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Exhibit 99.20
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
A DELAWARE LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of
CORPORATE PROPERTY ASSOCIATES 8, L.P., A DELAWARE LIMITED PARTNERSHIP (the
"Partnership"), which amends and restates the Amended Agreement of Limited
Partnership dated as of February 12, 1988, as amended as of _________________,
1997, is made and entered into as of the ____ day of ___________, 1997 by and
between ▇▇▇▇▇ DIVERSIFIED LLC, a Delaware limited liability company, as General
Partner and as Limited Partner, ▇▇▇▇▇ MANAGEMENT LLC, as Corporate Special
Partner, ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as Individual Special Partner, and EIGHTH ▇▇▇▇▇
CORPORATE PROPERTY, INC., a Delaware corporation, as Limited Partner, those
persons set forth on Schedule A hereto, as Limited Partners, and all persons and
entities admitted as Limited Partners as provided herein.
ARTICLE I
CONTINUATION OF PARTNERSHIP
The parties hereby continue the Partnership under the provisions of
the Delaware Revised Uniform Limited Partnership Act (6 Del.C. ss.ss.17-101, et
seq.), as amended from time to time (the "Act") and the rights and liabilities
of the Partners shall be as provided in the Act and as herein expressly
provided. Pursuant to Section 17-211 of the Act, upon the consummation of the
Merger, ▇▇▇▇▇ Diversified Properties LLC shall become the general partner of the
Partnership, and Eighth ▇▇▇▇▇ Corporate Property, Inc. shall become the limited
partner of the Partnership. In the event that it shall be necessary for the
Partnership to exist in or qualify to do business under the laws of any state or
states other than or in addition to the State of Delaware, the parties hereby
agree that the Partnership shall take such action as may be necessary to exist
or qualify to do business in any state in which such existence or qualification
shall be required, provided that in any such event the Partnership shall at all
times continue to be a limited partnership formed under and governed by the
provisions of the Act.
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ARTICLE II
NAME
The name of the Partnership shall be "Corporate Property Associates 8,
L.P., a Delaware limited partnership." The business of the Partnership shall be
conducted under the name "Corporate Property Associates 8, L.P., a Delaware
limited partnership" or under "Corporate Property Associates 8, L.P." in any
state or other jurisdiction which does not permit the term "limited" to be part
of the Partnership's name or under such other name as the General Partner shall
hereafter designate in writing to the other Partners.
ARTICLE III
DEFINITIONS
"Acquisition Expenses" means the expenses of the Partnership related to
the selection and acquisition of properties by the Partnership, whether or not
such properties are acquired, including but not limited to legal fees and
expenses, travel and communications expenses, costs of appraisals and fairness
letters, non-refundable option payments on property not acquired, accounting
fees and expenses, costs of title reports and title insurance, transfer and
recording taxes and miscellaneous expenses. Acquisition Expenses shall not
include Acquisition Fees.
"Acquisition Fees" means the total of all fees and commissions paid by any
party in connection with the purchase or development of property by the
Partnership including compensation paid in the form of stock or other interests
in, or warrants or other rights to purchase the stock of or other interests in
the stock of tenants or their affiliates, provided, however, that the percentage
calculated by dividing the number of warrants or other stock rights received by
the General Partner or its Affiliates (excluding the Partnership) by the total
warrants or other stock rights granted by the seller in any transaction cannot
exceed that percentage calculated by dividing the portion of the Acquisition Fee
paid in cash by the total cash purchase price of the real estate purchased by
the Partnership in such transaction, and except a development fee paid to a
Person not an Affiliate of the General Partner in connection with the actual
development of a project after the Partnership's acquisition of the land.
Included in the computation of such fees or commissions shall be any real estate
commission, selection fee, development fee (other than as described above),
nonrecurring management fee, or any fee
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of a similar nature, however designated. Acquisition Fees shall not include
Acquisition Expenses.
"Act" means the Delaware Revised Uniform Limited Partnership Act (6 Del.C.
ss.ss.17-101, et seq.) as amended from time to time.
"Affiliate" means, with respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(ii) any Person owning or controlling 10% or more of the outstanding voting
securities of such Person, (iii) any officer, director or partner of such Person
or of any Person specified in (i) or (ii) above and (iv) any company in which
any officer, director or partner of any Person specified in (iii) above is an
officer, director or partner.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership as hereafter amended from time to time.
"Appraisal Date" means December 31, 2002.
"Appraised Value" means the value according to an appraisal made by an
independent qualified appraiser. Such qualification may be demonstrated by
membership in a nationally recognized appraisal society such as American
Institute of Real Estate Appraisers ("M.A.I."), Society of Real Estate
Appraisers ("S.R.E.A.") or their equivalent, but is not limited thereto.
"Capital Account" means, in respect of any Partner, the account maintained
for such Partner in accordance with Article XII.
"Cash From Financings" means, the net cash proceeds realized by the
Partnership from the financing of Partnership property or the refinancing of any
Partnership indebtedness.
"Cash From Sales" means the net cash proceeds realized by the Partnership
from the sale, exchange or other disposition of any of its assets. Cash From
Sales shall not include net cash proceeds realized from the financing of
Partnership property or the refinancing of any Partnership indebtedness.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any similar law or provision enacted in lieu thereof, unless the
context indicates otherwise.
"Consolidation and Offering Expenses" means all expenses incurred in
connection with the formation and qualification of the Subsidiary Partnership,
the Merger and in offering the Shares to the former limited partners of the
Partnership in exchange for
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their Partnership Interests under applicable Federal and state law, and any
other expenses actually incurred and directly related to the offering of the
Shares, including such expenses as: (i) the preparing, printing, filing and
delivering of the Registration Statement and the Prospectus (including any
amendments thereof or supplements thereto), (ii) the preparing and printing of
this Agreement, other solicitation material and related documents and the filing
and/or recording of such certificates or other documents necessary to comply
with the laws of the State of Delaware for the formation of a limited
partnership, the merger of a limited partnership into another limited
partnership and for the continued good standing of a limited partnership, (iii)
the qualification or registration of the limited liability company interests
under state securities or "Blue Sky" laws, (iv) any escrow arrangements,
including any compensation to an escrow agent, (v) the filing fees payable to
the United States Securities and Exchange Commission and to the National
Association of Securities Dealers, Inc. and any costs payable to the NYSE for
the listing of the Listed Shares, (vi) the fees of the Partnership's counsel,
(vii) all advertising expenses incurred in connection therewith, including the
cost of all sales literature and the costs related to investor and broker/dealer
sales and information meetings and marketing incentive programs and (viii)
selling commissions and wholesaling expenses incurred in connection with the
sale of the Shares.
"Contribution" means any money, property or services rendered, or a
promissory note or other obligation to contribute money or property, or to
render services as permitted by the Act, which a Partner contributes to the
Partnership as capital in that Partner's capacity as Partner pursuant to this
Agreement.
"Corporate Special Partner" means ▇▇▇▇▇ Management LLC, a Delaware limited
liability company.
"CPA Partnership" means Corporate Property Associates, a California
limited partnership, Corporate Property Associates 2, a California limited
partnership, Corporate Property Associates 3, a California limited partnership,
Corporate Property Associates 4, a California limited partnership, Corporate
Property Associates 5, a California limited partnership, Corporate Property
Associates 6, a California limited partnership, Corporate Property Associates 7,
a California limited partnership, Corporate Property Associates 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.
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"Distributable Cash From Operations" means cash receipts from the ordinary
day-to-day operations of the Partnership (including all interest on Partnership
investments and mortgages held by the Partnership) without deduction for
depreciation and amortization of intangibles such as organization, underwriting
and debt placement costs but after deducting all other expenses 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, Acquisition Expenses and any other similar fees, however designated.
"General Partner" means any Person in his, her or its capacity as a
general partner of the Partnership (except as otherwise expressly provided
herein) and whose name and address are set forth in Article V, or any successor
thereto appointed or elected hereunder.
"Individual Special Partner" means ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
"Independent Advisor" means a long established, nationally recognized
investment banking firm, accounting firm, mortgage banking firm, bank, real
estate financial consulting firm or advisory firm which has a staff of real
estate professionals, whose compensation is determined and embodied in a written
contract before an opinion is rendered and who, directly or indirectly, has no
interest in, nor any material business or professional relationship with, the
Partnership, the General Partner, a borrower, or any of their Affiliates. No
more than 5% of the aggregate annual gross income of the Independent Advisor or
its Affiliates may be attributable to compensation paid to the
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Independent Advisor by the Partnership pursuant to the advisory agreement. The
compensation of the Independent Advisor will be paid by the Sponsor and the
Sponsor may not claim reimbursement from the Partnership for such expenses.
"Independent Director" means a director of the General Partner who, in the
opinion of the board of directors of the General Partner, is free from any
relationship that would interfere with the exercise of independent judgment. A
director of the General Partner who is an Affiliate of the General Partner or an
officer or employee of the General Partner or its subsidiaries or Affiliates
would not qualify as an Independent Director.
"Investment in Properties" means the amount of gross proceeds of the
Offering paid or allocated to the purchase, development, construction or
improvement of real property and personal or mixed property connected therewith,
acquired by the Partnership, including the purchase of properties, working
capital reserves (except that working capital reserves in excess of 5% of the
gross proceeds of the Offering shall not be included) and other cash payments
such as interest and taxes, but excluding Front-End Fees.
"Limited Partner" means any Person in his, her or its capacity as a
limited partner of the Partnership and whose name and address are set forth on
the books and records of the Partnership.
"Mandatory Distribution Event" means (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,
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
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assets to the Partnership for Federal income tax purposes. For purposes of the
preceding sentence, the term "nonrecourse debt" shall mean a liability of the
Partnership with respect to which no Partner has any personal liability.
"Net Lease" means a lease in which the tenant undertakes to pay all or
substantially all the cash expenses, excluding debt service, related to the
leased property.
"Nonrecourse Deductions" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Treasury Regulations.
"Nonrecourse Liabilities" has the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
"Offering" means the offering of the Shares made pursuant to the
Prospectus.
"Partner" means the General Partner, the Corporate Special Partner, the
Individual Special Partner and any Limited Partner where no distinction is
required by the context in which the term is used.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Debt
for the Partnership taxable year shall be determined in accordance with the
rules of Treasury Regulations Section 1.704-2(i)(2).
"Partnership" means Corporate Property Associates 8, L.P., a Delaware
limited partnership.
"Partnership Interest" or "Interest" means the interest of each Partner in
the profits, losses, distributions, capital and assets of the Partnership.
"Partnership Minimum Gain" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum Gain, for a
Partnership taxable year shall
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be determined in accordance with the rules of the Treasury Regulations.
"Person" means any natural person, partnership, corporation, limited
liability company, association or other legal entity.
