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EXHIBIT 99.19
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CORPORATE PROPERTY ASSOCIATES 7
A CALIFORNIA LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, (the
"Partnership") which amends and restates the Agreement of Limited Partnership
dated as of April 10, 1986, as amended as of April 10, 1988 and ______, 1997, is
made and entered into as of the ____ day of ______, 1996 by and between ▇▇▇▇▇
DIVERSIFIED PROPERTIES LLC, a Delaware limited liability company, as General
Partner and as Limited Partner, ▇▇▇▇▇ MANAGEMENT LLC, as Corporate Special
Partner, ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as Individual Special Partner, and SEVENTH ▇▇▇▇▇
CORPORATE PROPERTY, INC., a Delaware corporation, as Limited Partner, those
persons set forth on Schedule A hereto, as Limited Partners, and all persons and
entities admitted as Limited Partners as provided herein.
ARTICLE I
FORMATION OF PARTNERSHIP
The parties hereby continue the Partnership under the provisions of the
California Revised Limited Partnership Act (the "Act") and the rights and
liabilities of the Partners shall be as provided in such law and as herein
expressly provided. In the event that it shall be necessary for the Partnership
to exist in or qualify to do business under the laws of any state or states
other than or in addition to the State of California, the parties hereby agree
that the Partnership shall take such action as may be necessary to exist or
qualify to do business in any state in which such existence or qualification
shall be required, provided that in any such event the Partnership shall at all
times continue to be a limited partnership formed under and governed by the
provisions of the Act.
ARTICLE II
NAME
The business of the Partnership shall be conducted under the name
"Corporate Property Associates 7 - a California limited partnership" or under
"Corporate Property Associates 7" in any state or other jurisdiction which does
not permit the term "limited" to be a part of the Partnership's name or under
such other name as the General Partner shall hereafter designate in writing to
the other Partners.
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ARTICLE III
DEFINITIONS
"Acquisition Expenses" means the expenses of the Partnership related to
the selection and acquisition of properties by the Partnership, whether or not
such properties are acquired, including but not limited to legal fees and
expenses, travel and communications expenses, costs of appraisals and fairness
letters, non-refundable option payments on property not acquired, accounting
fees and expenses, costs of title reports and title insurance, transfer and
recording taxes and miscellaneous expenses. Acquisition Expenses shall not
include Acquisition Fees.
"Acquisition Fees" means the total of all fees and commissions paid by
any party in connection with the purchase or development of property by the
Partnership, except a development fee paid to a person not an Affiliate of the
Partnership in connection with the actual development of a project after the
Partnership's acquisition of the land. Included in the computation of such fees
or commissions shall be any real estate commission, selection fee, development
fee (other than as described above), nonrecurring management fee, or any fee of
a similar nature, however designated, but not any loan fee ("points").
Acquisition Fees shall not include Acquisition Expenses.
"Act" means the California Revised Limited Partnership Act.
"Affiliate" means, with respect to any Partner, (i) any person directly
or indirectly controlling, controlled by or under common control with such
Partner, (ii) any person owning or controlling 10% or more of the outstanding
voting securities of such Partner, (iii) any officer, director or partner of
such Partner or of any person specified in (i) or (ii) above and (iv) any
company in which any officer, director or partner of any person specified in
(iii) above is an officer, director or partner; provided, however, that for
purposes of this definition the term "Affiliate" shall not be deemed to include
any person providing legal, underwriting or financial or investment advisory
services to the Partnership, the General Partner or any Affiliate of any of them
from time to time so long as those are the only services provided to the
Partnership by any such person and except that ▇▇▇▇▇ Financial Corporation shall
be deemed as Affiliate hereunder if it otherwise meets the above definition.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership as hereafter amended from time to time.
"Appraisal Date" means December 31, 2001.
"Appraised Value" means the value according to an appraisal made by an
independent qualified appraiser. Such qualification
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may be demonstrated by membership in a nationally recognized appraisal society
such as American Institute of Real Estate Appraisers ("M.A.I."), Society of Real
Estate Appraisers ("S.R.E.A.")or their equivalent, but is not limited thereto.
"Capital Account" means, in respect of any Partner, the account
maintained for such Partner in accordance with Article XII.
"Cash From Financings" means the net cash proceeds realized by the
Partnership from the financing of Partnership property or the refinancing of any
Partnership indebtedness.
"Cash From Sales" means the net cash proceeds realized by the
Partnership from the sale, exchange or other disposition of any of its assets.
Cash From Sales shall not include net cash proceeds realized from the financing
of Partnership property or the refinancing of any Partnership indebtedness.
"Code" means the Internal Revenue Code of 1986.
"Consolidation and Offering Expenses" means all expenses incurred in
connection with the formation and qualification of the Subsidiary Partnership,
the Merger and in offering the Shares to the former limited partners of the
Partnership in exchange for their Partnership Interests under applicable Federal
and state law, and any other expenses actually incurred and directly related to
the offering of the Shares, including such expenses as: (i) the preparing,
printing, filing and delivering of the Registration Statement and the Prospectus
(including any amendments thereof or supplements thereto), (ii) the preparing
and printing of this Agreement, other solicitation material and related
documents and the filing and/or recording of such certificates or other
documents necessary to comply with the laws of the State of California for the
formation of a limited partnership, the merger of a limited partnership into
another limited partnership and for the continued good standing of a limited
partnership, (iii) the qualification or registration of the limited liability
company interests under state securities or "Blue Sky" laws, (iv) any escrow
arrangements, including any compensation to an escrow agent, (v) the filing fees
payable to the United States Securities and Exchange Commission and to the
National Association of Securities Dealers, Inc. and any costs payable to the
New York Stock Exchange for the listing of the Listed Shares, (vi) the fees of
the Partnership's counsel, (vii) all advertising expenses incurred in connection
therewith, including the cost of all sales literature and the costs related to
investor and broker/dealer sales and information meetings and marketing
incentive programs and (viii) selling commissions and wholesaling expenses
incurred in connection with the sale of the Shares.
"Contribution" means any money, property or services rendered, or a
promissory note or other binding obligation to
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contribute money or property, or to render services as permitted by Section
15651 of the Act, which a Partner contributes to the Partnership as capital in
that Partner's capacity as Partner pursuant to this Partnership Agreement or any
other agreement among the Partners, including any agreement as to value.
"Corporate Special Partner" means ▇▇▇▇▇ Management LLC, a Delaware
limited liability company.
"CPA Partnership" means Corporate Property Associates, a California
limited partnership, Corporate Property Associates 2, a California limited
partnership, Corporate Property Associates 3, a California limited partnership,
Corporate Property Associates 4, a California limited partnership, Corporate
Property Associates 5, a California limited partnership, Corporate Property
Associates 6, a California limited partnership, Corporate Property Associates 8,
L.P., a Delaware limited partnership, Corporate Property Associates 9, L.P., a
Delaware Limited Partnership, the Partnership and any other real estate limited
partnerships sponsored by W.P. ▇▇▇▇▇ & Co., Inc. or its Affiliates with
investment objectives substantially similar to the Partnership's.
"Distributable Cash From Operations" means cash receipts from the
ordinary day-to-day operations of the Partnership (including all interest on
Partnership investments and mortgages held by the Partnership) without deduction
for the management fee authorized by Paragraph G (7) of Article X payable to an
Affiliate of the General Partner or for depreciation and amortization of
intangibles such as organization, underwriting and debt placement costs but
after deducting all other expenses and debt amortization and provisions for
reserves established by the General Partner which it deems to be reasonably
required for the proper operation of the business of the Partnership.
"Distributable Cash From Operations" shall not include cash proceeds realized
from the sale, exchange or other disposition of assets of the Partnership or
from financing of Partnership property or the refinancing of any Partnership
indebtedness.
"Distribution" means any transfer of money or property by the
Partnership to a Partner without consideration.
"Fiscal Quarter" means the three-month period ending on the last day of
the third, sixth, ninth and twelfth calendar months of each Fiscal Year of the
Partnership.
"Fiscal Year" means the Fiscal Year specified in Article XIII.
"Front-End Fees" means all fees and expenses paid by any party for any
services rendered in connection with the organizational or acquisition phase of
the Partnership, including Consolidation and Offering Expenses, Acquisition
Fees,
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Acquisition Expenses and any other similar fees, however designated.
"General Partner" means any person or entity in his, her or its
capacity as general partner of the Partnership and whose name and address are
set forth in Article V, or any successor thereto appointed or elected hereunder.
"Independent Advisor" means a long established, nationally recognized
investment banking firm, accounting firm, mortgage banking firm, accounting
firm, mortgage banking firm, bank, real estate financial consulting firm or
advisory firm which has a staff of real estate professionals, whose compensation
is determined and embodied in a written contract before an opinion is rendered
and who, directly or indirectly, has no interest in, nor any material business
or professional relationship with, the Partnership, the General Partner, a
borrower, or any of their Affiliates. No more than 5% of the aggregate annual
gross income of the Independent Advisor or its Affiliates may be attributable to
compensation paid to the Independent Advisor by the Partnership pursuant to the
advisory agreement.
"Independent Directors" means a director of the General Partner who, in
the opinion of the board of directors of the General Partner, is free from any
relationship that would interfere with the exercise of independent judgment. A
director of the General Partner who is an Affiliate of the General Partner or an
officer or employee of the General Partner or its subsidiaries or Affiliates
would not qualify as an Independent Director.
"Individual Special Partner" means ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Investment in Properties" means the amount of gross proceeds of the
Offering paid or allocated to the purchase, development, construction or
improvement of real property, appurtenances thereto and personal or mixed
property connected therewith, acquired by the Partnership, including the
purchase of properties, working capital reserves (except that working capital
reserves in excess of 5% of the gross proceeds of the Offering shall not be
included) and other cash payments such as interest, financing fees, taxes and
other similar items, but excluding Front-End Fees.
"Limited Partner" means any person or entity in his, her or its
capacity as a limited partner of the Partnership and whose name and address are
set forth on the books and records of the Partnership.
"Mandatory Distribution Event" means (a) the sale or disposition of a
Partnership property to a third party unaffiliated with the Partnership or the
General Partner, not including the pledge, mortgage or encumbrance of a
property, or of any interest therein, in connection with the financing,
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refinancing or other leveraging of such property or otherwise or any assignment
of any leases or rents related to such property, or (b) the mandatory
distribution to holders of Partnership Interests following the Appraisal Date.
"Merger" means the merger of the Subsidiary Partnership into the
Partnership.
"Merger Agreement" means the Agreement of Merger pursuant to which the
Subsidiary Partnership is merged with and into the Partnership.
"Minimum Gain" shall mean and refer to, at any time, the excess, if
any, of the outstanding principal balance of all nonrecourse debt of the
Partnership that is secured by an interest in Partnership assets, over the
adjusted basis of such assets to the Partnership for Federal income tax
purposes. For purposes of the preceding sentence, the term "nonrecourse debt"
shall mean a liability of the Partnership with respect to which no Partner has
any personal liability.
"Nonrecourse Deductions" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Treasury Regulations.
"Nonrecourse Liabilities" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
"Net Lease" means a lease in which the tenant undertakes to pay all or
substantially all the cash expenses, excluding debt service, related to the
leased property. "Offering" means the offering of the Shares made pursuant to
the Prospectus.
