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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement under Section 14(d)(4)
of the Securities Exchange Act of 1934
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JMB INCOME PROPERTIES, LTD. - V
(Name of Subject Company)
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JMB INCOME PROPERTIES, LTD. - V
(Name of Person Filing Statement)
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Limited Partnership Interests
(Title of Class of Securities)
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466215308
(CUSIP Number of Class of Securities)
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Gary Nickele
JMB REALTY CORPORATION
900 North Michigan Avenue
Chicago, Illinois 60611
(312) 440-4800
(Name, address, and telephone number of person authorized to receive
notices and communications on behalf of the persons filing statement)
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With a copy to:
Michael H. Kerr, P.C.
KIRKLAND & ELLIS
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2000
[ ] Check the box if the filing relates solely to preliminary
communications made before commencement of a tender offer.
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<PAGE>
ITEM 1. SUBJECT COMPANY INFORMATION.
(a) NAME AND ADDRESS.
The name of the subject company is JMB Income Properties, Ltd.-V, an
Illinois limited partnership (the "Partnership"). The address of the
principal executive offices of the Partnership is 900 North Michigan
Avenue, Chicago, Illinois 60611. The telephone number of the principal
executive offices of the Partnership is (312) 915-1987.
(b) SECURITIES.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule
14D-9" or "Statement") relates are the outstanding limited partnership
interests of the Partnership (the "Interests"). As of the date hereof,
there are 38,505 Interests outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
(a) NAME AND ADDRESS.
The name, business address and business telephone number of the
Partnership, which is the subject company and person filing this Schedule
14D-9, are set forth in Item 1(a) above.
(b) TENDER OFFER.
This Statement relates to the cash tender offer (the "Offer")
described in the Tender Offer Statement on Schedule TO, dated May 3, 2000
(as amended or supplemented, the "Schedule TO"), filed by MP Value Fund 5,
LLC, MP Value Fund 4, LLC, Moraga Fund 1, L.P., Accelerated High Yield
Institutional Investors, Ltd., Accelerated High Yield Institutional Fund,
Ltd., Moraga-Dewaay Fund, LLC, MP Falcon Fund, LLC, Moraga Gold, LLC,
MacKenzie Patterson, Inc., and Previously Owned Mortgage Partnerships
Income Fund, L.P. (collectively, the "Purchasers") with the Securities and
Exchange Commission (the "SEC"), to purchase up to 15,402 Interests
(representing approximately 40% of the total Interests outstanding as of
May 3, 2000) at $80 per Interest, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in
the Purchasers' Offer to Purchase, dated May 3, 2000 (the "Offer to
Purchase") and the related Letter of Transmittal ("Letter of Transmittal")
(the Schedule TO, the Offer to Purchase and the Letter of Transmittal,
together with any amendments or supplements thereto, constitute the "Offer
Documents").
According to the Offer Documents, MacKenzie Patterson, Inc. is deemed
to control the Purchasers, but is not otherwise participating in the
Offer.
The Offer Documents indicate that the principal executive offices of
the Purchasers are located at 1640 School Street, Moraga, California 94556.
See Item 8(a) below for a discussion of certain terms and conditions
of the Offer.
<PAGE>
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
ALL REFERENCES TO THE PARTNERSHIP'S AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP, DATED JULY 15, 1977, AS AMENDED TO DATE (THE
"PARTNERSHIP AGREEMENT"), SET FORTH IN THIS STATEMENT DO NOT CONSTITUTE A
COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF THE PARTNERSHIP
AGREEMENT AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE PARTNERSHIP AGREEMENT, WHICH IS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") AS EXHIBIT 99.2 TO THIS SCHEDULE 14D-9 AND IS
INCORPORATED HEREIN BY REFERENCE. CAPITALIZED TERMS NOT OTHERWISE DEFINED
HEREIN ARE USED AS DEFINED IN THE PARTNERSHIP AGREEMENT.
(a) THE SUBJECT COMPANY, ITS EXECUTIVE OFFICERS, DIRECTORS
OR AFFILIATES.
Except as described in (i) the Partnership Agreement, (ii) the
Partnership's annual report on Form 10-K (including the Financial
Statements filed therewith (the "Financial Statements")) with respect to
the year ended December 31, 1999 (the "Partnership's 10-K"), which is
filed with the SEC as Exhibit 99.3 to this Schedule 14D-9 and is
incorporated herein by reference in its entirety, and (iii) as set forth
below, there are no material contracts, agreements, arrangements or under-
standings or any actual or potential material conflicts of interest between
JMB Realty Corporation, the managing general partner of the Partnership
(the "Managing General Partner"), or its affiliates, on the one hand, and
the Partnership, its executive officers, directors or affiliates, on the
other hand.
Substantially all of the outstanding shares of stock of the Managing
General Partner are owned directly or indirectly by its officers,
directors, members of their families and their affiliates. The Managing
General Partner has responsibility for all aspects of the Partnership's
operations, subject to the requirement that sales of real property must be
approved by Messrs. Neil G. Bluhm and Judd D. Malkin as the individual
general partners of the Partnership.
The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services have been and may
in the future be provided to the Partnership or its investment properties
by affiliates of the General Partners, including property management
services and insurance brokerage services. In general, such services are
to be provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership or its investment property under certain
circumstances, including, in certain geographical markets, for tenants
and/or for the sale of property. Because the timing and amount of cash
distributions and profits and losses of the Partnership may be affected by
various determinations by the General Partners under the Partnership
Agreement, including whether and when to sell a property, the establishment
and maintenance of reasonable reserves and the determination of the sources
(i.e., offering proceeds, cash generated from operations or sale proceeds)
and uses or distribution of such reserves, the timing of expenditures and
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the allocation of certain tax items under the Partnership Agreement, the
General Partners may have a conflict of interest with respect to such
determinations. See "Transactions With Affiliates" on pages 35-39 of the
Financial Statements, the terms of which are incorporated herein by
reference in their entirety, for further detail relating to the conflicts
of interest to which the Partnership is subject and transactions with the
Partnership's affiliates.
The Partnership is required to pay a management fee to the Managing
General Partner and the General Partners are entitled to receive a share of
cash distributions, when and as cash distributions are made to the Limited
Partners, and a share of profits or losses.
Please refer to the Financial Statements, the terms of which are
incorporated herein by reference in their entirety, for a description of
certain material contracts, agreements (including the Partnership
Agreement), arrangements and understandings that exist between (i) the
Partnership and (ii) the General Partners and their respective executive
officers, directors, partners and affiliates.
The Partnership Agreement exculpates the General Partners and their
respective officers, directors and affiliates from liabilities to the
Partnership and indemnifies the General Partners against liability to third
parties resulting from its or their acts or omissions, except in the event
such liabilities or losses resulted from misconduct or negligence (gross or
ordinary). As a result of the exculpation and indemnification provisions,
a holder of Interests (an "Interestholder") may be entitled to a more
limited right of action than he or she would otherwise have if such
provisions were not included in the Partnership Agreement.
The Managing General Partner entered into indemnification agreements
(the "Indemnification Agreements") with each of the members of the Special
Committee (the "Special Committee") formed by the Board of Directors of the
Managing General Partner to consider tender offers for Interests (each such
member, individually, an "Indemnitee"), which provide that subject to
certain provisions of the Indemnification Agreements, in the event an
Indemnitee is, or becomes a party to, or witness or other participant in,
or is threatened to be made a party to, or witness or other participant in,
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, investigative or other (a "Proceeding") by
reason of (or arising in part out of) an Indemnifiable Event (as
hereinafter defined), the Managing General Partner will indemnify such
Indemnitee from and against any and all expenses, judgments, fines,
penalties and amounts paid in settlement incurred or suffered by the
Indemnitee to the fullest extent permitted by law. The rights to receive
indemnification and the advancement of expenses under the Indemnification
Agreements are not exclusive of any other rights to which any Indemnitee
may be entitled under any statute, the Partnership Agreement or otherwise.
"Indemnifiable Event," as used in the Indemnification Agreements, means any
event or occurrence related to the fact that Indemnitee is or was a
director, officer, employee or agent of the Managing General Partner, or is
or was serving at the request of the Managing General Partner as a
director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise or by reason of anything done or not done by Indemnitee in
any such capacity.
The obligation of the Managing General Partner to make
indemnification payments is subject to the condition that Independent Legal
Counsel (as hereinafter defined) shall not have determined in a written
opinion that Indemnitee is not permitted to be indemnified under applicable
<PAGE>
law. If the Independent Legal Counsel determines that Indemnitee
substantively would not be entitled to indemnification under applicable
law, Indemnitee has the right to commence arbitration proceedings to
determine his right to indemnification. Otherwise any determination by
such Counsel shall be conclusive and binding on the Managing General
Partner and the Indemnitee. "Independent Legal Counsel" is defined as an
attorney or firm of attorneys selected by Indemnitee and approved by
Managing General Partner who shall not have otherwise performed services
for the Managing General Partner or Indemnitee within the last five years.
The fees of any Independent Legal Counsel are to be borne by the Managing
General Partner.
The Indemnification Agreement provides that if requested by
Indemnitee, Managing General Partner shall advance within two business days
any and all expenses of Indemnitee. If and to the extent that Independent
Legal Counsel determines that Indemnitee is not permitted to be indemnified
under applicable law, the Managing General Partner shall be entitled to be
reimbursed, provided that if Indemnitee exercises his right to have such
issue determined by arbitration or other legal proceedings his obligation
to reimburse the Managing General Partner shall be deferred pending the
outcome of such arbitration or proceedings.
The by-laws of the Managing General Partner also provide that its
officers, directors, employees and other agents shall be indemnified by the
Managing General Partner to the fullest extent permitted under Delaware
law, whether acting in their capacities as officers, directors, employees
or other agents of Managing General Partner or serving, at the request of
the Managing General Partner, as an officer, director, employee, fiduciary
or other agent of another corporation, partnership or other entity.
(b) THE OFFEROR, ITS EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES.
The Offer Documents provide that the Purchasers, together with their
affiliates, beneficially own an aggregate total of 619 Interests or
approximately 1.6% of the total outstanding Interests.
Except as described below, to the knowledge of the Managing General
Partner, there are no material contracts, agreements, arrangements or
understandings or any actual or potential material conflicts of interest
between the Partnership, Managing General Partner or its affiliates, on the
one hand, and the Purchasers, or their respective executive officers,
directors or affiliates, on the other hand.
In the event that the Offer is consummated, the Purchasers may be in
a position to significantly influence future Partnership decisions on which
Limited Partners may vote. Under the Partnership Agreement, Limited
Partners holding 10% or more of the Interests are entitled to call a
meeting of the Limited Partners, and Limited Partners holding a majority of
the Interests are entitled to take action with respect to a variety of
matters, including: removal of the Managing General Partner as the general
partner of the Partnership; election of a successor general partner;
dissolution of the Partnership; the sale of all or substantially all of the
Partnership's properties (other than in the ordinary course of the
Partnership's business); and most types of amendments to the Partnership
Agreement. If the Purchasers were to have a vote on such matters, the
Purchasers may be expected to vote in their own interest, which may not be
in the interest of the other Interestholders or the General Partners.
Under the Partnership Agreement, the Managing General Partner has the
right to grant or withhold its consent, in its sole discretion, to the
admission of the Purchasers as Substituted Limited Partners of the
Partnership. See Item 8(a) below.
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) SOLICITATION OR RECOMMENDATION.