"Prospectus" means the final prospectus of the General Partner pursuant to
which the General Partner will offer up to 23,654,898 Shares, as the same may at
any time and from time to time be amended or supplemented after the effective
date of the Registration Statement.
"Proxy" means a written authorization signed by a Partner or the Partner's
duly authorized attorney-in-fact giving another Person the power to vote with
respect to the Partnership Interest of that Partner. "Signed," for the purpose
of this paragraph, means the placing of the Partner's name on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
Partner or the Partner's duly authorized attorney-in-fact.
"Purchase Price of Property" means the price paid upon the purchase or
sale of a particular property, including the amount of Acquisition Fees and all
liens and mortgages on the property, but excluding points and prepaid interest.
"Registration Statement" means the General Partner's Registration
Statement on Form S-4 filed with the Securities and Exchange Commission in the
form in which it becomes effective, as the same may at any time and from time to
time thereafter be amended or supplemented.
"Shares" means the Shares of the General Partner.
"Special Partners" means the Corporate Special Partner and the Individual
Special Partner.
"Sponsor" means any Person directly or indirectly instrumental in
organizing wholly or in part, a limited or general partnership or any Person who
will manage or participate in the management of a limited or general
partnership, and any Affiliate of any such Person, but does not include a Person
whose only relation with the Partnership is as that of an independent property
manager and whose only compensation is as such. Sponsor does not include wholly
independent third parties such as attorneys, accountants and underwriters whose
only compensation is for professional services rendered in connection with the
offering of syndicated interests.
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"Subsidiary Partnership" means Eighth Subsidiary, L.P., a Delaware limited
partnership, which is a subsidiary of the General Partner.
ARTICLE IV
PURPOSE
The business and purpose of the Partnership is to carry on any business
that a Delaware partnership without limited partners may carry on (except the
business of granting policies of insurance, assuming insurance risks or
banking), and more particularly to invest in and own real property or interests
therein (including leasehold estates) as well as personal or mixed property
connected therewith which is income producing or capable of becoming income
producing within a reasonable time after acquisition. The Partnership may enter
into ventures, partnerships and other business arrangements with respect to real
property and personal or mixed property connected therewith or interests therein
as deemed prudent by the General Partner in order to achieve successful
operations for the Partnership. Operations of the Partnership may be conducted
wherever, in the opinion of the General Partner and not in violation of the
general restrictions described in Paragraph H of Article X, the factors involved
appear to be favorable for the Partnership and the Partners.
ARTICLE V
NAMES AND ADDRESSES OF PARTNERS
The General Partner shall be ▇▇▇▇▇ Diversified LLC, a limited liability
company having an office at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The
names and addresses of the Limited Partners shall be as set forth on the books
and records of the Partnership which shall be kept at the principal place of
business of the Partnership.
ARTICLE VI
PRINCIPAL PLACE OF BUSINESS; REGISTERED OFFICE AND AGENT
The principal place of business of the Partnership shall be ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The Partnership shall also maintain a
registered office in the State of Delaware at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The General Partner may from time to time change the principal
place of
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business of the Partnership or its registered 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 a registered office in the State of Delaware. The General
Partner may establish additional places of business of the Partnership when and
where required by the business of the Partnership. The Partnership at all times
shall maintain in the State of Delaware a registered agent for service of
process upon the Partnership.
ARTICLE VII
CAPITAL CONTRIBUTIONS
The Partnership is authorized to issue and sell up to 100,000 limited
partner interests.
No interest shall be paid on any contribution to the capital of the
Partnership.
Loans by a Partner to the Partnership shall not be considered
contributions to the capital of the Partnership. Any Partner, including any
additional or substituted Partner, who shall acquire a Partnership Interest or
whose Partnership Interest is increased by means of a transfer to him of all or
a part of the Partnership Interest of another Partner, shall succeed to the
Capital Account, or portion thereof, in respect of the Partnership Interest
received.
ARTICLE VIII
PROFITS AND LOSSES
A. Determination of Profits and Losses. The Partnership presently intends
to keep its books on the accrual method of accounting and to report for federal,
state and local income tax purposes using the same method by making such
adjustments as are necessary to include other items of income, expense,
deduction and allowance as are permitted or required under the Code and the
regulations promulgated thereunder. The Partnership may report its activities to
the Limited Partners in accordance with
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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 an adjustment to the basis of
Partnership assets made pursuant to a valid election under Sections 734, 743 and
754 of the Code and pursuant to corresponding provisions of applicable state and
local income tax laws shall be charged or credited, as the case may be, and any
increase or decrease in the amount of any item of credit or tax preference
attributable to any such adjustment shall be allocated to the Partners entitled
thereto under such laws. Profits and losses allocated to a particular class of
Partnership Interests shall be allocated among the holders of record of such
class of Partnership Interests at the end of each Fiscal Year (or such shorter
period as may be provided herein) of the Partnership in proportion to their
respective Partnership Interests; provided, however, that any such profits and
losses attributable to a limited partner interest assigned during a Fiscal Year
of the Partnership shall be allocated among the Persons who were the holders of
such limited partner interests during such Fiscal Year in proportion to the
number of months (for purposes of such allocation, ownership of limited partner
interests for each month will be determined as of the fifteenth day of each
month) that each such holder was recognized as the owner of such limited partner
interest during such Fiscal Year, without regard to the results of Partnership
operations during the period in which each such holder was recognized as the
owner thereof and without regard to the date, amount or recipient of any
distributions which may have been made with respect to such limited partner
interest.
B. Allocation of Profits and Losses.
1. Except as provided in subparagraph 4 of this paragraph B, the profits
and losses of the Partnership (other than gains or losses from the sale,
exchange or other disposition of Partnership assets) shall be allocated to the
Partners as follows and in the following order of priority:
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a. An amount of net income equal to the excess, if any, of the aggregate
negative balance of the Capital Accounts of the Partners over the Minimum Gain
(determined as of the end of such year or fraction thereof), shall first be
allocated among the Partners whose Capital Accounts are negative as a result of
nonrecourse debt in proportion to the negative amounts attributable to such
nonrecourse debt.
b. Any remaining balance of net income shall be allocated 1% to the
General Partner, 9% to the Corporate Special Partner, 1% to the Individual
Special Partner and 89% to the Limited Partners.
c. Net losses of the Partnership shall be allocated 1% to the General
Partner, 9% to the Corporate Special Partner, 1% to the Individual Special
Partner and 89% to the Limited Partners.
2. Except as provided in subparagraph 4 of this Paragraph B, net losses
arising from sales, exchanges or other dispositions of Partnership assets shall
be allocated 1% to the General Partner, 1% to the Individual Special Partner and
98% to the Limited Partners. For purposes of this subparagraph 2, Capital
Accounts shall be determined after applying the allocations provided in
subparagraphs 1 and 5 of this Paragraph B, and after applying subparagraphs 6
and 7 of this Paragraph B.
3. Net gains arising from sales, exchanges or other dispositions of
Partnership assets shall be allocated to the Partners as follows and in the
following order of priority:
a. An amount of such gains equal to the excess, if any, of the aggregate
negative balance of the Capital Accounts of the General Partner over the Minimum
Gain;
b. If each Partner's Capital Account is negative and the gains are less
than the aggregate negative amounts in the Capital Accounts, in the ratio that
the Capital Accounts bear to each other; c. If each Partner's Capital Account is
negative and the gains are greater than the aggregate negative amounts in the
Capital Accounts (i) first in an amount sufficient to bring each Partner's
Capital Account to zero, and (ii) then to the Partners in the percentage by
which Cash From Sales and Cash From Financings are then being distributed
pursuant to the provisions of Paragraph E of Article IX hereof;
d. If certain Partners' Capital Accounts are positive and other Partners'
Capital Accounts are negative (i) first in an amount sufficient to bring the
Capital Account of each Partner whose Capital Account is negative to zero (or if
the gains are
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less than the aggregate negative amounts of the Capital Accounts which are
negative, to such Partners in the ratio that such negative Capital Accounts bear
to each other), and (ii) then to the Partners in the percentage by which Cash
From Sales and Cash From Financings is then being distributed pursuant to the
provisions of Paragraph E of Article IX hereof; or
e. If each Partner's Capital Account is positive, in the percentages by
which Cash From Sales and Cash From Financings are then being distributed
pursuant to the provisions of Paragraph E of Article IX hereof. For purposes of
this subparagraph 3, Capital Accounts shall be determined after applying the
allocations provided first in subparagraph 5 and then in subparagraphs 1 and 2
of this Paragraph B and after applying subparagraphs 6 and 7 of Paragraph B.
4. No loss or deduction or item thereof under subparagraph 1 or 2 of this
Paragraph B shall be allocated to the General Partner if, or to the extent, such
allocation would create or increase a deficit in the General Partner's Capital
Account, unless:
a. Such allocation of loss or deduction is attributable to nonrecourse
debt of the Partnership; and
b. Such allocation does not cause the deficit Capital Account of the
General Partner to exceed the amount of Minimum Gain attributable to such
nonrecourse debt, determined as of the last day of the taxable year to which
such allocation is attributable.
5. To the extent that any amount paid to a Limited Partner or its
Affiliates pursuant to the provisions of Paragraphs G(2),(4),(5),(6) or (7) of
Article X hereof, or as Front-End Fees, is treated as a distributive share of
Partnership income to the Limited Partner for Federal income tax purposes, the
Limited Partner affected shall be allocated gross income of the Partnership at a
time and in an amount equal to the amount of such payment, and the Capital
Account of the Limited Partner so affected shall be adjusted to reflect such
allocation and payment. If the Partnership's gross income for a Fiscal Year is
less than the amount of such payment, the Limited Partner affected shall be
allocated gross income in each succeeding Fiscal Year until the total amount so
allocated equals the total amount of such payment.
6. For purposes of subparagraphs 1(a), 2 and 3 of this Paragraph B,
distributions to the Partners pursuant to Paragraphs A and E of Article IX
hereof shall be treated as having been made
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and charged to the Capital Accounts of the Partners prior to the allocations of
income, gains and losses provided therein.
7. Solely for purposes of this Paragraph B, the Capital Accounts of each
Partner shall be reduced by such Partner's share of any Partnership expenditure
which would be treated as if it were an expenditure described under Section
705(a)(2)(B) of the Code, and shall be reduced or increased by any other amount
required by the then applicable regulations under Section 704 of the Code.