"Partner" means the General Partner, the Corporate Special Partner, the
Individual Special Partner and any Limited Partner where no distinction is
required by the context in which the term is used.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Debt
for the Partnership taxable year shall be determined in accordance with the
rules of Treasury Regulations Section 1.704-2(i)(2).
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"Partnership" means Corporate Property Associates 7 - a California
limited partnership.
"Partnership Interest" means the interest of each Partner in the
profits, losses, distributions, capital and assets of the Partnership.
"Partnership Minimum Gain" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum Gain, for a
Partnership taxable year shall be determined in accordance with the rules of the
Treasury Regulations.
"Prospectus" means the final prospectus of the General Partner pursuant
to which the Partnership will offer up to 32,640,879 Shares as the same may at
any time and from time to time be amended or supplemented after the effective
date of the Registration Statement.
"Proxy" means a written authorization signed by a Partner or the
Partner's attorney-in-fact giving another person the power to vote with respect
to the Partnership Interest of that Partner. "Signed," for the purpose of this
paragraph, means the placing of the Partner's name on the proxy (whether by
manual signature, typewriting, telegraphic transmission or otherwise) by the
Partner or the Partner's attorney-in-fact.
"Registration Statement" means the General Partner's Registration
Statement on Form S-4 filed with the Securities and Exchange Commission in the
form in which it becomes effective, as the same may at any time and from time to
time thereafter be amended or supplemented.
"Shares" means the Shares of the General Partner.
"Special Partners" means the Corporate Special Partner and the
Individual Special Partner.
"Subsidiary Partnership" means Seventh Subsidiary, L.P., a California
limited partnership, which is a subsidiary of the General Partner.
ARTICLE IV
PURPOSE
The business and purpose of the Partnership is to carry on any business
that a California partnership without limited partners may carry on (except the
banking, insurance or trust company business), and more particularly to invest
in and own real property or interests therein (including leasehold estates)
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or appurtenances thereto as well as personal or mixed property connected
therewith which is income producing or capable of becoming income producing
within a reasonable time after acquisition. The Partnership may enter into
ventures, partnerships and other business arrangements with respect to real
property and personal or mixed property connected therewith or interest therein
as deemed prudent by the General Partner in order to achieve successful
operations for the Partnership. Operations of the Partnership may be conducted
wherever, in the opinion of the General Partner and not in violation of the
general restrictions described in Paragraph H of Article X, the factors involved
appear to be favorable for the Partnership and the Partners.
ARTICLE V
NAMES AND ADDRESSES OF PARTNERS
The General Partner of the Partnership shall be ▇▇▇▇▇ Diversified LLC,
a Delaware limited liability company having an office at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
The names and addresses of the Limited Partners of the Partnership
shall be as set forth on the books and records of the Partnership and shall be
kept at the principal place of business of the Partnership and a copy of which
shall be kept at the Partnership's California office.
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ARTICLE VI
PRINCIPAL PLACE OF BUSINESS; CALIFORNIA OFFICE
The principal place of business of the Partnership shall be ▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The Partnership shall also maintain
an office in California at Transamerica Pyramid, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The General Partner may from time to time change
the principal place of business of the Partnership or its California office and,
in either such event, the General Partner shall notify the Partners in writing
within ten days after the effective date of such change; provided, however, that
no such change shall be effected unless the General Partner determines that such
change is in the best interests of the Partnership after giving consideration to
any material adverse state or local income, estate or inheritance tax
consequences to the Partners, or any adverse effect on the limited liability of
the Limited Partners, as a result of such change and provided further that the
Partnership shall always maintain at least one office in California. The General
Partner may establish additional places of business of the Partnership when and
where required by the business of the Partnership. The Partnership at all times
shall maintain in California an agent for service of process upon the
Partnership.
ARTICLE VII
CAPITAL CONTRIBUTIONS
The Partnership is authorized to issue and sell up to $100,000 of
limited partner interests.
No interest shall be paid on any contribution to the capital of the
Partnership.
Loans by a Partner to the Partnership shall not be considered
contributions to the capital of the Partnership. Any Partner, including any
additional or substituted Partner, who shall acquire a Partnership Interest or
whose Partnership Interest is increased by means of a transfer to him of all or
a part of the Partnership Interest of another Partner, shall succeed to the
Capital Account, or portion thereof, in respect of the Partnership Interest
received.
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ARTICLE VIII
PROFITS AND LOSSES
A. Determination of Profits and Losses. The Partnership presently
intends to keep its books on the cash receipts and disbursements method of
accounting and to report for federal, state and local income tax purposes using
the same method by making such adjustments as are necessary to include other
items of income, expense, deduction and allowance as are permitted or required
under the Code and the regulations promulgated thereunder. The Partnership may
report its activities to the Limited Partners in accordance with generally
accepted accounting principles. Except as otherwise provided herein, whenever a
proportionate part of the Partnership profit or loss is credited or charged to a
Partner's Capital Account, every item of income, gain, loss or deduction
entering into the computation of such profit or loss shall be considered either
credited or charged, as the case may be, to such Partner's Capital Account and
every item of credit or tax preference related to such profit or loss and
applicable to the period during which such profit or loss was realized shall be
allocated to such Partner in the same proportion. Every recapture of deduction
or credit shall be allocated among the Partners in the same proportion as the
items of deduction or credit subject to recapture were allocated among the
Partners. Any increase or decrease in the amount of any item of income, gain,
loss or deduction attributable to any adjustment to the basis of Partnership
assets made pursuant to a valid election under Sections 734, 743 and 754 of the
Code and pursuant to corresponding provisions of applicable state and local
income tax laws shall be charged or credited, as the case may be, and any
increase or decrease in the amount of any item of credit or tax preference
attributable to any such adjustment shall be allocated to the Partners entitled
thereto under such laws. Profits and losses allocated to a particular class of
Partnership Interests shall be allocated among the holders of record of such
class of Partnership Interests at the end of each Fiscal Year (or such shorter
period as may be provided herein) of the Partnership in proportion to their
respective Partnership Interests; provided, however, that any such profits and
losses attributable to a limited partner interest assigned during a Fiscal Year
of the Partnership shall be allocated among the holders of such limited partner
interests during such Fiscal Year in proportion to the number of months (for
purposes of such allocation ownership of limited partner interests for each
month will be determined as of the fifteenth day of each month) that each such
holder was recognized as the owner of such limited partner interest during such
Fiscal Year, without regard to the results of Partnership operations during the
period in which each such holder was recognized as the owner thereof and without
regard to the date, amount or recipient of any distributions which may have been
made with respect to such limited partner interest.
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B. Allocation of Profits and Losses.
1. Except as provided in subparagraph 4 of this paragraph B, the
profits and losses of the Partnership (other than gains or losses from the sale,
exchange or other disposition of Partnership assets) shall be allocated to the
Partners as follows and in the following order to priority:
a. An amount of net income equal to the excess, if any, of the
aggregate negative balance of the Capital Accounts of the Partners over
the Minimum Gain (determined as of the end of such year or fraction
thereof), shall first be allocated among the Partners whose Capital
Accounts are negative as a result of nonrecourse debt in proportion to
the negative amounts attributable to such nonrecourse debt.
b. Any remaining balance of net income shall be allocated 1%
to the General Partner, 5% to the Corporate Special Partner, 1% to the
Individual Special Partner and 93% to the Limited Partners.
c. Net losses of the Partnership shall be allocated 1% to the
General Partner, 5% to the Corporate Special Partner, 1% to the
Individual Special Partner and 93% to the Limited Partners.
2. Except as provided in subparagraph 4 of this Paragraph B, net losses
arising from sales, exchanges or other dispositions of Partnership assets shall
be allocated 1% to the General Partner, 1% to the Individual Special Partner and
98% to the Limited Partners. For purposes of this subparagraph 2, Capital
Accounts shall be determined after applying the allocations provided in
subparagraphs 1 and 5 of this Paragraph B, and after applying subparagraphs 6
and 7 of this Paragraph B.
3. Net gains arising from sales, exchanges or other dispositions of
Partnership assets shall be allocated to the Partners as follows and in the
following order to priority:
a. An amount of such gains equal to the excess, if any, of the
aggregate negative balance of the Capital Accounts of the General
Partner over the Minimum Gain;
b. If each Partner's Capital Account is negative and the gains
are less than the aggregate negative amounts in the Capital Accounts,
in the ratio that the Capital Accounts bear to each other;
c. If each Partner's Capital Account is negative and the gains
are greater than the aggregate negative amounts in the Capital Accounts
(i) first in an amount to bring each Partner's Capital Account to zero,
and (ii) then to the Partners in the percentage by which Cash From
Sales and Cash
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From Financings is then being distributed pursuant to the provisions of
Paragraph E of Article IX hereof;
d. If certain Partner's Capital Accounts are positive and
other Partner's Capital Accounts are negative (i) first in an amount to
bring the Capital Account of each Partner whose Capital Accounts which
are negative to zero (or if gains are less than the aggregate negative
amounts of the Capital Accounts which are negative, to such Partners in
the ratio that such negative Capital Accounts bear to each other), and
(ii) then to the Partners in the percentage by which Cash From Sales
and Cash From Financings is then being distributed pursuant to the
provisions of Paragraph E of Article IX hereof;
e. If each Partner's Capital Account is positive, in the
percentages by which Cash From Sales and Cash From Financings is then
being distributed pursuant to the provisions of Paragraph E of Article
IX hereof;
For purposes of this subparagraph 3, Capital Accounts shall be
determined after applying the allocations provided in subparagraphs 1 and 2 of
this Paragraph B and after applying subparagraphs 6 and 7 of Paragraph B.
4. No loss or deduction or item thereof under subparagraph 1 or 2 of
this Paragraph B shall be allocated to the General Partner if, or to the extent,
such allocation would create or increase a deficit in the General Partner's
Capital Account, unless:
a. Such allocation of loss or deduction is attributable to nonrecourse
debt of the Partnership; and
b. Such allocation does not cause the deficit capital account of the
General Partner to exceed the amount of Minimum Gain attributable to
such nonrecourse debt, determined as of the last day of the taxable
year to which such allocation is attributable.
5. To the extent that any amount paid to a Limited Partner or its
Affiliates pursuant to the provisions of Paragraphs G(2), (4), (5), (6), or (7)
of Article X hereof, or as Front-End Fees, is treated as a distributive share of
Partnership income to the Limited Partner for Federal income tax purposes, the
Limited Partner affected shall be allocated gross income of the Partnership at a
time and in an amount equal to the amount of such payment, and the Capital
Account of the Limited Partner so affected shall be adjusted to reflect such
allocation and payment. If the Partnership's gross income for a Fiscal Year is
less than the amount of such payment, the Limited Partner so affected shall be
allocated gross income in each succeeding Fiscal Year until the total amount so
allocated equals the total amount of such payment.
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6. For purposes of subparagraphs 1(a), 2 and 3 of this Paragraph B,
distributions to the Partners pursuant to Paragraphs A and E of Article IX
hereof shall be treated as having been made and charged to the Capital Accounts
of the Partners prior to the allocations of income, gains and losses provided
therein.
7. Solely for purposes of this Paragraph B, the Capital Accounts of
each Partner shall be reduced by such Partner's share of any Partnership
expenditure which would be treated as it were an expenditure described under
Section 705(a)(2)(B) of the Code, and shall be reduced or increased by any other
amount required by the then applicable regulations under Section 704 of the
Code.