In anticipation of possible tender offers, the Board of Directors of
the Managing General Partner formed a special committee (the "Special
Committee") to consider any tender offers for Interests that may be
received, including the Offer. Following the Partnership's receipt of the
Offer, the Special Committee (with its legal advisors present) met to
review and consider the Offer. Based on its analysis, including
consideration of the factors discussed below, the Special Committee (i)
expresses no opinion and remains neutral with respect to the Offer for
those Interestholders who have no current or anticipated need for liquidity
with respect to the Interests and who are willing to continue bearing the
economic risk of retaining their Interests until the liquidation and
termination of the Partnership and (ii) recommends that all other
Interestholders accept the Offer and tender their Interests to the
Purchasers pursuant to the Offer.
(b) REASONS.
The Special Committee reached the conclusions set forth in Item 4(a)
above after considering a variety of factors, including, but not limited
to, the following:
(i) The Partnership owns, through a joint venture, two
remaining investment properties, the 301 North Main Building and the
Phillips Building, located in Winston-Salem, North Carolina and containing
an aggregate of approximately 692,000 rentable square feet of office space.
For a number of reasons, including, but not limited to the facts set forth
below, it is difficult to estimate the value of these properties and
therefore difficult to estimate the value of an Interest in the
Partnership. The 301 North Main Building and the Phillips Building, which
were completed in 1966 and 1972, respectively, together represent
approximately 40% of the current office space in the competitive office
submarket (excluding owner-occupied buildings) in Winston-Salem, North
Carolina. Currently, the 301 North Main Building, which contains
approximately 423,000 rentable square feet, is only approximately 11%
leased and occupied, while the Phillips Building, which contains
approximately 269,000 rentable square feet, is 100% leased to, and occupied
by, one tenant, Wachovia Bank, for a combined leased and occupied rate for
both buildings of approximately 45%. However, the lease with Wachovia Bank
expires in February 2002, and Wachovia Bank has recently announced that it
will move to a new building upon expiration of its lease. Unless new large
users of office space enter the downtown Winston-Salem market, the
Partnership expects that it will continue to be very difficult and
expensive to lease the vacant space in these two buildings. In addition,
both buildings require major capital improvements to bring them up to
standards typically required in the market by new long-term tenants,
including, potentially, renovations in conformity with the Americans With
Disabilities Act, abatement of existing asbestos fireproofing, an upgrade
of the existing mechanical systems and installation of new sprinkler
systems. As a result, an estimate of the current value of these properties
would likely involve an extensive range of values and be speculative.
Moreover, because only 38,505 Interests are outstanding, each $1 million
of value in the two buildings in excess of their existing mortgage
indebtedness would result in approximately $22 per Interest in sale
<PAGE>
proceeds to the Interestholders. Therefore, relatively small changes
in the sale prices for the buildings could result in a significant increase
or decrease in the amount of sale proceeds available for distribution to
the Interestholders. The joint venture that owns the buildings commenced
marketing them for sale in April 2000. However, there is no assurance that
a sale or sales of the properties can be arranged on an individual or
combined basis or, if so, at what price any such sale could be completed.
The joint venture has recently commenced the process of nominating the 301
North Main Building to the National Register of Historic Places. If such
nomination is ultimately approved, renovation costs at that building would
qualify for a combined 40% Federal and state income tax credit, which would
reduce a new owner's net renovation costs and potentially increase the
value of the building. However, there is no assurance that the nomination
to the National Register of Historic Places will be approved or, if so,
that such nomination will be obtained without undue delay.
(ii) The buildings owned by the joint venture are currently
subject to a single mortgage loan in the outstanding principal amount of
approximately $18.7 million with a maturity date of November 1, 2001. The
buildings currently produce cash flow for the joint venture in excess of
the required monthly debt service payments, largely as a result of the
Wachovia Bank lease. However, because the Wachovia Bank lease expires in
February 2002, it is unlikely that the joint venture will be able to
refinance the existing mortgage loan in the event that the buildings have
not been sold prior to the maturity of the loan. If the joint venture is
unable to repay or refinance the existing mortgage loan, the lender, State
Street Bank & Trust Company, as Trustee for the holders of commercial
mortgage pass-through certificates, may foreclose and take title to the
buildings. This would result in the joint venture (and the Partnership) no
longer having an ownership interest in the buildings, and in such event,
the Partnership (and the Interestholders) generally would recognize
substantial gain for Federal and state income tax purposes with no
corresponding distributable proceeds from the disposition of the buildings.
(iii) The Partnership currently has, either directly or
through the joint venture, net current assets of approximately $83 per
Interest, which amount is net of (i.e., after deduction for) deferred
management and leasing fees payable to an affiliate of the General
Partners, anticipated North Carolina state income taxes, an amount set
aside to purchase the joint venture partner's interest in the joint
venture, estimated operating and liquidation expenses of the Partnership
(assuming liquidation and termination of the Partnership no later than the
end of 2001, after sale or other disposition of the buildings) and the
General Partners' participation in any distributable cash. Such amount
is being retained for working capital purposes, which may include possible
tenant improvement and other leasing costs for the buildings. However, the
Partnership does not intend to use any such amount for significant tenant
improvement and other leasing costs unless the Partnership believes that it
will receive a return of such amount and a reasonable return thereon upon
the sale of the buildings. Any such amount not used by the Partnership or
the joint venture would be distributed to the Interestholders prior to the
termination of the Partnership. However, if the Partnership is not able to
liquidate and terminate until 2002, there would likely be reduced cash flow
to pay expenses of the Partnership and a reduction in the amount that could
otherwise be distributed to the General Partners and the Interestholders.
This could result in a reduction of approximately $15 per Interest from the
$83 per Interest of net current assets, reducing the amount potentially
distributable to Interestholders to $68 per Interest, if
<PAGE>
the Partnership were required to remain in existence through 2002.
Further reductions would likely occur if the Partnership were required to
remain in existence beyond 2002 or if the Partnership or joint venture at
any time incurs significant expenses or liabilities not currently
anticipated.
(iv) The Partnership intends to wind up its affairs and
terminate as soon as practicable after the sale or other disposition of the
301 North Main and Phillips Buildings. While this may occur in the current
year, it is also possible that it may not occur until 2001 or even later,
depending upon whether the joint venture is able to sell the buildings or,
if not, whether the lender is willing to acquire ownership of the buildings
after maturity of the mortgage loan.
(v) No active trading market exists for the Interests. Because
the Interests are not listed on an exchange or quoted as reported on
NASDAQ, they are essentially illiquid. Limited private sales and sales
through certain intermediaries are the only current means for an
Interestholder to liquidate an investment in Interests (other than the
Offer). Moreover, such sales have been extremely sporadic recently.
According to sales of Interests for which prices were reported to the
Partnership during the past ten months, only 52 Interests were sold at
trading prices ranging from $46 to $140 per Interest. The Offer presents
an opportunity for Interestholders who desire to do so to sell their
Interests. In view of the absence of a public market for the Interests,
once the Offer has expired, there may not be a price for Interests through
privately negotiated sales and sales through intermediaries or, if such a
price is available, it may be substantially less than the purchase price
under the Offer.
(vi) The Purchasers are making the Offer with a view to making
a profit. Accordingly, there is a conflict of interest between their
desire to purchase the Interests at the lowest possible price and the
desire of the Interestholders to obtain the maximum cash return for their
Interests.
(c) INTENT TO TENDER.
The Managing General Partner currently intends to hold the 5
Interests it owns. To the knowledge of the Managing General Partner, none
of its or the Partnership's executive officers, directors, affiliates or
subsidiaries owns, beneficially or of record, any Interests except for the
5 Interests owned by the Managing General Partner.
ITEM 5. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
Neither the Partnership nor any person acting on its behalf has
employed, retained, or compensated or intends to employ, retain, or
compensate any other person or class of persons to make solicitations or
recommendations to Interestholders on its behalf concerning the Offer.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Neither the Partnership nor the Managing General Partner has effected
any transactions in the Interests during the past 60 days. The Managing
General Partner is not aware of any transactions in the Interests during
the past 60 days by any of its or the Partnership's executive officers,
directors, affiliates, or subsidiaries.
<PAGE>
ITEM 7. PURPOSES OF THE TRANSACTIONS AND PLANS OR PROPOSALS.
On March 3, 2000, the Managing General Partner received a request
from the MacKenzie Fund VI ("MacKenzie") seeking a list of holders of
Interests in order to facilitate a tender offer for less than five percent
of the Interests in the Partnership. The Managing General Partner
subsequently entered into an agreement with MacKenzie to provide such list.
However, the Purchasers commenced the Offer before MacKenzie was provided
such list.
No negotiation is being undertaken nor is underway by the Partnership
or the Managing General Partner in response to the Offer that relates to or
would result in any extraordinary transaction involving, or a purchase,
sale or transfer of a material amount of assets by, or any tender offer for
or other acquisition of securities by or of, the Partnership or any
subsidiary of the Partnership, or any material change in the present
capitalization or dividend policy of the Partnership.
ITEM 8. ADDITIONAL INFORMATION.
(a) CERTAIN TERMS AND CONDITIONS OF THE OFFER.
Although the Offer purports to be for the purchase of limited
partnership interests, under the terms of Articles Seven and Eleven of the
Partnership Agreement, only an assignee interest in a limited partnership
interest may be transferred; a holder of an assignee interest becomes a
Limited Partner of the Partnership only upon satisfying certain conditions
and upon obtaining the consent of the Managing General Partner.
According to the Offer Documents, the Offer is subject to the
fulfillment of certain conditions, including, among other things, that
there shall not be any action taken, or any statute, rule, regulation or
order proposed, enacted, enforced, promulgated, issued or deemed applicable
to the Offer by any federal or state court, government or governmental
authority or agency (other than the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended) which might, directly or indirectly,
impose or confirm limitations on the ability of the Purchasers effectively
to exercise full rights of ownership of any Interests, including, without
limitation, the right to vote any Interests acquired by the Purchasers
pursuant to the Offer or otherwise on all material properly presented to
the holders of the Interests (the "Voting Condition").
The Letter of Transmittal provides that each seller of the Interests
in the Offer must represent and warrant to the Purchasers that such seller
owns the Interests tendered in the Offer and has full power and authority
to validly tender, sell, assign and transfer the Interests thereby, and
that after any such Interests are purchased by the Purchasers, the
Purchasers will acquire good, marketable and unencumbered title thereto,
free and clear of all restrictions (the "No Restrictions Representation").
The Partnership Agreement provides, however, that an assignee of any
Interest (including any Purchaser of Interests in the Offer) may not become
a Substituted Limited Partner (as defined in the Partnership Agreement),
and thus may not vote on matters properly brought before the Limited
Partners of the Partnership, without the prior consent of the Managing
General Partner, which consent may be granted or withheld in the Managing
General Partner's sole discretion.
Moreover, Section 210/702 of the Revised Uniform Limited Partnership
Act of the State of Illinois (the "RULPA"), which governs the terms of the
Partnership, provides that an assignment of a partnership interest does not
entitle the assignee to become a partner or exercise any rights of a
partner, unless the partnership agreement provides otherwise.
<PAGE>
Hence, under the terms of both the RULPA and the Partnership
Agreement, the Purchasers would not become Limited Partners in the
Partnership and would not have the right to vote on matters brought before
the Limited Partners of the Partnership without the Managing General
Partner's consent. Accordingly, the Voting Condition will be satisfied,
and the No Restrictions Representation (to the extent it relates to the
Purchasers stepping into the shoes of the sellers as Limited Partners) will
be true, only upon the Purchasers' obtaining the requisite consent of the
Managing General Partner. As of the date hereof, the Managing General
Partner has not determined whether it would grant or withhold its consent.
THE PURCHASERS, HOWEVER, HAVE RESERVED THE RIGHT TO WAIVE THE FAILURE OF
ANY SUCH CONDITION AND THE RIGHT TO AMEND ANY SUCH CONDITION.
