Partner shall
give notice to each Partner of any changes in the location of such books and
records. Such books and records must be open to inspection, audit and copying by
any Partner, or its designated representative, upon reasonable notice at any
time during business hours for any purpose reasonably related to the Partner's
Partnership Interest in the Partnership. Any information so obtained or copied
must be kept and maintained in strictest confidence except as required by law.
(b) Upon reasonable notice to the Managing General Partner given
within 90 days after the end of each calendar quarter, the other Partner, at its
sole cost and expense, or its representatives may perform such audit procedures
on the books and records of the Partnership as deemed appropriate by such other
Partner in its reasonable discretion. Managing General Partner shall cooperate
to the fullest extent possible and in a timely manner with any such audit, and
Managing General Partner shall not interfere with the performance of any audit
procedure. In no event may any such audit be performed more than four times in
each calendar year.
6.3 RELIANCE ON RECORDS AND BOOKS OF ACCOUNT. Any Partner may
rely in good faith upon the records and books of account of the Partnership and
upon such information, opinions, reports or statements presented to the
Partnership by the Managing General Partner, any of its Partners, officers,
employees or committees, or by any other person, as to matters the Partner
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Partnership, including information, opinions, reports or statements as to the
value and amount of the assets, liabilities, profits or losses of the
Partnership or any other facts pertinent to the existence and amount of assets
from which distributions to Partners might properly be paid.
6.4 TAX RETURNS. Managing General Partner shall, within ninety
(90) days after the end of each taxable year, file a federal income tax
information return and transmit to each Partner a schedule showing such
Partner's distributive share of the Partnership's income, deductions and
credits, and all other information necessary for such Partners timely to file
their
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respective federal income tax returns. Managing General Partner similarly shall
file, and provide information to the Partners regarding, all appropriate state
and local income tax returns.
6.5 BANK ACCOUNTS. The Managing General Partner shall maintain
the funds of the Partnership in one or more separate bank accounts in the name
of the Partnership, and shall not permit the funds of the Partnership to be
commingled in any fashion with the funds of any other Person.
6.6 ACCOUNTING DECISIONS AND RELIANCE ON OTHERS. Managing General
Partner shall make decisions as to accounting matters, except as otherwise
specifically set forth herein. The Managing General Partner may rely upon the
advice of the Partnership's accountants as to whether such decisions are in
accordance with accounting methods followed for federal income tax purposes.
6.7 TAX MATTERS FOR THE PARTNERSHIP HANDLED BY TAX MATTERS
PARTNER. The Tax Matters Partner shall from time to time cause the Partnership
to make such tax elections as it deems to be in the best interests of the
Partnership and the Partners. The Tax Matters Partner, as defined in Code
Section 6231, shall represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax
authorities, including resulting judicial and administrative proceedings, and
shall expend the Partnership funds for professional services and costs
associated therewith. Each Partner shall cooperate with the Tax Matters Partner
and agrees to do or refrain from doing anything reasonably requested by the Tax
Matters member with respect to any such proceedings. The Tax Matters Partner
shall oversee the Partnership's tax affairs in the overall best interests of the
Partnership. If for any reason the Tax Matters Partner can no longer serve in
that capacity or is no longer a Partner, the Managing General Partner may
designate another Partner to be the Tax Matters Partner.
ARTICLE VII
ALLOCATIONS
7.1 ALLOCATION OF NET INCOME OR NET LOSS. For each Accounting
Period, Net Income and Net Loss shall be allocated to the Partners in proportion
to the amounts distributed to such Partners pursuant to Section 8.1.
7.2 SPECIAL TAX PROVISIONS.
(a) Treatment as Partnership. The Partners expect and intend that
the Partnership be treated as a partnership for all federal income tax purposes.
Each Partner agrees that it (i) will not, on any federal, state, local or other
tax return, take a position inconsistent with such expectation and intent; (ii)
otherwise assert a position inconsistent with such expectation and intent; or
(iii) do any act or thing which could cause the Partnership to be treated as
other than a partnership for federal income tax purposes.
(b) Tax Allocations. Except as otherwise provided in this Article
VII, items of income, gain, loss or deduction recognized for income tax purposes
will be allocated in the same manner that the corresponding items entering into
the calculation of Net Income and Net Loss are allocated pursuant to this
Agreement.
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(c) Section 704(c) Adjustments. In accordance with Code Section
704(c) and the Treasury Regulations thereunder, items of income, gain, loss and
deduction with respect to an asset, if any, 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 value upon
contribution to the Partnership.