8. Notwithstanding anything to the contrary in this Article VIII, if
any Partner receives an adjustment, allocation or distribution described in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), such Partner
shall be specially allocated a pro rata portion of each item of Partnership
income, including gross income, and gain in an amount and manner sufficient to
eliminate, as quickly as possible, any deficit balance in such Partner's Capital
Account created by such adjustment, allocation or distribution in excess of the
sum of (i) the amount such Partner is obligated to restore pursuant to any
provision of this Agreement and (ii) the amount such Limited Partner is deemed
to be obligated to restore pursuant to the penultimate sentence of Treasury
Regulations Section 1.704-1(b)(2)(iv)(f) (as amended in 1986). This subparagraph
8 of Paragraph B is intended to constitute a "qualified income offset" within
the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(3).
9. Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, if there is a net decrease in Partnership Minimum Gain for any
Partnership fiscal year, each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary subsequent years)
in an amount equal to such Partner's share of the net decrease in Partnership
Minimum Gain to the extent required by Treasury Regulations Section 1.704-2(f).
The items to be so allocated shall be determined in accordance with Section
1.704-2(f) and (i) of the Treasury Regulations. This subparagraph is intended to
comply with the minimum gain chargeback requirement in said section of the
Treasury Regulations and shall be interpreted consistently therewith.
Allocations pursuant to this subparagraph shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant hereto.
10. Except as otherwise provided in Section 1.704-2(i)(4) of the
Treasury Regulations, if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any fiscal year, each Partner
who has a share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the
Treasury Regulations, shall be specially allocated items of
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Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to that Partner's share of the net decrease in the Partner
Minimum Gain attributable to such Partner Nonrecourse Debt to the extent and in
the manner required by Section 1.704-2(i) of the Treasury Regulations. The items
to be so allocated shall be determined in accordance with Sections 1.704-2(i) of
the Treasury Regulations. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i)(4) and (j)(2) of the Treasury Regulations.
This subparagraph is intended to comply with the minimum gain chargeback
requirement with respect to Partner Nonrecourse Debt contained in said section
of the Treasury Regulations and shall be interpreted consistently therewith.
Allocations pursuant to this subparagraph shall be made in proportion to the
respective amounts to be allocated to each Partner pursuant hereto.
11. To the extent any Partner has an Adjusted Capital Account Deficit
at the end of any Partnership Fiscal Year, each such Partner shall be specially
allocated items of Partnership income (including gross income) and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Paragraph 8(B)(11) shall be made if and only to the extent that
such Partners would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section have been tentatively made as if this
Paragraph 8(B)(11) were not in the Agreement.
12. Partner Nonrecourse Deductions for any fiscal year or other
applicable period with respect to a Partner Nonrecourse Debt shall be specially
allocated to the Partners that bear the economic risk of loss for such Partner
Nonrecourse Debt (as determined under Sections 1.704-2(b)(4) and 1.704-2(i)(1)
of the Treasury Regulations).
C. Power of the General Partner to Vary Allocations of Profits and
Losses. It is the intent of the Partners that each Partner's distributive share
of income, gains, losses, deductions and credits shall be determined and
allocated in accordance with this Article VIII to the fullest extent permitted
by Section 704(b) of the Code. If the Partnership is advised that the
allocations provided in this Article VIII are unlikely to be respected for
Federal income tax purposes, the General Partner has been granted power in
Paragraph B(2) of Article XVI of this Agreement to amend the allocation
provisions of this Agreement, on advice of accountants and legal counsel, to the
minimum extent necessary to effect the plan of allocations and distributions
provided in this Agreement.
D. Allocations of Profits and Losses Among Limited Partners. Except as
otherwise provided in this Article VIII, profits and losses shall be allocated
among the Limited Partners in the same manner as distributions are allocated in
Paragraph D of Article IX hereof.
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E. Consent of Partners to Allocation of Profits and Losses. The methods
hereinabove set forth by which profits and losses of the Partnership are
determined and allocated are hereby consented to by each Partner as a condition
to becoming a Partner.
ARTICLE IX
DISTRIBUTIONS
A. Distributable Cash From Operations. The General Partner shall
distribute as soon after the close of each Fiscal Quarter as is reasonably
feasible all of the Distributable Cash From Operations for such Fiscal Quarter
in the following manner: 1% to the General Partner, 5% to the Corporate Special
Partner, 1% to the Individual Special Partner and 93% to the Limited Partners.
Cash From Sales. The General Partner shall distribute, as soon
after the close of each Fiscal Quarter as is reasonably feasible, all Cash From
Sales realized by the Partnership during such Fiscal Quarter in accordance with
the provisions of Paragraph E of this Article IX.
Cash From Financings. The General Partner shall distribute, as
soon after the close of each Fiscal Quarter as is reasonably feasible, all of
the Cash From Financings realized by the Partnership during such Fiscal Quarter
in accordance with the provisions of Paragraph E of this Article IX.
B. Allocation of Distributions Among Limited Partners. Distributions of
cash to the Limited Partners shall be apportioned among the holders of record of
limited partner interests in the ratio in which the number of limited partner
interests held of record by each of them bears to the number of limited partner
interests held of record by all Limited Partners as of the first day of the
Fiscal Quarter with respect to which such distribution is made.
C. Distributions of Cash From Sales and Cash From Financings. General
Partner shall distribute Cash From Sales and Cash From Financings in the
following manner: 1% to the General Partner, 1% to the Individual Special
Partner and 98% to the Limited Partners.
D. No Distributions Under Certain Circumstances. Notwithstanding any
other provision of this Article IX, no distribution shall be made if, after
giving effect to the distribution, the liabilities of the Partnership, excluding
the Partnership non-recourse liabilities, exceeds the sum of (i) the fair market
value of the Partnership's assets not subject to Partnership non-recourse
liabilities and (ii) the fair market value of the Partnership's assets subject
to Partnership non-recourse liabilities (but only to the extent the fair market
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value of each such asset exceeds the amount of the corresponding Partnership
non-recourse liability). No Partner shall have the right to receive property
other than money upon any distribution. No Partner may be compelled to accept a
distribution of any asset in kind in lieu of a proportionate distribution of
money being made to other Partners.
E. Consent of Partners to Allocation of Distributions. The methods
hereinabove set forth by which Cash From Operations, Cash From Sales and Cash
From Financings are allocated and distributed are hereby consented to by each
Partner as a condition to becoming a Partner.
ARTICLE X
MANAGEMENT AND OPERATION OF BUSINESS
A. Management of Business. The Partnership shall be managed by the
General Partner and the conduct of the Partnership's business shall be
controlled and conducted by the General Partner in accordance with this
Agreement. The approval of only the General Partner is needed for decisions
concerning the Partnership's investments.
B. Authority of the General Partner. In addition to and not in
limitation of any rights and powers conferred by law or other provisions of this
Agreement, the General Partner shall have and may exercise on behalf of the
Partnership all powers and rights necessary, proper, convenient or advisable to
effectuate and carry out the purposes, business and objectives of the
Partnership. Such powers shall include, without limitation, the following
powers:
1. To acquire, hold and dispose of any real property (or any interests
therein, including leasehold estates) and appurtenances thereto as well as
personal or mixed property connected therewith, including the purchase, lease,
development, improvement, maintenance, exchange, trade or sale of such property
at such price, rental or amount, for cash, securities or other property and upon
such terms, as the General Partner deems to be in the best interests of the
Partnership;
2. Subject to the provisions of Paragraph H (10) of this Article X, to
borrow money and, if required therefor, to mortgage or subject to any other
security device any portion of the assets of the Partnership, to obtain
replacements of any mortgage or other security device, and to prepay, in whole
or in part, refinance, increase, modify, consolidate or extend any mortgage or
other security device, provided, however, that loans from Affiliates of the
General Partner shall be made in accordance with the provisions of Paragraphs G
(2) and G (6) of this Article X;
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3. To invest the Partnership's funds in United States Government
securities, certificates of deposit other time or demand deposits of banks,
savings banks, savings and loan associations or similar institutions which have
a net worth of at least $100,000,000 or in which such certificates or deposits
are fully insured by any Federal or state government agency, United States
dollar deposits in foreign branches of banks, which banks have a net worth of at
least $100,000,000 bank repurchase agreements covering securities of the United
States Government or governmental agencies, bankers' acceptances, public money
market funds, adjustable rate preferred stock funds, including those managed by
Affiliates of the General Partner, or other similar short-term highly liquid
investments (except that the Partnership will invest its liquid reserves in an
adjustable rate preferred fund managed by Affiliates of the General Partner only
if (i) such investment is approved in advance by a majority of the General
Partner's Independent Directors and (ii) the Partnership's investment in such
fund represents no more than 10% of such fund's net asset value); to invest any
working capital or other reserves retained by the General Partner for the
operation of the Partnership in like manner; and to deposit, withdraw, invest,
pay, retain and distribute the Partnership's funds in any manner consistent with
the provisions of this Agreement;
4. To bring and defend actions at law or in equity;
5. To employ persons in the operation and management of the
Partnerships' business, including but not limited to supervisory managing
agents, building management agents, real property developers and real estate
brokers;
6. To place record title to, or the right to use, Partnership assets in
the name or names of a non-operating nominee or nominees, including an Affiliate
of the General Partner, for any purpose convenient or beneficial to the
Partnership.
7. To perform all acts and file all documents, including tax returns
and registration statements, necessary to comply with federal, state and local
laws, rules and regulations applicable to the Partnership or the conduct of the
Partnership's business;
8. To enter into and carry out contracts and agreements and any or all
documents and instruments and to do and perform all such other things as may be
in furtherance of Partnership purposes or necessary or appropriate to the
conduct of Partnership's activities;
9. To cause the Partnership to make or revoke any of the elections
required or permitted to be made by the Partnership under the Code;
10. To determine the appropriate accounting method or methods to be
used by the Partnership (the Partnership intends
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initially to utilize the cash receipts and disbursements method of accounting in
reporting its profits and losses for Federal, state and local income tax
purposes);
11. To designate ▇▇▇▇▇ Diversified LLC, the General Partner, as the
"Tax Matters Partner" in accordance with Section 6231(a)(7) of the Code and, as
such, the General Partner shall have all powers necessary to so perform
including, without limitation, the power to retain attorneys and accountants of
its choice and the right to settle any audits without the consent of the Limited
Partners, except as otherwise required by the Code. the designation provided for
herein is expressly consented to by each Partner as an express condition to
becoming a Partner; and
12. To execute, acknowledge, deliver, seal, file, record and vote any
and all instruments which may be deemed necessary or convenient to effect the
foregoing.