The Letter of Transmittal further provides that each seller of the
Interests in the Offer will be obligated to appoint the Purchasers as its
proxy with respect to such Interests, including all voting rights with
respect thereto. The Partnership Agreement provides that any Limited
Partner who assigns all of its Interests shall cease to be a Limited
Partner of the Partnership, except that unless and until a Substituted
Limited Partner is admitted in its stead, such assigning Limited Partner
shall retain the statutory rights of an assignor under the RULPA. The
RULPA provides that except as provided in the partnership agreement, a
partner ceases to be a partner upon the assignment of all of his or her
partnership interest. Accordingly, the appointment of the Purchasers as
proxy by a seller who tenders all of his Interests pursuant to the Offer
will be without any effect after such seller's assignee interests are
purchased in the Offer by the Purchasers, for such seller will no longer be
a Limited Partner of the Partnership pursuant to the terms of the
Partnership Agreement and the RULPA.
(b) CERTAIN TAX CONSIDERATIONS.
Pursuant to the Partnership Agreement, no sale or exchange of any
Interest (or fraction thereof) may be made if the Interest sought to be
sold or exchanged, when added to the total of all other Interests sold or
exchanged during the twelve-month period ending with such sale or exchange,
would, in the opinion of counsel to the Partnership, result in the
Partnership being considered as to have been terminated for Federal income
tax purposes (which termination may occur if 50% or more of the total
Interests in Partnership capital and profits is transferred by sale or
exchange in a twelve-month period). For the period from May 1, 1999 to
April 30, 2000 approximately 67 (approximately 0.2%) of the Interests were
transferred. The aggregate number of Interests being sought pursuant to
the Offer equals approximately 40% of the Interests. Depending on the
number of Interests transferred within the twelve months preceding the
completion of the Offer, it is possible that less than 40% of the Interests
can be purchased pursuant to the Offer because of the tax-related transfer
restriction described above. Depending upon the number of Interests
tendered and purchased pursuant to the Offer, sales of Interests for the
twelve-month period following completion of the Offer may also be limited
because of the tax-related transfer restriction.
A holder of an Interest may recognize gain or loss on the sale of
Interests pursuant to the Offer depending on the specific circumstances of
the holder of an Interest. In addition, the ability of a holder of an
Interest to fully utilize losses may depend on whether the holder of an
Interest sells all or less than all of his or her Interests pursuant to the
Offer. The Partnership does not anticipate that a holder of an Interest who
does not tender his or her Interests under the Offer will realize any
material tax consequences as a result of the election not to tender his or
her Interests. EACH HOLDER OF AN INTEREST SHOULD CONSULT HIS, HER OR ITS
OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF
SELLING OR NOT SELLING INTERESTS PURSUANT TO THE OFFER.
<PAGE>
A statement made in the Offer with respect to the characterization of
a portion of the amount realized by a holder of an Interest under section
751 of the Internal Revenue Code of 1986, as amended (the "Code") is, in
the view of counsel to the Partnership, incorrect. The Offer states that
"[i]f any portion of the amount realized by [an Interestholder] is
attributable to such [Interestholder's] share of 'unrealized receivables'
or 'substantially appreciated inventory items' as defined in Code section
751, a corresponding portion of such [Interestholder's] gain or loss will
be treated as ordinary gain or loss." Code section 751 has been amended
for sales of partnership interests, removing the "substantial appreciation"
requirement from the definition of "inventory items" that are subject to
Code section 751. Code section 751 now applies to sales of partnership
interests in partnerships holding any "inventory items," whether or not
substantially appreciated.
(c) CERTAIN SECONDARY MARKET AND LIQUIDITY INFORMATION.
Secondary market sales activity for the Interests, including
privately negotiated sales, has been limited and sporadic. The
Partnership's Annual Report discloses that "there is no public market for
Interests, and it is not anticipated that a public market for Interests
will develop." Privately negotiated sales and sales through intermediaries
currently are the only means available to an Interestholder to liquidate an
investment in Interests (other than the Offer) because the Interests are
not listed or traded on any securities exchange or quoted on any NASDAQ
list or system. High and low sales prices of Interests may be obtained
through certain entities such as PARTNERSHIP SPECTRUM, an independent,
third-party source which reports such information; however, the gross sales
prices reported by PARTNERSHIP SPECTRUM do not necessarily reflect the net
sales proceeds received by sellers of Interests, which typically are
reduced by commissions and other secondary market transaction costs to
amounts less than the reported prices. See also Item 4(b)(v) above.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit
Number Description
- ------- -----------
99.1(1) Letter dated May 16, 2000, from the Partnership to Investors.
99.2 Amended and Restated Agreement of Limited Partnership,
as amended by amendments dated as of December 22, 1986,
and January 1, 1991.
99.3(2) The Partnership's Annual Report on Form 10-K, dated
March 24, 2000.
- --------------------
(1) Included with the materials mailed to the Partnership's
Interestholders.
(2) Filed with the SEC (File No. 0-8716), and incorporated
herein by reference.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
Dated: May 16, 2000 JMB INCOME PROPERTIES, LTD. - V
By: JMB Realty Corporation,
its Managing General Partner
By: /s/ Judd D. Malkin
------------------------------
Name: Judd D. Malkin
Title: Chairman
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
99.1(1) Letter dated May 16, 2000, from the Partnership to Investors.
99.2 Amended and Restated Agreement of Limited Partnership, as
amended by amendments dated as of December 22, 1986, and
January 1, 1991.
99.3(2) The Partnership's Annual Report on Form 10-K, dated
March 24, 2000.
- ------------------------------
(1) Included with the materials mailed to the Partnership's
Interestholders.
(2) Filed with the SEC (File No. 0-8716), and incorporated
herein by reference.
EXHIBIT 99.1
- ------------
JMB INCOME PROPERTIES, LTD.-V
900 North Michigan Avenue
Chicago, Illinois 60611
(312) 915-1987
May 16, 2000
Dear Investors:
A group that includes affiliates of MacKenzie Patterson, Inc. has
commenced a tender offer (the "Offer") to purchase up to 15,402 of the
outstanding limited partnership interests (the "Interests"), representing
approximately 40% of the outstanding Interests, in JMB Income Properties,
Ltd.-V (the "Partnership") at $80 per Interest.
The Board of Directors of JMB Realty Corporation ("JMB"), the
Managing General Partner of the Partnership, has formed a special committee
(the "Special Committee") consisting of certain Directors of JMB to
consider and respond to tender offers for Interests that may be received,
including the Offer. THE SPECIAL COMMITTEE EXPRESSES NO OPINION AND
REMAINS NEUTRAL WITH RESPECT TO THE OFFER FOR THOSE INVESTORS WHO HAVE NO
CURRENT OR ANTICIPATED NEED FOR LIQUIDITY WITH RESPECT TO THEIR INTERESTS
AND WHO ARE WILLING TO CONTINUE BEARING THE ECONOMIC RISK OF RETAINING
THEIR INTERESTS UNTIL THE LIQUIDATION AND TERMINATION OF THE PARTNERSHIP.
HOWEVER, THE SPECIAL COMMITTEE RECOMMENDS THAT ALL OTHER INVESTORS ACCEPT
THE OFFER AND TENDER THEIR INTERESTS PURSUANT TO THE OFFER.
The Special Committee gave careful consideration to the factors
discussed in the Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") accompanying this letter. The Special Committee
urges you to read the Schedule 14D-9 carefully in making your decision with
respect to tendering your Interests and recommends that you consider the
following factors, together with all other information in the Schedule 14D-
9, in connection with the Offer:
. The Partnership owns, through a joint venture, two remaining
investment properties, the 301 North Main Building and the Phillips
Building, located in Winston-Salem, North Carolina. For a number of
reasons, it is difficult to estimate the value of these properties and
therefore difficult to estimate the value of an Interest. Currently, the
301 North Main Building is only approximately 11% leased and occupied,
while the Phillips Building is 100% leased to and occupied by one tenant,
Wachovia Bank. However, the lease with Wachovia Bank expires in February
2002, and Wachovia Bank has recently announced that it will move to a new
building upon expiration of its lease. The Partnership expects that it
will continue to be very difficult and expensive to lease the vacant space
in these two buildings. In addition, both buildings require major capital
improvements to bring them up to standards typically required in the market
by new long-term tenants. As a result, an estimate of the current value of
these properties would likely involve an extensive range of values and be
speculative. Moreover, because of the relatively few Interests
outstanding, relatively small changes in the sale prices for the buildings
could result in a significant increase or decrease in the amount of sale
proceeds available for distribution to Investors. The joint venture that
owns the buildings commenced marketing them for sale in early April 2000,
but there is no assurance any sale of the properties can be arranged or, if
so, at what price any such sale could be completed.
. The buildings are currently subject to a single mortgage loan
in the outstanding principal amount of approximately $18.7 million with a
maturity date of November 1, 2001. However, because the Wachovia Bank
lease expires in February 2002, it is
<PAGE>
unlikely that the joint venture will be able to refinance the
existing mortgage loan in the event that the buildings have not been sold
prior to the maturity of the loan. If the joint venture is unable to repay
or refinance the existing mortgage loan, the lender may foreclose and take
title to the buildings. This would result in the joint venture (and the
Partnership) no longer having an ownership interest in the buildings, and
in such event, the Partnership (and Investors) generally would recognize
substantial gain for Federal and state income tax purposes with no
corresponding distributable proceeds from the disposition of the buildings.
. The Partnership currently has, either directly or through the
joint venture, net current assets of approximately $83 per Interest, which
amount is net of (i.e., after deduction for) certain anticipated
costs and expenses of the Partnership and the joint venture, including
estimated operating and liquidation expenses of the Partnership (assuming
liquidation and termination of the Partnership no later than the end of
2001), and the General Partners' participation in any distributable cash.
Such amount is being retained for working capital purposes. Any such
amount not used by the Partnership or the joint venture would be
distributed to Investors prior to termination of the Partnership.
However, if the Partnership is not able to liquidate and terminate until
2002, there would likely be reduced cash flow to pay expenses of the
Partnership and a reduction in the amount that could otherwise be
distributed to Investors. This could result in a reduction of
approximately $15 per Interest from the $83 per Interest of net current
assets, reducing the amount potentially distributable to Investors
to $68 per Interest, if the Partnership were required to remain
in existence through 2002. Further reductions would likely occur if the
Partnership were required to remain in existence beyond 2002 or if the
Partnership or joint venture at any time prior to termination incurs
significant expenses or liabilities not currently anticipated.
. No active trading market exists for the Interests. Because the
Interests are not listed on an exchange or quoted as reported on NASDAQ,
they are essentially illiquid. Limited private sales and sales through
certain intermediaries are the only current means for an Investor to
liquidate an investment in Interests (other than the Offer), and these have
been extremely sporadic recently. The Offer presents an opportunity for
Investors who desire to do so to sell their Interests. In view of the
absence of a public market for the Interests, once the Offer has expired,
there may not be a price for Interests through privately negotiated sales
and sales through intermediaries or, if such a price is available, it may
be substantially less than the purchase price under the Offer.
A sale of Interests pursuant to the Offer will constitute a taxable
event for taxable Investors. You should consult with your personal tax
advisor and financial consultant prior to accepting the Offer and tendering
your Interests. If you wish to retain your Interests and have not already
tendered them pursuant to the Offer, you need not take any action.
On behalf of the Special Committee.
Very truly yours,
JMB INCOME PROPERTIES, LTD.-V
By: JMB Realty Corporation
Managing General Partner
By: /s/ Judd D. Malkin
------------------------------
Judd D. Malkin, Chairman
EXHIBIT 99.2
- ------------
JMB INCOME PROPERTIES, LTD.-V
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
Amended and Restated Agreement of Limited Partnership dated as of
July 15, 1977 among JMB PROPERTIES-V, INC., NEIL G. BLUHM and JUDD D.