8. Notwithstanding anything to the contrary in this Article VIII, if any
Partner receives an adjustment, allocation or distribution described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), such Partner shall be
specially allocated a pro rata portion of each item of Partnership income,
including gross income, and gain in an amount and manner sufficient to
eliminate, as quickly as possible, any deficit balance in such Partner's Capital
Account created by such adjustment, allocation or distribution in excess of the
sum of (i) the amount such Partner is obligated to restore pursuant to any
provision of this Agreement and (ii) the amount such Limited 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
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Debt, determined in accordance with Section 1.704-2(i)(5) of the Treasury
Regulations, shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to that
Partner's share of the net decrease in the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt to the extent and in the manner required by
Section 1.704-2(i) of the Treasury Regulations. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i) of the Treasury
Regulations. The items to be so allocated shall be determined in accordance with
Sections 1.704-2(i)(4) and (j)(2) of the Treasury Regulations. This subparagraph
is intended to comply with the minimum gain chargeback requirement with respect
to Partner Nonrecourse Debt contained in said section of the Treasury
Regulations and shall be interpreted consistently therewith. Allocations
pursuant to this subparagraph shall be made in proportion to the respective
amounts to be allocated to each Partner pursuant hereto.
11. To the extent any Partner has an Adjusted Capital Account Deficit at
the end of any Partnership Fiscal Year, each such Partner shall be specially
allocated items of Partnership income (including gross income) and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Paragraph 8(B)(11) shall be made if and only to the extent that
such Partners would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section have been tentatively made as if this
Paragraph 8(B)(11) were not in the Agreement.
12. Partner Nonrecourse Deductions for any fiscal year or other applicable
period with respect to a Partner Nonrecourse Debt shall be specially allocated
to the Partners that bear the economic risk of loss for such Partner Nonrecourse
Debt (as determined under Sections 1.704-2(b)(4) and 1.704-2(i)(1) of the
Treasury Regulations).
C. Power of the General Partner to Vary Allocations of Profits and Losses.
It is the intent of the Partners that each Partner's distributive share of
income, gains, losses, deductions and credits shall be determined and allocated
in accordance with this Article VIII to the fullest extent permitted by Section
704(b) of the Code. If the Partnership is advised that the allocations provided
in this Article VIII are unlikely to be respected for Federal income tax
purposes, the General Partner has been granted the power in Paragraph B(2)(a) of
Article XVI of this Agreement to amend the allocation provisions of this
Agreement, on advice of accountants and legal counsel, to the minimum extent
necessary to effect the plan of allocations and distributions provided in this
Agreement.
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D. Allocations of Profits and Losses Among Limited Partners. Except as
otherwise provided in this Article VIII, all profits and losses shall be
allocated among the Limited Partners in the same manner as distributions are
allocated in Paragraph D of Article IX hereof.
E. Approval of Partners to Allocation of Profits and Losses. The methods
hereinabove set forth by which profits and losses of the Partnership are
determined and allocated are hereby approved by each Partner as a condition to
becoming a Partner.
ARTICLE IX
DISTRIBUTIONS
A. Distributable Cash From Operations. The General Partner shall
distribute as soon after the close of each Fiscal Quarter as is reasonably
feasible all of the Distributable Cash From Operations for such Fiscal Quarter
in the following manner: 1% to the General Partner, 9% to the Corporate Special
Partner, 1% to the Individual Special Partner and 89% to the Limited Partners.
B. Cash From Sales. The General Partner shall distribute, as soon after
the close of each Fiscal Quarter as is reasonably feasible, all Cash From Sales
realized by the Partnership during such Fiscal Quarter in accordance with the
provisions of Paragraph E of this Article IX.
C. Cash From Financings. The General Partner shall distribute, as soon
after the close of each Fiscal Quarter as is reasonably feasible, all of the
Cash From Financings realized by the Partnership during such Fiscal Quarter in
accordance with the provisions of Paragraph E of this Article IX.
D. Allocation of Distributions Among Limited Partners. Distributions of
Distributable Cash From Operations to the Limited Partners shall be apportioned
among the holders of record of limited partner interests (as determined in
accordance with Paragraph A of Article VIII) in the ratio in which the number of
limited partner interests held of record by each of them bears to the number of
limited partner interests held of record by all the Limited Partners as of the
last month of the Fiscal Quarter with respect to which such distribution is
made. Distributions of Cash From Sales and Cash From Financings shall be made to
holders of record (as determined in accordance with Paragraph A of Article VIII)
for the month in which the transaction giving rise to the distribution was
completed.
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E. Distributions of Cash From Sales and Cash From Financings. The General
Partner shall distribute Cash From Sales and Cash From Financings in the
following manner: 1% to the General Partner, 1% to the Individual Special
Partner and 98% to the Limited Partners, until such time as $682,646 has been
distributed to the Individual Special Partner pursuant to this Paragraph E of
Article IX. Thereafter, Cash From Sales and Cash From Financings shall be
distributed 1% to the General Partner and 99% to the Limited Partners.
F. No Distributions Under Certain Circumstances. Not withstanding any
other provision of this Article IX, no distribution shall be made to the extent
that at the time of the distribution, after giving effect to the distribution,
all liabilities of the Partnership, other than liabilities to Partners on
account of their partnership interests and liabilities for which the recourse of
creditors is limited to specified property of the Partnership, exceed the fair
value of the assets of the Partnership, except that the fair value of property
that is subject to a liability for which the recourse of creditors is limited
shall be included in the assets of the Partnership only to the extent that the
fair value of that property exceeds that liability. No Partner shall have the
right to receive property other than money upon any distribution. No Partner may
be compelled to accept a distribution of any asset in kind in lieu of a
proportionate distribution of money being made to other Partners. Except for
distributions to a trust as set forth in the last sentence of paragraph B of
Article XVIII, all distributions shall be made only in the form of cash.
G. Approval of Partners to Allocation of Distributions. The methods
hereinabove set forth by which Cash From Operations, Cash From Sales and Cash
From Financings are allocated and distributed are hereby approved by each
Partner as a condition to becoming a Partner.
ARTICLE X
MANAGEMENT AND OPERATION OF BUSINESS
A. Management of Business. The Partnership shall be managed by the General
Partner and the conduct of the 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
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other provisions of this Agreement, the General Partner shall have and may
exercise on behalf of the Partnership all powers and rights necessary, proper,
convenient or advisable to effectuate and carry out the purposes, business and
objectives of the Partnership. Such powers shall include, without limitation,
the following powers:
1. To acquire, hold and dispose of any real property (or any interests
therein, including leasehold estates) as well as personal or mixed property
connected therewith, including the purchase, lease, development, improvement,
maintenance, exchange, trade or sale of such property at such price, rental or
amount, for cash, securities or other property and upon such terms, as the
General Partner deems to be in the best interests of the Partnership;
2. Subject to the provisions of paragraph H(10) of this Article X, to
borrow money and, if required therefor, to mortgage or subject to any other
security device any portion of the assets of the Partnership, to obtain
replacements of any mortgage or other security device, and to prepay, in whole
or in part, refinance, increase, modify, consolidate or extend any mortgage or
other security device, provided, however, that loans from Affiliates of the
General Partner shall be made in accordance with the provisions of Paragraphs
G(2) and G(6) of this Article X;
3. To invest the Partnership's funds in United States Government
securities, certificates of deposit or other time or demand deposits of banks,
savings banks, savings and loan associations or similar institutions which have
a net worth of at least $100,000,000 or in which such certificates or deposits
are fully insured by any Federal or state government agency, United States
dollar deposits in foreign branches of banks, which banks have a net worth of at
least $100,000,000, bank repurchase agreements covering securities of the United
States Government or governmental agencies, bankers' acceptances, public money
market funds, or other similar short-term highly liquid investments; to invest
any working capital or other reserves retained by the General Partner for the
operation of the Partnership in like manner; and to deposit, withdraw, invest,
pay, retain and distribute the Partnership's funds in any manner consistent with
the provisions of this Agreement;
4. To bring and defend actions at law or in equity;
5. To employ persons in the operation and management of the Partnership's
business, including but not limited to supervisory managing agents, building
management agents, real property developers and real estate brokers;
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6. To place record title to, or the right to use, Partnership assets in
the name or names of a non-operating nominee or nominees, including an Affiliate
of the General Partner, for any purpose convenient or beneficial to the
Partnership;
7. To perform all acts and file all documents, including tax returns and
registration statements, necessary to comply with Federal, state and local laws,
rules and regulations applicable to the Partnership or the conduct of the
Partnership's business;
8. To enter into and carry out contracts and agreements and any or all
documents and instruments and to do and perform all such other things as may be
in furtherance of Partnership purposes or necessary or appropriate to the
conduct of Partnership activities;
9. To cause the Partnership to make or revoke any of the elections
required or permitted to be made by the Partnership under the Code;
10. To determine the appropriate accounting method or methods to be used
by the Partnership (the Partnership intends initially to utilize the accrual
method of accounting in reporting its profits and losses for Federal, state and
local income tax purposes);
11. To designate ▇▇▇▇▇ Diversified LLC, the General Partner, as the "Tax
Matters Partner" in accordance with Section 6231(a)(7) of the Code and, as such,
the General Partner shall have all powers necessary to so perform including,
without limitation, the power to retain attorneys and accountants of its choice
and the right to settle any audits without the approval of the Limited Partners,
except as otherwise required by the Code. The designation provided for herein is
hereby expressly approved by each Partner as an express condition to becoming a
Partner; and
12. To execute, acknowledge, deliver, seal, file, record and vote any and
all instruments which may be deemed necessary or convenient to effect the
foregoing.
C. Restrictions on Authority of General Partner. In addition to other acts
expressly prohibited or restricted by this Agreement or by law, the General
Partner shall have no authority to act on behalf of the Partnership with respect
to, and is expressly prohibited from undertaking, the following:
1. Doing any act in contravention of this Agreement;
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2. Except as provided in this Agreement and except in connection with the
liquidation and winding up of the business of the Partnership upon its
dissolution, doing any act which would make it impossible to carry on the
ordinary business of the Partnership;
3. Confessing a judgment against the Partnership in connection with any
threatened or pending legal action;
4. Possessing Partnership property or assigning the rights of the
Partnership in specific Partnership property for other than a Partnership
purpose;
5. Admitting a Person as a Limited Partner except as provided in this
Agreement;
6. Except as provided in this Agreement and except in connection with the
liquidation and winding up of the business of the Partnership upon its
dissolution or a Mandatory Distribution Event, selling substantially all the
assets of the Partnership at a single sale or in multiple sales in the same
12-month period without the prior written approval of Limited Partners holding
more than fifty percent (50%) of the then outstanding Limited Partner Interests,
with the same relative vote as provided in paragraph (d) of Article XI;
7. Pledging or encumbering substantially all the properties of the
Partnership at one time or from time to time in a series of related
transactions, unless the lien of such pledge or encumbrance arises in connection
with the acquisition or improvement of properties or the initial financing of
properties acquired free and clear of encumbrances or the refinancing of
previous obligations and such lien is limited to the properties so acquired,
improved, financed or refinanced;
8. Obtaining any loan or any mortgage loan on any residential property
made or guaranteed by any Federal, state or local government or municipality or
any agency of any Federal, state or local government or municipality;
9. Performing any act (other than an act required by this Agreement) which
would, at the time such act occurred, subject any Limited Partner to liability
as a general partner in any jurisdiction;
10. Prepaying any interest on any Partnership indebtedness; provided that
the payment of any amount commonly referred to as "points" shall not be deemed a
prepayment of interest; or
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11. Assessing any Partner for an additional capital contribution.