C. Restrictions on Authority of General Partner. In addition to other
acts expressly prohibited or restricted by this Agreement or by law, the General
Partner shall have no authority to act on behalf of the Partnership with respect
to, and are expressly prohibited from undertaking, the following:
1. Doing any act in contravention of this Agreement;
2. Except as provided in this Agreement and except in connection with
the liquidation and winding up of business of the Partnership upon its
termination and dissolution, doing any act which would make it impossible to
carry on the ordinary business of the Partnership;
3. Confessing a judgment against the Partnership in connection with any
threatened or pending legal action;
4. Possessing Partnership property or assigning the rights of the
Partnership in specific Partnership property for other than a Partnership
purpose;
5. Admitting a person as a Limited Partner except as provided in this
Agreement;
6. Except as provided in this Agreement and except in connection with
the liquidation and winding up of business of the Partnership upon its
termination and dissolution or a Mandatory Distribution Event, selling
substantially all the assets of the Partnership at a single sale or in multiple
sales in the same 12-month period without the prior written consent of Limited
Partners holding more than fifty percent (50%) of the then outstanding Limited
Partner Interests, with the same proportionate vote as provided in paragraph (d)
of Article XI;
7. Pledging or encumbering substantially all the properties of the
Partnership at one time or from time to time in
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a series of related transactions, unless the lien of such pledge or encumbrance
arises in connection with the acquisition or improvement of properties or the
initial financing of properties acquired free and clear of encumbrances or the
refinancing of previous obligations and such lien is limited to the properties
so acquired, improved, financed or refinanced;
8. Obtaining any loan or any mortgage loan on any residential property
made or guaranteed by any federal, state or local government or municipality or
any agency of any federal, state or local government or municipality;
9. Performing any act (other than an act required by this Agreement or
any act taken in good faith in 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;
10. Prepaying any interest on any Partnership indebtedness; provided
that the payment of any amount commonly referred to as "points" shall not be
deemed a prepayment of interest; or
11. Assessing any Partner for an additional capital contribution.
D. Fiduciary Obligations of General Partner. The General Partner shall
act at all times as a fiduciary with respect to the Partnership, the Limited
Partners and the Partnership property and assets.
E. Obligations of the General Partner. The General Partner shall:
1. Devote such of its time to the business of the Partnership as it
shall, in its discretion, exercised in good faith, determine to be necessary to
conduct the business of the Partnership for the benefit of the Partnership and
the Limited Partners;
2. File and publish all certificates, statements or other instruments
required by law for formation, qualification and operation of the Partnership
and for the conduct of its business in all appropriate jurisdictions;
3. Use its best efforts to cause Partnership and the Partners to be
protected by adequate public liability, directors and officers liability,
property damage and other insurance; however, no Partnership funds may be used
to purchase any liability insurance for which the indemnified person would be
prohibited from being indemnified by the Partnership under Article X(F) of this
Agreement;
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4. Employ attorneys to represent the Partnership, which attorneys may
also serve as counsel to the General Partner and any of its Affiliates; and
5. Use its best efforts to maintain the status of the Partnership as a
"partnership" for federal income tax purposes.
F. Limitation on Liability of General Partner; Indemnification.
1. Neither the General Partner nor any of its Affiliates shall have the
liability to the Partnership or to any Partner for any loss suffered by the
Partnership which arises out of any action or inaction of the General Partner of
its Affiliates if the General Partner or its Affiliates, in good faith
determined that such cause of conflict was in the best interest of the
Partnership and such course of conduct did not constitute negligence or
misconduct of the General Partner or its Affiliates and provided, with respect
to Affiliates, such Affiliates were acting within the scope of the authority of
the General Partner. The General Partner and its Affiliates (other than
broker-dealers) shall be indemnified by the Partnership against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claim
sustained by them in connection with the Partnership, provided that the same
were not the result of negligence or misconduct on the part of the General
Partner or its Affiliates and, with respect to the Affiliates, provided that
such Affiliates were acting within the scope of the authority of the General
Partner.
2. The General Partner and its Affiliates and any person acting as a
broker dealer shall not be indemnified for any losses, liabilities and expenses
arising from or out of an alleged violation of federal or state securities laws
unless (a) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee, (b)
such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee or (c) a court of
competent jurisdiction approves a settlement of the claims against a particular
indemnitee. 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 state securities
commissioner with respect to the issue of indemnification for securities law
violations.
3. The Partnership shall not incur the cost of that portion of any
insurance, other than public liability insurance, which insures any party
against any liability the indemnification of which is herein prohibited.
4. The Partnership shall not make any advances to the General Partner
or its Affiliates for legal expenses and other
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costs incurred as a result of legal action unless the following three conditions
are satisfied: (a) the legal action relates to the performance of duties or
services by the General Partner or its Affiliates on behalf of the Partnership,
(b) the legal action is initiated by a party other than the Partnership or a
Limited Partner and (c) the General Partner or its Affiliates undertake to repay
the advanced funds to the Partnership in cases in which they would not be
entitled to such indemnification.
5. For purposes of this Section (F) of Article X, the term Affiliate
shall mean any person performing services on behalf of the Partnership (i) who
directly or indirectly controls, is controlled by, or is under common control
with the General Partner, (ii) who owns or controls 10% or more of the
outstanding voting securities of the General Partner, (iii) who is an officer,
director or partner of the General Partner or (iv) which is a company for which
the General Partner acts as an officer, director, partner or trustee.
6. The Partnership shall indemnify to the extent of the Partnership
assets each Limited Partner against any claims of liability asserted against a
Limited Partner solely because he is a Limited Partner in the Partnership.
G. Specific Transactions Authorized. The General Partner is hereby
authorized to enter into, on behalf of the Partnership, the following specific
transactions:
1. The Partnership may purchase property from any Affiliate of the
General Partner provided (i) the property was acquired by such Affiliate for the
purpose of facilitating its purchase by the Partnership, facilitating the
borrowing of money or the obtaining of financing for the Partnership or any
other purpose related to the business of the Partnership, (ii) the property is
purchased by the Partnership for a price no greater than the acquisition and
out-of-pocket carrying cost of the property to such Affiliate, (iii) there is no
adverse difference in the interest rates of the loans secured by the property at
the time acquired by such Affiliates and at the time purchased by the
Partnership nor any other benefit arising out of such transaction to the General
Partner and (iv) no compensation is paid by the Partnership or by any
non-affiliated person to any Affiliate of the General Partner in connection with
the purchase of the property by the Partnership.
2. The Partnership may take a loan, the principal amount of which is
scheduled to be paid over a period of not less that 48 months and not more than
50% of the principal amount of which is scheduled to be paid during the first 24
months, from an Affiliate of the General Partner provided that such Affiliate is
a public program formed for the purpose of, among other things, making mortgage
loans and further provided that (i) the terms of any such loan are fair and at
least as favorable to the Partnership as could be obtained from a non-Affiliate
in similar
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circumstances; (ii) the Partnership obtains a letter of opinion from a qualified
Independent Advisor to such effect and (iii) the Partnership is represented,
with respect to such mortgage loan, be legal counsel different from the legal
counsel retained for such transaction by the Affiliated lender.
3. An officer or director of the General Partner may serve as a
director of a tenant of the Partnership after a lease with the Partnership has
been executed. Any tenant having such an officer or director serving as director
shall nor be considered an Affiliate for purposes of this Partnership Agreement.
4. The Partnership may contract (i) with Affiliates of the General
Partner to serve as real estate brokers and mortgage placement brokers in
connection with the investment of the Partnership assets and (ii) with
Affiliates of the General Partner to serve as real estate brokers in connection
with the sale of property by the Partnership. The amount of the real estate
commissions payable to Affiliates of the General Partner upon a sale of property
by the Partnership where such Affiliates of the General Partner upon a sale of
property by the Partnership where such Affiliates have provided a substantial
amount of services in the sales effort may not exceed the lesser of (i) 3% of
the contract price for the sale of the property or (ii) 50% of the reasonable,
customary and competitive rate for similar services in light of the size, type
and location of the property; provided, however that the total real estate
commissions payable to such Affiliates and to other persons may not exceed the
lesser of (a) 6% of the contract price for the sale of the property or (b) the
reasonable, customary and competitive rate for similar services in light of the
size, type and location of the property. No Affiliate of the General Partner may
receive payment of a real estate commission with respect to the sale of a
property by the Partnership unless the total consideration received by the
Partnership upon such sale exceeds the amounts actually paid by the Partnership
for the purchase, development, construction or improvement of the property and
any fees and commissions paid by the Partnership in connection therewith.
5. Affiliates of the General Partner may receive insurance premiums and
brokerage commissions with respect to insurance on property owned by the
Partnership only when the cost of such insurance is paid by the tenants who net
lease such properties from the Partnership. No such Net Lease shall provide that
the lessee is required to purchase insurance through an Affiliate of the General
Partner.
6. At any time, the Partnership may borrow funds on a short-term basis
from Affiliates of the General Partner or third parties on a short term basis to
provide the debt portion of the purchase price of any property if the
Partnership is unable to obtain a permanent loan or, in the judgment of the
General Partner, it is not in the best interests of the Partnership to obtain a
permanent loan at the interest rates then prevailing and
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(ii) the General Partner has reason to believe that the Partnership will be able
to obtain a permanent loan on or prior to the end of the loan term. Any such
short-term loans may be fully or partially amortized, may provide for the
payment of interest only during the term of the loan or may provide for the
payment of principal and interest only upon maturity. Any such short term loans
may be secured by a pledge of or security interest in the net assets of the
Partnership, or if the loan is obtained to pay or provide the debt or equity
portion of the purchase price of a property, by a first or junior mortgage on
the property to be acquired. Any short-term loans from Affiliates of the General
Partner will bear interest at a rate equal to the lesser of (A) 1% above the
prime interest rate at the Bank of New York or (B) the rate that would be
charged to the Partnership by unrelated lending institutions on comparable loans
for the same purpose in the locality of the property. Such borrowings shall be
nonrecourse to the Partnership, unless both General Partner shall otherwise
consent in writing. No prepayment charge or penalty shall be required by a
General Partner on a loan to the Partnership from the General Partner secured by
either a first or a junior or all inclusive trust deed, mortgage or encumbrance
on the property; except to the extent such prepayment charge or penalty is
attributable to the underlying encumbrance.
7. All of the Partnership's expenses shall be billed directly to and
paid by the Partnership. The Partnership shall reimburse the General Partner or
its Affiliates for: (a) all Consolidation and Offering Expenses, (b) the actual
cost to the General Partner or its Affiliates of goods and materials used for
and by the Partnership and obtained from unaffiliated parties, and (c) the costs
incurred by the General Partner or its Affiliates in performing administrative
services necessary to the prudent operation of the Partnership; provided,
however, that the amounts charged to the Partnership for services performed
pursuant to this clause (c) shall not exceed the lesser of (1) the actual cost
of such services, or (2) 90% of the amount which the Partnership would be
required to pay to independent parties for comparable services in the same
geographic location. Contracts entered into by the General Partner or its
Affiliates for the provision of goods and materials to the Partnership may be
modified only by a vote of the majority of Limited Partners. No reimbursement
shall be made to the General Partner or its Affiliates for: (x) services for
which the General Partner or its Affiliates are entitled to compensation by way
of a separate fee, (y) any rent or depreciation, utilities, capital equipment
and other administrative items, or (z) any of the salaries, fringe benefits,
travel expenses and other administrative items incurred by or allocated to any
controlling person (as defined herein) of the General Partner or its Affiliates;
provided, however, that the Partnership may reimburse the General Partner or its
Affiliates for the travel expenses of controlling persons if such travel
expenses are incurred by such controlling persons in connection with the initial
investment in properties of the
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proceeds of the Offering for the evaluation of properties being considered for
acquisition or visits to executives of potential tenants of properties being
considered for acquisition to discuss current financial results. The
Partnership's annual report to the Limited Partners shall contain a breakdown of
the costs reimbursed to the General Partner to its Affiliates. Within the scope
of the annual audit of the General Partner's (or such Affiliate's) financial
statement, the independent certified public accountant shall verify the
allocation of such costs to the Partnership. The method of review shall at
minimum provide (1) a review of time records of individual employees, the costs
of whose services were reimbursed; and (2) a review of the specific nature of
the work performed by each employee. The methods of review shall be in
accordance with generally accepted auditing standards and shall accordingly
include such tests of the accounting records and such other auditing procedures
which the General Partner's (or such Affiliate's) independent certified public
accountants consider appropriate in the circumstances. The additional costs of
such review shall be itemized by such accountants on a partnership by
partnership basis and may be reimbursed to the General Partner (or such
Affiliate) in accordance with this Paragraph G(7) only to the extent that such
reimbursement, when added to the cost for administrative services rendered, does
not exceed the competitive rate for such services as determined in this
Paragraph G(7).