MALKIN, as General Partners, JMB REALTY CORPORATION, as the Initial Limited
Partner, and those persons who shall hereafter be admitted as Additional
Limited Partners.
In consideration of the mutual promises made herein, the parties,
intending to be legally bound, hereby agree as follows:
ARTICLE ONE
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article One. The
singular shall include the plural and the masculine gender shall include
the feminine and neuter, and vice versa, as the context requires.
"Accountants" means Peat, Marwick, Mitchell & Co. or such other
nationally recognized firm of independent certified public accountants as
shall be engaged by the Managing General Partner for the Partnership.
"Acquisition Fees" means the total of all fees and commissions paid
by any person to any person, including the Managing General Partner or
Affiliates, in connection with the selection, purchase, construction or
development of any Property by the Partnership, whether designated as a
real estate commission, acquisition fee, finder's fee, selection fee,
development fee, construction fee, non-recurring management fee, consulting
fee or any fee of similar nature however designated and however treated for
tax or accounting purposes.
"Additional Limited Partners" means those Persons admitted to the
Partnership pursuant to Section 3.3 hereof.
"Adjusted Capital Contributions" means, for each fiscal quarter, the
Limited Partners' Capital Contributions reduced by all distributions of
Sale or Refinancing Proceeds made to the Limited Partners up to and
including any such distributions for such fiscal quarter (except that any
such distributions of Sale or Refinancing Proceeds shall not reduce the
Limited Partners' Capital Contributions if and to the extent that such
distributions were necessary at the time of distribution to compensate for
any deficiency in the amount of Disbursable Cash distributed to the Limited
Partners pursuant to Section 4.2(i)(a)).
"Affiliate" or "Affiliated Person" means, when used with reference to
a specified Person, (i) any Person that directly or indirectly through one
or more intermediaries controls or is controlled by or is under common
control with the specified Person, (ii) any Person that is an officer of,
partner in or trustee of, or serves in a similar capacity with respect to,
the specified Person or of which the specified Person is an officer,
partner or trustee, or with respect to which the specified Person serves in
a similar capacity, (iii) any Person that, directly or indirectly, is the
beneficial owner of 10% or more of any class of equity securities of, or
otherwise has a substantial beneficial interest in, the specified Person or
of which the specified Person is directly or indirectly the owner of 10% or
more of any class of equity securities or in which the specified Person has
a substantial beneficial interest and (iv) any relative or spouse of the
specified Person. Affiliate or Affiliated Person of the Partnership or the
General Partners does not include a Person who is a partner in a
partnership or joint venture with the Partnership or any other Affiliated
Person if such Person is not otherwise an Affiliate or Affiliated Person of
the Partnership or the General Partners.
<PAGE>
"Agreement" means this Agreement of Limited Partnership, as
originally executed and as amended from time to time, as the context
requires. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," when used with reference to this Agreement, refer
to this Agreement as a whole, unless the context otherwise requires.
"Capital Contribution" means the total amount of money contributed to
the Partnership (prior to the deduction of any selling commissions or
expenses) by all the Partners or any class of Partners or any one Partner
as the case may be (or the predecessor holders of the Interests of such
Partners or Partner) reduced, in the case of the Limited Partners, by any
return of funds to the Limited Partners pursuant to Section 3.4D.
"Cash Flow" means, with respect to any fiscal period, cash receipts
from operations, including any lease payments on net leases from builders
and sellers, without deduction for depreciation, but after deducting cash
receipts used to pay Operating Expenses, Debt Service and capital
expenditures with respect to Properties.
"Code" means the Internal Revenue Code of 1954, as amended (or any
corresponding provision or provisions of succeeding law).
"Consent" means either the consent given by vote at a meeting called
and held in accordance with the provisions of Section 10.1 hereof or the
prior written consent, as the case may be, of a Person to do the act or
thing for which the consent is solicited, or the act of granting such
consent, as the context may require.
"Debt Service" means all payments required to be made in connection
with any loan to the Partnership or any other loan secured by a lien on any
of the Properties.
"Disbursable Cash" means, with respect to any fiscal period, Cash
Flow less any amounts set aside from Cash Flow for the restoration or
creation of Reserves.
"General Partners" means JMB Properties-V, Inc., Neil G. Bluhm and
Judd D. Malkin, or any Person or Persons who, at the time of reference
thereto, has been admitted, as herein provided, as a successor to the
Interest of any of them or as an additional General Partner, in each such
Person's capacity as a General Partner.
"Individual General Partners" means Neil G. Bluhm and Judd D. Malkin
in their capacity as General Partners, so long as they shall be General
Partners and thereafter shall mean any such Person as shall be admitted, as
herein provided, as a successor General Partner, in his capacity as such,
to Neil G. Bluhm or Judd D. Malkin or any successor to his Interest.
"Interest" means the entire ownership interest of a Partner in the
Partnership at any particular time, including the right of such Partner to
any and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all
the terms and provisions of this Agreement. Reference to a majority or
specified percentage in interest of the Limited Partners means Limited
Partners whose combined Capital Contributions represent over 50% or such
specified percentage, respectively, of the Capital Contributions of all
Limited Partners.
"Limited Partner" means any Person who is a Limited Partner (whether
the Initial Limited Partner, an Additional Limited Partner or a Substituted
Limited Partner) at the time of reference thereto, in such Person's
capacity as a Limited Partner of the Partnership.
"Managing General Partner" means JMB Properties-V, Inc., in its
capacity as a General Partner, so long as it shall be a General Partner and
thereafter shall mean such Person as shall be admitted, as herein provided,
as a successor General Partner, in its capacity as such, to JMB
Properties-V, Inc. or any successor to its Interest or any portion thereof.
<PAGE>
"Notification" means a writing, containing the information required
by this Agreement to be communicated to any Person, sent by registered,
certified or regular mail, postage prepaid, to such Person at the last
known address of such Person. The date of registry thereof or the date of
the certified receipt therefor in the case of registered or certified mail
shall be deemed the date of receipt of Notification; provided, however,
that any communication containing such information sent to such Person and
actually received by such Person shall constitute Notification for all
purposes of this Agreement.
"Operating Expenses" means, with respect to any fiscal period, except
to the extent paid with cash withdrawn from Reserves therefor, the amount
of cash disbursed in such period in order to obtain all cash receipts
during such period not arising from any Sale or Refinancing, including all
cash expenses (such as advertising and promotional, management, salary,
utility, repair and maintenance, accounting, statistical or bookkeeping
service and computing or accounting equipment use, travel and telephone
expenses but not including any overhead expenses or any salaries paid by
the Managing General Partner to its officers and directors). "Operating
Expenses" shall not include any amounts payable to the General Partners
under Section 5.1D.
"Partner" means any General Partner or Limited Partner
"Partnership" means the limited partnership formed pursuant to this
Agreement by the parties hereto, as said limited partnership may from time
to time be constituted.
"Person" means any individual, partnership, corporation, trust or
other entity.
"Profits for Tax Purposes" and "Losses for Tax Purposes" means, at
all times during the existence of the Partnership, the income or loss of
the Partnership (including the Partnership's share of income or loss of any
partnership, venture or other entity which owns a particular Property) for
Federal income tax purposes determined as of the close of the Partnership's
fiscal year, including, without limitation, each item of Partnership
income, gain, loss, deduction or credit.
"Properties" means the properties described as such in the
Prospectus, or properties not so described but which are purchased out of
Capital Contributions or out of the proceeds (other than Sale or
Refinancing Proceeds) of a disposition of property by the Partnership, and
all improvements thereon and all repairs, replacements or renewals thereof,
together with all personal property acquired by the Partnership which is
from time to time located thereon or specifically used in connection
therewith. In the case of any Property owned by another partnership or
joint venture in which the Partnership shall be a partner, the term
"Properties" shall include any Property which is so owned.
"Prospectus" means the prospectus contained in the registration
statement filed with the Securities and Exchange Commission for the
registration of Additional Limited Partners' Interests under the Securities
Act of 1933, in the final form in which said prospectus is filed with said
Commission and as thereafter supplemented pursuant to Rule 424 under said
Act.
"Purchase Price" means the sum of the prices paid for all of the
Properties plus all costs of improvements, if any, reasonably and properly
allocable to the Properties but, however, excluding any "points" or prepaid
interest payable thereon, if any.
"Reserves" means, with respect to any fiscal period, payments made or
amounts allocated during such period to reserves which shall be maintained
in amounts deemed sufficient by the Managing General Partner for working
capital and to pay taxes, insurance, Debt Service, repairs, replacements or
renewals, or other costs and expenses, incident to the ownership or
operation of the Properties.
<PAGE>
"Sale or Refinancing" means any Partnership transaction (other than
the receipt of Capital Contributions) not in the ordinary course of its
business, including, without limitation, sales, exchanges or other
dispositions of real or personal property, condemnations, recoveries of
damage awards and insurance proceeds (other than business or rental
interruption insurance proceeds) or any borrowings or mortgage
refinancings. The disposition of a Property of the Partnership by transfer
back to the seller or an affiliate thereof, whether in the form of a
rescission, exchange or resale or pursuant to an option or other similar
arrangement entered into at or prior to the time of taking title to the
Property, shall not, if the proceeds from such transfer back are reinvested
in another Property, constitute a Sale or Refinancing and shall not result
in Sale or Refinancing Proceeds. Sale or Refinancing shall not include a
sale permitted under Section 5.3A(vi), and no such sale shall result in
Sale or Refinancing Proceeds.
"Sale or Refinancing Proceeds" means all cash receipts arising from a
Sale or Refinancing less the following:
(i) the amount of cash paid or to be paid in connection with
such Sale or Refinancing (which shall include, with regard to damage
recoveries or insurance or condemnation proceeds, cash paid or to be paid
in connection with repairs, replacements or renewals, in the discretion of
the Managing General Partner, relating to damage to or partial condemnation
of the affected Property);
(ii) the amount necessary for the payment of all debts and
obligations of the Partnership related to the particular Sale or
Refinancing;
(iii) the amount considered appropriate by the Managing General
Partner to provide reserves to pay taxes, insurance, Debt Service, repairs,
replacements or renewals, or other costs and expenses of the Partnership
(including costs of improvements or additions in connection with any
Property) or to provide for the purchase of the underlying land in
connection with any Property; and
(iv) any amount considered appropriate by the Managing General
Partner to purchase any interest in a joint venture partnership which owns
a particular Property, which interest is owned by a joint venture partner.
"Substituted Limited Partner" means any Person admitted to the
Partnership as a Limited Partner pursuant to the provisions of Section 7.2.
ARTICLE TWO
FORMATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM
SECTION 2.1 Formation
The parties hereto hereby form a limited partnership pursuant to the
provisions of the Uniform Limited Partnership Act of the State of Illinois.
SECTION 2.2 Name, Place of Business
The Partnership shall be conducted under the name and style of JMB
INCOME PROPERTIES, LTD.-V. The place of business and principal office of
the Partnership, unless changed by the Managing General Partner, shall be
875 North Michigan Avenue, Chicago, Illinois 60611. Notification of any
such change in the Partnership's place of business and principal office
shall be given to the Limited Partners.
<PAGE>
SECTION 2.3 Purpose
The purpose and character of the business of the Partnership is to
acquire, hold, maintain, operate, sell, lease, dispose of and otherwise
invest in and deal with the Properties and to engage in any other
activities related or incidental thereto. The Partnership shall not engage
in any other business or activity.
SECTION 2.4 Term
The Partnership shall commence on the date of first filing, with the
appropriate authority of the State of Illinois, of a Certificate of Limited
Partnership pursuant to the Uniform Limited Partnership Act of the State of
Illinois and shall continue in full force and effect until December 31,
2026 or until dissolution prior thereto pursuant to the provisions hereof.
