U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File Number
September 30, 1998 0-21867
BISHOP CAPITAL CORPORATION
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Wyoming 84-0901126
------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
716 College View Drive, Riverton, Wyoming 82501
- ----------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(307) 856-3800
-------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes --X-- No ----
The number of shares outstanding of the issuer's $.01 par value Common Stock as
of November 10, 1998 was 837,365.
Transitional Small Business Disclosure Format
(Check one): Yes No X
----- -----
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited)
ASSETS
Current Assets:
Cash and equivalents $ 45,114
Restricted cash 142,998
Marketable securities 655,526
Receivables:
Gas royalties 13,683
Interest and other 10,033
Prepaid expenses and other 4,304
-----------
Total current assets 871,658
Property and Equipment:
Building 218,447
Furniture and fixtures 66,887
Vehicles and equipment 91,380
-----------
376,714
Less accumulated depreciation (156,972)
-----------
Net property and equipment 219,742
-----------
Other Assets:
Land under development 720,104
Investment in limited partnership 215,259
Gas royalty interest, net of accumulated
amortization of $823,631 243,420
Deferred income taxes 23,000
Notes receivable 74,348
-----------
Total other assets 1,276,131
-----------
Total Assets $ 2,367,531
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable to bank $ 90,000
Accounts payable and accrued expenses 109,463
Income taxes payable 47,000
Deferred income taxes 62,000
Payable to broker 153,035
Deferred revenue 74,460
-----------
Total current liabilities 535,958
Stockholders' Equity:
Preferred stock, no par value; 5,000,000 shares
authorized, no shares issued --
Common stock, $.01 par value; 15,000,000 shares
authorized; 838,365 shares issued 8,384
Capital in excess of par value 2,195,609
Accumulated deficit (371,605)
Treasury stock, at cost, 1,000 shares (815)
-----------
Total stockholders' equity 1,831,573
-----------
Total Liabilities and Stockholders' Equity $ 2,367,531
===========
See accompanying notes to these consolidated financial statements
2
<PAGE>
<TABLE>
<CAPTION>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
Ended September 30, Ended September 30,
-------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
REVENUES -
<S> <C> <C> <C> <C>
Sales of real estate $ 225,540 $ 721,395 $ 499,566 $ 803,527
COSTS AND EXPENSES:
Cost of real estate sold 118,370 310,944 286,253 376,066
General and administration 108,009 104,694 223,692 243,279
Depreciation and amortization 6,269 6,476 12,757 12,878
--------- --------- --------- ---------
232,648 422,114 522,702 632,223
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS (7,108) 299,281 (23,136) 171,304
OTHER INCOME (EXPENSE):
Net gas royalties 17,972 9,382 41,310 17,999
Interest income 4,483 7,332 9,408 12,337
Dividend income 2,773 2,710 5,483 5,420
Rental income 2,610 3,435 5,220 6,870
Net gain on sale of marketable securities 7,784 5,339 7,784 6,519
Net unrealized gain (loss) on marketable securities (38,744) 77,206 (9,019) 97,520
Equity in limited partnership income (loss) 2,055 (16,982) 4,645 (20,198)
Interest expense (3,062) (3,098) (7,715) (8,429)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (11,237) 384,605 33,980 289,342
INCOME TAX BENEFIT (EXPENSE) 4,000 (59,500) (11,000) (59,500)
--------- --------- --------- ---------
NET INCOME (LOSS) $ (7,237) $ 325,105 $ 22,980 $ 229,842
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE $ (.01) $ .39 $ .03 $ .27
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 838,202 842,480 838,283 863,863
========= ========= ========= =========
See accompanying notes to these consolidated financial statements.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
September 30,
----------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 22,980 $ 229,842
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 19,429 19,550
Equity in limited partnership (income) loss (4,645) 20,198
Net gain on sale of marketable securities (7,784) (6,519)
Net unrealized (gain) loss on marketable
securities 9,019 (97,520)
Deferred income taxes (3,000) --
Changes in operating assets and liabilities:
(Increase) decrease in:
Restricted cash (88,688) (228,038)
Marketable securities (23,467) (5,929)
Gas royalties receivable (1,960) 10,135
Interest and other receivables 42,712 (2,674)
Prepaid expenses and other 3,609 2,782
Land under development (48,033) (41,724)
Increase (decrease) in:
Accounts payable and accrued expenses (62,913) 57,019
Income taxes payable 14,000 --
Payable to broker (2,248) 19,219
Deferred revenue 74,460 265,027
--------- ---------
Net cash provided by (used in) operating activities (56,529) 241,368
CASH FLOWS FROM INVESTING ACTIVITIES:
Funds advanced under notes receivable (15,000) --
Proceeds from collection of notes receivable 1,957 688
Purchase of property and equipment (10,015) (52,314)
--------- ---------
Net cash used in investing activities (23,058) (51,626)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 90,000 50,000
Principal payments on borrowings -- (50,000)
Treasury stock acquired (815) (100,565)
--------- ---------
Net cash provided by (used in) financing activities 89,185 (100,565)
--------- ---------
Net increase in cash and equivalents 9,598 89,177
Cash and equivalents, beginning of period 35,516 46,735
--------- ---------
Cash and equivalents, end of period $ 45,114 $ 135,912
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 4,100 $ 2,900
========= =========
Cash paid for income taxes $ -- $ 20,000
========= =========
See accompanying notes to these consolidated financial statements.
4
</TABLE>
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements reflect all adjustments which are, in
the opinion of management, necessary for a fair presentation of financial
position at September 30, 1998 and results of operations for the interim
periods ended September 30, 1998 and 1997. Such adjustments are of a normal
and recurring nature. The interim results presented are not necessarily
indicative of results that can be expected for a full year. The
accompanying consolidated financial statements should be read in
conjunction with the audited financial statements and related notes
appearing in the Company's March 31, 1998 Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission.
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income was issued in June 1997 and adopted by the Company in
the current fiscal year. This statement establishes standards for the
reporting and display of comprehensive income in financial statements.
Comprehensive income is generally defined as the change in equity of a
business enterprise during the period from transactions and other events
and circumstances from nonowner sources. SFAS No. 130 divides comprehensive
income into net income and other comprehensive income. The Company did not
have any items of other comprehensive income for the three and six months
ended September 30, 1998 and 1997.
Certain previously reported amounts have been reclassified to conform with
the current financial statement presentation.
2. Change in Capital Structure and Spinoff
Prior to June 20, 1997, the Company was a wholly-owned subsidiary of
American Rivers Oil Company (AROC). In November 1996, the Board of
Directors of AROC (the Company's sole stockholder of 4,500,000 common
shares outstanding) agreed to make a pro rata distribution of 885,481
shares of the Company's common stock to AROC's common stockholders
(excluding holders of AROC's Class B common stock) of record on November
18, 1996. The pro rata distribution of shares occurred on June 20, 1997,
and the remaining 3,614,519 shares of the Company's common stock owned by
AROC were canceled. Accordingly, all share and per share amounts in the
accompanying financial statements have been retroactively restated to give
effect to the change in capital structure.
3. Revenue Recognition
Sales of real estate generally are accounted for under the full accrual
method. Under that method, gain is not recognized until the collectibility
of the sales price is reasonably assured and the earnings process is
5
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
virtually complete. When a sale does not meet the requirements for income
recognition, gain is deferred until those requirements are met. Sales of
real estate are accounted for under the percentage-of-completion method
when the Company has material obligations under sales contracts to provide
improvements after the property is sold. Under the percentage-of-completion
method, the gain on sale is recognized as the related obligations are
fulfilled.
The development of Phase I (approximately 4.6 acres) consisting of four
commercial pad sites in The Crossings at Palmer Park was completed in the
fiscal year ended March 31, 1998. Three of the improved lots were sold and
closed in the prior fiscal year. The sale of the remaining improved lot
occurred in June 1998.
The Company has commenced Phase II (approximately 6.1 acres) of its 20 acre
development of The Crossings at Palmer Park in Colorado Springs, Colorado.
The Phase II development plan consists of four commercial pad sites and the
Company entered into a sale agreement on one of the lots. The Company
entered into a contract for approximately $350,000 of Phase II site
development work consisting of grading, utilities, channel lining, storm
sewer and paving with a scheduled completion date in November 1998. The
Company was also required to furnish a bank letter of credit for $111,600
to the City of Colorado Springs to provide assurance that the channel
lining improvements would be completed.
The Phase II lot sale closed in June 1998 and $200,000 of the net proceeds
of $268,802 were escrowed for the on-site development work. The balance of
the escrow of $142,998 at September 30, 1998 is reflected as restricted
cash on the balance sheet.
In connection with the real estate sales, the Company used the
percentage-of-completion method to determine the amount of gross profit to
be recognized for the three and six months ended September 30, 1998 and
1997 as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales of real estate $ -- $ 718,554 $ 574,026 $ 1,068,554
Revenue previously deferred 225,540 177,016 -- --
Deferred revenue -- (174,175) (74,460) (265,027)
----------- ----------- ----------- -----------
225,540 721,395 499,566 803,527
Cost of real estate sold 118,370 310,944 286,253 376,066
----------- ----------- ----------- -----------
Gross profit on sale of real estate $ 107,170 $ 410,451 $ 213,313 $ 427,461
=========== =========== =========== ===========
6
</TABLE>
<PAGE>
BISHOP CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The deferred revenue of $74,460 is reflected as a liability in the
Company's balance sheet at September 30, 1998 and will be recognized as the
related site development work obligations are completed.
4. Gas Royalty Income
Gas royalty income is net of amortization of $3,336 for the three months
ended September 30, 1998 and 1997 and $6,672 for the six months ended
September 30, 1998 and 1997.
5. Income Taxes
The provision for income taxes is based on management's estimate of the
effective tax rate expected to be applicable for the fiscal year net of the
utilization of the net operating loss carryforward which is subject to
limitations under IRS Section 382. The tax rate may be revised at the end
of each successive interim period during the fiscal year to reflect
management's current estimate of the annual effective tax rate.
6. Subsequent Event
In October 1998, the Company entered into a limited partnership agreement
(the "Partnership") with an unrelated third party to develop and construct
a 350 unit apartment complex (the "Project") with related amenities. The
Project is subject to the successful rezoning of approximately 18 acres of
undeveloped real property owned by the Company in Colorado Springs,
Colorado and favorable financing.
The total cost to acquire the land and develop the Project, including
equity, is estimated to be approximately $20,000,000. The Company, upon
successful rezoning, will contribute the land valued at $1,600,000 for an
80% limited partner interest. The unrelated third party will contribute
$400,000 of services for the remaining 20% limited partner interest and
will also be the general partner. The remaining $18,000,000 of the
estimated Project cost is anticipated to be financed by a non-recourse loan
from the U. S. Department of Housing and Urban Development or any other
third party lender.
The Company may be required to make additional capital contributions up to
$400,000 as determined by the general partner, based on the availability of
funds to finance the Project, with the other limited partner contributing
up to $100,000.
The limited partners will have preference on distributions as defined in
the limited partnership agreement and, after the occurrence of certain
events, the general partner will be entitled to 20% of any distributions
with the remaining 80% allocated to the Company (64%) and the other limited
partner (16%).
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's unaudited consolidated financial statements and notes thereto.
Forward-Looking Statements
The Company believes that this report contains forward-looking statements, as
defined in the Private Securities Litigation Reform Act of 1995, including,
without limitation, statements containing the words "believes," "anticipates,"
"estimates," "expects," "may," and words of similar import, or statements of
management's opinion. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements.
Results of Operations
The Company's results of operations are dependent primarily on the sale of real
estate which is affected by national and local economic and competitive
conditions, including interest rates, construction costs, governmental
regulations and legislation, availability of financing and other factors. In
addition, the Company competes with other owners and developers with greater
resources and experience.
Three Months Ended September 30, 1998 and 1997
The Company incurred a net loss of $7,200 for the three months ended September
30, 1998 compared to net income of $325,100 for the comparable period in 1997.
The loss in the current quarter resulted from a lower volume of sales of real
estate. The Company is currently developing Phase II of its real estate project
in Colorado Springs, Colorado and anticipates completion in November 1998. The
Company closed one Phase II lot sale in June 1998 and the gain on sale is being
recognized as the related site development work obligations are completed.
During the comparable period in 1997, the Company was completing the development
of Phase I and had closed two Phase I lot sales (see Note 3).
General and administrative expenses increased $3,300 or 3% for the three months
ended September 30, 1998 compared to the same period in 1997 and is attributable
to inflationary increases in operational costs and expenses.
Net gas royalty income increased $8,600 in the current quarter compared to the
corresponding quarter in 1997. Natural gas production for the three months ended
September 30, 1998 was 15,265 mcf compared to 12,138 mcf for the comparable
period in 1997. The average sales price of natural gas increased 4% ($1.59 per
mcf compared to $1.53 per mcf) and gas processing costs decreased $2,800 or 45%
for the three months ended September 30, 1998 compared to the same period in
1997.
8
<PAGE>
Interest and dividend income decreased $2,800 or 28% for the three months ended
September 30, 1998 compared to the same period in 1997 due to a decrease in cash
balances available for investment purposes.
The net unrealized loss on marketable securities of $38,700 for the three months
ended September 30, 1998 represents the net change from June 30, 1998 in the
market value of the trading securities portfolio.
Equity in partnership income of $2,100 for the three months ended September 30,
1998 represents the Company's share of the net rental income from a ground
lease. In October 1997, all improvements related to the partnership operations
were sold to an unrelated third-party and the purchaser entered into a 25 year
ground lease on the real property. The equity in partnership loss of $17,000 for
the three months ended September 30, 1997 resulted from certain expenses being
incurred without any offsetting revenue from operations due to the purchaser of
the improvements assuming management of the day-to-day operations in July 1997.
Six Months Ended September 30, 1998 and 1997
The Company's net income for the six months ended September 30, 1998 was $23,000
compared to $229,800 for the comparable period in 1997. During the current
period, the Company sold one lot in Phase I which was developed in the prior
fiscal year and one lot in Phase II currently under development (see Note 3)
compared to three lot sales in Phase I for the six months ended September 30,
1997.
General and administrative expenses decreased $19,600 or 8% for the six months
ended September 30, 1998 compared to the same period in 1997. The decrease is
due to non-recurring expenses associated with the June 1997 spin-off from
American Rivers Oil Company.
Net gas royalties increased $23,300 in the current six months compared to the
corresponding six months in 1997. Natural gas production for the six months
ended September 30, 1998 was 30,546 mcf compared to 24,155 mcf for the
comparable period in 1997. The average sales price of natural gas increased 19%
($1.78 per mcf compared to $1.49 per mcf) and gas processing costs decreased
$5,200 or 42% for the six months ended September 30, 1998 compared to the same
period in 1997.
Interest and dividend income decreased $2,900 or 16% for the six months ended
September 30, 1998 compared to the same period in 1997 due to a decrease in cash
balances available for investment purposes.
Net unrealized loss on marketable securities of $9,019 for the six months ended
September 30, 1998 represents the net change from March 31, 1998 in the market
value of the trading securities portfolio.
9
<PAGE>
Equity in partnership income of $4,645 for the six months ended September 30,
1998 represents the Company's share of the net rental income from a ground
lease. In October 1997, all improvements related to the partnership operations
were sold to an unrelated third-party and the purchaser entered into a 25 year
ground lease on the real property. The equity in partnership loss of $20,200 for
the six months ended September 30, 1997 resulted from certain expenses being
incurred without any offsetting revenue from operations due to the purchaser of
the improvements assuming management of the day-to-day operations in July 1997.
Financial Condition
At September 30, 1998, the Company had working capital of $335,700.
The following summary table reflects comparative cash flows for the Company as
follows:
Six Months Ended
September 30,
----------------------
1998 1997
---- ----
Net cash provided by (used in):
Operating activities $ (56,500) $ 241,400
Investing activities (23,100) (51,600)
Financing activities 89,200 (100,600)
Net cash used in operating activities of $56,500 for the six months ended
September 30, 1998 resulted from a lower volume of real estate sales compared to
1997. Net cash provided by operating activities of $241,400 for the comparable
period in 1997 resulted primarily from the sale of real estate.
Net cash used in investing activities of $23,100 for the six months ended
September 30, 1998 resulted primarily from funds advanced under notes receivable
of $15,000 and purchase of property and equipment. Net cash used in investing
activities of $51,600 for the six months ended September 30, 1997 resulted
primarily from the purchase of property and equipment.