As used herein, the term "controlling person" shall mean any
person, whatever his title, who performs executive or senior management
functions for the General Partner or Affiliate similar to those of executive or
senior management officers, directors or partners, or those holding 5% or more
equity interest in the General Partner or Affiliate or a person having the power
to direct or cause the direction of the management level employees and policies
of the General Partner or Affiliate, whether through the ownership of voting
securities, by contract or otherwise. For the purposes of this Paragraph G(7),
not every person who carries a title such as vice president or senior vice
president, corporate secretary or treasurer shall be considered a controlling
person, unless such person performs the functions or has the powers described
above, and even in the absence of a specific title, an executive in a senior
management position shall be considered a controlling person.
8. The Partnership may invest in unimproved or non-income producing
real property and the stock of or other interests in, or warrants or other
rights to purchase the stock of or other interests in, any tenant of the
Partnership or the parent or controlling person of any tenant. The Partnership
may not borrow funds to make investments in such stock, interests, warrants or
other rights. The Partnership will not exercise warrants or other rights to
purchase the stock of or other interests in a tenant or the parent or
controlling person of a tenant unless the Partnership will immediately liquidate
the stock or interest purchased at a price in excess of the exercise price.
Under such
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circumstances, payment of the exercise price shall not be deemed an investment
subject to the above limitations respecting the amount of net proceeds derived
from the sale of limited partner interests which the Partnership may invest in
unimproved or non-income producing real property or stock, interests, warrants
or other rights. The Partnership may borrow funds on a short term basis to pay
the exercise price on warrants or other rights or may pay such price on warrants
or other rights or may pay such exercise price from funds held in the working
capital reserve and will repay the loan or replenish the reserve upon the sale
of the securities or interests purchased before it makes distributions to the
Partners respecting the proceeds of sale or reinvests such proceeds in
properties.
9. The Partnership may incur indebtedness in connection with the
purchase, improvement, repair, development and financing or refinancing of
properties and the operation of the Partnership, including the funding of
operating deficits and obtaining Cash From Sales and Cash From Financings for
distribution to Partners. Such indebtedness may not exceed 80% of the total
purchase price of the Partnership's properties and may be in the form of
purchase money obligations to the sellers of properties or in the form of loans
from banks, institutional investors and other lenders, which indebtedness may be
secured by mortgages or other interests in the property owned by the Partnership
(including "wrap-around" or "all-inclusive" mortgages to the extent provided in
Paragraph (H) of this Article X) and may involve final or interim principal
payments substantially greater that the regular payments. The Partnership may
also from time to time borrow additional funds for the purchase of property,
which indebtedness may be secured by the general of the assets of the
Partnership.
H. General Restrictions.
1. The Partnership shall obtain a written evaluation report specifying
an Appraised Value signed by an independent appraiser prior to the purchase of
any property by the Partnership and shall not purchase any such property if the
purchase price and all Acquisition Fees paid by the Partnership in connection
with the acquisition exceed the Appraised Value set forth in such report. All
such appraisals, whether or not the property which is the subject of such
appraisal is purchased by the Partnership, shall be at the Partnership's expense
or at the expense of the seller, shall be retained for five years and shall be
available for inspection and duplication by the Limited Partners upon reasonable
notice to the Partnership.
2. The Partnership may not sell any property in a transaction in which
an Affiliate of the General Partner acts as a real estate broker unless the
provisions of Paragraph G(4) of this Article X are complied with.
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3. The Partnership shall not own any land where the buildings and
improvements thereon are owned by an Affiliate of the General Partner unless (i)
such Affiliate is a public program formed for the purpose of investing in real
estate, (ii) the terms of such transaction are at least as favorable as the
terms of any comparable transactions made on an arm's-length basis and known to
the General Partner, and (iii) payments to the General Partner and its
Affiliates for services rendered in a capacity other than that as General
Partner may only be made upon a determination that (a) the compensation is not
in excess of the compensation paid to them by third parties for any comparable
services and (b) the compensation is not greater than the charges for comparable
services available from others who are competent and not affiliated with any of
the parties involved and the Partnership has obtained a letter of opinion of a
qualified Independent Advisor to such effect prior to effecting such
transaction.
4. The Partnership shall not give an Affiliate of a General Partner the
exclusive right to sell property for the Partnership.
5. The aggregate borrowings of the Partnership shall not exceed 80% of
the purchase price of all properties purchased by the Partnership on a combined
basis. The foregoing restriction may be waived or lessened by the General
Partner without the approval of the Limited Partners, but only with the prior
written consent of the Commissioner of Corporations of the Sate of California or
pursuant to a change in the published Rules of the Commissioner. In no event,
however, shall the aggregate borrowings of the Partnership exceed the sum of 85%
of the purchase price of all properties which have not been refinanced and 85%
of the aggregate fair market value of all refinanced properties.
6. Except as set forth in Paragraph G(8) and Paragraph G(10) of this
Article X, all expenses of the Partnership shall be billed directly to and paid
by the Partnership.
7. Except as disclosed in the Prospectus, the General Partner shall not
receive from the Partnership a rebate or give-up or participate in any
reciprocal business arrangement which would enable them or any Affiliate of the
General Partner to receive such rebate or give-up or to circumvent any
restrictions contained herein upon dealings with Affiliates.
8. The Partnership funds shall not be commingled with the funds of any
other natural person, partnership, corporation, association or other legal
entity.
9. The Partnership shall not finance the purchase of property by use of
a wrap-around note and mortgage ("all-inclusive" note and deed of trust) unless
(a) neither the General Partner nor any Affiliate of the General Partner
receives
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interest on the amount of the underlying encumbrance in excess of that payable
to the lender on such underlying encumbrance, (b) the Partnership receives
credit on its obligation under the all-inclusive note for payments made directly
on the underlying encumbrance and (c) all payments on the underlying encumbrance
shall be made by the Partnership or, in the alternative, payments by the
Partnership on the wrap-around note are made to a third party collecting agent
which in turn disburses such payment, first to the holder of such underlying
encumbrance, and thereafter to the holder of the wrap-around note.
10. The Partnership shall not create or assume any indebtedness for
borrowed money unless the documents pursuant to which such indebtedness is
created or assumed provide, and the General Partner shall cause any and all such
documents assumed or entered into by or on behalf of the Partnership to provide,
that the parties thereto other than the Partnership (including any Affiliates of
the General Partner ) shall look only to the assets of the Partnership for
satisfaction of the liabilities and obligations of the Partnership under such
documents (including without limitation those arising from representations,
warranties, covenants and agreements made in or in connection with such
documents) and that such other parties shall have no recourse to the Partners or
the separate assets of the Partners for the satisfaction of such liabilities and
obligations. The Partnership shall not incur any indebtedness wherein the lender
will have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profit, capital or property of the Partnership other
than as a creditor.
11. The Partnership shall not enter into any contracts with the General
Partner or with any Affiliates of the General Partner to construct or develop
Partnership properties or to render any services in connection with such
construction or development.
12. The Partnership shall not acquire any property which under
construction unless completion of the improvements on the property is guaranteed
at the contracted price by an adequate completion bond or other satisfactory
arrangement.
13. Unimproved or non-income producing property shall not be acquired
except in amounts and upon terms which can be financed from Distributable Cash
From Operations.
14. No Partnership assets may be invested in junior mortgages or deeds
of trust; provided, however, that the acquisition of a junior mortgage or deed
of trust in connection with the sale, financing or refinancing of real property
shall not be deemed to be investing in junior mortgagees or deeds of trust.
15. Any agreement entered into between the Partnership and the General
Partner or its Affiliates, other than a mortgage with
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a public program sponsored by ▇▇▇▇▇ Co. or an Affiliate of ▇▇▇▇▇ Co., under
which such General Partner or its Affiliates are compensated for the provision
of goods or services to the Partnership, must be terminable by the Partnership,
without penalty, upon 60 days' notice and any such agreement must be embodied in
a written contract which precisely describes the services to be rendered and all
compensation to be paid and which agreement shall be fully disclosed in the
Prospectus and no such agreement shall be permitted unless the General Partner
or such Affiliate has been previously engaged in the business of rendering such
services or selling or leasing such goods independently of the Partnership and
as an ordinary and ongoing business and unless the cost to the Partnership does
not exceed the lesser of the cost of such goods of 90% of the comparable and
competitive with the cost to the Partnership of any other person who is
rendering comparable services or selling or leasing comparable goods which could
reasonably be made available to the Partnership and the agreement is on
competitive terms. If the General Partner or such Affiliate purchases goods or
materials from an independent third party which are used by the Partnership, the
General Partner or Affiliate may be reimbursed at its cost. "Cost", as that term
is used in this paragraph, includes the price of goods and materials paid to
independent third parties and direct costs incurred by the General Partner or
Affiliate providing the service, including overhead directly attributable to the
transaction but excluding general or administrative overhead (which term
includes but is not limited to salaries, rent, travel expenses and other items
generally falling under the category of overhead). Agreements with the General
Partner and its Affiliates for other than administrative services and other than
leases and mortgages may be modified only by a vote of the majority of Limited
Partners.
I. Compensation of General Partner. The General Partner shall not, in
its capacity as General Partner, receive an annual salary, fees, profits or
distributions from the Partnership except profits, distributions, fees and
allocations to which they may be entitled under Articles VIII or IX.
J. Other Business of Partners. Except as otherwise specifically
provided herein, any of the Partners and any shareholder, officer, director,
employee or other person holding a legal or beneficial interest in an entity
which is a Partner may engage in or possess an interest in other business
ventures of every nature and description, independently or with others,
including, but not limited to, the ownership, financing, leasing, operation,
management, syndication, brokerage and development of real, personal or mixed
property and neither the Partnership nor the Partners shall have any right by
virtue of this Agreement in and to such independent ventures or to the income or
profits derived therefrom.
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ARTICLE XI
STATUS OF LIMITED PARTNERS AND SPECIAL PARTNERS
A. The Limited Partners and Special Partners shall not participate in
the management or control of the Partnership's business nor shall they transact
any business for the Partnership nor shall they have the power to sign for or
bind the Partnership, said powers being vested solely and exclusively in the
General Partner. The Limited Partners and Special Partners shall not be bound
by, or be personally liable for, the expenses, liabilities or obligations of the
Partnership, except to the extent of their Capital Accounts. The Partnership
Interest owned by a Limited Partner or Special Partner shall be fully paid and
nonassessable.