(d) Section 754 Election. A Code Section 754 election may be made
for the Partnership at the sole and absolute discretion of the Tax Matters
Partner. If an adjustment to the adjusted tax basis of any Partnership asset is
required under Code Section 734(b) or Code Section 743(b) pursuant to a Code
Section 754 election by the Partnership, subsequent allocations of tax items
shall reflect such adjustment consistent with the Treasury Regulations
promulgated under Sections 704, 734 and 743 of the Code.
(e) Allocations upon Transfers of Partnership Interests. If,
during an Accounting Period, a Partner transfers all or a portion of its
Partnership Interest to another Person in compliance with this Agreement, items
of Net Income and Net Loss, together with corresponding tax items, that
otherwise would have been allocated to the transferring Partner with regard to
such Accounting Period will be allocated between the transferring Partner and
the Substitute Partner in accordance with their respective Partnership
Percentages during the Accounting Period using any method permitted by Section
706 of the Code and selected by the Tax Matters Partner.
ARTICLE VIII
DISTRIBUTIONS
8.1 DISTRIBUTIONS. Net Cash Flow from Operations shall be
distributed, at such reasonable intervals (not less frequently than quarterly)
as are determined by the Managing General Partner, in the following order of
priority:
(a) First, to Partners with respect to any unpaid Partner Loan
until all principal and accrued interest on such Partner Loan is paid in full.
If, at the time any distribution is made pursuant to this Section 8.1(a), there
is more than one Partner Loan outstanding, payments of interest on, and the
principal amount of a Partner Loan shall be made in the reverse order in which
the Partner Loans were made. For example, the accrued but unpaid interest on the
outstanding Partner Loans at any time shall be paid first on the Partner Loan
made most recently to the date of the payment. Payments in connection with a
Partner Loan shall be made first, to pay all accrued but unpaid interest on such
Partner Loan and second, to pay the outstanding principal balances of such
Partner Loan.
(b) Second, to each Partner, pro rata in accordance with such
Partner's Partnership Percentage.
8.2 DISTRIBUTIONS IN KIND. All distributions shall be made in
cash or cash equivalents unless the Partners have approved a distribution of
assets in kind.
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8.3 RESTRICTION ON DISTRIBUTIONS AND WITHDRAWALS.
(a) Restriction on Distributions. The Partnership shall not make
any distribution to the Partners unless, immediately after giving effect to the
distribution, all liabilities of the Partnership, other than liabilities to
Partners on account of their interests in the Partnership and liabilities as to
which recourse of creditors is limited to specified property of the Partnership,
do not exceed the fair value of the Partnership assets. For purposes of the
preceding sentence, the fair value of any property that is subject to a
liability as to which recourse of creditors is so limited shall be included in
the Partnership assets only to the extent the fair value of the property exceeds
such liability.
(b) Restriction on Withdrawals. No Partner will be liable to the
Partnership for the amount of a distribution received if, at the time of the
distribution, such Partner did not know that the distribution was in violation
of this Section 8.3. A Partner that receives a distribution in violation of this
Section 8.3, and that knew at the time of the distribution that the distribution
violated such condition, will be liable to the Partnership for the amount of the
distribution.
8.4 NO OTHER WITHDRAWALS. Except as provided in this Article
VIII, no withdrawals or distributions are required or permitted.
ARTICLE IX
TRANSFER OF PARTNERSHIP INTERESTS
9.1 TRANSFER. Except as expressly provided to the contrary in
this Article IX, no Partner may transfer, sell, encumber, mortgage, assign or
otherwise dispose of all or any portion of its Partnership Interest
(hereinafter, a "TRANSFER") without the prior written consent of the other
Partner, which consent may be withheld in such Partner's sole and absolute
discretion. Any purported transfer of all or any portion of a Partner's
Partnership Interest in contravention of this Article IX is void and of no
effect to, on or against the Partnership, any Partner, any creditor of the
Partnership or any claimant against the Partnership.
9.2 RIGHTS OF ASSIGNEES. The Assignee of a Partnership Interest
has no right to vote or to participate in the management of the business and
affairs of the Partnership or to become a Partner. The Assignee is only entitled
to receive distributions and to be allocated the Net Profits and Net Losses
attributable to the Partnership Interest transferred to the Assignee.