Net cash provided by financing activities of $89,200 for the six months ended
September 30, 1998 resulted from bank borrowings of $90,000 offset by the
acquisition of 1,000 shares of treasury stock for $800. Net cash used in
financing activities of $100,600 for the six months ended September 30, 1997
resulted from the Company acquiring 94,063 shares of treasury stock. The Company
also had bank borrowings of $50,000 and repayment of bank borrowings of $50,000
for the 1997 period.
The Company's material commitments for capital expenditures in the next twelve
months will be in conjunction with the Phase II and III development of The
Crossings at Palmer Park in Colorado Springs, Colorado. The Concept Plan for
Phases II and III and the Plat relating to one lot in Phase II of the
development were approved by the City of Colorado Springs (the "City"). The
Company closed on one Phase II lot sale in June 1998 and $200,000 of the net
proceeds were escrowed for on-site development costs (see Note 3).
10
<PAGE>
The estimated costs for the Phase II site improvements are approximately
$350,000 and will be funded partially by the $200,000 of net proceeds placed in
escrow in June 1998. In addition, the Company obtained two lines-of-credit with
a bank. A $150,000 line-of-credit is available for cash advances and is
collateralized by $160,000 of U. S. government securities. As of September 30,
1998, the Company had outstanding borrowings of $90,000 under this
line-of-credit. A $250,000 line-of-credit collateralized by the Company's
building is available for the issuance of letters of credit and a letter of
credit for $111,600 was issued to the City (see Note 3).
In October 1998, the Company entered into a limited partnership agreement (see
Note 6) with an unrelated third party to develop and construct a 350 unit
apartment complex (the "Project"). The Project is subject to the successful
rezoning of approximately 18 acres of undeveloped real property owned by the
Company in Colorado Springs, Colorado and favorable Project financing. The
rezoning process is anticipated to take four to six months to complete. The
estimated cost for the Project, including equity, is $20,000,000 of which
$18,000,000 is anticipated to be financed by a non-recourse loan from the U. S.
Department of Housing and Urban Development or any other third party lender. The
Company, upon successful rezoning, will contribute the land valued at $1,600,000
for an 80% limited partner interest. The unrelated third party will contribute
$400,000 of services for the remaining 20% limited partner interest and will
also be the general partner.
The Company believes that existing working capital, together with current
sources of available financing, will be sufficient to fund the Company's
operations during the next twelve months.
The Company is working to resolve the potential impact of the year 2000 on the
ability of the Company's computerized accounting system to accurately process
information that may be date-sensitive. The Company, which utilizes a minimal
number of computer programs in its operations, has not completed its assessment,
but presently believes that costs of addressing this issue will not have a
material adverse impact on the Company's financial position. However, if third
parties upon which it relies are unable to address this issue in a timely
manner, it could result in a material financial risk to the Company. In order to
assure that this does not occur, the Company is communicating with third parties
to resolve any significant year 2000 issues in a timely manner.
11
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.15 Creekside Apartments, LLLP Limited Partnership Agreement
dated October 28, 1998 between Wood Avenue Investment Co.,
LLC as General Partner and Bishop Powers, Ltd. as Limited
Partner.
10.16 Option Agreement dated October 28, 1998 between Bishop
Powers, Ltd. and Creekside Apartments, LLLP.
27 Financial Data Schedule (submitted only in electronic
format)
b. Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BISHOP CAPITAL CORPORATION
(Registrant)
Date: November 10, 1998 By: /s/ Robert E. Thrailkill
---------------------------------
Robert E. Thrailkill
President
(Principal Executive Officer)
Date: November 10, 1998 By: /s/ John A. Alsko
----------------------------------
John A. Alsko
Treasurer and Chief Financial
Officer
(Principal Financial Officer)
13
LIMITED PARTNERSHIP AGREEMENT
OF
CREEKSIDE APARTMENTS, LLLP
<PAGE>
PARTNERSHIP AGREEMENT
OF
CREEKSIDE APARTMENTS, LLLP
A Colorado Limited Liability Limited Partnership
This PARTNERSHIP AGREEMENT OF CREEKSIDE APARTMENTS, LLLP ("Agreement") is
made and entered into as of October 28, 1998, by and between Wood Avenue
Investment Co., LLC, a Colorado limited liability company ("Wood") and Bishop
Powers, Ltd., a Colorado limited partnership ("Bishop"), as those entities
executing the signature pages hereof as Limited Partners (hereinafter
collectively referred to as "Limited Partners"), and Wood Avenue Investment Co.,
LLC, a Colorado limited liability company, as General Partner (hereinafter
referred to as "General Partner"), for themselves, their successors, and assigns
(sometimes the General Partner and Limited Partners are referred to herein
individually as "Partner" or collectively as "Partners") for the purpose of
forming Creekside Apartments, LLLP, a Colorado limited liability limited
partnership, formed pursuant to the Colorado Uniform Limited Partnership Act of
1981 ("Colorado Act"), on all the terms and conditions set forth herein.
RECITALS
A. On behalf of the Partners, Creekside Apartments, LLLP (hereinafter
referred to as the "Partnership"), was created by the filing of a Certificate of
Limited Partnership with the Colorado Secretary of State on August 17, 1998,
which Certificate of Limited Partnership may be amended in the sole and absolute
discretion of the General Partner.
B. The Partnership was registered as a Colorado limited liability
limited partnership by the filing of such Registration Statement with the
Secretary of State of Colorado on September 3, 1998.
C. The parties hereto desire to effect the admission of Limited
Partners to the Partnership and to set forth the terms and conditions of their
Partnership Agreement as stated herein.
D. The parties now desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Partnership is hereby established subject to the following
terms and conditions:
2
<PAGE>
ARTICLE I
NAMES, ADDRESSES, AND DEFINITIONS
1.1 Name. This Partnership shall be known as and shall operate under
the name of Creekside Apartments, LLLP, a Colorado limited liability limited
partnership.
1.2 Purpose. The purpose of the Partnership shall be to: (i) acquire
from Bishop ("Seller") approximately 18 acres of undeveloped real property
("Land") located appurtenant to Powers Boulevard between Galley Road and Palmer
Park in Colorado Springs, CO, as more particularly described on Exhibit A
attached hereto and incorporated herein; (ii) rezone and develop the Land and
construct improvements thereon consisting of an apartment complex comprised of
approximately 350 units, together with parking facilities, pool and other
appurtenances and amenities thereon ("Improvements") [the Land and Improvements
are hereinafter collectively called the "Property" or "Project")]; and (iii)
hold, renovate, improve, repair, operate and manage the Property and to
ultimately lease, operate, sell, exchange or otherwise dispose of the Property
in the hope of deriving "Net Profits" therefrom as defined in this Agreement. As
of the date of this Agreement, it is estimated that total costs to acquire the
Land and complete the Project, including equity, will be approximately
$20,000,000. No other purpose will be pursued by the Partnership without the
approval of the Limited Partners as otherwise provided herein. The principal
place of business of the Partnership shall be 102 No. Cascade Ave., 5th Floor,
Colorado Springs, CO 80903, or such other location(s), inside or outside the
State of Colorado, as are necessary or desirable for the conduct of the
Partnership's business as designated by the General Partner. In addition, the
initial record keeping office of the Partnership shall be located at the above
address.
1.3 Registered Office and Registered Agent. The Partnership's initial
registered office shall be at the office of its registered agent at
Griffis/Blessing, Inc., 102 No. Cascade Ave., 5th Floor, Colorado Springs, CO
80903, and the name of its initial registered agent at such address shall be
Buck Blessing. The registered office and registered agent may be changed from
time to time by filing the address of the new registered office and/or the name
of the new registered agent with the Colorado Secretary of State pursuant to the
Colorado Act.
1.4 Addresses of the General Partner. The name and address of the
General Partner is set forth below:
Wood Avenue Investment Co., LLC,
a Colorado limited liability company
c/o Griffis/Blessing, Inc.
102 No. Cascade Ave., 5th Floor
Colorado Springs, CO 80903
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The names and addresses of the Limited Partners are set forth in the individual
Subscription Agreements attached hereto. A Partner may change such address by
written notice as provided herein to the Partnership.
1.5 Term. Except as provided herein, the Partnership shall continue
from the date of the filing of the Certificate of Limited Partnership with the
Secretary of State of the State of Colorado without dissolution until the first
to occur of the following: (i) the written agreement of the General Partner and
Limited Partners to dissolve the Partnership; (ii) the dissolution of the
Partnership in accordance with either the provisions of this Partnership
Agreement or the Colorado Act; or (iii) the expiration of 50 years from the date
of the completion of the Project.
1.6 Partnership Property.
(a) All property owned and acquired by the Partnership, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually, shall have any ownership
interest in any such Partnership Property. All property paid or brought into, or
transferred to, the Partnership as a Capital Contribution of a Partner, or
subsequently acquired by purchase, trade or otherwise, on account of the
Partnership, is Partnership Property.
(b) Legal title to Partnership Property, whether real, personal
or fixtures, shall be taken in the name of Creekside Apartments, LLLP.
1.7 Certificates. In addition to the Certificate of Limited
Partnership, the General Partner shall file and publish all such certificates,
notices, statements or other instruments, and appropriate amendments thereto for
the formation, operation, continuation, dissolution, and liquidation of a
limited liability limited partnership as the General Partner may deem necessary
or advisable, including but not limited to, the registration of the Partnership
as a limited liability limited partnership.
1.8 Definitions. The following terms used in this Partnership
Agreement shall have the following meanings (unless otherwise expressly provided
herein):
(a) "Capital Account" as of any given date shall mean the Capital
Contribution to the Partnership by a Partner as adjusted up to the date in
question pursuant to Articles III and IV herein. "Deficit Capital Account" shall
mean with respect to any Partner, the deficit balance, if any, in such Partner's
Capital Account as of the end of the taxable year.
(b) "Capital Contribution(s)" shall mean contributions to the
capital of the Partnership in cash or property by a Partner whenever and when
and as actually made, and where required shall mean the aggregate Capital
Contributions of a Partner for purposes of determining a Partner's pro rata
interest in the Partnership. "Initial Capital Contribution" shall mean the
initial Capital Contributions when and as actually made by the Partners to the
capital of the Partnership pursuant to this Partnership Agreement for purposes
of determining the Preference, all distributions and other allocations
hereunder.
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(c) "Capital Interest" shall mean the proportion that a Partner's
positive Capital Account bears to the aggregate positive Capital Accounts of all
Partners whose Capital Accounts have positive balances as may be adjusted from
time to time.
(d) "Cash Available from Major Capital Event" means, with respect
to any particular Major Capital Event, the net cash proceeds of such event after
the payment of the then current Partnership liabilities, applicable transaction
expenses, and an allowance for reserves as determined in the sole discretion of
the General Partner for working capital, contingencies and replacements.
(e) "Certificate of Limited Partnership" shall mean the
Certificate of Limited Partnership of Creekside Apartments, LLLP, as filed with
the Secretary of State of Colorado, as the same may be amended from time to
time.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of subsequent superseding federal revenue
laws.
(g) "Commencement of Construction " shall mean the issuance of a
building permit at the Project by the City of Colorado Springs, CO and
commencement of any work in connection with the development and/or construction
at the Project.
(h) "Colorado Act" shall mean the Colorado Uniform Limited
Partnership Act of 1981, at C.R.S. ss.7-62-101, et seq.
(i) "Distributable Cash" shall mean all cash, revenues, and funds
received by the Partnership from Partnership operations or activities, less the
sum of the following to the extent paid or set aside by the Partnership: (i) all
principal and interest payments on indebtedness of the Partnership and all other
sums paid to lenders; (ii) all cash expenditures incurred incident to the normal
operation of the Partnership's business, including any reimbursements and/or
management fees provided for herein, whether paid to the General Partner, third
parties, or affiliates of the General Partner; and (iii) such Reserves as the
General Partner deems reasonably necessary for the proper operation of the
Partnership's business, including but not limited to, working capital
requirements, capital replacements, improvements and any contingencies as
determined by the General Partner.
(j) "Entity" shall mean any general partnership, limited
partnership, limited liability partnership, limited liability limited
partnership, limited partnership association, limited liability company,
corporation, joint venture, trust, business trust, cooperative, or association
or any foreign trust or foreign business organization, or any other entity
through which business may be lawfully conducted.
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(k) "Fiscal Year" shall mean the Partnership's fiscal year, which
shall be the calendar year.
(l) "General Partner" shall mean each of the parties who executes
a counterpart of this Partnership Agreement as a General Partner and each of the
parties who may hereafter become a General Partner in accordance with the terms
of this Partnership Agreement. References to the General Partner in the singular
shall also, where the context so requires, be deemed to include the plural.
(m) "Liquidating Event" means a sale, condemnation, exchange,
foreclosure or other transaction which results in the disposition of all or
substantially all of the Property and triggers dissolution of the Partnership or
any other event that triggers a dissolution of the Partnership, as determined by
the General Partner and approved by the Limited Partners.
(n) "Major Capital Event" means any event (excluding a
Liquidating Event) arising other than in the ordinary course of the
Partnership's business and which results in proceeds (net of funds needed for
debt service, reconstruction, ongoing Reserves, to be determined in the General
Partner's sole and absolute discretion, and other Partnership purposes) in
excess of $100,000, including without limitation: (i) the sale or exchange of
less than all or less than substantially all of the Partnership's interest in
the Property; (ii) a condemnation of less than all or less than substantially
all of the Partnership's interest in the Property; and (iii) the recovery of
damage awards or settlements or insurance proceeds for the loss of or damage to
the Property (net of the costs of physical restoration of the remaining portion
of the Property or replacement of the whole); and (iv) a borrowing or
refinancing. The designation of an event as a "Major Capital Event" by the
General Partner shall be approved by the Limited Partners.
(o) "Majority" shall mean, where there exists more than one
General Partner, one or more votes of the General Partner(s), which, taken
together, exceed 50% of the aggregate votes allotted to the General Partners in
their capacity as General Partners. For all decisions required to be made by the
General Partner(s) under this Agreement, each General Partner shall be allocated
one vote.
(p) "Net Profits" and "Net Losses" shall mean the income, gain,
loss, deductions, and credits of the Partnership in the aggregate or separately
stated, as appropriate. determined in accordance with Article IV herein.
(q) "Operations" means all activities of the Partnership not
constituting a Major Capital Event or a Liquidating Event.
(r) "Partnership" shall refer to Creekside Apartments, LLLP, a
Colorado limited liability limited partnership.
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(s) "Partnership Agreement" and "Agreement" shall mean this
Partnership Agreement, as originally executed and as amended from time to time.
(t) "Person" shall mean any individual or Entity and the heirs,
executors, administrators, legal representatives, successors, and assigns of the
"Person" where the context so permits.
(u) "Preference" means the right to an annual, non-guaranteed,
cumulative. non-compounding, priority cash payment equal to 10% per year of the
unreturned Capital Contributions of the Limited Partners for which payments the
Limited Partners have a priority over distributions to the General Partner as
more fully described herein. The Preference shall start to accrue on the Initial
Capital Contributions following the later to occur of (i) "Rezoning the
Property," defined below; or (ii) acceptance by the General Partner of the
Initial Capital Contributions. The Preference shall start to accrue on
additional Capital Contributions upon acceptance by the General Partner of such
additional Capital Contributions. The Preference shall be computed based on the
daily balance of each Limited Partner's unreturned Capital Contributions.
Payments of the Preference shall not be deemed to be a return of unpaid Capital
Contributions of the Limited Partners.
(v) "Registration" shall mean that filing with the Colorado
Secretary of State necessary to cause the Partnership to become a Colorado
limited liability limited partnership as allowed under C.R.S. ss.7-60-144.
(w) "Reserves" shall mean, with respect to any fiscal period,
funds set aside or amounts allocated during such period to reserves which shall
be maintained in amounts deemed sufficient by the General Partner (in its sole
and absolute discretion) for working capital and to pay taxes, insurance, debt
service, or other costs or expense incident to the ownership or operation of the
Partnership's Property.
(x) "Rezoning of the Property" shall mean the successful
non-appealable decision by the City Council for the City of Colorado Springs, CO
rezoning the Property from PBC to R-5 or PUD status.
(y) "Subscription Agreement" shall mean and refer to the
Subscription Agreement to be executed by each Partner and Limited Partner to
evidence their respective interests in the Partnership.