D. Fiduciary Obligations of General Partner. The General Partner shall
have fiduciary responsibility for the safekeeping and use of all funds and
assets of the Partnership, whether or not such funds or assets are in their
possession or control. The General Partner will not employ, or permit another to
employ, such funds or assets in any manner except for the exclusive benefit of
the Partnership.
E. Obligations of the General Partner. The General Partner shall:
1. Devote such of its time to the business of the Partnership as it shall,
in its discretion, exercised in good faith, determine to be necessary to conduct
the business of the Partnership for the benefit of the Partnership and the
Limited Partners;
2. File and publish all certificates, statements or other instruments
required by law for formation, qualification and operation of the Partnership
and for the conduct of its business in all appropriate jurisdictions;
3. Use its best efforts to cause the Partnership and the Partners to be
protected by adequate public liability, directors and officers liability,
property damage and other insurance; however, no Partnership funds may be used
to purchase any liability insurance for which the indemnified person would be
prohibited from being indemnified by the Partnership under Article X(F) of this
Agreement;
4. Employ attorneys to represent the Partnership, which a(tau)torneys may
also serve as counsel to the General Partner and any of its Affiliates; and
5. Use its best efforts to maintain the status of the Partnership as a
"partnership" for Federal income tax purposes.
F. Limitation on Liability of General Partner; Indemnification.
1. Neither the General Partner nor any of its Affiliates shall have
liability to the Partnership or to any Partner for any loss suffered by the
Partnership which arises out of any action or inaction of the General Partner or
its Affiliates if the General Partner or its Affiliates in good faith determined
that such course of conduct was in the best interest of the Partnership and such
course of conduct did not constitute
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negligence or misconduct of the General Partner or its Affiliates and provided,
with respect to Affiliates, such Affiliates were acting within the scope of the
authority of the General Partner. To the fullest extent permitted by law, the
General Partner and its Affiliates (other than broker-dealers) shall be
indemnified by the Partnership for any losses, judgments, liabilities, expenses
and amounts paid in settlement of any claim sustained by them in connection with
the Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partner or its Affiliates, that the
General Partner or its Affiliates, as the case may be, in good faith determined
that their course of conduct was in the best interest of the Partnership and
that, with respect to Affiliates, such Affiliates were acting within the scope
of the authority of the General Partner.
2. The General Partner and its Affiliates and any Person acting as a
broker dealer shall not be indemnified for any losses, liabilities or expenses
arising from or out of an alleged violation of federal or state securities laws
unless (a) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee and
the court approves indemnification of the litigation costs, (b) such claims have
been dismissed with prejudice on the merits by a court of competent jurisdiction
as to the particular indemnitee and the court approves indemnification of the
litigation costs or (c) a court of competent jurisdiction approves a settlement
of the claims against a particular indemnitee and finds that indemnification of
the settlement and related costs should be made. In any claim for
indemnification for Federal or state securities law violations, the party
seeking indemnification shall place before the court the position of the
Securities and Exchange Commission, the Arizona Corporations Commission, the
Massachusetts Securities Division, the Missouri Securities Division, the
Pennsylvania Securities Division and other state securities commissioners with
respect to the issue of indemnification for securities law violations.
3. The Partnership shall not incur the cost of that portion of any
insurance which insures any party against any liability the indemnification of
which is herein prohibited.
4. The Partnership shall not make any advances to the General Partner or
its Affiliates for legal expenses and other costs incurred as a result of a
legal action unless the following three conditions are satisfied: (a) the legal
action relates to the performance of duties or services by the General Partner
or its Affiliates on behalf of the Partnership, (b) the legal action is
initiated by a party other than the Partnership or a Limited
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Partner and (c) the General Partner or its Affiliates undertake to repay the
advanced funds to the Partnership in cases in which they would not be entitled
to such indemnification.
5. For purposes of this Section (F) of Article X, the term Affiliate shall
mean any Person performing services on behalf of the Partnership (i) who
directly or indirectly controls, is controlled by, or is under common control
with the General Partner, (ii) who owns or controls 10% or more of the
outstanding voting securities of the General Partner, (iii) who is an officer,
director or partner of the General Partner or (iv) which is a company for which
the General Partner acts as an officer, director, partner or trustee.
6. Any payments made by the Partnership to the General Partner or its
Affiliates as a result of any indemnification or hold harmless agreement shall
be paid out of the assets of the Partnership (and any insurance proceeds) and
not from the separate assets of the Limited Partners.
G. Specific Transactions Authorized. The General Partner is hereby
authorized to enter into, on behalf of the Partnership, the following specific
transactions:
1. The Partnership may purchase property from any Affiliate of the General
Partner provided (i) the property was acquired by such Affiliate for the purpose
of facilitating its purchase by the Partnership, facilitating the borrowing of
money or the obtaining of financing for the Partnership or any other purpose
related to the business of the Partnership, (ii) the property is purchased by
the Partnership for a price no greater than the Appraised Value, (iii) there is
no adverse difference in the interest rates of the loans secured by the property
at the time acquired by such Affiliate and at the time purchased by the
Partnership nor any other benefit arising out of such transaction to the General
Partner and (iv) no compensation is paid by the Partnership or by any
non-affiliated person to any Affiliate of the General Partner in connection with
the purchase of the property by the Partnership.
2. The Partnership may take a loan, the principal amount of which is
scheduled to be paid over a period of not less than 48 months and not more than
50% of the principal amount of which is scheduled to be paid during the first 24
months, from an Affiliate of the General Partner provided that such Affiliate is
a program formed for the purpose of, among other things, making mortgage loans
and further provided that (i) the terms of any such loan are fair and at least
as favorable to the Partnership as could be obtained from a non-Affiliate in
similar circumstances, (ii) the Partnership obtains a letter of opinion
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from a qualified Independent Advisor to such effect and (iii) the Partnership is
represented, with respect to such mortgage loan, by legal counsel different from
the legal counsel retained for such transaction by the Affiliated lender.
3. An officer or director of the General Partner may serve as a director
of a tenant of the Partnership after a lease with the Partnership has been
executed, provided that the purpose of such service as a director is for
monitoring tenant activity on behalf of the Partnership and provided that the
Partnership shall not incur, directly or indirectly, any costs relating to such
service. Any tenant having such an officer or director serving as a director
shall not be deemed an Affiliate of the Partnership for purposes of this
Agreement so long as such tenant would not otherwise be an Affiliate for
purposes of this Agreement except by reason of such service. An officer or
director serving as a director of the tenant may not vote as a member of the
board of directors of the tenant on matters relating to the Partnership or any
Affiliate of the Partnership.
4. The Partnership may contract (i) with Affiliates of the General Partner
to serve as real estate brokers and mortgage placement brokers in connection
with the investment of the Partnership assets and (ii) with Affiliates of the
General Partner to serve as real estate brokers in connection with the sale of
property by the Partnership. The amount of real estate commissions payable to
Affiliates of the General Partner upon a sale of property by the Partnership
where such Affiliates have provided a substantial amount of services in the
sales effort may not exceed the lesser of (i) 3% of the contract price for the
sale of the property or (ii) 50% of the reasonable, customary and competitive
rate for similar services in light of the size, type and location of the
property; provided, however that the total real estate commissions payable to
such Affiliates and to other Persons may not exceed the lesser of (a) 6% of the
contract price for the sale of the property or (b) the reasonable, customary and
competitive rate for similar services in light of the size, type and location of
the property. No Affiliate of the General Partner may receive payment of a real
estate commission with respect to the sale of any property by the Partnership
unless the total consideration received by the Partnership upon such sale
exceeds the amounts actually paid by the Partnership for the purchase,
development, construction or improvement of the Property and any fees and
commissions paid by the Partnership in connection therewith.
5. Affiliates of the General Partner may receive insurance premiums and
brokerage commissions with respect to insurance on property owned by the
Partnership only when the cost of such insurance is paid by tenants who net
lease such properties from
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the Partnership. No such net lease shall provide that the lessee is required to
purchase insurance through an Affiliate of the General Partner.
6. At any time, the Partnership may borrow funds from Affiliates of the
General Partner or third parties on a short term basis to provide the debt
portion of the purchase price of any property if (i) the Partnership is unable
to obtain a permanent loan or, in the judgment of the General Partner, it is not
in the best interests of the Partnership to obtain a permanent loan at the
interest rates then prevailing and (ii) the General Partner has reason to
believe that the Partnership will be able to obtain a permanent loan on or prior
to the end of the loan term. Any such short-term loans may be fully or partially
amortized, may provide for the payment of interest only during the term of the
loan or may provide for the payment of principal and interest only upon
maturity. Any such short-term loans may be secured by a pledge of or security
interest in the net assets of the Partnership or, if the loan is obtained to pay
or provide the debt or equity portion of the purchase price of a property, by a
first or junior mortgage on the property to be acquired. Any short-term loans
from Affiliates of the General Partner will bear interest at a rate equal to the
lesser of (A) 1% above the prime interest rate at The Bank of New York or (B)
the rate that would be charged to the Partnership by unrelated lending
institutions on comparable loans for the same purpose in the locality of the
property but in no event greater than the maximum amount permitted by law. Such
borrowings shall be nonrecourse to the Partnership, unless the General Partner
shall otherwise consent in writing. No prepayment charge or penalty shall be
required by a General Partner on a loan to the Partnership from the General
Partner secured by either a first or a junior or all inclusive trust deed,
mortgage or encumbrance on the property; except to the extent such prepayment
charge or penalty is attributable to the underlying encumbrance.
7. All of the Partnership's expenses shall be billed directly to and paid
by the Partnership. The Partnership shall reimburse the General Partner or its
Affiliates for: (a) the actual cost to the General Partner or their Affiliates
of goods and materials used for and by the Partnership and obtained from
unaffiliated parties, and (b) the costs incurred by the General Partner or its
Affiliates in performing administrative services necessary to the prudent
operation of the Partnership; provided, however, that the amounts charged to the
Partnership for services performed pursuant to this clause (b) shall not exceed
the lesser of (1) the actual cost of such services, or (2) 90% of the amount
which the Partnership would be required to pay to independent parties for
comparable services in the same geographic location. No reimbursement shall be
made to the General Partner or its
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Affiliates for: (x) services for which the General Partner or its Affiliates are
entitled to compensation by way of a separate fee or (y) any of the salaries,
fringe benefits, travel expenses and other administrative items incurred by or
allocated to any controlling person (as defined herein) of the General Partner
or its Affiliates; provided, however, that the Partnership may reimburse the
General Partner or its Affiliates for the travel expenses of controlling persons
if such travel expenses are incurred by such controlling persons in connection
with the evaluation of properties being considered for acquisition or visits to
executives of potential tenants of properties being considered for acquisition
to discuss current financial results. The Partnership's annual report to the
Partners shall contain a breakdown of the costs reimbursed to the General
Partner or its Affiliates. Within the scope of the annual audit of the General
Partner's (or such Affiliate's) financial statement, the independent certified
public accountant shall verify the allocation of such costs to the Partnership.