ARTICLE X
INDEMNIFICATION AND LIMITATION OF LIABILITY
10.1 INDEMNIFICATION.
(a) Partners. To the fullest extent permitted by the Act and by
applicable law, the Partners and the partners, members, shareholders,
controlling Persons, officers, directors and employees of the Partners (herein
referred to as "INDEMNITEES") shall, in accordance with this Section 10.1 be
indemnified and held harmless by the Partnership from and against any and all
loss, claims, damages, liabilities, expenses, judgments, fines, settlements and
other amounts arising from any and all claims (including reasonable attorneys'
fees and expenses), demands,
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actions, suits or proceedings (civil, criminal, administrative or investigative)
(collectively, "CLAIMS") in which they may be involved, as a party or otherwise,
by reason of their management of, or involvement in, the affairs of the
Partnership, or rendering of advice or consultation with respect thereto, or
which relate to the Partnership, its properties, business or affairs, if such
Indemnitee acted in good faith and in a manner such Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Partnership,
and, with respect to any criminal proceeding, had no reasonable cause to believe
the conduct of such Indemnitee was unlawful. The termination of a proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not, of itself, create a presumption that the Indemnitee
did not act in good faith and in a manner which the Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Partnership or
that the Indemnitee had reasonable cause to believe that the Indemnitee's
conduct was unlawful (unless there has been a final adjudication in the
proceeding that the Indemnitee did not act in good faith and in a manner which
the Indemnitee reasonably believed to be in or not opposed to the best interests
of the Partnership; or that the Indemnitee did have reasonable cause to believe
that the Indemnitee's conduct was unlawful).
(b) Persons. The Partnership may also indemnify any Person who
was or is a party or is threatened to be made a party to any threatened,
pending, or completed action by or in the right of the Partnership to procure a
judgment in its favor by reason of the fact that such Person is or was an
officer, employee or agent of the Partnership, against expenses actually or
reasonably incurred by such Person in connection with the defense or settlement
of such action, if such Person acted in good faith and in a manner such Person
reasonably believed to be in, or not opposed to, the best interests of the
Partnership, except that indemnification shall be made in respect of any claim,
issue or matter as to which such Person has been adjudged to be liable for
misconduct in the performance of the Person's duty to the Partnership only to
the extent the court in which such action or suit was brought, or another court
of appropriate jurisdiction, determines upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
Person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper. To the extent the Person has been successful on
the merits or otherwise in defense of any proceedings referred to herein, or in
defense of any claim, issue or matter therein, the Person shall be indemnified
by the Partnership against expenses actually and reasonably incurred by the
Person in connection therewith. Notwithstanding the foregoing, no Person is
entitled to indemnification hereunder for any conduct arising from the gross
negligence or willful misconduct of such Person or reckless disregard in the
performance of its duties hereunder.
(c) Expenses. Expenses (including reasonable attorneys' fees and
expenses) incurred in defending any proceeding under Sections 10.1(a) or (b) may
be paid by the Partnership in advance of the final disposition of such
proceeding upon receipt of an undertaking by or on behalf of the Indemnitee to
repay such amount if it is ultimately determined that the Indemnitee is not
entitled to be indemnified by the Partnership as authorized hereunder.
(d) Exclusive Right. The indemnification provided by this Section
10.1 shall not be deemed to be exclusive of any other rights to which any Person
may be entitled under any agreement, or as a matter of law, or otherwise, both
as to action in a Person's official capacity and to action in another capacity.
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(e) Insurance. The Managing General Partner may purchase and
maintain insurance on behalf of the Partnership, any employees or agents of the
Partnership and any other Indemnitees at the expense of the Partnership, against
any liability asserted against or incurred by them in any such capacity whether
or not the Partnership would have the power to indemnify such Persons against
such liability under the provisions of this Agreement.
10.2 LIMITATION OF LIABILITY. Except as expressly required to the
contrary by the Act or other applicable law, (a) notwithstanding anything to the
contrary herein contained, the debts, obligations and liabilities of the
Partnership shall be solely the debts, obligations and liabilities of the
Partnership and (b) no Partners will be obligated personally for any such debt,
obligation or liability of the Partnership solely by reason of being a Partner
of the Partnership. Neither Partner has any obligation to make any capital
contribution to the Partnership in order to fund any indemnification obligation
described in Section 10.1.
ARTICLE XI
TERMINATION; DEFAULT
11.1 TERMINATION. The Partnership will be dissolved, its assets
disposed of and its affairs wound up upon the first to occur of the following:
(a) Expiration. The expiration of its stated term;
(b) Vote. The vote of the Partners;
(c) Judicial Dissolution. The entry of a decree of judicial
dissolution under the Act.
(d) Default. A non-defaulting Partner's election to terminate the
Agreement pursuant to Section 11.6 of the Agreement.