(z) "Successful Lender Pre-application Conference" shall mean
that certain event in which the General Partner and Limited Partners participate
in a pre-application loan conference with representatives from the regional
office of U.S. Department of Housing and Urban Development, or any other third
party lender, in connection with the status of obtaining a non-recourse loan
("Project Financing") to develop and construct the Project and the Partners
determine, in their discretion, to complete the application process and submit a
formal written loan application to obtain Project Financing.
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(aa) "Treasury Regulations" and "Regulations" shall include proposed,
temporary, and final regulations promulgated under the Code in effect as of the
date of filing the Certificate of Limited Partnership, and the corresponding
section's of any regulations subsequently issued that amend or supersede such
regulations.
ARTICLE II
OPERATING POWERS
2.1 Operating Powers. The Partnership shall have and exercise all
powers necessary or appropriate to do any and all things necessary or desirable
in the opinion of the General Partner to implement the purposes of the
Partnership subject to the limitations set forth in this Agreement or the
Colorado Act.
ARTICLE III
CAPITAL
3.1 Initial Capital Contributions, Loans From Partners and Loans From
Third Parties. Each of the Partners shall collectively contribute an amount not
to exceed $2,505,000 to the Partnership the amounts set forth as follows:
a. Capital:
i. Partners' Cash and Property Contributions: Each original
Partner admitted to the Partnership will have offered and made a cash
contribution in the amount set forth below. The original Limited Partners shall
collectively initially contribute $5,000 as follows prior to, or concurrent
with, the execution of this Agreement:
Bishop $4,000
Wood $1,000.
The original General Partner shall contribute the sum of
$100 prior to, or concurrent with, this Agreement.
The original Limited Partners shall also contribute to the
Partnership the following when and as provided below:
Bishop The Land on or after Rezoning of the
Property, which, for purposes of this
Agreement shall be valued at $1,600,000.
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Wood The products or property as follows: Rezoning
of the Property, as evidenced by the formal
minutes from City Council of Colorado
Springs, CO, memorializing the decision to
rezone the Property, which, for purposes of
this Agreement, shall be valued at $200,000;
Successful Lender Pre-application Conference
evidenced by written Partnership resolution
to complete and submit an application for
Project Financing ("Resolution",), which, for
purposes of this Agreement, shall be valued
at $100,000, and Commencement of Construction
evidenced by a building permit issued by the
Regional Building Department, which, for
purposes of this Agreement, shall be valued
at $100,000.
ii. Time for Contributions: All of the cash and property
contributions shall be paid or contributed as provided above.
iii. Non-Cash Contributions: The General Partner shall
contribute such time, skill, experience and expertise as are necessary to
accomplish the purpose of the Partnership in a timely and commercially
reasonable manner. The General Partner's non-cash contributions shall be made on
an "as needed" basis sufficient to assure the timely pursuit of the purpose of
the Partnership.
iv. No Withdrawals or Interest: No Partner shall be entitled
to receive any interest on his contributions to the capital of the Partnership
nor shall any Partner have the right to withdraw and demand the return of his
Capital Contribution except on dissolution of the Partnership or following a
decision of the General Partner to distribute capital of the Partnership.
v. No Priority: No Partner shall have any priority over any
other Partner with respect to any distribution of Partnership Property, or cash,
which may be made from the Partnership, except that Limited Partners shall be
entitled to priority of distribution as described in Sections 3.2.a., 3.2.b. and
3.2.c.
vi. Additional Capital Contributions: Following the request
by the General Partner for Partnership purposes, but in no event earlier than Re
zoning of the Property, each Limited Partner shall be required to make
additional Capital Contributions to the Partnership as follows with the
Preference adjusted accordingly:
Bishop Up to $100,000, which shall be evidenced by
converting the "Limited Partner Loan,"
defined below, to equity, as provided below;
and an additional sum up to $300,000, as
determined by the General Partner, at the
time the Limited Partner Wood Loan is
converted to equity. In the event the Limited
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Partner Loan is not converted to equity, or
the Limited Partner Loan is repaid from
Project Financing, Bishop shall contribute
the sum of up to $400,000, as determined by
the General Partner, based on the
availability of funds to finance the Project.
Wood Up to $100,000, which shall be evidenced by
converting the "Limited Partner Loan,"
defined below, to equity, as provided below.
In the event the Limited Partner Loan is not
converted to equity, or the Limited Partner
Loan is repaid from Project Financing, Wood
shall contribute the sum of $100,000, as
determined by the General Partner, based on
the availability of funds to finance the
Project.
In the event a Limited Partner elects to not make his contribution as requested
by the General Partner, the other Limited Partner(s) may, but shall not be
required to, make the contribution of the non-contributing Limited Partner, in
which case such contribution shall be treated as a Capital Contribution, and
each Limited Partner's pro rata share shall be adjusted to reflect the
additional Capital Contribution of the contributing Limited Partner(s).
b. Loans from Partners: Loans may be obtained from Partners on
the following terms:
i. Limited Partners: Each Limited Partner, on a pari passu
basis, has herewith agreed to loan to the Partnership a sum up to $100,000 each
for an aggregate loan not to exceed $200,000 advanced in sums as agreed to by
the Limited Partners ("Limited Partner Loan") pursuant to, and in accordance
with, that certain Loan Agreement, Promissory Note, Assignment of Partnership
Interests, and any other documents evidencing and/or securing the Limited
Partner Loan ("Limited Partner Loan Documents"). Pursuant to the Limited Partner
Loan Documents, the Limited Partner Loan will accrue interest at a rate equal to
the Prime Rate of Interest published in The Wall Street Journal, plus 1%. The
obligations of the Partnership under the Limited Partner Loan Documents may be
repaid from Project Financing or converted to an equity position to be held by
the Limited Partners on a pari passu basis no earlier than Rezoning of the
Property and at the sole discretion of the Limited Partners.
ii. Additional Loans. In addition to the Limited Partner
Loan, following the request of the General Partner for Partnership purposes,
each Limited Partner may, in its discretion, but shall not be required to, lend
money to the Partnership on such terms and conditions as may be offered by the
General Partner. Any such loans shall be made on such terms as the General
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Partner shall deem reasonable and appropriate subject to the provisions of
Colorado law. If a request for loans is made by the General Partner and the
offers to loan from the Limited Partners are greater than the amount needed, the
General Partner may, in its discretion, accept the first offers made until the
amount required is subscribed or may divide the loans among those offering to
loan pro rata based on the amount of each Limited Partner's Capital
Contributions.
iii. General Partner: Should the Limited Partners choose not
to loan all funds needed, or if the timing of the need for such borrowing, in
the opinion of the General Partner pursuant to Section 3.b.ii. above, does not
permit requesting loans from the Limited Partners, the General Partner may, in
its discretion, make one or more loans to the Partnership on terms no more
favorable than those offered to the Limited Partners, or if not offered, then on
such terms and conditions as are commercially reasonable at that time under
prevailing market conditions, which shall not be greater than the Prime Rate of
Interest published in The Wall Street Journal plus 2%, not to exceed the legal
maximum rate. Any loan by the General Partner shall be due and payable at any
time when the repayment thereof, in whole or in part, would, in the opinion of
the General Partner, not jeopardize the operating cash necessary for the proper
management of the Partnership's business.
c. Other Loans: The General Partner, or a related entity, intends
and is authorized to take such actions to cause the Partnership to obtain new
third-party non-recourse development and construction financing with respect to
the Property in an amount to be determined by the General Partner from the U.S.
Department of Housing and Urban Development, or any other third party lender,
which Project Financing will be secured in part by the Partnership's fee estate
in the Property. The General Partner anticipates obtaining such development
financing on terms acceptable to the General Partner. In addition to loans
provided for in Sections 3.1.b.ii. and 3.l.b.iii., the General Partner, or
related entity, may and is authorized to loan the Partnership funds to provide a
good faith seller and/or lender deposit and pay for any actual costs incurred
before funding, and acquisition, with such loan to be unsecured and to have a
priority for repayment as the Partnership's cash on hand or in escrow accounts.
The General Partner is also authorized to refinance the Property in such amount
and upon such terms and at any time it deems suitable. Additionally, the General
Partner is authorized to obtain secondary financing applicable to the Property.
Such financing may be on such terms and conditions as the General Partner deems
commercially reasonable under the circumstances. The General Partner does not
guarantee that loans will be available on any terms when the Partnership may
need them.
3.2 Cash Distributions. The General Partner shall make distributions
from available cash as follows:
a. Operating Distributions: Distributable Cash only if and when
available from Operations shall be distributed, when deemed appropriate by the
General Partner. who shall make a determination as to distributions within 30
days of the Partnership's receipt of substantial funds, but in no event less
than quarterly, as follows:
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i. First, such amounts shall be paid to the Limited Partners
until such time as the Limited Partners have received total cash disbursements
equal to the Preference; and
ii. Second, at any time prior to adopting the Resolution for
Successful Lender Pre-application Conference, 100% of the remaining
Distributable Cash from Operations to the Limited Partners (80% to Bishop and
20% to Wood), and at any time after adopting the Resolution for Successful
Lender Pre-application Conference, 80% of the remaining Distributable Cash from
Operations to the Limited Partners (80% to Bishop and 20% to Wood) and 20% to
the General Partner.
b. Major Capital Event Distributions: Distributable Cash
available from a Major Capital Event shall be distributed as follows:
i. First, to the extent that the Limited Partners have not
received disbursements equal to the Preference, such amounts shall be paid to
the Limited Partners until such time as the Limited Partners have received total
cash disbursements equal to the Preference;
ii. Second, to the extent that the Limited Partners have not
received total disbursements to date (excluding any disbursements in Sections
3.2.a.i. and 3.2.b.i.) during the Partnership's existence equal to their Capital
Contributions, such amounts shall be paid to the Limited Partners until such
time as the Limited Partners have received total cash disbursements equal to
their Capital Contributions; and
iii. Third, at any time prior to adopting the Resolution for
Successful Lender Pre-application Conference, 100% of the remaining
Distributable Cash from a Major Capital Event to the Limited Partners (80% to
Bishop and 20% to Wood), and at any time after adopting the Resolution for
Successful Lender Pre-application Conference, any remaining Distributable Cash
from a Major Capital Event shall be distributed 80% to the Limited Partners (80%
to Bishop and 20% to Wood) and 20% to the General Partner.
c. Liquidating Distributions: Distributable Cash available from a
Liquidating Event shall be made as follows:
i. First, to the extent that the Limited Partners have not
received disbursements equal to the Preference, such amounts shall be paid to
the Limited Partners until such time as the Limited Partners have received total
cash disbursements equal to the Preference;
ii. Second, to the extent that the Limited Partners have not
received total cash disbursements to date (excluding any disbursements in
Sections 3.2.a.i., and 3.2.b.i.) during the Partnership's existence equal to
their Capital Contributions, such amounts shall be paid to the Limited Partners
until such time as the Limited Partners have received total cash disbursements
equal to their Capital Contributions; and
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iii. Third, at any time prior to adopting the Resolution for
Successful Lender Pre-application Conference, 100% of the remaining
Distributable Cash from a Liquidating Event to the Limited Partners (80% to
Bishop and 20% to Wood), and at any time after adopting the Resolution for a
Successful Lender Pre-application Conference, any remaining Distributable Cash
from a Liquidating Event shall be distributed 80% to the Limited Partners (80%
to Bishop and 20% to Wood) and 20% to the General Partner.
d. Priority of Distributions: No Limited Partner shall have any
priority to distributions over any other Limited Partner. The fees and
reimbursements owed to the General Partner and its affiliates will be paid
before distributions are made to Partners.
3.3 Additional Borrowings. In order to satisfy its financial needs,
the Partnership, by decision of the General Partner, may borrow from banks,
lending institutions, or other unrelated third parties and may pledge
Partnership property or the production of or other income therefrom to secure
and provide for the repayment of such loans.
3.4 Limitations on Distributions. No Partner may receive a
distribution from the Partnership to the extent that, after giving effect to the
distribution, all liabilities of the Partnership, other than liabilities to
Partners on account of their Partnership Interests, would exceed the fair value
of the Partnership's assets. Each Partner understands that if he has received a
return of part of his Capital Contribution in violation of this Partnership
Agreement or the Colorado Act, he is liable to the Partnership for a period of 6
years thereafter for the amount of the Capital Contribution wrongfully returned.
If a Partner receives the return of any part of his Capital Contribution not in
violation of this Agreement or the Colorado Act, he is liable to the Partnership
for a period of one year thereafter for the amount of the returned contribution,
but only to the extent necessary to discharge the Partnership's liability to
creditors who extended credit to the Partnership during the period the Capital
Contribution was held by the Partnership.
3.5 Distributions. All distributions of Distributable Cash and
property shall be made at such time as determined by the General Partner
pursuant to this Agreement. All amounts withheld pursuant to the Code or any
provisions of state or local tax law with respect to any payment or distribution
to the Partners from the Partnership shall be treated as amounts distributed to
the relevant Partner or Partners pursuant to this Article III.
ARTICLE IV
ALLOCATIONS OF PROFITS AND LOSSES
4.1 Determination. Net Profits and Net Losses shall mean the amounts
which are reportable by the Partnership for federal income tax purposes
generally determined in accordance with I.R.C. ss.703, et seq. Net Profits and
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Net Losses from Operations shall be determined and allocated at the end of each
Partnership year with respect to that year. Net Profits and Net Losses from a
Major Capital Event and a Liquidating Event shall be determined and allocated as
of the date of such event.
4.2 Net Profits and Net Losses From Operations and From Major Capital
Events. Subject to Section 4.5 Net Profits and Net Losses from Operations and
from Major Capital Events, if any, shall be allocated as follows:
a. Net Profits from Operations shall be allocated:
i. First, 100% to the Limited Partners until the cumulative
Net Profits allocated under this Agreement equals the cumulative cash paid to
them as their Preference; and
ii. Second, at any time prior to adopting the Resolution for
Successful Lender Pre-application Conference, 100% to the Limited Partners (80%
to Bishop and 20% to Wood), and at any time after adopting the Resolution for
Successful Lender Pre-application Conference, 80% to the Limited Partners (80%
to Bishop and 20% to Wood) and 20% to the General Partner.
b. Net Losses from Operations shall be allocated:
i. At any time prior to adopting the Resolution for
Successful Lender Pre-application Conference, 100% to the Limited Partners (80%
to Bishop and 20% to Wood); and
ii. At any time after adopting the Resolution for Successful
Lender Pre-application Conference, 80% to the Limited Partners (80% to Bishop
and 20% to Wood) and 20% to the General Partner.
c. Net Profits from a Major Capital Event shall be allocated:
i. First, 100% to the Limited Partners until the cumulative
Net Profits allocated under this Agreement equals the cumulative cash paid to
them as their Preference; and
ii. Second, at any time prior to adopting the Resolution for
Successful Lender Pre-application Conference, 100% to the Limited Partners (80%
to Bishop and 20% to Wood), and at any time after adopting the Resolution for
Successful Lender Pre-application Conference, 80% to the Limited Partners (80%
to Bishop and 20% to Wood) and 20% to the General Partner.
d. Net Losses from a Major Capital Event shall be allocated:
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i. At any time prior to adopting the Resolution for
Successful Lender Pre-application Conference, 100% to the Limited Partners (80%
to Bishop and 20% to Wood); and
ii. At any time after adopting the Resolution for Successful
Lender Pre-application Conference, 80% to the Limited Partners (80% to Bishop
and 20% to Wood) and 20% to the General Partner.
4.3 Net Profits and Net Losses from a Liquidating Event. Net Profits
and Net Losses from a Liquidating Event shall be allocated as follows:
a. Net Profits from a Liquidating Event shall be allocated:
i. First, 100% to the Limited Partners until the cumulative
Net Profits allocated under this Agreement equals the cumulative cash paid to
them as their Preference; and
ii. Second, at any time prior to adopting the Resolution for
Successful Lender Pre-application Conference, 100% to the Limited Partners (80%
to Bishop and 20% to Wood), and at any time after adopting the Resolution for
Successful Lender Pre-application Conference, 80% to the Limited Partners (80%
to Bishop and 20% to Wood) and 20% to the General Partner.
b. Net Losses arising from a Liquidating Event shall be
allocated:
i. At any time prior to adopting the Resolution for
Successful Lender Pre-application Conference, 100% to the Limited Partners (80%
to Bishop and 20% to Wood); and
ii. At any time after adopting the Resolution for Successful
Lender Pre-application Conference, 80% to the Limited Partners (80% to Bishop
and 20% to Wood) and 20% to the General Partner.