The method of review shall at minimum provide (1) a review of time records of
individual employees, the costs of whose services were reimbursed; and (2) a
review of the specific nature of the work performed by each such employee. The
methods of review shall be in accordance with generally accepted auditing
standards and shall accordingly include such tests of the accounting records and
such other auditing procedures which the General Partner's (or such Affiliate's)
independent certified public accountants consider appropriate in the
circumstances. The additional costs of such review shall be itemized by such
accountants on a partnership by partnership basis and may be reimbursed to the
General Partner (or such Affiliate) in accordance with this Paragraph only to
the extent that such reimbursement, when added to the cost for administrative
services rendered, does not exceed the competitive rate for such services as
determined in this Paragraph G(7).
As used herein, the term "controlling person" shall mean any Person,
whatever his title, who performs executive or senior management functions for
the General Partner or such Affiliate similar to those of executive or senior
management officers, directors or partners, or those holding 5% or more equity
interest in the General Partner or such Affiliate or a Person having the power
to direct or cause the direction of the management and/or policies of the
General Partner or such Affiliate, whether through the ownership of voting
securities, by contract or otherwise. For the purposes of this Paragraph G(7),
not every Person who carries a title such as vice president, corporate secretary
or treasurer shall be considered a controlling person, unless such Person
performs the functions or has the powers described above, and even in the
absence of a
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specific title, an executive in a senior management position shall be considered
a controlling person.
8. The Partnership may invest in unimproved or non-income producing real
property and the stock of or other interests in, or warrants or other rights to
purchase the stock of or other interests in, any tenant of the Partnership or
the parent or controlling person of any tenant. The Partnership may not borrow
funds to make investments in such stock, interests, warrants or other rights.
The Partnership will not exercise warrants or other rights to purchase the stock
of or other interests in a tenant or the parent or controlling person of a
tenant unless the Partnership will immediately liquidate the stock or interest
purchased at a price in excess of the exercise price. Under such circumstances,
payment of the exercise price shall not be deemed an investment subject to the
above limitations respecting the amount of net proceeds derived from the sale of
limited partner interests which the Partnership may invest in unimproved or
non-income producing real property or stock, interests, warrants or other
rights. The Partnership may borrow funds on a short-term basis to pay the
exercise price on warrants or other rights or may pay such exercise price from
funds held in the working capital reserve and will repay the loan or replenish
the reserve upon the sale of the securities or interests purchased before it
makes distributions to the Partners respecting the proceeds of sale or reinvests
such proceeds in properties.
9. The Partnership may incur indebtedness in connection with the purchase,
improvement, repair, development and financing or refinancing of properties and
the operation of the Partnership, including the funding of operating deficits
and obtaining Cash From Sales and Cash From Financings for distribution to
Partners. Such indebtedness may not exceed 80% of the total purchase price of
the Partnership's properties and may be in the form of purchase money
obligations to the sellers of properties or in the form of loans from banks,
institutional investors and other lenders, which indebtedness may be secured by
mortgages or other interests in the property owned by the Partnership (including
"wrap-around" or "all-inclusive" mortgages to the extent provided in Paragraph
H(9) of this Article X) and may involve final or interim principal payments
substantially greater than the regular monthly payments. The Partnership may
also from time to time borrow additional funds for the purchase of property,
which indebtedness may be secured by the general assets of the Partnership.
H. General Restrictions.
1. The Partnership shall obtain a written evaluation report specifying an
Appraised Value signed by an independent
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appraiser prior to the purchase of any property by the Partnership and shall not
purchase any such property if the purchase price and all Acquisition Fees paid
by the Partnership in connection with the acquisition exceed the Appraised Value
set forth in such report. All such appraisals, whether or not the property which
is the subject of such appraisal is purchased by the Partnership, shall be at
the Partnership's expense or at the expense of the seller, shall be retained for
five years and shall be available for inspection and duplication by the Limited
Partners upon reasonable notice to the Partnership for a purpose reasonably
related to their interest as limited partners in the Partnership.
2. The Partnership may not sell any property in a transaction in which an
Affiliate of the General Partner acts as a real estate broker unless the
provisions of Paragraph G(4) of this Article X are complied with.
3. The Partnership shall not own any land where the buildings and
improvements thereon are owned by an Affiliate of a General Partner unless (i)
such Affiliate is a public program formed for the purpose of investing in real
estate, (ii) the terms of such transaction are at least as favorable as the
terms of any comparable transactions made on an arm's length basis and known to
the General Partner, and (iii) payments to the General Partner and its
Affiliates for services rendered in a capacity other than that as General
Partner may only be made upon a determination that (a) the compensation is not
in excess of the compensation paid to them by third parties for any comparable
services and (b) the compensation is not greater than the charges for comparable
services available from others who are competent and not affiliated with any of
the parties involved and the Partnership has obtained a letter of opinion of a
qualified Independent Advisor to such effect prior to effecting such
transaction.
4. The Partnership shall not give an Affiliate of a General Partner the
exclusive right to sell property for the Partnership.
5. The aggregate borrowings of the Partnership shall not exceed 80% of the
purchase price of all properties purchased by the Partnership on a combined
basis. The foregoing restriction may be waived or lessened by the General
Partner without the approval of the Limited Partners, but only with the prior
written consent of the Commissioner of Corporations of the 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
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and 85% of the aggregate fair market value of all refinanced properties.
6. Except as set forth in paragraph G(7) of this Article X, all expenses
of the Partnership shall be billed directly to and paid by the Partnership.
7. Except as disclosed in the Prospectus, the General Partner shall not
receive from the Partnership a rebate or give up or participate in any
reciprocal business arrangement which would enable them or any Affiliate of the
General Partner to receive such rebate or give-up or to circumvent any
restrictions contained herein upon dealings with Affiliates.
8. The Partnership funds shall not be commingled with the funds of any
other Person.
9. The Partnership shall not finance the purchase of property by use of a
wraparound note and mortgage ("all-inclusive" note and deed of trust) unless (a)
the General Partner and any Affiliate of the General Partner receives interest
on the amount of the underlying encumbrance in excess of that payable to the
lender on such underlying encumbrance, (b) the Partnership receives credit on
its obligation under the all-inclusive note for payments made directly on the
underlying encumbrance and (c) all payments on the underlying encumbrance shall
be made by the Partnership or, in the alternative, payments by the Partnership
on the wrap-around note are made to a third party collecting agent which in turn
disburses such payment, first to the holder of such underlying encumbrance, and
thereafter to the holder of the wrap-around note.
10. The Partnership shall not create or assume any indebtedness for
borrowed money unless the documents pursuant to which such indebtedness is
created or assumed provide, and the General Partner shall cause any and all such
documents assumed or entered into by or on behalf of the Partnership to provide,
that the parties thereto other than the Partnership (including any Affiliates of
the General Partner) shall look only to the assets of the Partnership for
satisfaction of the liabilities and obligations of the Partnership under such
documents (including without limitation those arising from representations,
warranties, covenants and agreements made in or in connection with such
documents) and that such other parties shall have no recourse to the Partners or
the separate assets of the Partners for the satisfaction of such liabilities and
obligations. The Partnership shall not incur any indebtedness wherein the lender
will have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profit, capital or property of the Partnership other
than as a creditor.
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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 is under
construction unless completion of the improvements on the property is guaranteed
at the contracted price by an adequate completion bond or other satisfactory
arrangement.
13. Unimproved or non-income producing property shall not be acquired
except in amounts and upon terms which can be financed by Distributable Cash
From Operations.
14. No Partnership assets may be invested in junior mortgages or deeds of
trust; provided, however, that the acquisition of a junior mortgage or deed of
trust in connection with the sale, financing or refinancing of real property
shall not be deemed to be investing in junior mortgages or deeds of trust.
15. Any agreement entered into between the Partnership and the General
Partner or its Affiliates, other than a mortgage with a program sponsored by
W.P. ▇▇▇▇▇ & Co., Inc. or an Affiliate of W.P. ▇▇▇▇▇ & Co., Inc. under which
such General Partner or its Affiliates are compensated for the provision of
goods or services to the Partnership, must be terminable by the Partnership,
without penalty, upon 60 days' notice and any such agreement must be embodied in
a written contract which precisely describes the services to be rendered and all
compensation to be paid and which agreement shall be fully disclosed in the
Prospectus and no such agreement shall be permitted unless the General Partner
or such Affiliate has been previously engaged in the business of rendering such
services or selling or leasing such goods independently of the Partnership and
as an ordinary and ongoing business and unless the cost to the Partnership does
not exceed the lesser of the cost of such goods or 90% of the cost to the
Partnership of any other Person who is rendering comparable services or selling
or leasing comparable goods which could reasonably be made available to the
Partnership and the agreement is on competitive terms. If the General Partner or
such Affiliate purchases goods or materials from an independent third party
which are used by the Partnership, the General Partner or Affiliate may be
reimbursed at its cost. "Cost", as that term is used in this paragraph, includes
the price of goods and materials paid to independent third parties and direct
costs incurred by the General Partner or Affiliate providing the service,
including overhead directly attributable to the transaction but excluding
general or administrative overhead (which term includes but is
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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 any salary, fees, profits or distributions
from the Partnership except profits, distributions, fees and allocations to
which they may be entitled under Articles VIII, IX and X.
J. Other Business of Partners. Except as otherwise specifically provided
herein, any of the Partners and any shareholder, officer, director, employee or
other Person holding a legal or beneficial interest in an entity which is a
Partner may engage in or possess an interest in other business ventures of every
nature and description, independently or with others, including, but not limited
to, the ownership, financing, leasing, operation, management, syndication,
brokerage and development of real, personal or mixed property and neither the
Partnership nor the Partners shall have any right by virtue of this Agreement in
and to such independent ventures or to the income or profits derived therefrom.