11.2 AUTHORITY TO WIND UP. Upon the occurrence of any event
specified in Section 11.1, the Partnership will continue solely for the purpose
of winding up its affairs in an orderly manner, liquidating its assets, and
satisfying the claims of its creditors. The Managing General Partner has all
necessary power and authority required to marshal the assets of the Partnership,
to pay its creditors, to distribute assets and otherwise wind up the business
and affairs of the Partnership. In particular, the Managing General Partner has
the authority to continue to conduct the business and affairs of the Partnership
insofar as such continued operation remains consistent with the orderly winding
up of the Partnership.
11.3 WINDING UP AND CERTIFICATE OF DISSOLUTION. The winding up of
the Partnership will be completed when all debts, liabilities and obligations of
the Partnership have been paid and discharged or reasonably adequate provision
therefore has been made, and all of the remaining property and assets of the
Partnership have been distributed. Upon the completion of winding up of the
Partnership, the Managing General Partner shall make all filings necessary to
terminate the existence of the Partnership.
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11.4 DISTRIBUTION OF ASSETS. Upon dissolution and winding up of
the Partnership, the affairs of the Partnership shall be wound up and the
Partnership liquidated. The assets of the Partnership shall be distributed as
follows in accordance with the Act:
(a) To third party creditors of the Partnership in the order of
priority provided by law; and
(b) To each Partner, pro rata in accordance with such Partner's
Partnership Percentage until each Partner's Capital Contribution has been
reduced to zero; and
(c) To AMC and TIC pro rata in accordance with their respective
Partnership Interests.
11.5 DEFICIT CAPITAL ACCOUNT. Upon liquidation of the
Partnership, each Partner shall look solely to the assets of the Partnership for
the return of such Partner's capital in the Partnership. Except as expressly
required to the contrary by the Act, no Partner is personally liable, either to
the other Partner or to any third Person, for a deficit capital account balance
of such Partner, it being expressly understood that the payment of the
Partnership's debts and the distribution of liquidation proceeds shall be made
solely from existing Partnership assets.
11.6 DEFAULT. The following each constitute an "EVENT OF DEFAULT"
under this Agreement.
(a) A material breach of a Partner's obligation under the
Agreement which continues for thirty (30) days after delivery of written notice;
or
(b) (i) Bankruptcy of a Partner; or
(ii) The entry of any order against any Partner decreeing
the dissolution of such Partner, which order is not vacated or
otherwise terminated within thirty (30) days;
(c) Fraud or willful misconduct by a Partner;
(d) Any attempted dissolution of the Partnership in violation of
Section 11.7;
(e) Any attempted withdrawal from the Partnership in violation of
this Agreement.
Upon the occurrence of an Event of Default, the non-defaulting Partner may elect
to either (1) purchase the defaulting Partner's Partnership Interest, for a
price equal to the lesser of such Partner's initial Capital Account balance or
then Capital Account balance, or (ii) to terminate the Agreement and liquidate
the Partnership, in the manner set forth in this Article XI. If the
non-defaulting Partner elects to purchase the defaulting Partner's Partnership
Interest, the non-defaulting Partner shall pay the price described in the
preceding sentence no later than ninety (90) days after delivery of a notice of
default. If the Event of Default is the result of the act or omission of the
Managing General Partner, such Managing General Partner shall be deemed to be
immediately removed from such position.
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11.7 NO ACTION FOR DISSOLUTION. Except as expressly permitted in
this Agreement, a Partner shall not take any voluntary action that directly
causes a dissolution of the Partnership. The Partners acknowledge that
irreparable damage would be done to the goodwill and reputation of the
Partnership if any Partner should bring an action in court to dissolve the
Partnership under circumstances where dissolution is not required by Section
11.1. This Agreement has been drawn carefully to provide fair treatment of all
parties and equitable payment in liquidation of the Partnership Interests.
Accordingly, each Partner hereby waives and renounces its right to initiate
legal action to seek the appointment of a receiver or trustee to liquidate the
Partnership or to seek a decree of judicial dissolution of the Partnership on
the ground that (a) it is not reasonably practicable to carry on the business of
the Partnership in conformity with the Certificate or this Agreement, or (b)
dissolution is reasonably necessary for the protection of the rights or
interests of the complaining Partner. Damages for breach of this Section 11.7
are monetary damages only (and not specific performance), and the damages may be
offset against distributions by the Partnership to which such Partner would
otherwise be entitled. Each Partner hereby irrevocably waives any right that it
may have to maintain any action for partition with respect to the property of
the Partnership during the term of the Partnership.