4.4 Allocations Among Partners.
a. Amounts allocated to the Limited Partners collectively shall
be allocated pro rata among the Limited Partners.
b. All allocations of Net Profits and Net Losses from Operations
shall be made to the persons who were Partners during the fiscal period for
which such allocation is made based upon the number of days in such period
during which the person was a Partner.
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c. All allocations of Net Profits and Net Losses from a Major
Capital Event or Liquidating Event shall be made to the persons who are Partners
as of the date of such event.
d. If Net Profits from a Major Capital Event or Liquidating Event
allocated to the Partners are less than the deficit amounts of the Capital
Accounts of all Partners whose Capital Accounts are negative, if any, such Net
Profits shall be allocated among such Partners in the ratio which the deficit
amount of each such Partner's Capital Account bears to the deficit amounts of
the Capital Accounts of all such Partners whose Capital Accounts have a deficit
balance. Nothing contained in this Section 4.4.d. shall be deemed to defeat or
alter the Preference which is owed to Limited Partners, as provided elsewhere in
this Agreement.
e. If the character of any Net Profit or Net Loss is in part
capital and in part from Operations in the hands of the Partnership or is in
part governed by Internal Revenue Code ss. 1231 and in part not governed
thereby, then all allocations of any such Net Profit or Net Loss shall be made
among the Partners in a manner such that each Partner to whom such Net Profit or
Net Loss is allocated, is allocated the same proportion of each such separate
class of Net Profit or Net Loss as such Partner is allocated to the total amount
of such Net Profit or Net Loss.
f. Any recognition of taxable income or loss arising from the
recharacterization of the status or treatment of any item, or any recapture of
any tax credit on audit or by an amended tax return, shall be allocated in the
same manner and ratio as said item or credit was previously allocated to the
Partners, or as close thereto as the General Partner may determine, in its sole
discretion on competent advice.
g. For the purposes of the allocations set forth herein, the
balance in a Partner's Capital Account shall be determined as if the
Partnership's year had closed immediately prior to the date as of which such
allocations are made.
4.5 Overriding and Special Allocations to Capital Accounts.
Notwithstanding any other provision of this Agreement, the following allocations
shall be made prior to any other allocations under this Agreement and in the
following order of priority:
a. No allocations of loss, deduction, and/or expenditures
described in ss.705(a)(2)(B) of the Code shall be charged to the Capital
Accounts of any Partner if such allocation would cause such Partner to have a
Deficit Capital Account. The amount of the loss, deduction, and/or Code
ss.705(a)(2)(B) expenditure which would have caused a Partner to have a Deficit
Capital Account shall instead be charged to the Capital Account of any Partners
which would not have a Deficit Capital Account as a result of the allocations,
in proportion to their respective Capital Contributions, or, if no such Partners
exist, then to the Partners in accordance with their respective interests in the
Partnership.
b. In the event any Partner unexpectedly receives any
adjustments, allocations, or distributions described in
ss.ss.l.704-l(b)(2)(ii)(d)(4), (5), or (6) of the Treasury Regulations which
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create or increase a Deficit Capital Account of such Partner, then items of
Partnership income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain for each year and, if
necessary, for subsequent years) shall be specially credited to the Capital
Account of such Partner in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations, the Deficit Capital Account so
created as quickly as possible. It is the intent that this Section 4.5.b. be
interpreted to comply with the alternate test for economic effect ("Qualified
Income Offset") set forth in ss.l.704-l(b)(2)(ii)(d) of the Treasury
Regulations.
c. In the event any Partner would have a Deficit Capital Account
at the end of any Partnership taxable year which is in excess of the sum of any
amount that such Partner is obligated to restore to the Partnership under
Treasury Regulations ss.1.704-l(b)(2)(ii)(c) and such Partner's share of minimum
gain as defined in ss. 1 .704-2(g)(1) of the Treasury Regulations (which is also
treated as an obligation to restore in accordance with ss.1.704-l(b)(2)(ii)(d)
of the Treasury Regulations), the Capital Account of such Partner shall be
specially credited with items of Partnership income (including gross income) and
gain in the amount of such excess as quickly as possible.
d. Notwithstanding any other provision of this Section 4.5, if
there is a net decrease in the Partnership's minimum gain as defined in Treasury
Regulation ss.1.704-2(d) during a taxable year of the Partnership, then the
Capital Accounts of each Partner shall be allocated items of income (including
gross income) and gain for such year (and, if necessary, for subsequent years)
equal to that Partner's share of the net decrease in Partnership minimum gain.
This Section 4.5.d. is intended to comply with the minimum gain charge back
requirement of ss.1.704-2 of the Treasury Regulations and shall be interpreted
consistently therewith. If in any taxable year that the Partnership has a net
decrease in the Partnership's minimum gain, if the minimum gain charge back
requirement would cause a distortion in the economic arrangement among the
Partners and it is not expected that the Partnership will have sufficient other
income to correct that distortion, the General Partner may, in its discretion,
seek to have the Internal Revenue Service waive the minimum gain charge back
requirement in accordance with Treasury Regulation ss.1.704-2(f)(4).
e. Items of Partnership loss, deduction, and expenditures
described in ss.705(a)(2)(B) which are attributable to any nonrecourse debt of
the Partnership and are characterized as partner nonrecourse deductions under
ss.1.704-2(i) of the Treasury Regulations shall be allocated to the Partners'
Capital Accounts in accordance with said ss.1.704-2(i) of the Treasury
Regulations.
f. Beginning in the first taxable year in which there are
allocations of "nonrecourse deductions" (as described in ss.1.704-2(b) of the
Treasury Regulations), such deductions shall be allocated to the Partners in
accordance with, and as a part of, the allocations of Partnership Net Profits or
Net Losses for such period.
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g. Any credit or charge to the Capital Accounts of the Partners
pursuant to Sections 4.5.b., c. and/or d. hereof shall be taken into account in
computing subsequent allocations of Partnership Net Profit and Net Losses so
that the net amount of any items charged or credited to Capital Accounts
pursuant to Sections 4.2, 4.3, 4.4 and 4.5 shall, to the extent possible, be
equal to the net amount that would have been allocated to the Capital Account of
each Partner pursuant to the provisions of this Article IV if the special
allocations required by Sections 4.5.b., c., and/or d. hereof had not occurred.
h. In connection with the contribution of any property other than
cash by a Partner to the Partnership, the General Partner, in its sole
discretion and upon competent advice, shall make such allocations as are
necessary by ss.704 of the Code.
4.6 Capital Accounts. The Partnership, with respect to each Partner,
shall maintain Capital Accounts in accordance with the following provisions:
a. To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions at the time actually made, such Partner's
allocable share of Partnership Net Profits and any items in the nature of income
or gain which are specially allocated pursuant to this Article IV hereof, and
the amount of any Partner liabilities assumed by such Partner or which are
secured by any assets or property distributed to such Partner or which are
properly allocated to such Partner under the Code and Treasury Regulations;
b. To each Partner's Capital Account there shall be debited the
amount of cash and the gross asset value of any assets or property distributed
to such Partner pursuant to any provision of this Agreement, such Partner's
distributive share of Partnership Net Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to this Article IV
hereof, and
c. In determining the amount of any liability for purposes of
Sections 4.6.a and b. above, there shall be taken into account Code ss.752(c)
and any other applicable provisions of the Code and Treasury Regulations.
d. Notwithstanding anything contained in this Agreement to the
contrary each Limited Partner's Capital Account shall be adjusted to reflect
each Limited Partner's pro rata interest in the Partnership as follows: Bishop
80%, Wood 20%. As an example, in the event of a Liquidating Event prior to
adopting the Resolution for Successful Lender Pre-application Conference, Wood
shall recontribute to the Partnership any sums in excess of its Capital
Contribution, as actually made (less any Preference to be paid), to be
distributed 80% to Bishop and 20% to Wood. By way of illustration, assuming the
Limited Partners elect to dissolve the Partnership upon the Partnership events
specified below, the following distributions shall apply:
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<TABLE>
<CAPTION>
Net Proceeds after
Repayment of the Recontribution Net Limited Partner
Partnership Event Capital Contribution Limited Partner Loan Prior to Recontribution Amount Distribution
- ----------------- -------------------- -------------------- ----------------------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Subsequent to Bishop $1,600,000 $1,500,000 Bishop $1,200,000 $1,360,000
Rezoning of the Wood 200,000 Wood 300,000 200,000 140,000
Property but prior Bishop 1,600,000 $2,100,000 Bishop 1,680,000 1,840,000
to Resolution for Wood 200,000 Wood 420,000 200,000 260,000
Successful
Lender Pre-
application
Conference
Subsequent to Bishop $1,600,000 $1,500,000 Bishop $1,200,000 100,000 $1,280,000
Resolution for Wood 300,000 Wood 300,000 220,000
Successful Lender Bishop 1,600,000 2,100,000 Bishop 1,680,000 100,000 1,760,000
Pre-application Wood 300,000 Wood 420,000 340,000
Conference but
prior to
Commencement
of Construction
</TABLE>
The foregoing provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Treasury Regulations
ss. 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations. In the event the General Partner shall determine that it
is prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Partnership or the Partners), are computed in order to comply
with such Regulations, the Partners may make such modification, provided that it
is not likely to have a material effect on the amounts distributable to any
Partner upon the dissolution of the Partnership. The Partners also shall: (i)
make any adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Partners and the amount of Partnership
capital reflected on the Partnership's balance sheet, as computed for book
purposes in accordance with Treasury Regulations ss.l.704-1(b)(2)(iv)(q); and
(ii) make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Treasury Regulations ss.
1.704-1(b).
4.7 Timing of Distributions. All distributions of Distributable Cash
and property shall be made at such time as determined by the General Partner
pursuant to this Agreement.
ARTICLE V
ACCOUNTING AND REPORTING
5.1 Books of Account. The Partnership shall maintain complete and
accurate books of account of the Partnership's affairs at the principal office
of the Partnership specified in Section 1.2 of this Agreement. Every Partner
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shall have access at all reasonable times to the Partnership's books of account
and may inspect and copy any of them. Pursuant to Section 7.10.a., the General
Partner shall cause the Partnership's accountant to provide to each Partner
quarterly unaudited financial statements of the Partnership. The Partnership's
books of account shall be closed promptly after the end of each accounting and
tax year, and, as soon as practicable thereafter, the Partnership's accountant
shall prepare such unaudited financial statements as requested by the General
Partner. Copies of such financial statements shall be furnished to each Partner.
Within 60 days after the end of each calendar year, the Partnership shall
furnish to every Partner who owned an interest in the Partnership during such
year such tax information regarding the Partnership and its operations as shall
be reasonably necessary for the preparation of each Partner's federal, state and
other tax returns.
5.2 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
5.3 Accounting Methods; Transfers During Year. Partnership Net Profits
and Net Losses shall be determined as of the end of each fiscal year by the
Partnership's accountant in accordance with Article IV hereof.
5.4 Tax Matters Partner. Buck Blessing is hereby designated the "tax
matters partner" for purposes of Code ss.6221, et seq.
5.5 Tax Elections and Returns. The Partnership may make any election
under the Tax Code as determined by vote of the General Partner.
ARTICLE VI
RIGHTS AND DUTIES OF GENERAL PARTNER
6.1 Management. The business and affairs of the Partnership shall be
managed by the General Partner. Any reference to the General Partner in this
Agreement shall be a reference to the singular or plural as the case may be. The
General Partner shall direct, manage and control the business of the Partnership
to the best of its ability. Except for situations in which the approval of the
Limited Partners is expressly required by this Partnership Agreement or by
nonwaivable provisions of applicable law, the General Partner shall have full
and complete authority, power and discretion to manage and control the business,
affairs and properties of the Partnership, to make all decisions regarding those
matters and to perform any and all other acts or activities customary or
incident to the management of the Partnership's business. At any time when there
is more than one General Partner, any one General Partner may take any action
permitted to be taken by the General Partner upon the Majority vote of the
General Partners, unless the approval of the Limited Partners or more than one
of the General Partners is expressly required to take such action as provided
herein (eg., Section 6.8) or the Colorado Act. No person shall be required to
determine or question a General Partner's authority to undertake any act or
execute any contract on behalf of the Partnership or to see to the application
or distribution of revenues or proceeds paid to a General Partner as a
representative of the Partnership.
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6.2 Certain Powers of General Partner. Without limiting the generality
of Section 6.1, and subject to Section 7.10, the General Partner shall have the
power and authority, on behalf of the Partnership:
a. To acquire property from any Person as the General Partner may
determine. The fact that a General Partner or a Limited Partner is directly or
indirectly affiliated or connected with any such Person shall not prohibit the
General Partner from dealing with that Person;
b. Unless provided otherwise herein, to borrow money for the
Partnership from banks, other lending institutions, the General Partner, Limited
Partners, or affiliates of the General Partner or Limited Partners on such terms
as the General Partner deems appropriate, including without limitation,
obtaining the Limited Partner Loan and the Project Financing, and in connection
therewith, to hypothecate, encumber and grant security interests in the assets
of the Partnership to secure repayment of the borrowed sums. No debt shall be
contracted or liability incurred by or on behalf of the Partnership except by
the General Partner, or to the extent permitted under the Colorado Act, by
agents or employees of the Partnership expressly authorized to contract such
debt or incur such liability by the General Partner;
c. To purchase liability and other insurance to protect the
Partnership's property and business;
d. To hold and own any Partnership real and/or personal
properties in the name of the Partnership;
e. To invest any Partnership funds temporarily (by way of example
but not limitation) in time deposits, short-term governmental obligations,
commercial paper or other investments;
f. To sell or otherwise dispose of all or substantially all of
the assets of the Partnership as part of a single transaction or plan so long as
such disposition is not in violation of or a cause of a default under this
Agreement or any other agreement to which the Partnership may be bound;
g. To execute on behalf of the Partnership all instruments and
documents, including without limitation, checks; drafts; notes and other
negotiable instruments; mortgages or deeds of trust; security agreements;
financing statements; documents providing for the acquisition, mortgage or
disposition of the Partnership's Property; assignments, bills of sale; leases;
partnership agreements, operating agreements; any other instruments or documents
necessary to the business of the Partnership; and take such other steps or make
such other expenditures as are reasonably necessary, required or advisable to
implement the terms and provisions of the most recent budget approved by the
General Partner (the "Budget");
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<PAGE>
h. To employ accountants, legal counsel, managing agents or other
experts to perform services for the Partnership and to compensate them from
Partnership funds in accordance with the Budget;
i. Except as limited by Section 6.8, to enter into any and all
other agreements on behalf of the Partnership, with any other Person for any
purpose, in such forms as the General Partner may approve;
j. To negotiate and execute any and all documents, contracts and
agreements relating to the development and construction of the Project,
including but not limited to, construction contracts and development agreements,
and any and all loan documents, including documents evidencing or securing the
Project Financing, Limited Partner Loan Documents, deeds of trust, letters of
credit, and modifications or rescissions of any of the foregoing and any and all
service contracts; to prepay or extend, in whole or in part any debt of the
Partnership or any debt secured by a Partnership investment; to borrow monies
and incur obligations for and on behalf of the Partnership and its purposes; to
invest liquid funds of the Partnership in interest bearing instruments or
accounts; and to sell, exchange or transfer all or part of the Property and
thereupon dissolve the Partnership, all without any prior notice to or
additional approval of the Limited Partners unless otherwise required in this
Agreement;
k. To direct overall management of and be responsible for the
development and construction of the Project, financing, management, initial
lease-up, replacement leasing, maintenance and ultimate disposition of the
Property, management of the Partnership and all reasonable and necessary acts in
connection therewith upon such terms and conditions as the General Partner deems
reasonable and where required hereunder;
1. Without limitation, the General Partner is further authorized
to negotiate and incur obligations on behalf of the Partnership and its
investment activities upon such terms and conditions as they deem advisable and
proper, and to pledge the credit of the Partnership or the Property for such
purposes; to prepay in whole or in part, refinance, modify or extend any
agreement, promissory note, lease or deed of trust affecting the Property and in
connection therewith execute for and on behalf of the Partnership any and all
extensions, renewals and modifications of any such agreements or documents;
m. Consistent with the provisions hereof relating to liquidation
of the Partnership, the General Partner is specifically empowered to list the
Property for sale with any licensed broker, which may be a General Partner or an
affiliate of same, and to sign any listing agreement or other documents in
connection therewith on behalf of the Partnership and obligating the Partnership
to pay a commission; provided the total commission paid shall be set at a market
rate which shall not exceed a total of 6% of the selling price, and provided
that the General Partner may not refuse to cooperate with any bonafide third
party purchaser's broker or agent as designated in writing; and
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<PAGE>
n. Except as limited by Section 6.8, to do and perform all other
acts as may be necessary or appropriate to the conduct of the Partnership's
business.