ARTICLE XI
STATUS OF LIMITED PARTNERS AND SPECIAL PARTNERS
The Limited Partners and Special Partners shall not participate in the
management or control of the Partnership's business nor shall they transact any
business for the Partnership nor shall they have the power to sign for or bind
the Partnership, said powers being vested solely and exclusively in the General
Partner. Except as described herein and in the Act, Limited Partners and Special
Partners have no liability in excess of their obligation to make contributions
to the Partnership and their share of the Partnership's assets and undistributed
profits. The Partnership Interest owned by a Limited Partner or Special Partner
shall be fully paid and nonassessable except as described herein and in the Act.
In addition to those described elsewhere in this Agreement, the Limited
Partners and Special Partners shall have the following rights, powers,
privileges, duties and liabilities:
(a) The Limited Partners and Special Partners shall have the right to have
full and true information of all things affecting the Partnership and shall be
entitled to such reports
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as are set forth in Article XII hereof for a purpose reasonably related to such
Partner's interest as a partner in the Partnership.
(b) The Limited Partners and Special Partners shall receive from the
Partnership the share of the distributions provided for in this Agreement in the
manner and at the times provided for in this Agreement.
(c) A Limited Partner or a Special Partner shall have the right to demand
the return of his Capital Account only on the dissolution and winding up of the
Partnership in accordance with Article XVIII hereof. No Limited Partner shall
have priority over any other Limited Partner either as to the return of capital
or as to profits, losses or distributions. No Limited Partner or Special Partner
shall have the right to bring an action for partition against the Partnership.
(d) Limited Partners holding more than 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,
continue the business of the Partnership and elect a successor General Partner
upon the withdrawal, removal, death, adjudication of incompetence to manage his
person or his property, adjudication of bankruptcy under Chapter 7 of the
Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof), assignment by the General Partner of all of the General Partner's
Interest or other cessation to exist as a General Partner under the Act.
(e) Upon written request to the Partnership for a purpose reasonably
related to such Partner's interest as a partner in the Partnership, each Limited
Partner and Special Partner shall have the right to be mailed, at such Partner's
expense, a complete list of names and addresses and interests of all Limited
Partners as set forth in the books and records of the Partnership, copies of the
Certificate of Limited Partnership and all amendments thereto and copies of this
Agreement and all amendments thereto and powers of attorney pursuant to which
this Agreement was executed. A reasonable charge for copy work may be charged by
the Partnership.
ARTICLE XII
BOOKS OF ACCOUNT AND REPORTS
Proper books of account shall be kept by the General Partner wherein shall
be entered all transactions, matters and things relating to the Partnership's
business as are usually entered
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into books of account kept by Persons engaged in a business of a like character.
The books of account shall be kept at the principal place of business of the
Partnership and each Partner (or any duly constituted designee of a Partner)
shall at all times during reasonable business hours have free access to and the
right to inspect and copy the same for a purpose reasonably related to such
Partner's interest as a partner in the Partnership. The Partnership shall also
maintain the following: a current alphabetical list of the Partners' names,
addresses, Contributions and Capital Accounts; copies of the Certificate of
Limited Partnership and all amendments thereto; copies of the Partnership's
Federal, state and local income tax or information returns and reports for the
six most recent tax years; copies of this Agreement and all amendments thereto
and powers of attorney pursuant to which this Agreement was executed and the
Partnership's financial statements for the six most recent fiscal years.
There shall be established for each Partner on the books and records of
the Partnership a Capital Account which shall be maintained in accordance with
Federal income tax accounting principles and which shall show the amount of each
capital contribution made by such Partner (or his, her or its predecessor in the
case of an assignment of a Partnership Interest), adjusted to reflect such
Partner's proportion of profits and losses (determined according to Article
VIII) and of withdrawals and distributions and other items to the extent
properly creditable to or chargeable against such Capital Account.
Within 75 days after the end of each Fiscal Year, the General Partner
shall deliver to each Limited Partner adequate information to enable each
Limited Partner to complete and file his Federal tax return.
Copies of each report distributed to the Limited Partners shall, to the
extent required by applicable law, be filed concurrently with relevant state
"Blue Sky" authorities. If the Partnership engages an Independent Advisor who is
not the Independent Advisor engaged to render a current fairness opinion or the
fairness opinion preceding it, the General Partner shall inform the Limited
Partners (by no later than the next annual report) of the date when such new
Independent Advisor was engaged, and whether there were any disagreements with
the former Independent Advisor on any matters of valuation, assumptions,
methodology, accounting principles and practice, or disclosure, which
disagreements, if not resolved to the satisfaction of the former Independent
Advisor, would have caused him to make reference, in connection with the
fairness opinion, to the subject matter of the disagreement or decline to give
an opinion.
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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 part thereof except as
permitted in this Article, and any act in violation of this Paragraph A shall
not be binding upon or recognized by the Partnership regardless of whether the
General Partner shall have knowledge thereof.
B. General Partner.
1. Limited Partners holding more than fifty percent (50%) of the then
outstanding Limited Partner Interests, pursuant to Paragraph (d) of Article XI
and with the same proportionate vote as provided therein, may remove a General
Partner from the Partnership. Written notice of the removal of such General
Partner shall be served upon the General Partner either by certified or by
registered mail, return receipt requested, or by personal service. Said notice
shall set forth the day upon which the removal is to become effective. Upon
receipt of notice, the General Partner shall cause an accounting to be prepared
covering the transactions of the Partnership since the end of the previous
Fiscal Year and, it shall not thereafter sell or dispose of or
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allow the sale or disposition of any Partnership asset unless such sale or
disposition was the subject of a contract entered into by and binding upon the
Partnership prior to the date upon which the notice was received by the General
Partner.
2. Until the dissolution of the Partnership otherwise occurs, the General
Partner shall not voluntarily take any steps to dissolve itself nor shall the
General Partner voluntarily withdraw; provided, however, that nothing in this
Agreement shall be deemed to prevent the merger or reorganization of ▇▇▇▇▇
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 the rights and
duties of the General Partner by, in the case of a merger, reorganization or
consolidation, the surviving entity by operation of law provided that the
surviving entity shall be admitted to the Partnership immediately prior to such
event and such successor shall continue the business of the Partnership as the
General Partner without dissolution.
3. Upon the removal, adjudication of bankruptcy under Chapter 7 of the
Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof), assignment by the General Partner of its General Partner's Interest
(other than by operation of law as a result of a merger or reorganization
permitted by Paragraph B(2) of this Article XV) or other cessation to exist as
the General Partner under the Act, the General Partner's Partnership Interest
and interest in Distributable Cash From Operations and its interest in Cash From
Sales and Cash From Financings shall be purchased by the Partnership for a
purchase price equal to the fair market value thereof determined pursuant to the
provisions of Section 4 of this Paragraph B. The purchase price of such interest
shall be paid by the Partnership to the General Partner by the promissory note
of the Partnership, payable to the General Partner or its order, having a face
amount equal to such purchase price, containing provisions as would be usual and
customary in a commercial promissory note, bearing interest at a rate per annum
equal to the lesser of 1% above the prime interest rate at The Bank of New York
or the maximum rate permitted by law, payable annually in equal installments of
principal and interest over a period of no less than five years from the date of
the General Partner's removal, adjudication of bankruptcy under Chapter 7 of the
Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof), assignment by the General Partner of its General Partner's Partnership
Interest (other than by operation of law as a result of a merger or
reorganization permitted by Paragraph (2) of this Article XV) or other cessation
to exist as a General Partner under the Act. The Partnership
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shall also pay to the General Partner all amounts then accrued and owing to the
General Partner.
4. The fair market value of the General Partner's Partnership Interest
purchased by the Partnership pursuant to Section 3 of this Paragraph B shall be
determined by agreement between the General Partner and the Partnership (which
agreement shall require the approval of the Limited Partners holding more than
fifty percent (50%) of the outstanding Limited Partner Interests, with the same
proportionate vote as provided in paragraph (d) of Article XI). If the General
Partner and the Partnership cannot agree upon the fair market value of such
Partnership Interest within 30 days after the occurrence of the event upon which
such interest of the General Partner is to be purchased by the Partnership, the
fair market value thereof shall be determined by arbitration in accordance with
the then current rules of the American Arbitration Association. The results of
such arbitration shall be final and binding and may be enforced by legal
proceedings. The expense of arbitration shall be borne equally by the General
Partner and the Partnership. The fair market value of the General Partner's
Partnership Interest shall be the amount the General Partner would receive upon
dissolution and termination of the Partnership assuming that such dissolution or
termination occurred on the date of the occurrence of the event upon which such
Partnership Interest of the General Partner is to be purchased by the
Partnership and the assets were sold for their then fair market value without
any compulsion on the part of the Partnership to sell such assets.
C. Limited Partners and Special Partners.
1. The General Partner may, pursuant to this Article XV, (a) admit as a
substituted Limited Partner or Special Partner any successor in interest to a
Limited Partner or Special Partner either deceased or under legal disability,
and (b) admit as substituted Limited Partners or Special Partners assignees of
Limited Partners or Special Partners.
2. A substituted Limited Partner or Special Partner is a Person admitted
to all the rights of a Limited Partner or Special Partner. An assignee is a
Person to whom a Limited Partner or Special Partner has assigned his interest in
the Partnership but who has not become a substituted Limited Partner or Special
Partner. An assignee shall have no right to require any information or account
of the Partnership's transactions or to inspect the Partnership's books and
records but shall only be entitled to receive the share of the profits, or the
return of the capital contribution, to which his assignor would otherwise be
entitled as set forth in Section 5 of this Paragraph C.
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3. No assignee of the whole or any portion of a Limited Partner's or
Special Partner's interest in the Partnership shall have the right to become a
substituted Limited Partner or Special Partner in place of his assignor unless
all of the following conditions are satisfied:
(a) The 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) and, if the assignor shall retain any limited
partner interest, such retention shall consist of at least five percent of the
limited partner or special partner interests (two percent of the limited partner
or special partner interests for an Individual Retirement Account);
(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
(e) The assignee shall pay a transfer fee not to exceed $50.00 per
transaction to the Partnership. The written consent of the General Partner to
such substitution or a notice of denial of consent shall be given to the
assignee not later than the last day of the calendar month following the month
the General Partner actually receives the instrument of assignment.
4. Any Person admitted to the Partnership as a Partner shall be subject to
all of the provisions of this Agreement as if originally a party to it.
5. Subject to the provisions of Section 11 of this Paragraph C, compliance
with the suitability standards imposed by the Partnership, applicable "Blue Sky"
laws and the applicable rules of any other governmental authority, a Limited
Partner or
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Special Partner shall have the right to assign the whole or any portion of its
limited partner or special partner interest (but not less than five percent of
the limited partner or special partner interests (two percent of the limited
partner or special partner interests for an Individual Retirement Account)) and,
if he shall retain any limited partner or special partner interest, subject to
his retaining not less than five percent of the limited partner or special
partner interests (two percent of the limited partner or special partner
interests for an Individual Retirement Account) of his Partnership Interest by a
written assignment the terms of which are not in contravention of any of the
provisions of this Agreement, which assignment has been executed by the assignor
and received by the Partnership and recorded on the books and records thereof.