ARTICLE THREE
PARTNERS AND CAPITAL
SECTION 3.1 General Partners
The names, addresses and Capital Contributions of the General
Partners of the Partnership are as set forth in Schedule A attached hereto
and hereby incorporated herein. Except as set forth in Section 8.2, the
General Partners, as such, shall not make any additional Capital
Contribution to the Partnership.
SECTION 3.2 Initial Limited Partner
The name, address and Capital Contribution (which may be expressed as
the number of Interests held) of the Initial Limited Partner are as set
forth in Schedule A attached hereto and hereby incorporated herein.
SECTION 3.3 Additional Limited Partners
A. The Managing General Partner is authorized (subject to the
receipt of the written commitment of JMB Realty Corporation referred to in
Section 5.5C) to admit to the Partnership Additional Limited Partners if,
after the admission of such Additional Limited Partners, the Capital
Contributions of all Limited Partners would be not less than $10,805,000
and not more than such maximum amount (not to exceed $38,505,000) as the
Managing General Partner shall determine.
B. The Capital Contribution of each Additional Limited Partner
shall be not less than $5,000 and may be such greater integral multiple of
$1,000 as such Additional Limited Partner and the Managing General Partner
shall agree upon. Such Capital Contribution shall be made in cash.
C. Each Additional Limited Partner shall, as a condition of being
admitted to the Partnership, satisfy the conditions of Section 11.2. The
names and addresses of the Additional Limited Partners and their Capital
Contributions (which may be expressed as the number of Interests held)
shall be set forth in Schedule A attached hereto, as amended from time to
time, and hereby incorporated herein.
D. All subscriptions for Interests shall be accepted or rejected
by the Partnership within 30 days of receipt by the Partnership, and if
rejected all subscription funds will be returned to the subscriber
forthwith. If not rejected within 30 days of receipt by the Partnership,
any subscription shall be deemed to be accepted. No General Partner or
Affiliated Person of a General Partner or any underwriter, dealer or
salesmen of Interests shall directly or indirectly pay or award any
finder's fee, commission or other compensation to any person engaged by a
potential investor for investment advice as an inducement to such advisor
to advise the purchase of Interests; provided, however, that this provision
shall not prohibit the normal selling commission payable to a registered
broker-dealer or other properly licensed person for selling Interests
(including Affiliated Persons of the General Partners).
<PAGE>
SECTION 3.4 Partnership Capital
A. No Partner shall be paid interest on any Capital Contribution;
provided, however, that if the offering of Interests is not consummated
subscription proceeds will be returned with a pro rata portion of any
interest earned thereon.
B. No Partner shall have the right to withdraw, or receive any
return of, his Capital Contribution, except as may be specifically provided
herein.
C. Under circumstances requiring a return of any Capital
Contribution, no Partner shall have the right to receive property other
than cash except as may be specifically provided herein.
D. In the event that any portion of the Limited Partners' Capital
Contributions is not invested or committed for investment within 24 months
from the date of effectiveness of the Prospectus (except for any amounts
utilized to pay Operating Expenses, and amounts set aside for Reserves),
such portion of Capital Contributions shall be distributed to the Limited
Partners by the Partnership as a return of capital, without reduction for
any Acquisition Fee which would have been payable to JMB Realty Corporation
if such portion of the Limited Partners' Capital Contributions had been
invested and without reduction for any fee paid with respect to such
Capital Contributions by the Partnership to Merrill Lynch, Pierce, Fenner &
Smith Incorporated; provided, however, that any such funds distributable to
Limited Partners hereunder may be reduced by the proportionate amount of
any fee paid to Merrill Lynch, Pierce, Fenner & Smith Incorporated in the
event that, for any reason, the General Partners shall submit a proposed
investment to a vote of Limited Partners resulting in the disapproval of
such investment by the Limited Partners, thereby requiring a return of
uninvested funds under this Section 3.4D. JMB Realty Corporation (the
parent company of the Managing General Partner) shall undertake, in a
written commitment to be received by the Partnership prior to the admission
of Additional Limited Partners under Section 3.3A, to provide any funds
necessary to permit the Partnership to distribute to the Limited Partners a
refund of any such fee paid to Merrill Lynch, Pierce, Fenner & Smith
Incorporated. For the purpose of this Agreement, funds will be deemed to
have been committed to investment and will not be returned to the Limited
Partners to the extent written agreements in principle, commitment letters,
letters of intent or understanding, option agreements or any similar
contracts or understandings were at any time executed, regardless of
whether any such investment may or may not be consummated, and to the
extent any funds have been reserved to make contingent payments in
connection with any property, regardless of whether any such payments may
or may not be made.
SECTION 3.5 Liability of Partners
No Limited Partner shall be liable for the debts, liabilities,
contracts or any other obligations of the Partnership. A Limited Partner
shall be liable only to make his Capital Contribution and shall not be
required to lend any funds to the Partnership or, after his Capital
Contribution shall have been paid, to make any further capital contribution
to the Partnership. No General Partner shall have any personal liability
for the repayment of the Capital Contribution of any Limited Partner. It is
the intent of the Partners that no distribution (or any part of any
distribution) made to any Limited Partner pursuant to Section 4.1 of this
Agreement shall be deemed a return or withdrawal of capital, even if such
distribution represents (in full or in part) a distribution of depreciation
or any other non-cash item accounted for as a loss or deduction from or
offset to the Partnership's income, and that no Limited Partner shall be
obligated to pay any such amount to or for the account of the Partnership
or any creditor of the Partnership. However, if any court of competent
jurisdiction holds that, notwithstanding the provisions of this Agreement,
any Limited Partner is obligated to make any such payment, such obligation
shall be the obligation of such Limited Partner and not of the General
Partners.
<PAGE>
ARTICLE FOUR
DISTRIBUTIONS OF INCOME; ALLOCATIONS OF PROFITS AND LOSSES
SECTION 4.1 Distributions of Disbursable Cash
All Disbursable Cash of the Partnership for any fiscal quarter prior
to the first fiscal quarter following the termination of the offering of
Interests to the public as contemplated by Section 3.3 shall be distributed
to the Limited Partners pursuant to Section 4.4F. Beginning with the first
fiscal quarter following the termination of the offering of Interests to
the public as contemplated by Section 3.3, all Disbursable Cash of the
Partnership for each fiscal year shall be paid or distributed quarterly
within 60 days after the close of each fiscal quarter as follows:
(i) first, Disbursable Cash for such fiscal quarter shall be
distributed to the Limited Partners and the General Partners in the same
respective proportions in which they are allocated Profits or Losses for
Tax Purposes under Section 4.3C (i.e. 97% to the Limited Partners and 3% to
the General Partners) until the Limited Partners have received cumulative
distributions for such fiscal year equal to 7% of the average of their
Adjusted Capital Contributions for such fiscal quarter and for any
preceding fiscal quarters of such fiscal year (or such preceding fiscal
quarters of such fiscal year to which this Section 4.1(i) applies); and
(ii) second, Disbursable Cash for such fiscal quarter
remaining after the distribution pursuant to Section 4.1(i) shall be
distributed to the General Partners until the General Partners have
received distributions for such fiscal year (under Section 4.1(i) and this
Section 4.1(i)) equal to 5% of all Disbursable Cash distributed to all of
the Partners for such fiscal year pursuant to Section 4.1(i) and this
Section 4.1(ii); and
(iii) third, Disbursable Cash for such fiscal year remaining
after the distributions made pursuant to Sections 4.1(i) and 4.1(ii) shall
be paid to the Managing General Partner (as a part of its incentive
management fee for its overall supervisory services for the Partnership)
until the Managing General Partner has received such payments for such
fiscal year (under this Section 4.1 (iii)) equal to 1.5% of all Disbursable
Cash paid to the Managing General Partner pursuant to this Section 4.1(iii)
and distributed to the Partners pursuant to Sections 4.1(i) and 4.1(ii);
and
(iv) fourth, Disbursable Cash for such fiscal quarter
remaining after the distributions made pursuant to Sections 4.1(i) and
4.1(ii) and the payments made pursuant to Section 4.1(iii) shall be
distributed to the Limited Partners until the Limited Partners have
received cumulative distributions for such fiscal year (under Section
4.1(i) and this Section 4.1(iv)) equal to 7.25% of their Adjusted Capital
Contributions for such fiscal quarter and for any preceding fiscal quarters
of such fiscal year (or such preceding fiscal quarters of such fiscal year
to which this Section 4.1(iv) applies); and
(v) fifth, Disbursable Cash for such fiscal quarters
remaining after the distributions pursuant to Sections 4.1(i), 4.1(ii), and
4.1(iv) and the payments pursuant to Section 4.1(iii) shall be paid to the
Managing General Partner (as additional incentive management fee for its
overall supervisory services for the Partnership) until the Managing
General Partner has received such payments for such fiscal year (under
Section 4.1(iii) and this Section 4.1(v)) equal to 5% of all Disbursable
Cash paid to the Managing General Partner pursuant to Sections 4.1(iii) and
this Section 4.1(v) and distributed to all of the Partners for such fiscal
year pursuant to Sections 4.1(i), 4.1(ii) and 4.1(iv); and
<PAGE>
(vi) sixth, Disbursable Cash for such fiscal quarter remaining
after the distributions pursuant to Sections 4.1(i), 4.1(ii) and 4.1(iv)
and the payments made pursuant to Sections 4.1(iii) and 4.1(v), shall be
distributed 90% to the Limited Partners and 5% to the General Partners (as
part of their distributive share of Disbursable Cash), and the remaining 5%
shall be paid to the Managing General Partner (as additional incentive
management fee for its overall supervisory services for the Partnership).
Amounts distributable to the Limited Partners under Sections 4.1(i)
and 4.1(iv) in excess of 90% of Disbursable Cash being paid or distributed
with respect to the first three quarters in any fiscal year shall not
include such amounts as the Managing General Partner reasonably estimates
may be distributable or payable to the General Partners for such fiscal
year under this Section 4.1.
SECTION 4.2 Distributions of Sale or Refinancing Proceeds
All Sale or Refinancing Proceeds shall be distributed as follows:
(i) first, to the Limited Partners in an amount equal to (a)
the sum of the amounts by which, for each fiscal year commencing with 1978,
the amount of Disbursable Cash distributed to the Limited Partners pursuant
to Section 4.1 for such year was less than 7% of the average of their
Adjusted Capital Contributions as computed in Section 4.1 above (and for
the purposes of the computation of such deficiency, the amount by which
distributions of Disbursable Cash for any year were in excess of 7% of the
average of the Adjusted Capital Contributions of Limited Partners shall be
credited to reduce any deficiency for any other year) less (b) the sum of
all previous distributions made to the Limited Partners out of Sale or
Refinancing Proceeds pursuant to this Section 4.2(i);
(ii) second, to the Limited Partners, to the extent that all
previous distributions to them under this Section 4.2(u) (including the
excess, if any, of the amount determined pursuant to Section 4.2(i) (b)
over the amount determined pursuant to Section 4.2(i) (a)) do not equal
their Capital Contributions; and
(iii) third, in the case of sales of Properties by the
Partnership or by a partnership, venture or other entity which owns a
particular Property, subject to the limitation set forth in the last
sentence of Section 5.3A(i), an amount to the General Partners equal to
.75% of the selling price of the Property being sold plus up to .75% of the
aggregate selling prices of Properties previously sold to the extent the
General Partners have not previously received such .75% of the selling
prices of such Properties by reason of clauses (i) and (ii) of this Section
4.2 (the selling price or prices of all such Properties to include the
amount of any indebtedness to which such Property or Properties are subject
or which is assumed by the buyer); and
(iv) fourth, the balance 85% to the Limited Partners and 15%
to the General Partners.