6.3 Liability for Certain Acts. The General Partner shall perform its
duties as General Partner in good faith, in a manner it reasonably believes to
be in the best interests of the Partnership, and with such care as an ordinarily
prudent Person in a like position would use under similar circumstances. The
General Partner performing its duties as General Partner shall not have any
liability solely by reason of being or having been a General Partner of the
Partnership. The General Partner shall not be liable to the Partnership or to
any Partner for any loss or damage sustained by the Partnership or any Partner,
unless the loss or damage shall have been the result of gross negligence, fraud,
deceit, willful misconduct or a wrongful taking by the General Partner. The
duties of the General Partner to the Partnership and all other Partners are of a
fiduciary nature.
6.4 General Partner Has No Exclusive Duty to the Partnership. The
General Partner shall not be required to manage the Partnership as its sole and
exclusive function and it (or any General Partner) may have other business
interests and may engage in other activities in addition to those relating to
the Partnership. The General Partner shall devote such time to the conduct of
the business of the Partnership as shall be reasonably necessary to achieve its
investment goals in a commercially reasonable manner. The Limited Partners
understand and acknowledge that the General Partner has time demands, duties,
responsibilities and business interests apart from and outside of this
Partnership. Neither the Partnership nor any Partner shall have any right, by
virtue of this Agreement, to share or participate in such other investments or
activities of the General Partner or to the income or proceeds derived
therefrom. The General Partner shall not incur liability to the Partnership or
to any of the Partners as a result of engaging in any other business or venture.
6.5 Bank Accounts. The General Partner shall from time to time open
bank and other accounts in the name of the Partnership, and the General Partner
shall be the sole signatory thereon, unless the General Partner determines
otherwise.
6.6 Insurance. The General Partner is authorized to obtain insurance
to protect the General Partner against liability resulting from its good faith
actions or omissions as General Partner (for example, officers and directors
insurance). Such insurance shall only protect the General Partner for liability
to the extent that such liability could be indemnified pursuant to the Colorado
Act, if this Agreement provided for such indemnification.
6.7 Salaries and Reimbursements. The compensation of the General
Partner shall be as otherwise set forth in this Agreement, and the General
Partner shall not be prevented from receiving such compensation by reason of the
fact that it, or any of its members, is also a Limited Partner of the
Partnership. The Partnership shall reimburse the General Partner for such
General Partner's actual and reasonable out-of-pocket expenditures made pursuant
to the exercise of such General Partner's authority under this Agreement. The
Partners acknowledge and agree that the Property shall at all times be managed
by a professional management company acceptable to the General Partner.
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<PAGE>
6.8 Limitation on Authority of the General Partner. In addition to the
limitation on the authority of the General Partner set forth in Section 7.10.c.
which requires the vote of the Limited Partners as provided therein, in the
event there is more than one General Partner, a General Partner shall not,
without the consent of all the General Partners, do any of the following:
a. Enter into any bond, become endorser or surety for any Person,
or knowingly cause or suffer to be done anything whereby the Partnership
property may be seized, attached, or taken on execution;
b. Compromise any Partnership claim for any reason or confess
judgment against the Partnership in an amount in excess of $25,000;
c. Dispose of any assets of the Partnership, including any of the
Partnership goodwill, except in the ordinary course of the Partnership's
business;
d. Borrow any money in the name of or on behalf of the
Partnership in excess of 5% of the project costs of the Property;
e. Unless authorized under this Agreement, enter into any
acquisition, debt, mortgage, encumbrance, obligation or other transaction
requiring an obligation or expenditure of the Partnership in excess of that
amount agreed to in writing from time to time by the General Partner and filed
in the Partnership's records or, in the absence of such written agreement, in
excess of 5% of the project costs of the Property;
f. Alter the primary purpose of the Partnership;
g. Conduct any act in contravention of this Agreement or which
would make it impossible to carry on the ordinary business of the Partnership;
or
h. Perform any act which would subject any Partner to personal
liability beyond its Capital Contributions, if any.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF PARTNERS
7.1 Limitation of Liability. Each Partner's liability shall be limited
as set forth in the Colorado Act, other applicable law, and as set forth in this
Agreement. The failure of the Partnership to observe the formalities or
requirements relating to the management of the Partnership's business and
affairs shall not, in itself, impose personal liability on the Partners for the
liabilities of the Partnership beyond that provided under the Colorado Act,
other applicable law, and/or this Agreement.
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7.2 Liability For Partnership Debt. A Partner will not personally be
liable for any debts or losses of the Partnership beyond his or her respective
unreturned Capital Contributions, except as otherwise required by law or as to
such debts and liabilities of the Partnership as are personally guaranteed by a
Partner.
7.3 Reimbursement. The Partnership shall reimburse each Partner for
such Partner's actual and reasonable out-of-pocket expenditures made pursuant to
the exercise of such Partner's authority under this Agreement or reasonably made
for the purpose of preserving the Partnership's business or property.
Notwithstanding the foregoing, no Limited Partner shall be entitled to receive
any reimbursements from the Partnership unless the expenses incurred by any such
Limited Partner have been pre-approved by the General Partner, in the General
Partner's sole discretion.
7.4 Partner's Business Conflicts. Any Partner and any affiliate of any
Partner may engage independently or with others in other business ventures of
every nature and description, including without limitation, the ownership and
operation of other real estate services, development, sales and leasing
businesses and the making or management of other investments. Nothing in this
Agreement shall be deemed to prohibit any Partner from dealing or otherwise
engaging in business with persons transacting business with the Partnership or
from providing real estate management services, real estate brokerage services,
or engaging in any aspect of the real estate development or leasing business and
receiving compensation therefor, not involving any rebate or reciprocal
arrangement which would have the effect of circumventing any restriction set
forth herein upon dealings with the General Partner. Neither the Partnership nor
any Partner shall have any right by virtue of this Agreement or the Partnership
relationship created hereby in or to such other ventures or activities or to the
income or proceeds derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper.
7.5 Confidentiality. Each Partner agrees on behalf of itself, its
employees, and independent contractors and its affiliates as follows:
a. All records and information owned by the Partnership or
created, purchased, or obtained by any such party in the course of providing
services to or acting on behalf of the Partnership, shall be considered the
exclusive property of the Partnership; and
b. The duty of confidentiality to be observed by each such
Partner shall be of the highest degree, and at no time shall any such party
divulge the proprietary information of the Partnership except to the extent
reasonably necessary for the purpose of conducting the business of the
Partnership.
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7.6 General Partner's Conflicts of Interest. The General Partner's
management of the Partnership's affairs, as specified in this Agreement,
involves the following actual or potential conflicts of interest to which the
Limited Partners hereby consent, although nothing in this Section 7.6 is
intended to reduce or eliminate any restriction or limitation placed on the
General Partner by any specific provision of this Agreement:
a. Several potential conflicts of interest arise from the terms
of this Agreement. The Agreement permits the General Partner to make a number of
decisions without the approval or ability to veto by the Limited Partners, which
decisions may have substantial and material impact on the ultimate profitability
of the Partnership. The Agreement restricts voting rights of the Limited Partner
which, but for the terms of the Agreement as written, the Limited Partners may
have had. Reimbursement to the General Partner and its affiliates is hereby
authorized for out-of-pocket expenses actually paid, the need for which cannot
be predicted but which will be incurred solely in the General Partner's
discretion, although subject to the real property investment industry-wide
standards of reasonableness. The Agreement permits the General Partner to obtain
loans for the Partnership on then-available market terms if deemed necessary or
appropriate to achieve the Partnership's purpose in the General Partner's sole
discretion;
b. Griffis/Blessing, Inc., a Colorado corporation 100% owned by
Buck Blessing, shall receive a development and construction management fee equal
to 5% of the "total cost of the Project," as defined below, less $400,000, for
development and construction management services on a per unit basis
("Construction Management Fee"). The Construction Management Fee shall begin to
accrue upon Commencement of Construction and after Wood has made its non-cash
contributions as specified in Section 3.l.a.i. above valued at $400,000. The
Construction Management Fee shall be payable ratably during construction of
Improvements commencing on the beginning of construction of the 141st unit at
the Project, or as Griffis/Blessing, Inc. and the General Partner otherwise
agree. For purposes of this Agreement, "total cost of the Project" shall mean
all hard and soft costs associated with, or related to, the Project, including
the Land valued at $1,600,000;
c. Griffis/Blessing, Inc. will also be retained, pursuant to a
separate management agreement, as the property manager of the Property for the
Partnership's operations, and thereafter as determined by the General Partner,
and shall receive a management fee equal to 5% of the "gross revenues," defined
below, of the Property for its services, but in no event an amount less than
$2,000 per month, commencing with the lease up of the Property. Any termination
of Griffis/Blessing, Inc. as property manager of the Property shall require 30
days' notice prior to any termination. Griffis/Blessing, Inc. may additionally
provide the services of its maintenance and repair division and charge such fees
to the Partnership as said division charges its other customers as is permitted
in the Management Agreement. Griffis/Blessing, Inc. shall receive a construction
management fee, as further described in the Management Agreement, on all capital
improvement projects undertaken subsequent to the initial development and
construction at the Property. Upon prior disclosure to the Limited Partners and
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based on market conditions, Griffis/Blessing, Inc.'s leasing agents may receive
additional incentive fees for leasing of the Property, a portion of which fees
may or may not be retained by Griffis/Blessing, Inc., as further described in
the Management Agreement, or amendment thereto. For purposes of this Agreement
and the Management Agreement, "gross revenue" shall be deemed to include all
rents and other income and charges from the normal operation of the Property,
including but not limited to, rents, parking fees, forfeited security deposits,
utilities, other fees and deposits, "NNN" or other "pass through" charges, and
other miscellaneous income if billed by and through the Partnership. The term
"gross revenue" does not include special charges collected by the property
manager in accordance with the Management Agreement, interest on security
deposits, income arising out of the sale of Property, or the settlement of fire
or other casualty losses and items of a similar nature in accordance with the
Management Agreement;
d. The General Partner shall receive a non-negotiated
participation in profits in the Partnership as previously set forth herein;
e. The General Partner, its affiliate(s), or members of the
General Partner, will be paid a non-negotiated monthly asset management fee for
managing the Partnership in the aggregate of 2% of all gross revenue derived
from or generated by the Property (to be allocated by a separate written
agreement), excluding revenue from a Major Capital Event or a Liquidating Event;
f. Upon the sale of the Property, the General Partner, its
affiliate(s), or members of the General Partner, could participate in a sales
commission for the sale of the Property, not in excess of 3% of the gross sales
price of the Property;
g. The General Partner has reasonably, but arbitrarily,
established the amount necessary to fund the Partnership, and the allocations
and priorities of profits and losses after return of the Capital Contributions
to the Limited Partners;
h. The General Partner shall not be liable, responsible or
accountable in damages to any of the Limited Partners or the Partnership for
errors in judgment or other negligent acts or omissions performed or omitted by
the General Partner in good faith and in a manner reasonably within the scope of
the authority granted by this Agreement unless guilty of gross negligence or
willful misconduct with respect to such act(s) or omission(s). Any loss or
damage incurred by the General Partner by reason of involvement in this
Partnership, excepting those involving the gross negligence or willful
misconduct of the General Partner, shall be paid by the Partnership, and if not,
then the General Partner shall be indemnified therefor as a creditor to the
extent Partnership assets are available;
i. The General Partner is authorized to hire and has hired legal
counsel, at the Partnership's expense. To the extent the Partnership retains the
law firm of Braden Frindt & Stinar LLC, such legal counsel has a preexisting
representation relationship with the General Partner and Wood; and
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j. To the extent other services not provided herein are provided
by the General Partner (or any of the Limited Partners) for ongoing operations
and/or management of the Property, the Partner who provides the services will be
paid a fee commensurate with market rates, and such fees shall be pre-approved
in each instance by both the General Partner and the Limited Partners.
7.7 Reimbursement of General Partner For Organizational, Acquisition,
and Management Costs. Following formation, the Partnership shall reimburse the
General Partner for all reasonable out-of-pocket costs actually paid by the
General Partner in connection with the formation of the Partnership, the
acquisition of the Property and the management of the Property, including all
direct reasonable and proper third party administration and management expenses
incurred on behalf of the Partnership and the Property, accounting, tax
preparation and legal services.
7.8 Restrictions on General Partner.
a. Notwithstanding anything herein to the contrary, the General
Partner shall not borrow money on behalf of the Partnership for other than a
Partnership purpose;
b. Without the consent of the Limited Partners, as described in
Section 7.10 hereof, the General Partner shall have no authority to do any act
in contravention of this Agreement, as it may be amended from time to time, to
do any act which would make it impossible to carry on the ordinary business of
the Partnership, or to possess any Partnership Property or assign its rights in
specific Partnership Property for other than a Partnership purpose;
c. For matters beyond the terms of this Agreement, the General
Partner shall have no authority to bind the Partnership in any contract with the
General Partner or any affiliate thereof, the terms of which are not equivalent
to those which would pertain in any such contract with an unrelated party
normally engaged in providing such services; and
d. The General Partner shall have no authority to commingle
Partnership funds with the personal funds of the General Partner, or vice versa.
Partnership funds in the possession of the property manager will be kept in a
separate management account and separate records will be maintained as required
by and approved by the Colorado Department of Real Estate.
7.9 Rights, Powers, and Duties of Limited Partners.
a. The Limited Partners shall have only those rights. powers.
duties and liabilities as designated in this Agreement;
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b. The Limited Partners shall not be bound by, nor be personally
liable for, any expenses, liabilities or obligations of the Partnership except
as otherwise provided in this Agreement; provided, however, the Capital
Accounts, Distributable Cash and Net Profits of the Limited Partners shall be
subject to the risks of the business and investments of the Partnership and to
the claims of its creditors;
c. The Limited Partners shall not take part in the control or
conduct of the Partnership's business, nor the management of the Partnership's
affairs, and shall not have any power to bind the Partnership in any contract,
agreement, compromise, or undertaking. Should any Limited Partner(s) attempt to
exercise or assert control over, or interfere with, the Partnership's business,
management or affairs, except as specifically provided in this Agreement, such
Limited Partner(s) agrees to indemnify the Partnership, the General Partner and
the other Limited Partners for all costs, loss and expense incurred by them in
resolving, rectifying, settling or defending against such actions. If not
otherwise collected or voluntarily paid, such indemnity may be recovered
directly by the General Partner and distributed to the appropriate recipient(s)
out of any distributions otherwise available to any Limited Partner(s) from whom
the indemnity is owed; and
d. The Limited Partners shall have no right to vote on any
Partnership matter or decision except for those set forth in Section 7.10 below.