Any assignment in contravention of any of the provisions of this Section 5 shall
be of no force and effect and shall not be binding upon or recognized by the
Partnership.
(a) Except as provided in Subsection (e) below, Paragraph A of Article
VIII hereof and Paragraph D of Article IX hereof, an assignee of a Partnership
Interest shall be entitled to receive distributions from the Partnership of
Distributable Cash From Operations for any quarter attributable to the interest
acquired by reason of such assignment beginning in the Fiscal Quarter in which
the assignee is recognized as the owner of such Partnership Interest. For
purposes of such distribution, ownership of a Partnership Interest for each
Fiscal Quarter will be determined as of the fifteenth day of the last month of
each Fiscal Quarter.
(b) Except as provided in Subsection (e) below, Paragraph A of Article
VIII hereof and Article IX hereof, an assignee of a Partnership Interest shall
be entitled to receive distributions from the Partnership of Cash From Sales and
Cash From Financings beginning in the month in which the assignee is recognized
as the owner of such Partnership Interest. For purposes of such distributions,
ownership of a Partnership Interest for each month will be determined as of the
fifteenth day of each month.
(c) The net profits and net losses attributable to an interest in the
Partnership assigned during any year shall be divided among and allocated in
accordance with the provisions of Paragraph A of Article VIII hereof.
(d) The effective date of an assignment of an interest in the Partnership
as used in this Section shall be the day on which the written instrument of
assignment, in form and substance satisfactory to the General Partner, is
accepted by the General Partner.
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(e) Notwithstanding the other provisions of this Article XV and subject to
the limitations of Article X(F), both the Partnership and the General Partner
shall be entitled to treat the assignor of such interest as the absolute owner
thereof in all respects, and shall incur no liability for distributions made in
good faith to him, until such time as the written assignment has been received
by, and recorded in the books and records of, the Partnership.
6. The General Partner may elect to treat an assignee who has not become a
substituted Limited Partner or Special Partner as a substituted Limited Partner
or Special Partner in the place of his assignor should the General Partner deem,
in its absolute discretion, that such treatment is in the best interests of the
Partnership for any of its purposes or for any of the purposes of this
Agreement.
7. No approval of any of the Limited Partners or Special Partners is
required to effect the substitution of a Limited Partner or Special Partner,
except that a Limited Partner or Special Partner who assigns his interest in the
Partnership must evidence his intention that his assignee be admitted as a
substituted Limited Partner or Special Partner in his place and must execute
such instruments as the General Partner may in its absolute discretion determine
to be necessary or desirable in connection therewith.
8. Upon the admission of a Limited Partner or Special Partner (whether as
a result of his purchase of partner interest from the Partnership or his
admission as a substituted Limited Partner or Special Partner), the General
Partner shall make an appropriate entry on the books and records of the
Partnership.
9. Upon the death or adjudication of incompetence to manage his person or
his property of an individual Limited Partner or Special Partner, his personal
representative shall have all of the rights of a Limited Partner or Special
Partner for the purpose of settling or managing his estate, and such power as
the decedent or incompetent possessed to constitute a successor as an assignee
of its interest in the Partnership and to join with such assignee in making
application to substitute such assignee as a Limited Partner or Special Partner.
However, such personal representative shall not have the right to become a
substituted Limited Partner or Special Partner in the place of his predecessor
in interest unless the conditions of Section 3 of this Paragraph C (other than
the requirement that the assignor execute and acknowledge instruments) are first
satisfied.
10. Upon the adjudication of bankruptcy under Chapter 7 of the Federal
Bankruptcy Code (or any similar law or provision
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enacted in lieu thereof) or other cessation to exist as a legal entity of a
Limited Partner or Special Partner not an individual, the authorized
representative of such entity shall have all of the rights of a Limited Partner
or Special Partner for the purpose of effecting the orderly winding up and
disposition of the business of such entity and such power as such entity
possessed to constitute a successor as an assignee of its interest in the
Partnership and to join with such assignee in making application to substitute
such assignee as a Limited Partner or Special Partner. However, such authorized
representative shall not have the right to become a substituted Limited Partner
or Special Partner in the place of his predecessor in interest unless the
conditions of Section 3 of this Paragraph C (other than the requirement that the
assignor execute and acknowledge instruments) are first satisfied.
11. (a) No assignment or transfer of an interest in the Partnership may be
made which would result in Limited Partners or Special Partners and assignees of
Limited Partners or Special Partners owning, directly or indirectly,
individually or in the aggregate, more than twenty percent (20%) of the equity
interests of a General Partner or any Affiliate of a General Partner as defined
in Section 1504(a) of the Code. If any such assignment or transfer would
otherwise be made by bequest, inheritance or operation of law, the transferee
shall not become a Partner and the interest in the Partnership transferred shall
be automatically redeemed by the Partnership in the same manner as provided in
Subsection (b)(4) of this Section 11.
(b) Anything to the contrary contained herein notwithstanding:
(1) Except in the case of the Merger, in any twelve (12) consecutive month
period no assignment or transfer of a limited partner interest may be made if as
a result thereof the aggregate total of limited partner interests assigned
and/or transferred in such period would exceed forty percent (40%) of the
outstanding limited partner interests. This limitation is hereinafter referred
to as the "forty percent (40%) limitation."
(2) A Limited Partner may assign or transfer his Partnership Interest to:
(i) his spouse (unless legally separated), child or ancestor, or (ii) a
corporation, partnership, trust or other entity, fifty-one percent (51%) of the
equity interest of which is owned by such Limited Partner and/or any of the
Persons specified in clause (i) so related to such Limited Partner, provided,
however, that such transfers are subject to the forty percent (40%) limitation.
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(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.
(4) If, after the forty percent (40%) limitation is reached in any
consecutive twelve (12) month period, a transfer of a Partnership Interest would
otherwise take place by operation of law (but not including any transfer
referred to in Subsection (b)(3) of this Section 11), then the transferee shall
not become a Limited Partner and such Partnership Interest shall be
automatically redeemed by the Partnership for a price equal to the fair market
value of said interest on such date of transfer. The price shall be paid within
ninety (90) days after the date of the transfer and redemption. If the
Partnership and the transferor do not agree upon the fair market value of the
Partnership Interest, the purchase price shall be determined by arbitration. The
purchase price shall be paid in cash within ten (10) days after such
determination.
(c) No transfer or assignment of any partner interest shall be made
if it would result in the Partnership's being treated as an association taxable
as a corporation for tax purposes. The General Partner, in its sole discretion,
may, on behalf of the Partnership, impose any restrictions 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 will cause the Partnership to make the election
referred to in Section 754 of the Code, and any similar election provided by
state or local law, or any similar provision enacted in lieu thereof.
13. No Limited Partner or Special Partner shall be entitled to withdraw
from the Partnership except on transfer of all his partner interest pursuant to
this Article XV.
14. Each Limited Partner or Special Partner shall immediately notify the
Partnership of any assignment of any partner interest in the Partnership and
shall provide the name, address and identification number of the assignee.
D. Opinions Regarding Taxation. In the event that the tax status of the
Partnership changes and, notwithstanding any other provision of this Agreement,
the requirement, as a condition to
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any action proposed to be taken under this Agreement, that the Partnership be
furnished an opinion of counsel for the Partnership to the effect that the
proposed transaction would not result in the Partnership being treated as an
association taxable as a corporation for federal income tax purposes, shall not
be applicable if the Partnership is at such time treated in all material
respects as an association taxable as a corporation for federal income tax
purposes.
ARTICLE XVI
MEETINGS AND AMENDMENT OF LIMITED PARTNERSHIP
CERTIFICATE AND AGREEMENT
A. Amendment of Limited Partnership Certificate. The General Partner shall
amend the Certificate of Limited Partnership of the Partnership, and shall file
the same, without additional approval of Limited Partners when, pursuant to the
terms of this Agreement:
1. There is a change in the name of the Partnership;
2. The General Partner withdraws, is removed, is adjudicated bankrupt
under Chapter 7 of the Federal Bankruptcy Code (or any similar law or provision
enacted in lieu thereof), assigns its General Partner's Interest, is adjudicated
incompetent to manage his person or his property or dies or otherwise ceases to
exist as a General Partner under the Act or a Person is admitted as a General
Partner;
3. There is a false or erroneous statement in the Certificate;
4. The Partners desire to make a change in any other statement in the
Certificate in order that it shall be accurate; or
5. There is a change in the address of the Partnership's principal place
of business or registered office, or a change in the name or address of the
Partnership's registered agent.
If the General Partner is required to file a certificate of amendment and
fails after demand to do so within 30 days of such demand or if it refuses to do
so, any other Person who is adversely affected by such failure or refusal, may
petition the Court of Chancery in the State of Delaware to direct the execution
of the certificate.
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B. Amendments to the Agreement.
1. Amendments to this Agreement may be proposed by the General Partner or
by Limited Partners holding ten percent (10%) or more of the then outstanding
Limited Partner Interests, with the same proportionate vote as provided in
paragraph (d) of Article XI. Following such proposal, the General Partner shall
submit to the Limited Partners a verbatim statement of any proposed amendment
and an opinion of counsel, who may be counsel to the Partnership, as to the
legality of such amendment and the effect of such amendment on the liability of
Limited Partners for the debts of the Partnership. The General Partner shall
include in any such submission the General Partner's recommendations as to the
proposed amendment. The amendment shall become effective only upon the written
approval or affirmative vote of Limited Partners holding more than fifty percent
(50%) of the then outstanding Limited Partner Interests, with the same
proportionate vote as provided in paragraph (d) of Article XI.
2. Any provision to the contrary herein notwithstanding, the General
Partner may, without the approval of the Limited Partners, make the following
amendments to this Agreement:
a. Any amendments to Article VIII and/or Article IX of this Agreement if
the Partnership is advised by its accountants or legal counsel at any time that
the allocations provided in those Articles are not likely to be respected for
Federal income tax purposes, either because of the promulgation of Treasury
Regulations under Section 704 of the Code or other developments in the law. The
General Partner is empowered to amend such provisions to the minimum extent
necessary in accordance with the advice of the accountants and counsel to effect
the allocations provided in this Agreement. New allocations made by the General
Partner in reliance upon the advice of the accountants or counsel described
above shall be deemed to be made pursuant to the fiduciary obligation (as
described herein) of the General Partner to the Partnership and the Limited
Partners, and no such new allocation shall give rise to any claim or cause of
action by any Limited Partner, provided that the General Partner acted in good
faith; and
b. In the event that the State of Delaware amends the Delaware Revised
Uniform Limited Partnership Act in any manner and, as a result of such
amendment, counsel to the Partnership is unable to give the Partnership an
opinion to the effect that the Partnership will be treated as a partnership for
Federal income tax purposes and not as association taxable a corporation, then
the General Partner may decide in its sole discretion to reconstitute the
Partnership under the laws of another state.