SECTION 4.3 Profits and Losses for Tax Purposes
A. The Profits and Losses for Tax Purposes of the Partnership
shall he determined and allocated with respect to each fiscal year of the
Partnership as of, and within 75 days after, the end of such year.
<PAGE>
B. All Profits or Losses for Tax Purposes with respect to the year
1976 shall be allocated 99% to the Initial Limited Partner and 1% to the
General Partners. All Profits or Losses for Tax Purposes with respect to
the year 1977 prior to the first date upon which subscription proceeds are
initially received out of the escrow account described in the Prospectus
and Additional Limited Partners are admitted to the Partnership shall be
allocated 3% to the Initial Limited Partner and 97% to the General
Partners. Such Profits or Losses for Tax Purposes shall be determined on
the basis of an interim closing of the Partnership's books on a cash basis
on such date.
C. Except as provided in Section 4.3B, all Profits or Losses for
Tax Purposes, other than those arising from the occurrence of a Sale or
Refinancing, shall be allocated 3% to the General Partners and 97% to the
Limited Partners.
D. Except as provided in Section 4.3B, Losses for Tax Purposes
arising from the occurrence of a Sale or Refinancing shall be allocated 99%
to the Limited Partners and 1% to the General Partners.
E. Except as provided in Section 4.3B, Profits for Tax Purposes
arising from the occurrence of a Sale or Refinancing shall be allocated as
follows:
(i) first, Profits for Tax Purposes in the amount of the
greater of (a) 1% of such Profits for Tax Purposes or (b) the amount
distributable to the General Partners as Sale or Refinancing Proceeds under
Section 4.2 shall be allocated to the General Partners; and
(ii) second, Profits for Tax Purposes remaining after the
allocation provided for in Section 4.3E(i) shall be allocated to the
Limited Partners.
SECTION 4.4 Determinations of Allocations and Distributions Among Partners
A. Except as provided in Section 4.4F, all Profits and Losses for
Tax Purposes allocable to the Limited Partners and all Disbursable Cash and
Sale or Refinancing Proceeds distributable to the Limited Partners shall be
allocated or distributed, as the case may be, to each Limited Partner
entitled to such distribution or allocation in the ratio which the Capital
Contribution of such Limited Partner bears to the total Capital
Contributions of all Limited Partners entitled to such distribution or
allocation.
B. Except as provided in Sections 4.4C and 4.4F, all Profits and
Losses for Tax Purposes not arising from a Sale of Refinancing allocable to
the Limited Partners shall be allocated, and all Disbursable Cash
distributable to the Limited Partners shall be distributed, as the case may
be, to the Persons recognized by the Partnership as the holders of
Interests as of the last day of the fiscal period for which such allocation
or distribution is to be made.
C. All Profits or Losses for Tax Purposes not arising from a Sale
or Refinancing for a calendar year allocable to any Interest which may have
been transferred during such year shall be allocated between the transferor
and the transferee based upon the number of quarterly periods that each was
recognized (in accordance with Section 7.2D) as the holder of the Interest
for purposes of this Section, without regard to the results of Partnership
operations during particular quarterly periods of such calendar year and
without regard to whether cash distributions were made to the transferor or
transferee.
D. All Profits or Losses for Tax Purposes arising from a Sale or
Refinancing allocable to the Limited Partners shall be allocated, and all
Sale or Refinancing Proceeds arising from such Sale or Refinancing
distributable to the Limited Partners shall be distributed, as the case may
be, to the Persons recognized as the holders of Interests for this purpose
as of the date of such Sale or Refinancing in accordance with Section 7.2D.
<PAGE>
E. The General Partners' distributive share of Disbursable Cash,
all Sale and Refinancing Proceeds distributable to the General Partners,
and all Profits for Tax Purposes and Losses for Tax Purposes allocable to
the General Partners (whether or not arising from a Sale or Refinancing)
shall be distributed or allocated, as the case may be, 90% to the Managing
General Partner and 5% to each of the Individual General Partners.
F. All Disbursable Cash for any fiscal quarter prior to the first
fiscal quarter following the termination and final closing of the offering
of Interests to the public as contemplated by Section 3.3 shall be
allocated and distributed to the Limited Partners (within 60 days after the
close of such fiscal quarter) as follows: Each Limited Partner shall
receive a percentage of the total amount of such Disbursable Cash for each
such fiscal quarter equal to the percentage represented by a fraction, the
numerator of which is the number of Escrow Deposit Days credited to such
Limited Partner and the denominator of which is the number of Escrow
Deposit Days credited to all of the Limited Partners with respect to such
fiscal quarter. For the purposes of this Section 4.4F, the number of
"Escrow Deposit Days" which are credited to a Limited Partner for such
fiscal quarter shall be, if such Limited Partner is an Additional Limited
Partner, equal to the product of (a) the number of days from and including
the first day following the day on which subscription proceeds received
from such Limited Partner in cash for the purchase of Interests are
deposited in the escrow account described in the Prospectus (or the first
day of such fiscal quarter if such Limited Partner became an Additional
Limited Partner during a fiscal quarter prior to such fiscal quarter),
through the last day of such fiscal quarter, multiplied by (b) the number
of Interests purchased by such Limited Partner with such subscription
proceeds and shall be, if such Limited Partner is the Initial Limited
Partner (with respect to Interests purchased as the Initial Limited
Partner) equal to the product of (x) the number of days from and including
the initial effective date of the Prospectus (or the first day of such
fiscal quarter if any Additional Limited Partners were admitted to the
Partnership prior to such fiscal quarter), through the last day of such
fiscal quarter, multiplied by (y) the number of Interests purchased by the
Initial Limited Partner.
G. In the event that there is more than one closing date on which
Additional Limited Partners are admitted to the Partnership as a result of
the Partnership's offering of Interests as contemplated by Section 3.3, all
Profits or Losses for Tax Purposes allocable to the Limited Partners for
the period from any such closing date through the next succeeding closing
date will be allocated in accordance with Section 4.4A solely to the
Limited Partners admitted to the Partnership as of or prior to such
preceding closing date. Profits or Losses for Tax Purposes incurred for the
period from any such closing date through the next succeeding such closing
date will be allocated on the basis of an interim closing of the
Partnership's books on a cash basis on such closing dates.
ARTICLE FIVE
RIGHTS, POWERS AND DUTIES OF GENERAL PARTNERS
SECTION 5.1 Management and Control of the Partnership
A. Subject to the Consent of the Limited Partners where required
by this Agreement, the General Partners, within the authority granted to
them under this Agreement, shall have the exclusive right to manage the
business of the Partnership and are hereby authorized to take any action of
any kind and to do anything and everything they deem necessary in
accordance with the provisions of this Agreement.
B. Except as expressly provided herein, the authority of the
General Partners to manage the business of the Partnership shall be
exercised only by the Managing General Partner and, except as expressly
provided herein, no General Partner other than the Managing General Partner
shall have any control over Partnership business.
<PAGE>
C. No Limited Partner (except one who may also be a General
Partner, and then only in its capacity as General Partner within the scope
of his authority hereunder) shall participate in or have any control over
the Partnership business or shall have any authority or right to act for or
bind the Partnership. The Limited Partners hereby Consent to the exercise
by the Individual General Partners and the Managing General Partner of the
powers respectively conferred on them and it by this Agreement.
D. As compensation for its overall supervisory services with
respect to the Partnership, the Partnership shall pay to the Managing
General Partner an incentive management fee as provided in Section
4.1(iii), Section 4.1(v) and Section 4.1(vi).
E. All of the Partnership's expenses shall be billed directly to
and paid by the Partnership. Reimbursements (other than for organization
and offering expenses) to the General Partners or any Affiliates shall not
be allowed, except for reimbursement of the actual cost to the General
Partners or such Affiliates of goods and materials used for or by the
Partnership and except as provided in this Section 5.1E. Expenses incurred
by the General Partners or such Affiliates in connection with the
administration of the Partnership, including, but not limited to, salaries,
rent and such other items generally constituting General Partners'
overhead, shall not be charged to the Partnership. Reimbursement of the
actual costs to the General Partners and such Affiliates of travel expenses
shall be limited as follows: the amount of such reimbursement plus the
amount of Acquisition Fees paid to any party in connection with the
acquisition of the Properties and the amounts distributed or paid to the
General Partners under Sections 4.1 and 5.1D will not exceed (a) 18% of the
gross proceeds of the offering (or, if less, the real estate commissions or
Acquisition Fees customarily charged in arm's length transactions by others
in the same geographical location for comparable property to that acquired
by the Partnership), and (b) 10% of the total amount of Disbursable Cash
distributed or paid pursuant to Sections 4.1 and 5.1D. In addition, such
reimbursement as to expenses relating to the acquisition of the Properties
will not be made if and to the extent that such expenses, when combined
with the Acquisition Fees, exceed 6% of the Purchase Price of all of the
Properties acquired. The reimbursement for expenses provided for in this
Section 5.1E shall be made to the General Partners regardless of whether
any distributions are made to the Limited Partners under the provisions of
Section 4.1.
F. The Managing General Partner shall initially, upon completion
of the offering contemplated by the Prospectus, establish reserves for
working capital and to pay taxes, insurance, Debt Service, repairs,
replacements or renewals, or other costs and expenses incident to the
ownership or operation of the Properties and for such other purposes as the
Managing General Partner may determine, in an amount equal to not less than
2% of the gross proceeds of such offering and thereafter shall maintain
such reserves in such amounts as the Managing General Partner deems
appropriate under the circumstances from time to time.
SECTION 5.2 Authority of the Managing General Partner
A. Except to the extent otherwise provided herein, the Managing
General Partner for, and in the name and on behalf of, the Partnership is
hereby authorized:
(i) to acquire by purchase, lease, exchange or otherwise any
real or personal property (including the Properties) which may be
necessary, convenient or incidental to the accomplishment of the purposes
of the Partnership; provided, however, that real property shall not be
acquired at a cost to the Partnership (which cost shall include any
Acquisition Fees) in excess of its market value as determined by an
appraisal prepared by a competent independent appraiser, and further
provided that investments by the Partnership in other partnerships or
ventures shall be limited to partnerships or
<PAGE>
ventures which own and operate a particular property in which the
Partnership or an Affiliate of any General Partner or both acquires a
controlling interest and which do not involve duplicate property management
or other fees and provided, in addition, that the Partnership will not
devote more than 10% of the gross proceeds of the offering to the purchase
of unimproved land or non-income producing property. For purposes of this
section "unimproved or non-income producing property" does not include
Properties under construction or under contract for development;
(ii) to operate, maintain, finance, improve, own, grant
options with respect to, sell, convey, assign, mortgage, exchange or lease
and to cause to have constructed any real estate and any personal property
necessary, convenient or incidental to the accomplishment of the purposes
of the Partnership;
(iii) to execute any and all agreements, contracts, documents,
certifications and instruments necessary or convenient in connection with
the management, maintenance and operation of the Properties;
(iv) to borrow money and issue evidences of indebtedness
necessary, convenient or incidental to the accomplishment of the purposes
of the Partnership, and to secure the same by mortgage, pledge or other
lien on any Properties or other assets of the Partnership; provided,
however, that the aggregate amount of mortgage indebtedness which may be
incurred in connection with the acquisition of Properties shall not exceed
80% of the Purchase Price of all Properties determined on a combined basis;
and provided, further, that in connection with the borrowing of money
recourse for the repayment of which is limited solely to property of the
Partnership, no lender shall be granted or acquire, at any time as a result
of making such a loan, any direct or indirect interest in the profits,
capital or property of the Partnership other than as a secured creditor;
(v) to execute, in furtherance of any or all of the purposes
of the Partnership, any deed, lease, mortgage, mortgage note, bill of sale,
contract or other instrument purporting to convey, exchange or encumber the
real or personal property of the Partnership;
(vi) to prepay in whole or in part, refinance, recast,
increase, modify or extend any mortgages affecting the Properties and in
connection therewith to execute any extensions or renewals of mortgages on
any of the Properties;
(vii) to execute an Agency Agreement with Merrill Lynch,
Pierce, Fenner & Smith Incorporated pursuant to which said firm would
assist the Partnership in the sale of Interests and pursuant to which the
Partnership would agree to indemnify and hold harmless said firm from any
liability incurred by it in so acting as agent for the Partnership; and
(viii) to engage in any kind of activity and to perform
and carry out contracts of any kind necessary to, or in connection with, or
incidental to the accomplishment of the purposes of the Partnership, as may
be lawfully carried on or performed by a partnership under the laws of each
State in which the Partnership is then formed or qualified.