7.10 Meetings.
a. There will be no regular Partnership meetings. However, the
General Partner shall periodically, no less often than quarterly, mail out (or
meet with the Limited Partners) unaudited operating statements and provide
informal reports and, at least once annually, mail (or meet with the Limited
Partners) to the Limited Partners a formal, but unaudited annual report on the
Property and the Partnership's investment, financial position and cash flow;
b. A meeting of the Limited Partners for any of the purposes
specified in Section 7.10.c. below may be called at any time by the General
Partner or by any Limited Partners by giving at least 30, but not more than 90
days' prior written notice of the time, date and place to each Partner. Meetings
shall be held at the Property, or at such other reasonable place as may be
designated by the General Partner in the interest of the convenience of all
concerned, or, or at the offices of the Partnership's attorneys or accountants,
as appropriate to the meeting or as otherwise designated by the General Partner;
c. At any meeting of the Partners duly called for the purposes
set forth below, the Limited Partners may vote only upon the following matters
which, for passage or approval, will require the affirmative vote or written
consent of 75% or more of the Limited Partners' interests in the Partnership
which, for purposes of this Section 7.10.c. shall, as of the date of this
Agreement, mean: Bishop 80% and Wood 20%:
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i. a material change in the Partnership's purpose or term,
including an exchange into another real property investment;
ii. Early dissolution and winding up of the Partnership, for
any reason other than those in accordance with the stated purposes of the
Partnership, the approval of a Major Capital Event, and the approval of a
Liquidating Event, as may be determined by the General Partner;
iii. Approval of any transaction in which the General
Partner has an actual or potential conflict of interest with the Limited
Partners or the Partnership, other than those described and authorized by the
terms of this Agreement;
iv. Removal of the General Partner as general partner of the
Partnership upon the occurrence of any one of the following: (a) the transfer,
conveyance, sale or assignment by Buck Blessing of more than 29% of his
membership interest in and to the General Partner, or the removal of Buck
Blessing as the sole manager of the General Partner and the General Partner
fails to, in the opinion of the Limited Partners, satisfactorily perform its
duties and obligations hereunder; (b) the death of Buck Blessing and the General
Partner fails to, in the opinion of the Limited Partners, satisfactorily perform
its duties and obligations hereunder; or (c) gross negligence in the performance
or willful disregard of the General Partner's duties and obligations under this
Agreement. Any such removal of the General Partner pursuant to this Section
7.10.c.iv., shall not affect or alter any economic interest of the General
Partner in and to the Partnership and/or the Property, including without
limitation, any profits interest or fees to which the General Partner is
entitled to hereunder, but only cause the General Partner to lose its right to
vote on any Partnership matter;
v. An election to continue the business of the Partnership
after the General Partner ceases to be General Partner, where there is no
remaining or surviving General Partner;
vi. Determination to adopt the Resolution for a Successful
Lender Pre-application Conference; and
vii. Conversion of the Limited Partner Loan to an equity
position to be held by the Limited Partners on a pari passu basis no earlier
than Rezoning of the Property;
d. If a proposed motion, action or decision does not receive the
specified affirmative vote of all voting Limited Partners, such motion, action
or decision shall be deemed not to be resolved, authorized or made;
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e. Each Limited Partner shall be entitled to vote at any meeting
called for the purposes set forth above in Section 7.10.c. Votes may not be
split. All owners of each integral interest must vote unanimously and shall
appoint one representative to express their vote and each integral interest with
common ownership shall be voted alike, or such vote shall not count. No quorum
at a meeting shall exist unless more than 50% of the Limited Partners are
present based on their pro rata limited partnership interests in the
Partnership, in person or by proxy. The votes of the Limited Partners shall be
weighted according to their respective interests in the Partnership; and
f. Upon any decision of the Partnership reached pursuant to the
preceding procedure, the General Partner, on behalf of all Partners, may execute
a certificate evidencing such decision. Such certificate, when executed by the
required percentage of Partners, personally or through their power of attorney,
shall be conclusive evidence against the Partnership and each Partner in favor
of any bonafide purchaser, encumbrancer, or other concerned party.
7.11 Proscribed Activities. Except as provided in this Agreement, no
Limited Partners shall have the right to:
a. Withdraw or reduce its Capital Contribution to the
Partnership;
b. Unless otherwise allowed under the Colorado Act, bring an
action for partition against the Partnership;
c. Unless otherwise allowed under the Colorado Act, cause the
dissolution and winding up of the Partnership by court decree or otherwise; and
d. Vote on or veto any indebtedness incurred by the Partnership.
ARTICLE VIII
ADMISSION OF NEW PARTNERS
8.1 Unanimous Consent Required. No Person, regardless of whether such
Person is or is not a transferee of a Partner in the Partnership, may become a
Partner in the Partnership without becoming a party to this Agreement (with such
amendments thereto, if any, as the then existing General Partner may agree upon)
and without first obtaining the written consent of all then-existing Partners.
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ARTICLE IX
TRANSFER OF INTEREST IN THE PARTNERSHIP
9.1 Restriction.
a. Except as provided below, no Partner shall transfer or
encumber his interest in the Partnership without the written consent of the
General Partner; provided, however, this restriction shall not apply if the
transfer or encumbrance is to a Partner or is a "Permitted Transfer" as defined
in Section 9.2 hereof.
b. In order to raise additional Capital Contributions up to
$300,000 as required pursuant to Section 3.1.a.vi., Bishop may, one time only,
transfer an integral portion of its 80% limited partnership interest in and to
the Partnership not to exceed 15% of Bishop's limited partnership interest (any
such interest to be transferred is called the "Bishop Portion"), to a third
party new limited partner. Bishop shall provide prior written notice to the
General Partner of its intent to transfer all or a portion of the Bishop
Portion, the purchase price to be paid for such interest and the percentage
interest to be transferred ("Transfer Notice"). Either Bishop or the General
Partner may identify any new third party limited partner to purchase the Bishop
Portion and the agreed upon purchase price shall be paid in full with
immediately available good funds. Any transfer of the Bishop Portion to a new
third party limited partner pursuant to this Section 9.1 shall transfer only the
economic rights associated with the Bishop Portion, and Bishop shall retain all
voting rights, unless otherwise agreed by Bishop and Wood. Any new third party
limited partner pursuant to this Section shall execute an amendment to this
Agreement.
c. Except as provided above, any transfer or encumbrance of an
interest in the Partnership without the written consent of the General Partner
other than a Permitted Transfer shall be null and void and of no legal effect
upon the Partnership, and the Partnership will not be required to accept,
recognize or be bound by such transfer or encumbrance. Any transfer or attempted
transfer of an interest in violation of this Section shall subject the interest
of such Partner to the option to purchase by the other Partners pursuant to
Article X of this Partnership Agreement, except that the purchase price for the
purchase of the interest of the transferring or selling Partner shall be the
lower of: (i) the purchase price agreed upon by the transferring or selling
Partner in connection with the transfer or attempted transfer in violation of
this Article IX; or (ii) the purchase price as determined pursuant to Section
10.2. The payment of the purchase price so determined shall, at the election of
the purchasing Partner(s), be payable either: (i) pursuant to the terms set
forth in Section 10.3; or (ii) pursuant to the terms of payment agreed upon by
the transferring or selling Partner in connection with the transfer or attempted
transfer in violation of this Article IX. In the event of an encumbrance in
violation of this Article IX, the event of encumbrance shall not trigger the
option to purchase rights of the Partners but if the holder or beneficiary of
such encumbrance exercises its rights under the documents creating the
encumbrance to acquire the interest, then the remaining Partners shall have the
option to purchase such interest pursuant to this Section. The failure of the
other Partners to exercise such option to purchase shall not be deemed a consent
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to the transfer or attempted transfer in violation of this Article IX, and the
purported transferee of such interest shall not become a Partner, nor shall the
Partnership be required to accept, recognize or be bound by such transfer. The
terms of this Section may be specifically enforced against a transferee or
encumbrancer.
9.2 Permitted Transfers. The General Partner may not transfer any part
of its General Partner interest without the consent of the Limited Partners
holding a majority of the Limited Partnership interest in the Partnership.
Except as provided in Section 9.1.b., a Limited Partner may transfer only the
Limited Partner's economic rights of the transferring Limited Partner without
the consent of the General Partner, to: (i) a trust for the spouse and/or
children of the Limited Partner of which the Limited Partner is a trustee; (ii)
to a family limited partnership or similar entity in which the transferring
Limited Partner has a controlling interest; or (iii) to the spouse or child of
the Limited Partner ("Permitted Transfer"). Such Limited Partner's economic
rights shall hereinafter be referred to as an "Economic Interest," subject to
the limitations set forth in this Partnership Agreement. Except as provided in
Section 9.1.b., any other transfer by a Limited Partner shall require the
written consent of the General Partner. The recipient of a transfer of a Limited
Partnership interest receiving the consent of the General Partner shall
thereafter be a Limited Partner with all the voting rights and economic rights
of the transferring Limited Partner. Notwithstanding any other provision
contained in this Agreement, in the event a Limited Partner elects to sell, gift
or otherwise transfer all or part of his Limited Partnership interest other than
as provided in Section 9.1.b., or a Permitted Transfer, the General Partner
shall have the option for a 20-day period after its receipt of notice of the
proposed transfer from the transferring Limited Partner to purchase the Limited
Partnership interest proposed to be transferred (the "Offered Interest"). The
purchase price for the Offered Interest shall be an amount equal to the bonafide
third party offer. For purposes of exercising the option to purchase the Offered
Interest, written notice of the proposed transfer and terms of the purchase
shall be provided to the General Partner who shall have 30 days following
receipt thereof to notify the Limited Partner of the General Partner's election
to purchase. Failure to timely notify the transferring Limited Partner of the
General Partner's election shall cause the option to automatically terminate
with respect to the proposed transfer only; provided, such failure to timely
notify the transferring Limited Partner shall not affect the requirement of the
Limited Partner to obtain the written consent of the General Partner with
respect to the proposed transfer.
9.3 Status of Transferee in Violation of this Article IX.
Notwithstanding the provisions of Section 9.1, the Partnership may, with the
unanimous written consent of the General Partner and majority consent of the
Limited Partners, consent to treat the transferee of an interest transferred in
violation of this Article IX as a frill Partner with voting rights, which
consent shall be upon and subject to the terms set forth in the General
Partner's and Limited Partners' consent.
9.4 Liability of Transferring General Partner. In the event that the
General Partner transfers all or a portion of the Economic Interest associated
with its interest in the General Partner interest, but otherwise retains the
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remaining rights associated with its General Partner interest, such General
Partner shall remain obligated as a General Partner under this Partnership
Agreement.
9.5 Restriction on Transfer of Economic Interest. Other than as
provided in Sections 9.1 and 9.2, an Economic Interest of a Limited Partner may
not be transferred or encumbered without the consent of the General Partner, and
any transfer or encumbrance in violation of this Section 9.5 shall be subject to
all restrictions and rights of the other Partners as are applicable in the event
of a transfer or encumbrance of an interest in the Partnership; provided,
however, that this prohibition shall not apply if the Economic Interest is
transferred to a Partner. An Economic Interest of the General Partner may be
transferred or encumbered without the consent of a majority of the Limited
Partners.
ARTICLE X
BANKRUPTCY, WITHDRAWAL OR RESIGNATION OF A GENERAL PARTNER
10.1 Bankruptcy, Withdrawal or Resignation of a General Partner. Upon
the bankruptcy, withdrawal or resignation (as applicable) of the General
Partner, the Partnership shall dissolve; provided, however, that the remaining
General Partners (if any) within 90 days after the filing of the bankruptcy
petition, or the date the Partnership is notified in writing of the withdrawal
or resignation, as applicable, may by a consent of all the remaining General
Partners (if any) elect to continue the business of the Partnership, or in the
event there is no remaining General Partner, then upon unanimous consent of the
Limited Partners to continue the business of the Partnership and appoint a new
General Partner or convert the Partnership to a general partnership. In the
event the remaining General Partners, if any, elect to continue the business of
the Partnership upon the bankruptcy of a General Partner, the successor in
interest to the bankrupt General Partner shall remain a General Partner and/or
Limited Partner; provided, however, the General Partner interest retained by
such successor in interest shall not have any voting rights as a General Partner
interest as otherwise provided herein. In the event that the remaining General
Partners (if any) elect to continue the Partnership upon the withdrawal or
resignation of a General Partner, the remaining General Partners shall have the
option to purchase the General Partner interest of such withdrawing or resigning
General Partner ("Selling Partner") in the Partnership for a 90-day period after
date of the withdrawal or resignation. Each remaining General Partner's right to
purchase shall be on a pro rata basis according to its General Partnership
Capital Interests in the Partnership. If a General Partner or General Partners
decide not to participate in the purchase of the interest of the Selling
Partner, the General Partner or General Partners electing to purchase may
acquire the entire interest of the Selling Partner on a pro rata basis according
to the ratio of each participating General Partner's Capital Interest in the
Partnership compared to the aggregate Capital Interests of all participating
General Partners for an additional 20 days after the expiration of the initial
90-day period. The purchase price shall be determined under Section 10.2 herein.
The bankruptcy, withdrawal or resignation of a General Partner shall not entitle
the General Partner, to receive any distribution from the Partnership except in
accordance with the terms of this Partnership Agreement as if the Selling
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Partner remained a General Partner of the Partnership; specifically such General
Partner shall be entitled to receive the fair value of his interest until the
dissolution and termination of the Partnership in accordance with Article XI of
this Agreement. For purposes of exercising the option to purchase under this
Partnership Agreement, notice of the exercise of the option shall be given to
the General Partner who has withdrawn or resigned. The notice shall be given
within the times set forth in this Section 10.1 and closing shall occur upon the
earlier of: (i) the date set forth in the notice; or (ii) 120 days after the
occurrence of the event triggering the option to purchase. The notice shall
designate the time and place of closing.
10.2 Purchase Price. Unless otherwise agreed, the purchase price to be
determined in accordance with Section 9.1, Section 9.2 and Section 10.1 herein
shall be the fair market value of the Property less any debts of the Partnership
multiplied by a percentage determined by comparing the General Partner's Capital
Contribution to the sum of all General Partners' Capital Contributions or the
Limited Partner's Capital Contribution to the sum of all Limited Partners'
Capital Contributions (if applicable). Fair market value shall be established as
follows: (i) the remaining Partner(s) selects an appraiser of its choice to
appraise the Property of the Partnership; (ii) in the event the selling Partner
disapproves of the value established in (i) above, the selling Partner selects
an appraiser of his choice to appraise the Property of the Partnership and the
values established by (i) and this (ii) will be averaged to determine fair
market value unless the 2 values differ by 10% or more; (iii) in the event the
values established by (i) and (ii) above differ by 10% or more, the 2 appraisers
selected in (i) and (ii) above shall select a third appraiser to appraise the
property of the Partnership, in which case fair market value shall be
established by averaging the nearest 2 appraised values established by (i), (ii)
and (iii) of this Section 10.2.
10.3 Payment of Purchase Price. Payment of the purchase price shall be
made in cash or certified funds at time of closing if the purchase price is less
than $50,000. If the purchase price is $50,000 or more, payment of the purchase
price shall be made by: (i) the cash payment of the greater of $25,000 or 25% of
the purchase price at closing; and (ii) delivery of the purchaser's promissory
note for the balance of the purchase price, payable in equal quarterly
installments, including principal and interest on unpaid balances at the rate
hereinafter specified over 3 years from date of closing. Such note shall contain
the normal provisions, including but not limited to, acceleration on default and
payment of collection costs (including reasonable attorneys' fees) on default
and shall provide that prepayment may be made at any time without penalty. The
promissory note shall be secured by a pledge of the selling Partner's Partner
interest, pursuant to a commercially reasonable security agreement and related
documents. The interest rate for such note shall be the prime rate published by
The Wall Street Journal, plus 1% per annum. However, if the interest rate
exceeds the maximum legal rate of interest then interest shall accrue at the
maximum legal rate.
10.4 Miscellaneous. Nothing in this Article X shall prohibit the
General Partner or the Partnership from structuring the retirement of a selling
Partner's interest in the Partnership in a manner different from the one set
forth herein, provided all the General Partner(s) unanimously agree to such a
modification.
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ARTICLE XI
DISSOLUTION AND TERMINATION
11.1 Dissolution. The Partnership shall terminate, dissolve and
liquidate its affairs on the earlier of the following:
a. Expiration of its term;
b. The decision of the General Partner to terminate following the
sale of the Partnership property, which the General Partner is authorized to do
in its discretion, or following the sale of all, or substantially all, of the
Partnership's property, with the Partnership owning only assets consisting of
cash or negotiable debt;
c. The occurrence of any event, including but not limited to, the
enactment of any law, which makes it impossible to continue the operation of the
Partnership as a limited liability limited partnership or which makes it
impossible to pursue the Partnership's purpose; or
d. The General Partner's filing of an amendment to the
Certificate of Limited Partnership indicating that the Partnership is dissolving
on proper authority.
11.2 Effective Date. Dissolution of the Partnership shall be effective
on the day on which the event occurs giving rise to the dissolution, but the
Partnership shall not terminate until the withdrawal or termination of the
Certificate of Limited Partnership has been issued and the assets of the
Partnership shall have been distributed as provided herein. Notwithstanding the
dissolution of the Partnership, the business and affairs of the Partners shall
continue to be governed by this Agreement until termination of the Partnership.