In addition to those described elsewhere in the Partnership
Agreement, the Limited Partners and Special Partners shall have the following
rights, powers, privileges, duties and liabilities:
(a) The Limited Partners and Special Partners shall have the right to
have full and true information of all things affecting the Partnership and shall
be entitled to such reports as are set forth in Article XII hereof.
(b) The Limited Partners and Special Partners shall receive from the
Partnership the share of distributions provided for in this Agreement in the
manner and at the times provided for in this Agreement.
(c) A Limited Partner or a Special Partner shall have the right to
demand the return of his Capital Account only on the dissolution and winding up
of the Partnership in accordance with Article XVIII hereof. No Limited Partner
shall have priority over any other Limited Partner either as to the return of
his capital or as to profits, losses or distributions. No Limited Partner or
Special Partner shall have the right to bring an action for partition against
the Partnership.
(d) Limited Partners holding more than fifty percent (50%) of the
outstanding Limited Partner Interests may (1) remove the General Partner and (2)
in the event that a vacancy shall occur in the office of General Partner, elect
a successor General Partner upon retirement, removal, death, adjudication of
incompetence to manage his person or estate, adjudication of bankruptcy under
Chapter 7 of the Bankruptcy Code (or any similar law or provision enacted in
lieu thereof), dissolution or other cessation to exist as a legal entity of the
General Partner.
(e) Upon written request to the Partnership for a purpose reasonably
related to such Partner's interest as a Partner of the Partnership, each Limited
Partner and Special Partner shall have the right to be mailed, at Partner's
expense, a complete list of
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names and addresses and interests of all Limited Partners as set forth in the
records of the Partnership, copies of the Certificate of Limited Partnership and
all amendments thereto, copies of this Agreement and all amendments thereto and
powers of attorney pursuant to which this Agreement was executed. A reasonable
charge for copy work may be charged by the Partnership.
ARTICLE XII
BOOKS OF ACCOUNT AND REPORTS
Proper books of account shall be kept by the General Partner
wherein shall be entered all transactions, matters and things relating to the
Partnership's business as are usually entered into books of account kept by
persons engaged in a business of a like character. The books of account shall be
kept at the principal place of business of the Partnership and the books of
account for the current and past three Fiscal Years shall be kept at the
Partnership's California office and each Partner (or any duly constituted
designee of a Partner) shall at all times during reasonable business hours have
free access to and the right to inspect and copy the same. There shall also be
kept at the Partnership's California office: a current alphabetical list of the
Partners' names, addresses, Contributions and Capital Accounts; copies of the
Certificate of Limited Partnership and all amendments thereto; copies of the
Partnership's Federal, state and local income tax or information returns and
reports for the six most recent tax years; copies of this Partnership Agreement
and all amendments thereto and powers of attorney pursuant to which this
Agreement was executed and the Partnership's financial statements for the six
most recent fiscal years.
There shall be established for each Partner on the books of
the Partnership a Capital Account which shall be maintained in accordance with
Federal income tax accounting principles and which shall show the amount of each
capital contribution made by such Partner (or his, her or its predecessor in the
case of an assignment of a Partnership Interest), adjusted to reflect such
Partner's proportion of profits and losses (determined according to Article
VIII) and of withdrawals and distributions and other items to the extent
properly creditable to or chargeable against such Capital Account.
Within 75 days after the end of each Fiscal Year, the General
Partner shall deliver to each Limited Partner adequate information to enable
each Limited Partner to complete and file his Federal tax return.
Copies of each report distributed to the Limited Partners
shall, to the extent required by applicable law, be filed
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concurrently with relevant state "Blue Sky" authorizes. If the Partnership
engages an Independent Advisor who is not the Independent Advisor engaged to
render a current fairness opinion or the fairness opinion preceding it, the
General Partner shall inform the Limited Partners (by no later that the next
annual report) of the date when such new Independent Advisor was engaged, and
whether there were any disagreements with the former Independent Advisor on any
matters of valuation, assumptions, methodology, accounting principles and
practice, or disclosure, which disagreements, if not resolved to the
satisfaction of the former Independent Advisor, would have caused him to make
reference, in connection with the fairness opinion, to the subject matter of the
disagreement or decline to give an opinion.
ARTICLE XIII
FISCAL YEAR
The Fiscal Year of the Partnership shall begin on the first
day of January and end on the thirty-first day of December in each year. Should
the General Partner decide to change the Fiscal Year of the Partnership, it will
seek to obtain any required approvals from the Internal Revenue Service for such
change. If such approval is obtained (or not then required), the General Partner
will give prompt notice to the Limited Partners of the change in Fiscal Year.
ARTICLE XIV
PARTNERSHIP FUNDS
The funds of the Partnership shall be deposited in such
account or accounts as shall be designated by the General Partner and all
withdrawals against such accounts shall be made only by the General Partner or
by its properly delegated agents.
ARTICLE XV
TRANSFER OF PARTNERSHIP INTEREST
A. In General. A Limited Partner or Special Partner may not sell,
assign, transfer or otherwise dispose of, or pledge, hypothecate or in any
manner encumber, his interest in the Partnership or any thereof except as
permitted in this Article, and any act in violation of this Paragraph A shall
not be binding upon or recognized by the Partnership regardless of whether the
General Partner shall have knowledge thereof.
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B. General Partner.
1. Limited Partners holding more than fifty percent (50%) of the then
outstanding Limited Partner Interests, pursuant to Paragraph (d) of Article XI
and with the same proportionate vote as provided therein, may remove a General
Partner from the Partnership. Written notice of the removal of the General
Partner shall be served upon the General Partner either by certified or
registered mail, return receipt requested, or by personal service. Said notice
shall set forth the day upon which the removal is to become effective. Upon
receipt of notice, the General Partner shall cause an accounting to be prepared
covering the transactions of the Partnership since the end of the previous
Fiscal Year and it shall not thereafter sell or dispose of or allow the sale or
disposition of any Partnership asset unless such sale or disposition was the
subject of a contract entered into by and binding upon the Partnership prior to
the date upon which the notice was received by the General Partner.
2. Until the dissolution of the Partnership otherwise occurs, the
General Partner shall not voluntarily take any step to dissolve itself nor shall
the General Partner voluntarily retire, provided, however, that nothing in this
Partnership Agreement shall be deemed to prevent the merger or reorganization of
▇▇▇▇▇ Diversified LLC into or with any other entity organized under the laws of
the United States or any state thereof or the transfer of all the limited
liability company interests of ▇▇▇▇▇ Diversified LLC and the assumption of
rights and duties of the General Partner by, in the case of a merger,
reorganization or consolidation, the surviving entity by operation of law.
3. Upon the removal, adjudication of bankruptcy under Chapter 7 of the
Bankruptcy Code (or any similar law or provision enacted in lieu thereof),
dissolution or other cessation to exist as a legal entity of the General
Partner, the General Partner's Partnership Interest and interest in
Distributable Cash From Operations and its subordinated interest in Cash From
Sales and Cash From Financings shall be purchased by the Partnership for a
purchase price equal to the fair market value thereof determined pursuant to the
provisions of Section 4 of this Paragraph B. The purchase price of such interest
shall be paid by the Partnership to the General Partner by the promissory note
of the Partnership, payable to the General Partner or its order, having a face
amount equal to such purchase price, containing provisions as would be usual and
customary in a commercial promissory note, bearing interest at a rate per annum
equal to 1% above the prime interest rate at The Bank of New York, payable
annually, with principal and all unpaid accrued interest subject to mandatory
prepayment from all Cash From Sales and Cash From Financings , and the remaining
unpaid principal balance and unpaid accrued interest on such promissory note due
and payable five years from the date of the General Partner's retirement,
expulsion, adjudication of bankruptcy or insolvency, dissolution or other
cessation to exist as a legal entity. The Partnership shall also pay to the
General
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Partner all amounts then accrued and owing to the General Partner.
4. The fair market value of the General Partner's interest purchased by
the Partnership pursuant to Section 3 of this Paragraph B shall be determined by
agreement between the General Partner and the Partnership (which agreement shall
require the approval of the Limited Partners holding more than fifty percent
(50%)of the outstanding Limited Partner Interests, with the same proportionate
vote as provided in paragraph (d) of Article XI). If the General Partner and the
Partnership cannot agree upon the fair market value of such Partnership Interest
within 30 days after the occurrence of the event upon which such interest of the
General Partner is to be purchased by the Partnership, the fair market value
thereof shall be determined by arbitration in accordance with the then current
rules of the American Arbitration Association. The results of such arbitration
shall be final and binding and may be enforced by legal proceedings. The expense
of arbitration shall be borne equally by the General Partner and the
Partnership. The fair market value of the General Partner's interest shall be
the amount the General Partner would receive upon dissolution and termination of
the Partnership assuming that such dissolution or termination occurred on the
date of the occurrence of the event upon which such interest of the General
Partner is to be purchased by the Partnership and the assets sold for their then
fair market value without any compulsion on the part of the Partnership to sell
such assets.
C. Limited Partners and Special Partners.
1. The General Partner may, pursuant to this Article XV, (a) admit as a
substituted Limited Partner or Special Partner any successor in interest to a
Limited Partner or Special Partner either deceased or under legal disability,
and (b) admit as substituted Limited Partners or Special Partners assignees of
Limited Partners or Special Partners.
2. A substituted Limited Partner or Special Partner is a person
admitted to all the rights of a Limited Partner or Special Partner. An assignee
is a person to whom a Limited Partner or Special Partner has assigned his
interest in the Partnership but who has not become a substituted Limited Partner
or Special Partner. An assignee shall have no right to require any information
or account of the Partnership's transactions or to inspect the Partnership's
books but shall only be entitled to receive the share of the profits, or the
return of the capital contribution, to which his assignor would otherwise be
entitled as set forth in Section 5 of this Paragraph C.
3. No assignee of the whole or any portion of a Limited Partner's or
Special Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner or
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Special Partner in place of his assignor unless all of the following conditions
are satisfied:
(a) The written consent of the General Partner to such
substitution shall be obtained, the granting or denial of which shall be within
the absolute discretion of the General Partner;
(b) The duly executed written instrument of assignment setting
forth the intention of the assignor that the assignee become a substituted
Limited Partner or Special Partner in his place shall have been filed with the
Partnership;
(c) The interests in the Partnership being acquired by the
assignee shall consist of at least five percent of the limited partner or
special partner interest (two percent of the limited partner or special partner
interest for an Individual Retirement Account or a Self Employed Retirement
(▇▇▇▇▇) Plan) and, if the assignor shall retain any limited partner or special
partner interest, such retention shall consist of at least five percent of the
limited partner or special partner interest (two percent of the limited partner
or special partner interest for an Individual Retirement Account or a Self
Employed Retirement (▇▇▇▇▇) Plan);
(d) The assignor and assignee shall execute and acknowledge
such other instruments as the General Partner may deem necessary or desirable to
effect such assignment and admission, including the written acceptance and
adoption by the assignee of the provisions of this Agreement and his execution,
acknowledgment and delivery to the General Partner of a Power of Attorney, the
form and content of which are more fully described in Article XIX hereof; and
The assignee shall pay a transfer fee not to exceed $50.00 per
transaction to the Partnership. The written consent or a notice of denial of
consent shall be given to the assignee not later that the last day of the
calendar month following the month the General Partner actually receives the
instrument of assignment.