B. Any Person dealing with the Partnership or the General Partners
may rely upon a certificate signed by the Managing General Partner,
thereunto duly authorized, as to:
(i) the identity of any General Partner or Limited Partner
hereof;
<PAGE>
(ii) the existence or non-existence of any fact or facts which
constitute a condition precedent to acts by a General Partner or in any
other manner germane to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver any
instrument or document of the Partnership; or
(iv) any act or failure to act by the Partnership or as to any
other matter whatsoever involving the Partnership or any Partner.
C. The Managing General Partner shall maintain in its records for
at least five years any appraisal required to be obtained under the
provisions of clause (i) of Section 5.2A.
SECTION 5.3 Authority of Partners to Deal With Partnership
A. Without limitation upon the other powers set forth herein, the
Managing General Partner is expressly authorized for, in the name of and on
behalf of the Partnership to:
(i) pay or cause to be paid to JMB Realty Corporation ("JMB")
(the parent company of the Managing General Partner), or purchase
Properties in connection with the purchase of which JMB shall receive from
the sellers thereof, Acquisition Fees in an amount equal to 8% of the
Limited Partners' Capital Contributions; provided, however, that (1)
Acquisition Fees shall be paid only for services actually rendered, and (2)
in no event shall the total of all Acquisition Fees paid to anyone exceed
the lesser of (a) the compensation customarily charged in arm's length
transactions by others rendering similar services as an on-going public
activity in the same geographical location, and for comparable property or
(b) an amount equal to 18% of the Capital Contributions to the Partnership;
and further provided that the limitation imposed in clause (2) shall be
applied separately to each Property, with the 18% maximum percentage
computed on that portion of the Capital Contributions (including a
proportionate share of uninvested reserves, and the selling commissions and
expenses incurred in connection with the offering contemplated by the
Prospectus) applicable to the Property which is the subject of the
transaction; and in no event shall Acquisition Fees payable to all pates in
connection with the acquisition of any Property exceed 6% of the cost to
the Partnership of such Property. In addition, in no event shall the total
of all Acquisition Fees paid to anyone plus amounts paid to the General
Partners under Section 4.2(iii) exceed the limitation set forth in
subclauses (a) and (b) of clause (2) above;
(ii) enter into an Agency Agreement with Merrill Lynch,
Pierce, Fenner & Smith Incorporated providing for the payment of
commissions to Carlyle Securities Corporation for participating as a
Selected Dealer in the offering of Interests to the public; provided,
however, that there shall be no selling commissions paid or received by any
Person in connection with the sale of Interests to (and for the account of)
a General Partner or Affiliated Person thereof;
(iii) invest in partnerships or ventures which own a particular
property in which an Affiliate of the General Partners (having comparable
investment objectives) has also made, or is expected to make, an equity
investment; provided, however, that (a) the Partnership and such Affiliate,
considered together, have or acquire a controlling interest in such other
ventures or partnerships, (b) there are no duplicate property management or
other fees, (c) the Partnership's investment is on substantially the same
terms and conditions as the investment of such Affiliate, (d) the purchase
price of the Partnership's investment has been confirmed by independent
appraisal as not greater than the fair market value of
<PAGE>
such investment, (e) such investment shall not result in the
impairment, abrogation or circumvention of any of the terms or provisions
of this Agreement and (f) the investments are not in public limited
partnerships or other public real estate investment entities;
(iv) enter into agreements with and pay fees to JMB or other
Affiliated Persons of the General Partners in consideration of property
management services respecting the Properties subject to the conditions of
this Agreement (it being understood and agreed that the provision of such
property management services does not constitute a part of the duties or
obligations of the Managing General Partner as a general partner of the
Partnership); provided, however, that any property management fee paid to
JMB or any Affiliated Person thereof shall be competitive in price and
terms with those of nonaffiliated Persons rendering comparable services
which could reasonably be made available to the Partnership (but in no
event at rates greater than 5% of the gross income from a Property);
(v) pay or cause to be paid brokerage commissions to JMB
Insurance Agency, Inc. or other Affiliated Persons of the General Partners
in connection with insurance covering the Properties subject to the
conditions that: (a) before any such brokerage services are provided, there
will have been received quotations from three independent insurance brokers
relating to the proposed coverage, which quotations shall be upon coverage
and terms comparable to those proposed to be provided by JMB Insurance
Agency, Inc., and such Agency shall not provide such insurance brokerage
services unless it can obtain such insurance at a cost which is no greater
than the lowest of the three unaffiliated insurance agency quotations; (b)
in no event will the commissions earned by JMB Insurance Agency, Inc. on
all insurance written on behalf of the Partnership exceed $25,000 per
annum; and (c) if at any time JMB Insurance Agency, Inc. ceases to derive
at least 75% of its gross income from insurance commissions with respect to
insurance written for Persons who are not Affiliates of any of the General
Partners, JMB Insurance Agency, Inc. shall not write any further insurance
on behalf of the Partnership or any Property then owned by it;
(vi) if the proceeds of the Partnership's sale of Interests as
described in Section 3.3A are insufficient to make, or repay indebtedness
incurred to make, required cash payments in connection with the acquisition
of any Property or Properties acquired prior to the termination of the
offering described in Section 3.3, sell to the General Partners or any
Affiliates of the General Partners such Property or Properties, but only on
terms which provide for cash payments to the Partnership equal to the
Partnership's cash payments made in connection with the acquisition of such
Property or Properties; and
(vii) enter into banking transactions in the ordinary course of
business with Continental Illinois National Bank and Trust Company of
Chicago or acquire properties encumbered by indebtedness owed to such Bank.
B. Other than as specifically authorized in Section 5.3A, the
Managing General Partner is prohibited from entering into any agreements,
contracts or arrangements on behalf of the Partnership with any General
Partner or any Affiliated Person of any General Partner. Such prohibition
shall include, without limitation, the following: (i) neither a General
Partner nor any such Affiliated Person shall be given an exclusive right to
sell or exclusive employment to sell Property for the Partnership
(provided, however, that the General Partners may receive a portion of Sale
or Refinancing Proceeds pursuant to Section 4.2); (ii) neither any General
Partner nor any such Affiliated Person shall receive directly or indirectly
<PAGE>
a commission or fee in connection with the reinvestment of the proceeds of
the sale, exchange or refinancing of any Property (provided, however, that
JMB or another Affiliate of the General Partners may receive an Acquisition
Fee in connection with the purchase of a Property which is in substitution
for a Property transferred back to a seller or an affiliate thereof which
transfer back does not constitute a Sale or Refinancing or result in Sale
or Refinancing Proceeds if no Acquisition Fee was paid to and retained by
JMB or another Affiliate of the General Partners in connection with the
purchase of the Property so transferred back); (iii) neither any General
Partner nor any such Affiliated Person shall enter into an agreement or
contract with the Partnership for the development of any Property or the
construction of improvements on any Property; and (iv) neither any General
Partner nor any such Affiliated Person shall loan money to the Partnership
with interest rates and other finance charges and fees in excess of the
amounts that are charged by unrelated banks on comparable loans for the
same purpose in the locality of the Property or make loans with a
prepayment charge or penalty which are evidenced or secured by either a
first or junior or all-inclusive note or mortgage except to the extent that
such prepayment charge or penalty is attributable to an underlying
encumbrance. In the event the Partnership utilizes any all-inclusive note
said note shall provide that the Partnership shall receive credit on its
obligation under said note for payments made by the Partnership directly on
the underlying encumbrance and that a bank, escrow company or other paying
agent shall collect payments (other than amounts not to be applied to the
underlying encumbrance) on the all-inclusive note and make disbursements
therefrom to the holder of the underlying encumbrance prior to making any
disbursement to the holder of the all-inclusive note or in the alternative
all payments on the all-inclusive note and underlying notes shall be made
directly by the Partnership.
C. Any agreements, contracts and arrangements with a General
Partner or Affiliated Person of a General Partner permitted by clauses (iv)
and (v) of Section 5.3A shall be subject to the following conditions:
(i) any such agreements, contracts or arrangements shall be
embodied in a written contract which precisely describes the subject matter
thereof and all compensation to be paid therefor;
(ii) no rebates or "give-ups" may be received by a General
Partner or any such Affiliated Person, nor may the General Partner or any
such Affiliated Person participate in any reciprocal business arrangements
which would have the effect of circumventing any of the provisions of this
Agreement;
(iii) neither a General Partner (in any capacity other than as
General Partner) nor any such Affiliated Person may act as paying or
purchasing agent for the Partnership and no funds of the Partnership may be
paid to a General Partner or any such Affiliated Person by way of
reimbursement for Partnership expenses other than organization and offering
expenses or direct expenses as permitted by Section 5.1E;
(iv) any such agreements, contracts or arrangements shall be
fully and promptly disclosed to all Partners in the reports provided for in
Sections 9.4A and 9.4C (stating the compensation to be paid by the
Partnership);
(v) any such agreements, contracts or arrangements shall be
terminable by either party, without penalty, upon 60 days' prior written
notice; and
(vi) neither a General Partner nor any such Affiliated Person
shall receive any brokerage commission (or any other form of compensation)
from any Person in connection with the sale of any Property or other assets
by the Partnership (provided, however, that the General Partners may
receive a portion of Sale or Refinancing Proceeds pursuant to Section 4.2).
<PAGE>
SECTION 5.4 Restrictions on Authority of Managing General Partner
A. Without the Consent of all the Limited Partners, the Managing
General Partner shall not have the authority to:
(i) do any act in contravention of this Agreement;
(ii) do any act which would make it impossible to carry on the
ordinary business of the Partnership;
(iii) confess a judgment against the Partnership;
(iv) possess Partnership property, or assign its rights in
specific Partnership property, for other than a Partnership purpose;
(v) admit a Person as a General Partner, except as provided
in this Agreement;
(vi) admit a Person as a Limited Partner, except as provided
in this Agreement;
(vii) knowingly perform any act that would subject any Limited
Partner to liability as a general partner in any jurisdiction; or
(viii) invest in junior trust deeds or similar obligations,
except that the Partnership may advance a portion of the purchase price of
a Property to the seller in the form of a loan, and except that junior
trust deeds or similar obligations may be taken back from purchasers of
Properties in connection with the sale thereof by the Partnership.
B. Without the Consent of all the General Partners and (subject to
Section 10.3) a majority in interest of the Limited Partners, the Managing
General Partner shall not have the authority to:
(i) sell or otherwise dispose of at one time all or
substantially all the assets of the Partnership, except for a liquidating
sale of a final Property remaining as a result of the sale of Properties in
the ordinary course of business; or
(ii) elect to dissolve the Partnership.
C. Without the Consent of all the General Partners the Managing
General Partner shall not have the authority to purchase or to sell or
otherwise dispose of any of the Properties.