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3. Any provision to the contrary contained herein notwithstanding, the
General Partner may, without the approval of the Limited Partners, amend this
Agreement (a) to add to the representations, duties or obligations of a General
Partner or to surrender any right or power granted to a General Partner herein,
for the benefit of the Limited Partners, (b) to cure any ambiguity, to correct
or supplement any provision herein which may be inconsistent with any other
provision herein or to make any other provision with respect to matters or
questions arising under this Agreement which will not be inconsistent with the
provisions of this Agreement, (c) to delete any provision from this Agreement or
to add any provision to this Agreement required to be so deleted or added by the
Staff of the Securities and Exchange Commission or by a State "Blue Sky"
Commissioner or similar such official, which addition or deletion is deemed by
such Commission or official to be for the benefit or protection of the Limited
Partners, and (d) to change administrative or other provisions of this Agreement
in a manner which, in the opinion of the General Partner, will permit the most
profitable and/or efficient operation of the Partnership; provided, however,
that no amendment shall be adopted pursuant to this Section 3 unless the
adoption thereof (i) is for the benefit of, or not adverse to, the interests of
the Limited Partners, (ii) is consistent with Article IV and Paragraph A of
Article X hereof, (iii) does not affect the distribution of Distributable Cash
From Operations, Cash From Sales or Cash From Financings or the allocation of
profits and losses among the Limited Partners or between the Limited Partners
and the General Partner and (iv) does not affect the limited liability of the
Limited Partners or the status of the Partnership as a partnership for Federal
income tax purposes.
4. Upon amendment of this Agreement, the Certificate of Limited
Partnership shall also be amended if necessary to reflect such change.
5. Any amendment to this Agreement which modifies the compensation or
distributions to which a General Partner is entitled or which affects the duties
of a General Partner must be consented to by such General Partner before
becoming effective.
6. In the event there is a change in the Federal income tax laws or
regulations which results in the Partnership being taxed as an association
taxable as a corporation, the General Partner may take all steps necessary to
cause the Partnership to conduct its business so as to be treated as a real
estate investment trust for Federal income tax purposes, provided, however, that
Limited Partners holding more than fifty percent (50%) of the then outstanding
Limited Partner Interests, with the same proportionate vote as provided in
paragraph (d) of Article
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XI, approve such action either prior to or within six months after such action
is taken.
C. Meetings of the Partnership. Meetings of the Partnership may be called
by the General Partner and shall be called by it upon the written request of
Limited Partners holding ten percent (10%) or more of the then outstanding
Limited Partner Interests, with the same proportionate vote as provided in
paragraph (d) of Article XI. Upon receipt of such a written request, stating the
purpose of the proposed meeting, the General Partner shall provide each Partner,
within 10 days of such request, written notice (either by personal service or
certified mail or by express or other overnight delivery service) of a meeting
and the purpose of such meeting. Such meeting shall be held not less than 15
days nor more than 60 days after the receipt of such request at a time and place
convenient to the Limited Partners as specified in the written notice of the
meeting. Included with the notice shall be a detailed statement of the action
proposed, including a verbatim statement of the wording of any resolution
proposed for adoption by the Limited Partners and of any proposed amendment to
this Agreement. The Partnership will provide for Proxies or written approvals
which specify a choice between approval and disapproval of each matter to be
acted upon at the meeting. Holders of a majority of the Limited Partner
Interests entitled to vote represented in person or by Proxy, shall constitute a
quorum at a meeting of the Limited Partners. The General Partner may establish a
record date for any meeting.
ARTICLE XVII
TERM
The term for the Partnership shall terminate on December 31, 2050, unless
the Partnership is sooner dissolved pursuant to the provisions of Article XVIII
hereof or as otherwise provided by law.
ARTICLE XVIII
DISSOLUTION
A. Events Requiring Dissolution. The Partnership shall be dissolved upon
the happening of any of the following events:
1. The withdrawal, removal, adjudication of bankruptcy under Chapter 7 of
the Federal Bankruptcy Code (or any similar law or provision enacted in lieu
thereof) of the General Partner,
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the assignment by the General Partner of its General Partner's Interest (other
than by operation of law as a result of a merger or reorganization permitted by
Paragraph B(2) of Article XV) or other cessation to exist as a General Partner
under the Act unless within 90 days of such event all remaining Partners agree
in writing to continue the business of the Partnership and to admit one or more
General Partner effective as of the date of such event.
2. The Partnership is adjudicated bankrupt under Chapter 7 of the Federal
Bankruptcy Code (or any similar law or provision enacted in lieu thereof).
3. The vote of Limited Partners, holding more than fifty percent (50%) of
the then outstanding Limited Partner Interests held by all Limited Partners with
the same proportionate vote as provided in paragraph (d) of Article XI.
4. The disposition of all interests in the real, personal and mixed
property and other assets of the Partnership.
5. The entry of a decree of judicial dissolution under Section 17-802 of
the Act.
6. December 31, 2050.
B. Distributions on Dissolution. Upon the dissolution of the Partnership
the General Partner who has not wrongfully dissolved the Partnership shall wind
up the affairs of the Partnership. If there is no such General Partner, a
majority of Limited Partners shall elect a party to wind up the affairs of the
Partnership. The party winding up the affairs of the Partnership shall take full
account of the Partnership assets and liabilities and all assets shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom shall be applied and distributed in the following
order: (1) to creditors (including Partners who are creditors to the extent
permitted by law), in satisfaction of liabilities of the Partnership (whether by
payment or by the making of reasonable provision for the payment thereof), in
the order of priority as provided by law, (2) to the Partners in accordance with
their respective Capital Accounts, determined after the application of Articles
VIII and IX hereof and (3) to the Partners in accordance with the provisions of
Paragraph E of Article IX hereof. Notwithstanding anything to the contrary, in
the event the Partnership is "liquidated" within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g), liquidating distributions shall be made pursuant
to the previous sentence by the end of the taxable year in which the Partnership
is liquidated, or, if later, within 90 days after the date of such
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liquidation. Distributions pursuant to the preceding sentence may be made to a
trust for the purposes of an orderly liquidation of the Partnership by the trust
in accordance with the Act.
C. Contributions by the General Partner. In the event that, upon the
liquidation of the Partnership, a General Partner shall have a negative balance
in such General Partner's Capital Account then such General Partner shall
contribute to the capital of the Partnership an amount equal to such negative
balance in such General Partner's Capital Account.
ARTICLE XIX
POWER OF ATTORNEY
Each Limited Partner and Special Partner hereby constitutes and appoints
the General Partner as the attorney-in-fact for such Limited Partner or Special
Partner with power and authority to act in his name and on his behalf in the
execution, acknowledgment and filing of documents, which will include but not be
limited to a Certificate of Limited Partnership, as well as amendments thereto,
under the laws of the State of Delaware and under the laws of any other state in
which the General Partner deems it advisable to file such a certificate; this
Agreement and any amendments hereto, any other instrument which may be required
to be filed by the Partnership under the laws of any state or by any
governmental agency, or which the General Partner deems it advisable to file;
and any documents which may be required to effect the continuation of the
Partnership, the admission of an additional or substituted Limited Partner,
Special Partner or General Partner or the dissolution and termination of the
Partnership, provided such continuation, admission or dissolution and
termination are in accordance with the terms of this Agreement.
The Power of Attorney so granted by each Limited Partner and Special
Partner to the General Partner is a Special Power of Attorney coupled with an
interest, is irrevocable and shall survive and not be affected by the subsequent
death, incapacity or disability of the Limited Partner or Special Partner; may
be exercised by the General Partner for each Limited Partner or Special Partner
by a facsimile signature of one of its officers or with a single signature of
one of its officers acting as attorney-in-fact for all of them; shall be
retained by the General Partner; and shall survive the delivery of any
assignment by a Limited Partner or Special Partner of the whole or any portion
of his interest in the Partnership; except that where the assignee thereof has
been approved by the General Partner for
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admission to the Partnership as a substituted Limited Partner or Special
Partner, the Power of Attorney shall survive the delivery of such assignment for
the sole purpose of enabling the General Partner to execute, acknowledge and
file any instrument necessary to effect such substitution.
The Power of Attorney so granted by each Limited Partner to the General
Partner shall not authorize the General Partner to act on behalf of Limited
Partners in any situation in which this Agreement requires the approval of
Limited Partners unless such approval is obtained.
ARTICLE XX
LITIGATION
The General Partner is hereby authorized to prosecute, defend, settle or
compromise actions or claims at law or in equity at the Partnership's expense as
may be necessary or proper to enforce or protect the Partnership's interests.
The General Partner shall satisfy any judgment, decree or decision of any court,
board or authority having jurisdiction or any settlement of any suit or claim
prior to judgment or final decision thereon first, out of any insurance proceeds
available therefor, next out of the Partnership's assets and income and finally
out of the assets and income of the General Partner.
ARTICLE XXI
MISCELLANEOUS
All notices under this Agreement shall be in writing and shall, except as
otherwise expressly provided herein, be given to the Partner entitled thereto by
personal service or by certified or registered mail or express mail or other
overnight delivery service, return receipt requested, to the address set forth
in the books and records of the Partnership for such Partner or at such other
address as he may specify in writing.
Article titles or captions contained in this Agreement are inserted only
as a matter of convenience and for reference and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision hereof.
Whenever the singular number is used in this Agreement and when required
by the context, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders and the word persons shall include
individuals,
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corporations, firms, partnerships, trusts or other forms of associations.
This Agreement may be executed in several counterparts, and all so
executed shall constitute one agreement, binding on all of the parties hereto,
notwithstanding that all the parties are not signatory to the original or the
same counterpart.
Subject to the provisions of Article XV, the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and assigns of the respective Partners.
Whenever the vote of the Limited Partners is referred to in this
Agreement, the General Partner may vote on behalf of such Limited Partners who
have by written proxy authorized the General Partner so to do.
This Agreement and all amendments hereof shall be governed by the laws of
the State of Delaware.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their respective
hands as of the day and year first above written.
GENERAL PARTNER:
▇▇▇▇▇ DIVERSIFIED LLC
By:_______________________________________
CORPORATE SPECIAL PARTNER:
▇▇▇▇▇ MANAGEMENT LLC
By:_______________________________________
INDIVIDUAL SPECIAL PARTNER
_________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
LIMITED PARTNERS:
EIGHTH ▇▇▇▇▇ CORPORATE PROPERTY, INC.
By:_______________________________________
▇▇▇▇▇ DIVERSIFIED LLC
By:_______________________________________
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,
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General Partner
By:_______________________________________
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