11.3 Winding Up Upon Dissolution. In the event of a dissolution of the
Partnership, the General Partner shall immediately commence to liquidate the
Partnership and its property and to convert the same to cash or cash equivalents
and to wind up the Partnership's affairs. The Partners, during liquidation and
winding up, shall continue to share Partnership Net Profits and Net Losses and
all Partnership income, gain, loss, deductions and credits and all items thereof
in accordance with their respective interests in the Partnership as provided in
Sections 4.2 through 4.4 herein. The proceeds from liquidation of the
Partnership Property shall be applied in the following order of priority:
a. To debts and liabilities of the Partnership, including debts
owed to General Partner who are creditors of the Partnership.
b. To the reasonable debts and expenses of liquidating the
Partnership and its property and winding up the Partnership's affairs, including
any reasonable compensation to be paid to the Partners who participate and
assist in liquidating the Partnership and its property or winding up the
Partnership's affairs.
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c. To the setting up of such Reserves, if any, for contingent
liabilities of the Partnership, with the amount of such Reserves to be
determined by the General Partner in its sole and absolute discretion.
d. To the Partners in accordance with the positive balance (if
any) of each Partner's Capital Account (as determined after taking into account
all Capital Account adjustments for the Partnership's taxable year during which
the liquidation occurs). Any such distributions to the Partners in respect of
their Capital Accounts shall be made in accordance with the time requirements
set forth in ss. 1.704-1 (b)(2)(ii)(B)(2) of the Treasury Regulations.
11.4 Return of Contribution Nonrecourse to Other Partners. Except as
provided by law or as expressly provided in this Agreement, upon dissolution,
each Partner shall look solely to the assets of the Partnership for the return
of its Capital Contribution. If the Partnership property remaining after the
payment or discharge of the debts and liabilities or the Partnership is
insufficient to return the Capital Contribution of one or more Partners, such
Partner or Partners shall have no recourse against any other Partner, including
the General Partner.
ARTICLE XII
GENERAL PROVISIONS
12.1 Entire Agreement. This Partnership Agreement contains the entire
agreement among the Partners concerning the Partnership and supersedes all prior
negotiations, understandings or agreements in regard thereto.
12.2 Applicable Law. This Partnership Agreement shall be construed in
accordance with and governed by the laws of the State of Colorado.
12.3 Successors and Assigns. Except as set forth herein, this
Partnership Agreement shall be binding upon and shall inure to the benefit of
the heirs, personal representatives, successors and assigns of the Partners.
12.4 Notices. All notices and other communications under this
Partnership Agreement shall be in writing and shall be sufficiently given if
personally delivered to the addressee or, if mailed, postage prepaid, to the
addressee at his address stated in this Agreement. The address of a Partner may
be changed in the manner required in this Section for the giving of notice.
12.5 Amendments. This Partnership Agreement shall not be amended,
modified, restated or extended except by the written agreement of the General
Partner and 75% of the Limited Partners based on their pro rata limited
partnership interests in the Partnership.
12.6 Severability. If any clause or provision of this Partnership
Agreement is determined by a court of competent jurisdiction to be illegal,
invalid or unenforceable under applicable present or future laws effective
during the term of this Partnership Agreement, then and in that event, it is the
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intention of the Partners that the remainder of this Partnership Agreement shall
not be affected thereby. It is also the intention of the Partners that, in lieu
of each clause or provision of this Partnership Agreement that is so determined
to be illegal, invalid or unenforceable, there be added as a part of this
Partnership Agreement a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and yet be
legal, valid and enforceable.
12.7 Section Headings. The section headings herein are for the
convenience of reference and shall not be deemed to affect or alter any
provision herein.
12.8 Colorado Act. Except as otherwise provided herein, the terms of
this Partnership Agreement shall be governed by the Colorado Act and any items
not addressed in this Partnership Agreement will be governed by the Colorado Act
as if written herein, except to the extent such provision of the Colorado Act is
contrary to the express terms of this Partnership Agreement.
12.9 Indemnification. Each Partner herein shall pay his separate debts
punctually and does hereby indemnify the other Partners and the Partnership
against any attempt or action by such Partner's creditors to recover same from
the Partnership or any other Partner. Such indemnity shall extend to all
expenses incurred by any Partner or the Partnership in protecting himself/itself
on account thereof, including reasonable attorneys' fees and costs.
12.10 No Waiver. The failure at any time to require performance of any
provision hereof shall not affect in any way the full right to require such
performance at any time thereafter, nor shall the waiver by any party hereto of
a breach of any provision hereof be taken or held to be a waiver of the
provision itself.
IN WITNESS WHEREOF, the parties hereto have executed this Partnership
Agreement effective as of the day and year first above written.
GENERAL PARTNER:
Wood Avenue Investment Co., LLC, a
Colorado limited liability company
By: /s/ Buck Blessing
--------------------------------------
Buck Blessing, Member/Manager
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LIMITED PARTNERS
The Limited Partners are as listed and identified below.
Each Limited Partner shall execute the attached ACKNOWLEDGMENT AND
AGREEMENT and return same to the General Partner.
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ACKNOWLEDGMENT AND AGREEMENT
I, Robert E. Thrailkill, as President of Bishop Capital Corporation, a
Wyoming corporation, as General Partner of Bishop Powers, Ltd., a Colorado
limited partnership, do hereby acknowledge and agree that I have read the
foregoing Partnership Agreement of Creekside Apartments, LLLP, understand the
Agreement and agree to abide by and be bound by its terms.
Bishop Powers, Ltd.,
a Colorado limited partnership
By: Bishop Capital Corporation,
a Wyoming corporation,
as General Partner
By: /s/ Robert E. Thrailkill
------------------------------------
Robert E. Thrailkill, President
Please print the name and address of the Limited Partner executing the
Acknowledgment and Agreement:
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ACKNOWLEDGMENT AND AGREEMENT
I, Buck Blessing, as Member/Manager of Wood Avenue Investment Co.,
LLC, a Colorado limited liability company, do hereby acknowledge and agree that
I have read the foregoing Partnership Agreement of Creekside Apartments, LLLP,
understand the Agreement and agree to abide by and be bound by its terms.
Wood Avenue Investment Co., LLC,
a Colorado limited liability company,
as General Partner
By: /s/ Buck Blessing
---------------------------------
Buck Blessing, Member/Manager
Please print the name and address of the Limited Partner executing the
Acknowledgment and Agreement:
41
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is made and entered into this 28th day
of October, 1998 ("Execution Date") by and between Bishop Powers, Ltd., a
Colorado limited partnership ("Seller") and Creekside Apartments, LLLP, a
Colorado limited liability limited partnership ("Buyer"). Seller and Buyer may
be termed individually the "Party" and collectively the "Parties."
RECITALS:
A. Seller is the owner of certain real property located in the County of El
Paso, State of Colorado located appurtenant to Powers Boulevard between Galley
Road and Palmer Park in Colorado Springs, CO, specifically described on Exhibit
A attached hereto and incorporated herein by this reference ("Property").
B. The Property is currently zoned as PBC. Buyer desires to have the
Property rezoned as R-5 or PUD for the purpose of developing the Property and
constructing thereon a 350 unit residential apartment complex with amenities.
C. Seller is desirous of granting to Buyer, and Buyer is desirous of
obtaining from Seller, the exclusive, irrevocable right and option to buy the
Property, subject to the terms below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties hereby covenant and agree
as follows:
ARTICLE I
PURCHASE AND SALE; REZONING
Section 1.01. Purchase and Sale Option. Upon and subject to the terms and
conditions set forth in this Agreement, Seller hereby grants and conveys to
Buyer the exclusive irrevocable right and option to purchase the Property
("Option").
Section 1.02. Term of Option. The term of the Option ("Term") shall
commence on the Execution Date and shall end upon the earliest to occur of (i) 2
years from the Execution Date; or (ii) any non-appealable decision by the City
Council for the City of Colorado Springs, CO to rezone the Property from PBC to
R-5 or PUD status (such event is called "Rezoning of the Property"), unless the
Option is earlier terminated pursuant to the provisions of this Agreement or
further extended by agreement of the Parties.
Section 1.03. Exercise of the Option. On or before expiration of the Term
of the Option and provided successful Rezoning of the Property has occurred.
Buyer may exercise the Option by delivering to Seller written notice in
accordance with the provisions of this Agreement ("Exercise Notice").
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Section 1.04. Breach of Agreement. Should Buyer fail to deliver the
Exercise Notice within the Term for any reason other than the default of Seller,
the Option granted herein shall terminate in its entirety, both Parties shall be
released from any and all obligations hereunder, and the Option Consideration
(as defined below) shall be retained by Seller. If the Option is so terminated,
Buyer hereby covenants and agrees to quitclaim to Seller all of its right, title
and interest in and to all of the Property not theretofore purchased hereunder.
Concurrent with the execution of this Agreement, Buyer shall execute,
acknowledge and deliver to the title company selected by the Parties ("Title
Company") a quit claim deed conveying to Seller the Property. Such deed shall be
held in escrow by the Title Company in accordance with escrow instructions to be
executed by Seller and Buyer to implement the provisions of this Section 1.04
such that the deed will be re-delivered to Seller if Buyer defaults under this
Agreement.
Section 1.05. Authority to Rezone Prior to Exercise of Option.
Notwithstanding anything contained herein to the contrary, Seller hereby
authorizes Buyer, prior to the exercise of the Option during the Term, to take
whatever actions Buyer deems reasonable and prudent in connection with Rezoning
of the Property, and the preparation and submittal to the City of Colorado
Springs, CO of a development plan, plat map and rezoning application. The
preparation and submittal of the development plan and plat map will be
independent but contemporaneous with Rezoning of the Property. Buyer shall be
responsible for all costs and expenses and satisfy all requirements and
conditions in connection with preparation and submittal of the development plan,
plat map and Rezoning of the Property, including the payment of any development
and/or drainage fees and the posting of any letters of credit required by the
City of Colorado Springs, CO.
ARTICLE II
PURCHASE OF THE PROPERTY
Section 2.01. Purchase of the Property. Upon exercise of the Option in
accordance with Article I hereinabove, Buyer shall purchase from Seller, and
Seller shall sell and convey to Buyer, the Property in accordance with the terms
and conditions contained in this Article II.
Section 2.02. Purchase Price of the Property. The total purchase price to
be paid by Buyer to Seller in exchange for a fee simple interest in and to the
Property shall be an amount equal to an 80% limited partnership interest in and
to Buyer, which, for purposes of this Agreement, shall be valued at $1,600,000
("Purchase Price").
Section 2.03. Option Consideration. Concurrent with the execution of this
Agreement. Buyer shall deliver to Seller the sum of $1,000 ("Option
Consideration"). If Buyer defaults under this Agreement before the Purchase
Price has been paid, the Option Consideration shall be retained by Seller as
consideration for the granting of the Option to purchase the Property pursuant
to this Agreement. If the Buyer exercises the Option as provided herein. or this
Agreement is terminated for reasons other than Buyer's default, the Option
Consideration shall be returned to Buyer.
2
<PAGE>
Section 2.04. Closing Adjustments. General real property taxes and special
assessments for the Property purchased at Closing for the year in which Closing
occurs shall not be apportioned between the Parties based upon the most recent
levy and assessment, and which shall be paid by Buyer. Buyer shall pay all
documentary fees and recording fees. Buyer and Seller each shall pay 1/2 of the
Title Company's closing fee.
Section 2.05. Place and Time of Closing. Closing shall take place at the
offices of the Title Company no later than 60 days after Buyer exercises the
Option ("Closing"). The Purchase Price shall be paid by Buyer to Seller at
Closing in the form of a credit pursuant to, and in accordance with, a limited
partnership agreement evidencing Seller's partnership interest in and to the
Buyer.
Section 2.06. Seller's Deliveries at Closing. At Closing, Seller shall
deliver to Buyer and/or the Title Company, as appropriate, the following:
A. A duly executed and acknowledged special warranty deed. Such deed
shall convey the subject Property in as-is condition (except for warranties of
title) to Buyer free and clear of all taxes, except the general real property
taxes and special improvement assessments for the year of Closing, and free and
clear of all liens then due and payable for special improvements installed as of
the date of this Agreement, and free and clear of all liens and encumbrances,
security interests, demands or claims of any kind whatsoever by Seller or any
third person or anyone else, subject to the permitted exceptions in existence at
Closing ("Deed"). Buyer shall order, and be responsible for, all costs
associated with issuance of an owner's extended coverage title insurance policy;
B. At Closing, copies of resolutions adopted by Seller authorizing
Seller to execute and deliver this Agreement and to consummate the sale of the
Property. Such resolutions shall be certified by the secretary of Seller as
having been duly adopted by Seller's board of directors and not having been
revoked or terminated;
C. Such agreements or statements concerning claims for mechanic's
liens as may be required by Buyer or the Title Company;
D. Any and all conveyances, assignments and all other instruments and
documents as may be reasonably necessary in order to complete the transaction
herein provided and to carry out the intent and purposes of this Agreement;
E. Such documentary and other evidence as may be reasonably required
by Buyer or the Title Company evidencing the status and capacity of Seller, and
the authority of the person or persons who are executing the various documents
on behalf of Seller in connection with this Agreement; and
F. An affidavit evidencing Seller is exempt from the withholding
requirements of Section 1445 of the Internal Revenue Code; Seller shall furnish
to Buyer a sworn Affidavit stating under penalty of perjury that Seller is not a
3
<PAGE>
"foreign person," as such term is defined in Section 1445(f)(3) of the Internal
Revenue Code of 1954, as amended ("Code"), or such evidence that Buyer is not
required to withhold taxes from the purchase price under Section 1445(a) of the
Code as Buyer may reasonably determine to meet the requirements of Section
1445(b)(4) and Section 1445(b)(5) of the Code. Seller shall also execute and
deliver such evidence as is required by the Title Company to satisfy the
requirements of Section 39-22-604.5 of the Colorado Revised Statutes.
Section 2.07. Buyer's Deliveries at Closing. At Closing, Buyer shall
deliver to Seller the following:
A. The Purchase Price in the manner set forth in this Agreement,
adjusted for closing costs;
B. Copies of resolutions adopted by Buyer authorizing Buyer to execute
and deliver this Agreement and to consummate the purchase of the Property. Such
resolutions shall be certified by the general partner of Buyer as having been
duly adopted by Buyer's members and not having been revoked or terminated;
C. Such documentary and other evidence as may be reasonably required
by Seller or the Title Company evidencing the status and capacity of Buyer and
the authority of the person or persons who are executing the various documents
on behalf of Buyer in connection with this Agreement;
D. Such agreements or statements concerning claims for mechanic's
liens arising out of Buyer's actions as may be required by the Title Company;
and
E. All other instruments and documents as may be reasonably necessary
in order to complete the transaction herein provided and to carry out the intent
and purposes of this Agreement.
ARTICLE III
DUE DILIGENCE
Section 3.01. Minimize Costs and Expenses. Buyer and Seller acknowledge
there will be certain costs and expenses incurred by Buyer in connection with
Buyer's investigation of the Property prior to the Rezoning of the Property.
Buyer and Seller acknowledge that Buyer intends to minimize such costs and
expenses until Rezoning of the Property is probable.
Section 3.02. Prior to Submittal. Buyer shall have until submission to the
City of Colorado Springs. CO of Buyer's application to rezone the Property
development plan and plat mat ("Submittal") to review the following matters
affecting the Property:
4
<PAGE>
A. Any soils condition report and an existing environmental assessment
report on the Property in Seller's possession or control;
B. Topographic maps, grading plans, development plans, master plans
and all other related materials relevant to development of the Property
presently in Seller's possession or control, including a map showing the general
location of adjacent utility lines and stubouts and any initial site plan
development work caused or performed by Buyer;
C. Any other information relating to, or arising out of, the Property
in Seller's possession; and
D. Current updated title commitment and underlying documentation (all
of the items in Paragraphs A through D are collectively called "Investigation
Information").
Seller is not aware of any inaccuracies in any of the Investigation
Information, but is not making any representations or warranties with respect to
the contents of the Investigation Information. Buyer shall be responsible to
verify the accuracy of any information in the investigation Information.
If Buyer provides Seller with written disapproval of the feasibility of the
Property for any item or matter disclosed in the Investigation Information on or
before 5:00 p.m., Mountain Time, on or before Submittal, this Agreement shall
automatically terminate.
Section 3.03. Subsequent to Submittal. Subsequent to Submittal, but prior
to exercise of the Option, Buyer shall have the right, at its sole risk and
expense, to enter upon the Property for the purposes of inspection and making
such tests, staking and preliminary development work, as Buyer shall deem
advisable, including soils report, environmental Phase I audit report,
engineering report, foundation and structural reports and analyses.
If Buyer provides Seller with written disapproval of the feasibility of the
Property other than those items disclosed in the Investigation Information
subsequent to Submittal but prior to Rezoning of the Property, this Agreement
shall automatically terminate.