ARTICLE XII
INTENTIONALLY DELETED
ARTICLE XIII
MISCELLANEOUS
13.1 AMENDMENT. This Agreement may be amended only with the prior
written consent of both of the Partners.
13.2 WITHHOLDING TAXES. If the Partnership is obligated to
withhold and pay any taxes with respect to any Partner, any tax required to be
withheld may be withheld from any distribution otherwise payable to such
Partner, or in lieu thereof upon remittance to the appropriate tax authority may
be charged to that Partner's Capital Account as if the amount of such tax had
been distributed to such Partner.
13.3 FURTHER ASSURANCES. The Partners shall execute and deliver
any further instruments or documents and perform any additional acts that are or
may become necessary to effectuate and carry on the Partnership created by this
Agreement.
13.4 BINDING EFFECT. Subject to the restrictions on transfer set
forth in Article X, this Agreement is binding on and inures to the benefit of
the Partners and their respective permitted transferees, successors, assigns and
legal representatives.
13.5 GOVERNING LAW. The laws of the State of California,
including, without limitation, the Act, govern the organization and internal
affairs of the Partnership and the liability of the Partners of the Partnership.
13.6 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter herein.
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13.7 COUNTERPARTS. This Agreement may be executed in one (1) or
more counterparts with the same force and effect as if each of the signatories
had executed the same instrument.
13.8 PARTIES IN INTEREST. Except as expressly provided in the
Act, nothing in this Agreement confers any rights or remedies under or by reason
of this Agreement on any Persons other than the Partners and their respective
permitted successors and assigns, nor does anything in this Agreement relieve or
discharge the obligation or liability of any third Person to any party to this
Agreement, nor does any provision give any third Person any right of subrogation
or action over or against any party to this Agreement.
13.9 PRONOUNS; STATUTORY REFERENCES. All pronouns and all
variations thereof are deemed to refer to the masculine, feminine, or neuter,
singular or plural, as the context in which they are used may require. Any
reference to the Code, the Regulations, the Act, or other statutes or laws
includes all amendments, modifications or replacements of the specific sections
and provisions concerned.
13.10 HEADINGS. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
13.11 INTERPRETATION. If any claim is made by any Partner
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied because this
Agreement was prepared by or at the request of a particular Partner or its
counsel.
13.12 REFERENCES TO THIS AGREEMENT. Numbered or lettered
articles, sections and subsections herein contained refer to articles, sections
and subsections of this Agreement unless otherwise expressly stated.
13.13 EXHIBITS. All Exhibits attached to this Agreement are
incorporated and shall be treated as if set forth herein.
13.14 SEVERABILITY. If any provision of this Agreement or the
application of such provision to any person or circumstance is held invalid, the
remainder of this Agreement or the application of such provision to persons or
circumstances other than those to which it is held invalid will not be affected
thereby.
13.15 ATTORNEY FEES. If any dispute between the Partnership and
the Partners or among the Partners should result in litigation or arbitration,
the prevailing party in such dispute is entitled to recover from the other party
all reasonable fees, costs and expenses of enforcing any right of the prevailing
party, including, without limitation, reasonable attorneys' fees and expenses
and expert witness fees.
13.16 TIME IS OF THE ESSENCE. All dates and times in this
Agreement are of the essence.
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13.17 REMEDIES CUMULATIVE. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
entitled at law or in equity.
13.18 CONFIDENTIALITY AND PUBLICITY. The parties agree to keep
this transaction, this Agreement and any documents received from each other in
connection herewith confidential, except to the extent necessary to comply with
applicable law and regulations, or in order to carry out the obligations set
forth in this Agreement. No press release or other public disclosure may be made
by either party or any of its agents concerning this transaction without the
prior written consent of the other parties.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
APARTMENT MANAGEMENT COMPANY, LLC,
a Delaware limited liability company
By: Irvine Apartment Communities, L.P.,
a Delaware limited partnership
By: Irvine Apartment Communities, LLC
a Delaware limited liability company
its general partner
By:
-----------------------------------
Xxx Xxxxxxx
Its President
By:
-----------------------------------
Xxxxxx X. Xxxxx
Its Vice President & Controller
THE IRVINE COMPANY,
a Delaware corporation
By:
--------------------------------
Xxxxxxxx X. Xxxxxx
Executive Vice President
By:
--------------------------------
Xxxxx X. Xxxxx
Executive Vice President,
Investment Properties Group
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