4. Any person admitted to the Partnership as a Partner shall be subject
to all of the provisions of this Agreement as if originally a party to it.
5. Subject to the provisions of Section 11 of this Paragraph C,
compliance with the suitability standards imposed by the Partnership, applicable
"Blue Sky" laws and the applicable rules of any other governmental authority, a
Limited Partner or Special Partner shall have the right to assign the whole or
any portion (but not less than five percent of the limited partner or special
partner interest (two percent of the limited partner interest for an Individual
Retirement Account or a Self Employed Retirement (▇▇▇▇▇) Plan)) and, if he shall
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retain any limited partner or special partner interest, subject to his retaining
not less than five percent of the limited partner or special partner interest
(two percent of the limited partner or special partner interest for an
Individual Retirement Account or a Self Employed Retirement (▇▇▇▇▇) Plan) of his
Partnership Interest by a written assignment the terms of which are not in
contravention of any of the provisions of this Agreement, which assignment has
been executed by the assignor and received by the Partnership and recorded on
the books thereof. Any assignment in contravention of any of the provisions of
this Section 5 shall be of no force and effect and shall not be binding upon or
recognized by the Partnership.
(a) Except as provided in Subsection (c) below, Paragraph A of
Article VII hereof and Paragraph D of Article IX hereof, an assignee of
a Partnership Interest shall be entitled to receive distributions from
the Partnership attributable to the interest acquired by reason of such
assignment from and after the effective date of the assignment of such
interest to him. The effective date of an assignment of an interest in
the Partnership as used in this Subsection shall be the last day of the
quarter in which the written instrument of assignment, in form and
substance satisfactory to the General Partner, is received by the
General Partner.
(b) The net profits and net losses attributable to an interest
in the Partnership assigned during any year shall be divided among and
allocated in accordance with the provisions of Paragraph A of Article
VIII hereof.
(c) Anything herein to the contrary notwithstanding, both the
Partnership and the General Partner shall be entitled to treat the
assignor of such interest as the absolute owner thereof in all
respects, and shall incur no liability for distributions made in good
faith to him, until such time as the written assignment has been
received by, and recorded in the books of, the Partnership.
6. The General Partner may elect to treat an assignee who has not
become a substituted Limited Partner or Special Partner as a substituted Limited
Partner or Special Partner in the place of his assignor should the General
Partner deem, in its absolute discretion, that such treatment is in the best
interests of the Partnership for any of its purposes or for any of the purposes
of this Agreement.
7. No consent of any of the Limited Partners or Special Partners is
required to effect the substitution of a Limited Partner or Special Partner,
except that a Limited Partner or Special Partner who assigns his interest in the
Partnership must evidence his intention that his assignee be admitted as a
substituted Limited Partner or Special Partner in his place and must execute
such instruments as the General Partner may in its
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absolute discretion determine to be necessary or desirable in connection
therewith.
8. Upon the admission of a Limited Partner or Special Partner (whether
as a result of his purchase of limited partner interests from the Partnership or
his admission as a substituted Limited Partner or Special Partner), the General
Partner shall make an appropriate amendment to the list of the Partner's names,
addresses, Contributions and Capital Accounts referred to in Article XII hereof.
9. Upon the death or adjudication of incompetence to manage his person
or estate of an individual Limited Partner or Special Partner, his personal
representative shall have all of the rights of a Limited Partner or Special
Partner for the purpose of setting or managing his estate, and such power as the
decedent or incompetent possessed to constitute a successor as an assignee of
its interest in the Partnership and to join with such assignee in making
application to substitute such assignee as a Limited Partner or Special Partner.
However, such personal representative shall not have the right to become a
substituted Limited Partner or Special Partner in the place of his predecessor
in interest unless the conditions of Sections 3 of this Paragraph C (other than
the requirement that the assignor execute and acknowledge instruments) are first
satisfied.
10. Upon the adjudication of bankruptcy under Chapter 7 of the
Bankruptcy Code (or any similar law or provision enacted in lieu thereof),
dissolution or other cessation to exist as a legal entity of a Limited Partner
or Special Partner not an individual, the authorized representative of such
entity shall have all of the rights of a Limited Partner or Special Partner for
the purpose of effecting the orderly winding up and disposition of the business
of such entity and such power as such entity possessed to constitute a successor
as an assignee of its interest in the Partnership and to join with such assignee
in making the application to substitute such assignee as a Limited Partner or
Special Partner. However, such authorized representative shall not have the
right to become a substituted Limited Partner or Special Partner in the place of
his predecessor in interest unless the conditions of Sections 3 of this
Paragraph C (other than the requirement that the assignor execute and
acknowledge instruments) are first satisfied.
11. (a) No assignment or transfer of an interest in the Partnership may
be made which would result in Limited Partners or Special Partners and assignees
of Limited Partners or Special Partners owning, directly or indirectly,
individually or in the aggregate, more than twenty percent (20%) of the equity
interests of a General Partner or any Affiliate of a General Partner as defined
in Section 1504(a) of the Code. If any such assignment or transfer would
otherwise be made by bequest, inheritance or operation of law, the transferee
shall not become
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a Partner and the interest in the Partnership transferred shall be automatically
redeemed by the Partnership immediately prior to such transfer in the same
manner as provided in Subsection (b)(4) of this Section 11.
(b) Anything to the contrary contained herein notwithstanding:
(1) Except in the case of the Merger, in any twelve (12)
consecutive month period no assignment or transfer of a limited partner
interest may be made as a result thereof the aggregate total of limited
partner interests assigned and/or transferred in such period would
exceed forty percent (40%) of the outstanding limited partner
interests. This limitation is hereinafter referred to as the "forty
percent (40%) limitation".
(2) A Limited Partner may assign or transfer his Partnership
Interest to: (i) his spouse (unless legally separated), child or
ancestor, or (ii) a corporation, partnership, trust or other entity,
fifty-one percent (51%) of the equity interest of which is owned by
such Limited Partner and/or any of the persons specified in clause (i)
so related to such Limited Partner, provided, however, that such
transfers are subject to the forty percent (40%) limitation.
(3) Subsection (b)(1) of this Section 11 shall not apply to a
transfer by gift, bequest or inheritance, or a transfer to the
Partnership and, for purposes of the forty percent (40%) limitation,
any such transfer shall not be treated as such.
If, after the forty percent (40%) limitation is
reached in any consecutive twelve (12) month period, a transfer of the
Partnership Interest would otherwise take place by operation of law
(but not including any transfer referred to in Subsection (b)(3) of
this Section 11), then the transferee shall not become a Limited
Partner and such Partnership Interest shall be automatically redeemed
by the Partnership immediately prior to such transfer for a price equal
to the fair market value of said interest on such date of transfer. The
price shall be paid within ninety (90) days after the date of the
transfer and redemption. If the Partnership and the transferor do not
agree upon the fair market value of the Partnership Interest, the
purchase price shall be determined by arbitration. The purchase price
shall be paid in cash within ten (10) days after such determination.
(c) No transfer or assignment of any limited partner
interest shall be made if it would result in the Partnership's being
treated as an association taxable as a corporation for tax purposes.
The General Partner, in its
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sole discretion, may, on behalf of the Partnership, impose any
restrictions or transfers or assignments of limited partner interests
it may deem appropriated to give effect to the preceding sentence. The
General Partner shall incur no liability to any Limited Partner,
prospective investor or assignee for any action or inaction in
connection with the foregoing, provided that the General Partner acted
in good faith and such course of conduct did not constitute negligence
or misconduct of the General Partner.
12. The General Partner, in its absolute discretion, may cause the
Partnership to make or refrain from making, or once having made, to revoke, the
election referred to in Section 754 of the Code, and any similar election
provided by state or local law, or any similar provision enacted in lieu
thereof.
13. Until the dissolution of the Partnership, the General Partner shall
not take any voluntary steps to dissolve itself nor shall the General Partner
voluntarily withdraw or resign.
14. No Limited Partner or Special Partner shall be entitled to withdraw
from the Partnership except on transfer of all his partner interest pursuant to
this Article XV.
15. Each Limited Partner or Special Partner shall immediately notify
the Partnership of any assignment of any Unit in the Partnership and shall
provide the name, address and identification number of the assignee.
ARTICLE XVI
MEETINGS AND AMENDMENT OF LIMITED PARTNERSHIP
CERTIFICATE AND AGREEMENT
A. Amendment of Limited Partnership Certificate. The General Partner
shall amend and record the Certificate of Limited Partnership of the Partnership
without additional consent of Limited Partners, when, pursuant to the terms of
this Partnership Agreement:
1. There is a change in the name of the Partnership;
2. The General Partner withdraws, is removed, is adjudicated bankrupt
under Chapter 7 of the Federal Bankruptcy Code (or any similar law or provision
enacted in lieu thereof), is adjudicated incompetent to manage his person or
estate or dies, or a person is admitted as the General Partner;
3. There is a false or erroneous statement in the Certificate;
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4. A time is fixed for dissolution of the Partnership or the return of
contributions and such time has not been specified in the Certificate;
5. The Partners desire to make a change in any other statement in the
Certificate in order that it shall accurately represent the agreement among
them;
6. There is a change in the address of the Partnership's principal
place of business or its California office;
7. There is a change in the time as stated in the Certificate for the
dissolution of the Partnership or for the return of a contribution; and
8. There is a change in the address of the California agent for service
of process designated in the Certificate of Limited Partnership (unless such
agent is a corporation) or a new agent for service of process is appointed.
If the General Partner is required to file a certificate of
amendment and fails after demand to do so within 30 days of such demand or if it
refuses to do so, any Limited Partner may, unless otherwise precluded by
applicable law, prepare, execute and file an appropriate certificate of
amendment.
B. Amendments to the Agreement.
1. Amendments to this Partnership Agreement may be proposed by the
General Partner or by Limited Partners holding ten percent (10%) or more of the
outstanding Limited Partner Interests, with the same proportionate vote as
provided in paragraph (d) of Article XI. Following such proposal, the General
Partner shall submit to the Limited Partners a verbatim statement of any
proposed amendment and the effect of such amendment on the liability of Limited
Partners for the debts of the Partnership. The General Partner shall include in
any such submission the General Partner's recommendations as to the proposed
amendment. The amendment shall become effective only upon the written consent or
affirmative vote of holders holding more than fifty percent (50%) of the then
outstanding Limited Partner Interests, with the same proportionate vote as
provided in paragraph (d) of Article XI.
2. Any provision to the contrary herein notwithstanding, the General
Partner may, without the consent of the Limited Partners, make the following
amendments to this Agreement:
a. Any amendments to Article VIII and/or Article IX of this
Agreement if the Partnership is advised by its accountants or legal
counsel at any time that the allocations provided in those Articles are
not likely to be respected for Federal income tax purposes, either
because of the promulgation of Treasury Regulations under Section
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704 of the Code or other developments in the law. The General Partner
is empowered to amend such provisions to the minimum extent necessary
in accordance with the advice of the accountants and counsel to effect
the allocations provided in this Agreement . New allocations made by
the General Partner in reliance upon the advice of the accountants or
counsel described above shall be deemed to be made pursuant to the
fiduciary obligation of the General Partner to the Partnership and the
Limited Partners, and no such new allocation shall give rise to any
claim or cause of action by any Limited Partner, provided that the
General Partner acted in good faith; and
b. In the event that the State of California amends the
California Revised Limited Partnership Act in any manner and, as a
result of such amendment, counsel to the Partnership is unable to give
the Partnership an opinion to the effect that the Partnership will be
treated as a partnership for Federal income tax purposes and not as an
association taxable as a corporation, then the General Partner may
decide in its sole discretion to reconstitute the Partnership under the
laws of another state.