Section 3.04. Indemnity. Buyer hereby agrees to indemnify and hold Seller
harmless from any mechanics' liens or other claim or liability resulting from
Buyer's activities on the Property pursuant to the provisions of this Article
III.
ARTICLE IV
USE OF THE PROPERTY
Section 4.01. Seller's Use of the Property.
A. From and after the date of Seller's execution hereof, until
termination by this Agreement. Seller shall not grant or convey any easement.
lease. license. permit, right or any other legal or beneficial interest in the
5
<PAGE>
Property without the prior written consent of Buyer, except those customarily
required in connection with the rezoning of the Property and platting of the
Property which do not interfere with Buyer's ability to develop the Property for
its intended use.
B. Seller agrees to consult with Buyer and to make any reasonable
changes requested by Buyer with respect to the final development plan, including
grading, streets, phasing and infrastructure.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 5.01. Representations and Warranties. Seller represents that as of
the date hereof and as of the Closing:
A. Neither the execution of this Agreement nor the consummation of
the transactions contemplated herein will constitute a breach under any contract
or agreement to which Seller is a Party or by which Seller is bound or affected
which affects the Property or any part thereof.
B. Seller has not been notified of any pending condemnation or similar
proceedings affecting the Property, or any part thereof, or any pending or
threatened litigation or other legal administrative claim affecting the
Property.
C. Seller has not granted to any party, other than Buyer hereunder,
any option, contract, or other agreement with respect to a purchase or sale of
the Property or any portion thereof or any interest therein.
ARTICLE VI
DEFAULT; REMEDIES
Section 6.01. Default. Time is of the essence hereof, and if any payment or
any other covenant or agreement hereof is not made, tendered or performed as
herein provided, there shall be the following remedies:
A. In the event a payment or any other agreement hereof is not made,
tendered or performed by Buyer. Seller shall give Buyer written notice of such
failure ("Default Notice") and if Buyer fails to cure such default within 10
days after its receipt of such Default Notice, this Agreement shall be null and
void and of no further force and effect. Thereupon, Buyer shall quitclaim to
Seller all of its right, title and interest in and to the Property not
theretofore purchased hereunder, both Parties hereto shall be released from all
further obligations hereunder with respect to the Property not purchased as of
said date. and the Option Consideration shall be retained by Seller as
liquidated damages, as Seller's sole and exclusive remedy hereunder.
6
<PAGE>
B. If Seller fails to perform any covenant, agreement or condition
hereof as provided herein, Buyer shall give Seller a Default Notice. If Seller
fails to cure such default within 10 days after its receipt of the Default
Notice, then Buyer may, at its election, treat this Agreement as terminated, and
the Option Consideration shall be returned to Buyer; provided, however, that
Buyer may, at its election, treat this Agreement as being in full force and
effect with the right to an action for specific performance and/or damages,
which shall be limited to the sum of $200,000, or both.
ARTICLE VII
PROVISIONS OF GENERAL APPLICATION
Section 7.01. Commissions. Seller and Buyer agree to indemnify and hold the
other harmless against any and all claims based in whole or in part on any act
of the other for commissions, fees, or other compensation claimed by a real
estate broker or other third party.
Section 7.02. Condemnation. In the event any portion of the Property shall
be taken in condemnation or under the right of eminent domain after the date of
Seller's execution hereof and before the respective Closing for such portion of
the Property, this Agreement, only insofar as any portion of the Property which
is so affected is concerned, at the option of Buyer, may either: (a) be declared
null and void and all payments or deposits made hereunder with respect to the
affected portion of the Property shall then immediately be returned to Buyer; or
(b) the proceeds received from such condemnation or right of eminent domain
proceeding shall be applied against and reduce the purchase price hereunder of
the affected portion of the Property.
Section 7.03. Further Instruments. Each Party hereto shall from time to
time execute and deliver such further instruments as the other Party or its
counsel may reasonably request to effectuate the intent of this Agreement,
including but not limited to, documents necessary for compliance with the laws,
ordinances, rules or regulations of any applicable governmental authorities.
Section 7.04. Governing Law. The Parties hereto hereby expressly agree the
terms and conditions hereof, and the subsequent performance hereunder, shall be
construed and controlled by the laws of the State of Colorado.
Section 7.05. Headings. Article and section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
any provision of this Agreement.
Section 7.06. Possession. Exclusive possession of each portion of the
Property shall be delivered to Buyer on the respective Closing therefor, free
and clear of any leases or tenancies.
Section 7.07. Entire Agreement - Alteration or Amendment. This Agreement
constitutes the entire agreement of the Parties with respect to the subject
matter hereof. Any and all prior agreements, whether written or oral, are
7
<PAGE>
superseded hereby and are deemed null and void and of no effect. The Parties are
not bound by any agreements, understandings, conditions or inducements otherwise
than are as expressly referenced, set forth, or stipulated hereunder. No change,
alteration, amendment, modification or waiver of any of the terms or provisions
hereof shall be valid unless the same shall be in writing and signed by the
Parties hereto.
Section 7.08. Assignment. This Agreement shall be binding upon, and inure
to the benefit of, Seller and Buyer and their respective permitted successors
and assigns. This Agreement shall not be assignable by Buyer or Seller without
the prior written consent of the other.
Section 7.09. Notices. All notices provided for hereunder shall be deemed
given and received (a) when personally delivered; or (b) 48 hours after the same
are deposited in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the applicable Party at
the address indicated below for such Party, or as to each Party, at such other
address as shall be designated by such Party in a written notice to the other
Party:
TO SELLER: Bishop Powers, Ltd.
716 College View Drive
Riverton, WY 82501
Attn: Robert E. Thrailkill/John A. Alsko
TO BUYER: Creekside Apartments, LLLP
102 No. Cascade Ave., 5th Floor
Colorado Springs, CO 80903
Attn: Stephen P. Engel.
Section 7.10. Survival: Conditions Precedent: Consent. Agreements,
representations, covenants. and warranties on the part of both Parties contained
in this Agreement or any amendment or supplement hereto shall survive the
Closing and deliveries of deeds hereunder and shall not be merged thereby, and,
in addition to any effect any of same have in law or in equity, all of same will
be deemed to be conditions precedent to performance by the Parties hereunder,
whether so expressed or not. The Party for whose benefit a condition exists may
unilaterally waive same. Unless otherwise provided herein, when any matter is
subject to the prior consent of the other Party, such consent shall not be
unreasonably withheld, delayed or conditioned.
Section 7.11. Indemnities. Seller hereby agrees to defend, indemnify, save
and hold Buyer, its successors and assigns, harmless from and against any and
all liabilities and claims regarding the Property, arising from facts or
circumstances caused by Seller and existing before the Closing for the Property,
unless same arise from any actions or activities of Buyer. Buyer hereby agrees
to defend, indemnify, save and hold Seller, its successors and assigns, harmless
from and against any and all liabilities and claims regarding the Property,
arising from facts or circumstances caused by Buyer and existing after the
Closing for the Property, unless same arise from any actions or activities of
Seller.
8
<PAGE>
Section 7.12. Attorney's Fees. In the event that any Party is required to
commence any action or proceeding against the other in order to enforce the
provisions hereof or in order to obtain damages for the alleged breach of any of
the provisions hereof, the prevailing Party therein shall be entitled to
recover, in addition to any amounts or relief otherwise awarded, all reasonable
costs incurred in connection therewith, including reasonable attorney's fees.
Section 7.13. Recording. A memorandum of this Agreement may be recorded in
the real property records of El Paso County, CO.
Section 7.14. Invalidity of Any Provision. In the event any condition or
covenant herein contained is held to be invalid or void by any court of
competent jurisdiction, the same shall be deemed severable from the remainder of
this Agreement and shall in no way affect any other covenant or condition herein
contained. If such condition, covenant or other provisions shall be deemed
invalid due to its scope or breadth, such provision shall be deemed valid to the
extent of the scope or breadth permitted by law.
Section 7.15. Waiver of Rights. Notwithstanding anything set forth herein
to the contrary, if no notice of default or waiver is required hereunder and
none has been given, neither Party hereto shall be deemed to have waived any
rights which it may have hereunder until 48 hours following receipt by it
("Waiving Party") of written notice from the other Party alerting the Waiving
Party to the fact that the time for exercising any right or remedy hereunder has
lapsed without exercise thereof and such time for exercise shall automatically
be a period which ends 48 hours after such notice. If no action is taken by the
Waiving Party within the 48-hour period following such notice, said right shall
conclusively be deemed to have been waived. The intent of this section is to
avoid unintentional waivers by either Party hereto of any of its rights
hereunder.
Section 7.16. Special Taxing District. SPECIAL TAXING DISTRICTS MAY BE
SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT IS PAID BY REVENUES PRODUCED
FROM ANNUAL TAX LEVIES ON THE TAXABLE PROPERTY WITHIN SUCH DISTRICTS. PROPERTY
OWNERS IN SUCH DISTRICTS MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND
EXCESSIVE TAX BURDENS TO SUPPORT THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES
ARISE RESULTING IN THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH
INDEBTEDNESS WITHOUT SUCH AN INCREASE IN MILL LEVIES. BUYER SHOULD INVESTIGATE
THE DEBT FINANCING REQUIREMENTS OF THE AUTHORIZED GENERAL OBLIGATION
INDEBTEDNESS OF SUCH DISTRICTS. EXISTING MILL LEVIES OF SUCH DISTRICT SERVICING
SUCH INDEBTEDNESS. AND THE POTENTIAL FOR AN INCREASE IN SUCH MILL LEVIES.
Section 7.17. Property Condition. Except as set forth in this Agreement,
Seller has not made and does not make any representation as to the physical
condition. operation or any other matter or thing affecting or related to the
Property which is the subject of this Agreement. Neither Party is relying upon
any statement or representation made by the other not embodied herein. Buyer
9
<PAGE>
hereby expressly acknowledges no such representations have been made other than
as set forth in this Agreement. All matters concerning the Property shall be
independently verified by Buyer, and Buyer acknowledges that it is purchasing
the Property based on its own investigations, inspections and examinations,
including but not limited to, investigation regarding soils conditions, radon
gas concentrations and hazardous substances. Further, Buyer acknowledges the
disclosure requirements pursuant to Colorado Revised Statutes Section 6-6.5-
101, including disclosures regarding soil conditions and Buyer agrees to comply
with such requirements.
Section 7.18. Relationship of Parties. Nothing contained herein shall make
Seller an agent or partner of Buyer, nor shall make Buyer an agent or partner of
Seller.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered as of the day and year first above written.
BUYER:
Creekside Apartments, LLLP,
a Colorado limited liability limited
partnership
SELLER:
By: Wood Avenue Investment Co., LLC,
a Colorado limited liability company,
as General Partner
By: /s/ Buck Blessing
-------------------------------
Buck Blessing, Manager
Bishop Powers, Ltd.,
a Colorado limited partnership
By: Bishop Capital Corporation,
a Wyoming corporation
as General Partner
By: /s/ Robert E. Thrailkill
----------------------------------
Robert E. Thrailkill, President
10
<PAGE>
EXHIBIT A
THE NORTHERLY MOST EIGHTEEN ACRES (THE SOUTHERN BOUNDARY OF WHICH IS A STRAIGHT
LINE PERPENDICULAR TO THE CENTER LINE OF POWERS BOULEVARD) OF THE FOLLOWING
DESCRIBED TRACT OF LAND:
A PORTION OF THE E1/2 OF THE NE1/4 OF SECTION 12, TOWNSHIP 14 SOUTH, RANGE
66 WEST OF THE 6TH P.M., CITY OF COLORADO SPRINGS, COUNTY OF EL PASO, STATE
OF COLORADO, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: ASSUMING THE
EASTERLY LINE OF THE NE1/4 OF SAID SECTION 12 BEARS N 00 DEGREES 00'23" E,
WITH THE NORTHEAST CORNER AND THE SOUTHEAST CORNER OF SAID NE1/4 BEING 3/4
INCH ROD WITH NO CAPS (APPROXIMATELY ONE FOOT BELOW ASPHALT); COMMENCING AT
THE NORTHEAST CORNER OF SAID NE1/4 OF SECTION 12; THENCE N 86 DEGREES
23'53" W ALONG THE NORTHERLY LINE OF SAID NE1/4, A DISTANCE OF 58.97 FEET
TO THE WESTERLY RIGHT OF WAY LINE OF POWERS BOULEVARD AS DESCRIBED IN BOOK
5259 AT PAGE 1306 OF THE RECORDS OF EL PASO COUNTY, COLORADO, POINT ALSO
BEING THE TRUE POINT OF BEGINNING; THENCE ALONG SAID WESTERLY RIGHT-OF-WAY
LINE, THE FOLLOWING EIGHT (8) COURSES: (1) S 00 DEGREES 02'25" E, A
DISTANCE OF 622.45 FEET; (2) ALONG THE ARC OF A CURVE TO THE RIGHT, HAVING
A CENTRAL ANGLE OF 10 DEGREES 36'16", A RADIUS OF 2425.00 FEET, A DISTANCE
OF 448.83 FEET (CHORD BEARS S 05 DEGREES 15'43" W); (3) S 10 DEGREES 33'51"
W, A DISTANCE OF 257.69 FEET; (4) S 12 DEGREES 58'22" W, A DISTANCE OF
272.06 FEET; (5) ALONG THE ARC OF A CURVE TO THE LEFT, HAVING A CENTRAL
ANGLE OF 09 DEGREES 21'58", A RADIUS OF 2587.00 FEET, A DISTANCE OF 422.90
FEET (CHORD BEARS S 04 DEGREES 40'52" W); (6) S 00 DEGREES 00'07" E, A
DISTANCE OF 404.17 FEET; (7) ALONG THE ARC OF A CURVE TO THE RIGHT, HAVING
A CENTRAL ANGLE OF 93 DEGREES 36'49", A RADIUS OF 100.00 FEET, A DISTANCE
OF 163.39 FEET (CHORD BEARS S 46 DEGREES 48'15" W); (8) S 04 DEGREES 43'39"
E, A DISTANCE OF 70.78 FEET TO THE NORTHERLY RIGHT-OF-WAY LINE OF GALLEY
ROAD AS PLATTED IN RUSTIC HILLS SUBDIVISION NO.3, ACCORDING TO THE RECORDED
PLAT THEREOF AS FILED FOR RECORD APRIL 15, 1964, IN PLAT BOOK F-2 AT PAGE
57 OF SAID RECORDS; THENCE N 86 DEGREES 23'45" W, ALONG SAID NORTHERLY
RIGHT-OF-WAY LINE OF GALLEY ROAD, A DISTANCE OF 762.23 FEET TO THE EASTERLY
LINE OF A GREEN BELT AS PLATTED IN SAID RUSTIC HILLS SUBDIVISION NO.3;
THENCE ALONG SAID EASTERLY LINE THE FOLLOWING FIVE (5) COURSES: (1) N 55
DEGREES 35'21" E, A DISTANCE OF 450.01 FEET; (2) ALONG THE ARC OF A CURVE
TO THE LEFT, HAVING A CENTRAL ANGLE OF 50 DEGREES 31'27", A RADIUS OF
229.29 FEET, A DISTANCE OF 202.19 FEET (CHORD BEARS N 30 DEGREES 19'02" E);
(3) N 05 DEGREES 04' 11" E, A DISTANCE OF 1063.19 FEET; (4) ALONG THE ARC
OF A CURVE TO THE LEFT, HAVING A CENTRAL ANGLE OF 31 DEGREES 30'11", A
RADIUS OF 264.15 FEET, A DISTANCE OF 145.24 FEET (CHORD BEARS N 10 DEGREES
40'01" W); (5) N 26 DEGREES 26'32" W, A DISTANCE OF 1087.81 FEET TO THE
NORTHERLY LINE OF SAID NE1/4 OF SECTION 12; THENCE S 86 DEGREES 23'53" E,
ALONG SAID NORTHERLY LINE, A DISTANCE OF 993.54 FEET TO THE POINT OF
BEGINNING, EXCEPT THAT PORTION THEREOF CONVEYED TO THE CITY OF COLORADO
SPRINGS IN DEED RECORDED IN BOOK 5545 AT PAGE 89 AND EXCEPT THAT PORTION
THEREOF CONVEYED TO EL PASO COUNTY IN DEED RECORDED IN BOOK 2097 AT PAGE
324.
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