3. Any provision to the contrary contained herein notwithstanding, the
General Partner may, without the consent of the Limited Partners, amend this
Agreement (a) to add to the representations, duties or obligations of a General
Partner or to surrender any right or power granted to a General Partner herein,
for the benefit of the Limited Partners, (b) to cure any ambiguity, to correct
or supplement any provision herein which may be inconsistent with any other
provision herein or to make any other provision with respect to matters or
questions arising under this Agreement which will not be inconsistent with the
provisions of this Agreement, (c) to delete any provision from this Agreement or
to add any provision to this Agreement required to be so deleted or added by the
Staff of the Securities and Exchange Commission or by a State "Blue Sky"
Commissioner or similar such official, which addition or deletion is deemed by
such Commission or official to be for the benefit or protection of the Limited
Partners, and (d) to change administrative or other provisions of this Agreement
in a manner which, in the opinion of the General Partner, will permit the most
profitable and/or efficient operation of the Partnership; provided, however,
that no amendment shall be adopted pursuant to this Section 3 unless the
adoption thereof (i) is for the benefit of, or not adverse to, the interests of
the Limited Partners, (ii) is consistent with Article IV and Paragraph A of
Article X hereof, (iii) does not affect the distribution of Distributable Cash
From Operations, Cash From Sales and Cash From Financings or the allocation of
profits and losses among the Limited Partners or between the Limited Partners
and the General Partner and (iv) does not effect the limited liability of the
Limited Partners or the status of the Partnership as a partnership for Federal
income tax purposes.
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4. Upon amendment of this Agreement, the Certificate of Limited
Partnership shall also be amended to reflect such change.
5. Any amendment to the Partnership Agreement which modifies the
compensation or distributions to which a General Partner is entitled or which
affects the duties of a General Partner must be consented to by the General
Partner before becoming effective.
6. In the event there is a change in the Federal income tax laws or
regulations which result in the Partnership being taxed as an association
taxable as a corporation, the General Partner may cause the Partnership to
conduct its business so as to be treated as a real estate investment trust for
Federal income tax purposes.
C. Meetings of the Partnership. Meetings of the Partnership may be
called by the General Partner and shall be called by them upon the written
request of Limited Partners holding ten percent (10%) or more of the outstanding
Limited Partner Interests, with the same proportionate vote as provided in
paragraph (d) of Article XI. Upon receipt of such a written request, stating the
purpose of the proposed meeting, the General Partner shall provide each Partner,
within 10 days of such request, written notice (either by personal service or
certified mail or by express or other overnight delivery service) of a meeting
and the purpose of such meeting. Such meeting shall be held not less than 10
days nor more than 60 days after the receipt of such request. Included with the
notice shall be a detailed statement of the action proposed, including a
verbatim statement of the wording of any resolution proposed for adoption by the
Limited Partners and of any proposed amendment to the Partnership Agreement. The
Partnership will provide for Proxies or written consents which specify a choice
between approval or disapproval of each matter to be acted upon at the meeting.
Holders of a majority of the Limited Partner Interests entitled to vote,
represented in person or by Proxy, shall constitute a quorum at a meeting of the
Limited Partners. To the extent not consistent with this Paragraph C, all
meetings shall be governed by the provisions of Section 15637 of the Act. The
General Partner may establish a record date for any meeting, subject to the
limitations of Section 15637(j) of the Act.
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ARTICLE XVII
TERM
The Partnership shall terminate on December 31, 2010, unless
sooner dissolved pursuant to the provisions of Article XVIII hereof as otherwise
provided by law.
ARTICLE XVIII
DISSOLUTION
A. Events Requiring Dissolution. The Partnership shall be dissolved
upon the happening of any of the following events:
1. The retirement, removal, adjudication of bankruptcy under Chapter 7
of the Bankruptcy Code (or any similar law or provision enacted in lieu
thereof), of the General Partner, the dissolution or other cessation to exist as
a legal entity of the General Partner, unless the Limited Partners agree in
writing to continue the business of the Partnership and to admit one or more
General Partners.
2. The Partnership is adjudicated bankrupt under Chapter 7 of the
Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof).
3. The vote of Limited Partners holding more than fifty percent (50%)
of the then outstanding Limited Partner Interests held by all Limited Partners,
with the same proportionate vote as provided in paragraph (d) of Article XI.
4. The disposition of all interests in the real, personal and mixed
property and other assets of the Partnership.
5. December 31, 2010.
B. Distributions on Dissolution. Upon the dissolution of the
Partnership the General Partner who has not wrongfully dissolved the Partnership
shall wind up the affairs of the Partnership. If there is no such General
Partner, the Limited Partners shall wind up the affairs of the Partnership. The
Partners winding up the affairs of the Partnership shall take full account of
the Partnership assets and liabilities and all assets shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom shall be applied and distributed in the following order: (1)
to creditors (including Partners who are creditors to the extent permitted by
law), in the order of priority as provided by law, (2) to the Partners in
accordance with their respective Capital
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Accounts, determined after the application of Articles VIII and IX hereof and
(3) to the Partners in accordance with the provisions of Paragraph E of Article
IX hereof. Notwithstanding anything to the contrary, in the event the
Partnership is "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), liquidating distributions shall be made pursuant to the
previous sentence by the end of the taxable year in which the Partnership is
liquidated, or, if later, within 90 days after the date of such liquidation.
Distributions pursuant to the preceding sentence may be made to a trust for the
purposes of an orderly liquidation of the Partnership by the trust in accordance
with the Act.
C. Contributions by the General Partner. In the event that, upon the
liquidation of the Partnership, the General Partner shall have a negative
balance in the General Partner's Capital Account then the General Partner shall
contribute to the capital of the Partnership an amount equal to such negative
balance in the General Partner's Capital Account.
ARTICLE XIX
POWER OF ATTORNEY
Concurrently with the written acceptance and adoption of the
provisions of this Agreement, each Limited Partner and Special Partner shall
execute and deliver to the General Partner a Power of Attorney in a form
acceptable to the General Partner in which the General Partner is constituted
and appointed as the attorney-in-fact for such Limited Partner or Special
Partner with power and authority to act in his name and on his behalf in the
execution, acknowledgment and filing of documents, which will include but not be
limited to a Certificate of Limited Partnership, as well as amendments thereto,
under the laws of the State of California and under the laws of any other state
in which the General Partner deems it advisable to file such a certificate; any
other instrument which may be required to be filed by the Partnership under the
laws of any state or by any governmental agency, or which the General Partner
deems it advisable to file; and any documents which may be required to effect
the continuation of the Partnership, the admission of an additional or
substituted Limited Partner or Special Partner or the dissolution and
termination of the Partnership, provided such continuation, admission or
dissolution and termination are in accordance with the terms of this Agreement.
The Power of Attorney so granted by each Limited Partner and
Special Partner to the General Partner is a Special Power of Attorney coupled
with an interest, is irrevocable and shall survive the death or legal incapacity
of the Limited Partner or Special Partner; may be exercised by the General
Partner for each Limited Partner or Special Partner by a facsimile signature
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of one of its officers or by listing all the Limited Partners or Special
Partners executing any instrument with a single signature of one of its officers
acting as attorney-in-fact for all of them; and shall survive the delivery of
any assignment by a Limited Partner or Special Partner of the whole or any
portion of his interest in the Partnership; except that where the assignee
thereof has been approved by the General Partner for admission to the
Partnership as a substituted Limited Partner or Special Partner, the Power of
Attorney shall survive the delivery of such assignment for the sole purpose of
enabling the General Partner to execute, acknowledge and file any instrument
necessary to effect such substitution.
The Power of Attorney so granted by each Limited Partner to
the General Partner shall not authorize the General Partner to act on behalf of
Limited Partners in any situation in which this Agreement requires the consent
of Limited Partners.
ARTICLE XX
LIMITATIONS ON LIABILITY; LITIGATION
Except as provided in his Subscription Agreement, no Limited
Partner or Special Partner shall be liable (i) as a General Partner unless, in
addition to the exercise of his rights and powers as a Limited Partner or
Special Partner, he takes part in the management or control of the Partnership's
business or is named as a General Partner in the Certificate of Limited
Partnership or any amendment thereto or (ii) to the Partnership or to a General
Partner unless a liability of the Partnership or of the General Partner, as the
case may be, is founded upon the unauthorized activity of such Limited Partner
or Special Partner in attempting to take part in the control of the
Partnership's business or misstatements contained in such Partner's Subscription
Agreement delivered in connection with his purchase of limited partner
interests.
The General Partner is hereby authorized to prosecute, defend,
settle or compromise actions or claims at law or in equity at the Partnership's
expense as may be necessary or proper to enforce or protect the Partnership's
interests. The General Partner shall satisfy any judgment, decree or decision of
any court, board or authority having jurisdiction or any settlement of any suit
or claim prior to judgment or final decision thereon first, out of any insurance
proceeds available therefor, next out of the Partnership's assets and income and
finally out of the assets and income of the General Partner.
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ARTICLE XXI
MISCELLANEOUS
All notices under this Agreement shall be in writing and
shall, except as otherwise expressly provided herein, be given to the Partner
entitled thereto by personal service or by certified or registered mail or
express mail or other overnight delivery service, return receipt requested, to
the address set forth in this Agreement for such Partner or at such other
address as he may specify in writing.
Article titles contained in this Agreement are inserted only
as a matter of convenience and for reference and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision hereof.
Whenever the singular number is used in this Agreement and
when required by the context, the same shall include the plural, and the
masculine gender shall include the feminine and neuter genders and the word
"persons" shall include individuals, corporations, firms, partnerships, trusts
or other forms of associations.
This Agreement may be executed in several counterparts, and
all so executed shall constitute one agreement, binding on all of the parties
hereto, notwithstanding that all the parties are not signatory to the original
or the same counterpart.
Subject to the provisions of Article XV, the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
heirs, executors, administrators, successors and assigns of the respective
Partners.
Whenever the vote of the Limited Partners is referred to in
this Agreement, the General Partner may vote on behalf of such Limited Partners
who have by written proxy authorized the General Partner so to do.
This Agreement and all amendments hereof shall be governed by
the laws of the State of California.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their
respective hands as of the day and year first above written.
GENERAL PARTNER:
▇▇▇▇▇ DIVERSIFIED LLC
By:___________________________________
CORPORATE SPECIAL PARTNER:
▇▇▇▇▇ MANAGEMENT LLC
By:___________________________________
INDIVIDUAL SPECIAL PARTNER
______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
LIMITED PARTNERS:
SEVENTH ▇▇▇▇▇ CORPORATE PROPERTY, INC.
By:___________________________________
▇▇▇▇▇ DIVERSIFIED LLC
By:___________________________________
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All Limited Partners now and hereafter
admitted as limited partners of the
Partnership pursuant to powers of attorney
and authorizations now and hereafter
executed in favor of and granted and
delivered to the General Partner
By: ▇▇▇▇▇ DIVERSIFIED LLC,
General Partner
By:_______________________________
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