D. The Managing General Partner on behalf of the Partnership shall
not purchase, lease or acquire any Property from any General Partner or any
Affiliated Person of any General Partner or from any Person in which any
General Partner or any Affiliated Person of any General Partner has a
material interest. Notwithstanding the foregoing, the Managing General
Partner may purchase Property in its own name, and assume loans in
connection therewith and temporarily hold title thereto for the purpose of
facilitating the acquisition of such Property or the borrowing of money or
obtaining of financing for the Partnership, or completion of construction
of the Property, or any other purpose related to the business of the
Partnership, provided that such Property is purchased by the Partnership
for a cash investment no greater than the cash investment in such Property
by the Managing General Partner and that no other payment directly or
indirectly arising out of such transaction is received by any General
Partner or Affiliated Person thereof apart from compensation otherwise
permitted by this Agreement. Except as otherwise provided herein, the
Partnership shall not sell Property to any General Partner or any
Affiliated Person of a General Partner. The Partnership shall not lease
Property to any General Partner or any Affiliated Person of a General
Partner.
<PAGE>
E. The Managing General Partner shall not on behalf of the
Partnership acquire any Property in exchange for Interests in the
Partnership.
F. The Managing General Partner, in its capacity as such, or in
its capacity as a general partner in any partnership or joint venture which
may hold title to any Property, shall not do, or cause any of its
subsidiaries acting in such capacity to do, or cause the Partnership to do,
any act which would not be permitted under this Agreement to be done by it
as the Managing General Partner if title to such Property were held
directly by the Partnership, and shall, in general, act, and cause any such
subsidiary or the Partnership to act, in such capacity in the same manner
as if title to such Property were held directly by the Partnership.
G. The Managing General Partner shall not utilize Disbursable Cash
or Sale or Refinancing Proceeds for investment in Properties in addition to
Properties purchased out of Capital Contributions.
SECTION 5.5 Duties and Obligations of the General Partners
A. The General Partners shall take all action which may be
necessary or appropriate (i) for the continuation of the Partnership's
valid existence as a limited partnership under the laws of the State of
Illinois (and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Limited Partners or to
enable the Partnership to conduct the business in which it is engaged) and
(ii) for the acquisition, development, maintenance, preservation and
operation of the Properties as contemplated by the Prospectus in accordance
with the provisions of this Agreement and applicable laws and regulations
(it being understood and agreed, however, that the provision of day-to-day
property management services for specific properties is not the obligation
of the General Partners of the Partnership).
B. Each of the General Partners shall devote to the Partnership
such time as may be necessary for the proper performance of its duties
hereunder, but neither the officers and directors of the Managing General
Partner nor the other General Partners shall be expected to devote their
full time to the performance of such duties.
C. The General Partners shall at all times use their best efforts
to maintain their combined net worth at a sufficient level to meet all
requirements of the Internal Revenue Code of 1954, as amended, under
currently applicable rulings, regulations and policies of the Internal
Revenue Service and as hereafter interpreted by the Internal Revenue
Service, any agency of the Federal government or the courts, to assure that
the Partnership will be classified for Federal income tax purposes as a
partnership and not as an association taxable as a corporation, and shall,
irrespective of such requirements, maintain their net worth at an amount at
least equal to $1,000,000, being the minimum net worth required under Rule
II of the Statement of Policy of the Midwest Securities Commissioners
Association on the date of the Prospectus. The General Partners shall use
their best efforts to cause JMB to comply in all respects with the terms of
its obligation which shall be comparable to the General Partners'
obligation and which shall be set forth in a written commitment to be
received by the Partnership prior to the admission of Additional limited
Partners under Section 3.3A.
D. The Managing General Partner shall take such action as may be
necessary or appropriate in order to form or qualify the Partnership under
the laws of any jurisdiction in which the Partnership is doing business or
in which such formation or qualification is necessary in order to protect
the limited liability of the Limited Partners or in order to continue in
effect such formation or qualification. The Managing General Partner shall
file or cause to be filed for recordation in the office of the appropriate
authorities of the State of Illinois, and in the proper office or offices
in each other jurisdiction in which the Partnership is formed or qualified,
<PAGE>
such certificates (including limited partnership and fictitious name
certificates) and other documents as are required by the applicable
statutes, rules or regulations of any such jurisdiction or are required to
reflect the identity of the Partners and the amounts of their respective
Capital Contributions.
E. Each of the General Partners shall at all times conduct its
affairs and the affairs of the Partnership and all of its Affiliated
Persons in such a manner that neither the Partnership nor any Partner nor
any Affiliated Person of any Partner will have any personal liability under
any mortgage on any of the Properties, unless in the opinion of the
Managing General Partner it would be in the best interests of the Limited
Partners.
F. The Managing General Partner shall prepare or cause to be
prepared and shall file on or before the due date (or any extension
thereof) any Federal, state or local tax returns required to be filed by
the Partnership. The Managing General Partner shall cause the Partnership
to pay any taxes payable by the Partnership.
G. The Managing General Partner shall obtain and keep in force
during the term hereof fire and extended coverage, workmen's compensation
and public liability insurance in favor of the Partnership with such
insurers and in such amounts as the Managing General Partner shall deem
advisable, but in amounts not less (and with deductible amounts not
greater) than those customarily maintained with respect to properties
comparable to the Properties.
H. The General Partners shall be under a fiduciary duty to conduct
the affairs of the Partnership in the best interests of the Partnership and
of the Limited Partners, including the safekeeping and use of all
Partnership funds and assets and the use thereof for the exclusive benefit
of the Partnership. The Partnership shall not enter into any transaction
with a General Partner or any of its Affiliated Persons which may
significantly benefit such General Partner in its independent capacity or
any such Affiliated Persons unless the transaction is entered into
principally for the benefit of the Partnership in the ordinary course of
Partnership business.
I. In the case of any vote, consent or other action by the Limited
Partners pursuant to the terms of this Agreement which shall become binding
upon the Managing General Partner, the Managing General Partner, in acting
on behalf of the Partnership in the Partnership's capacity as a partner in
any partnership or joint venture which may hold title to any Property,
shall, to the extent permitted by the partnership agreement relating to
such partnership or joint venture, take corresponding or identical action
or cause an Affiliate of the Managing General Partner in its capacity as a
general partner of such partnership or joint venture to take such action
pursuant to the terms of the partnership agreement relating to such
partnership or joint venture and, in general, shall not act on behalf of
the Partnership in such capacity in a manner inconsistent with any such
vote, consent or other action pursuant to this Agreement.
J. The General Partners shall use their best efforts to assure
that the Partnership shall not be deemed an investment company as such term
is defined in Investment Company Act of 1940.
SECTION 5.6 Compensation of General Partners
The General Partners shall not in their capacities as General
Partners receive any salary, fees, profits or distributions except profits,
distributions, fees and allocations to which they may be entitled under
Articles Four and Five.
<PAGE>
SECTION 5.7 Other Business of Partners
Any Partner may engage independently or with others in other business
ventures of every nature and description, including, without limitation,
the rendering of advice or services of any kind to other investors and the
making or management of other investments. 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. Neither the Managing General Partner
nor any Affiliate of any General Partner shall be obligated to present any
particular investment opportunity to the Partnership even if such
opportunity is of a character which, if presented to the Partnership, could
be taken by the Partnership and each of them shall have the right to take
for its own account (individually or as a trustee) or to recommend to
others any such particular investment opportunity. Notwithstanding the
above, no General Partner or Affiliated Person of a General Partner shall
offer for sale interests in a public limited partnership whose underlying
properties are less than 75% specified and which has the same investment
objectives as the Partnership until substantially all the net proceeds from
the offering contemplated by the Prospectus have been invested or committed
for investment in real properties as described in Section 3.4D hereof.
SECTION 5.8 Limitation on Liability of General Partners; Indemnification
None of the General Partners shall be liable, responsible or
accountable in damages or otherwise to any of the Limited Partners for any
act or omission performed or omitted by them in good faith pursuant to the
authority granted to them by this Agreement and in a manner reasonably
believed by them to be within the scope of the authority granted to them by
this Agreement and in the best interests of the Partnership, provided that
such General Partner was not guilty of fraud, bad faith or negligence
(gross or otherwise). The Partnership shall indemnify and save harmless the
General Partners against any loss or damage incurred by them on behalf of
the Partnership or in furtherance of the Partnership's interests without
relieving the General Partners of liability for fraud, bad faith,
negligence (gross or otherwise) or other breach of fiduciary duty. The
satisfaction of any indemnification and any saving harmless shall be from
and limited to Partnership assets, and no Limited Partner shall have any
personal liability on account thereof.
ARTICLE SIX
ADMISSION OF SUCCESSOR AND ADDITIONAL GENERAL PARTNERS
SECTION 6.1 Admission of Successor or Additional General Partners
A. With the Consent of all the other General Partners and of such
number of the Limited Partners as are then required under the Uniform
Limited Partnership Act of the State of Illinois, and under the laws of
such other jurisdictions in which the Partnership is formed or qualified,
to consent to or ratify the admission of a General Partner, but in no event
with the consent of less than a majority in interest of the Limited
Partners, any General Partner may at any time designate one or more Persons
to be successors to such General Partner or to be additional General
Partners, in each case with such participation in such General Partner's
Interest as such General Partner and such successors or additional General
Partners may agree upon, provided that the Interests of the Limited
Partners shall not be affected thereby. Each such designee shall become a
successor or additional General Partner upon satisfying the conditions of
Section 11.2.
<PAGE>
B. Except in connection with a transfer to a successor or
additional General Partner pursuant to Section 6.1A, no General Partner
shall have any right to retire or withdraw voluntarily from the Partnership
or to sell, transfer or assign its Interest, except that (i) it may
substitute in its stead as General Partner any entity which has, by merger,
consolidation or otherwise, acquired substantially all of its assets or
stock and continued its business or (ii) it may cause to be admitted to the
Partnership an additional General Partner or Partners to enable the
aggregate net worth of the General Partners to comply with the provisions
of Section 5.5C. Each such successor or additional General Partner shall be
admitted as such to the Partnership upon satisfying the conditions of
Section 11.2. Each Limited Partner hereby Consents to the admission of any
additional or successor General Partner pursuant to this Section 6.1B, and
no further Consent or approval shall be required.
C. Any voluntary withdrawal by any General Partner from the
Partnership or any sale, transfer or assignment by such General Partner of
its Interest shall be effective only upon the admission in accordance with
Section 6.1A of a successor or additional General Partner, as the case may
be.
SECTION 6.2 Bankruptcy, Death, Dissolution or Incompetence of a
General Partner
A. In the event of the bankruptcy of a General Partner or the
death or dissolution of a General Partner or the adjudication that a
General Partner is incompetent (which term shall include, but not be
limited to, insanity), the business of the Partnership shall be continued
with Partnership property if such General Partner is not then the sole
General Partner.
B. Upon the bankruptcy, death, dissolution or adjudication of
incompetence of a General Partner such General Partner shall immediately
cease to be a General Partner and its Interest in the Partnership shall
terminate; provided, however, that such termination shall not affect any
rights or liabilities of such General Partner which matured prior to such
event, or the value, if any, at the time of such event of the Interest of
such General Partner.
C. If, at the time of the bankruptcy, death, dissolution or
adjudication of incompetence of a General Partner such General Partner was
not the sole General Partner, the remaining General Partner or Partners
shall continue the business of the Partnership and shall immediately (i)
give Notification to the Limited Partners of such event and (ii) make such
amendments to this Agreement and execute and file for recordation such
amendments or other documents or instruments as are necessary to reflect
the termination of the Interest of the bankrupt, deceased, dissolved or
incompetent General Partner and such General Partner's having ceased to be
a General Partner.
SECTION 6.3 Liability of a Withdrawn General Partner
Any General Partner who shall voluntarily or involuntarily for any
reason (including bankruptcy, death, dissolution or adjudication of
incompetence) withdraw from the Partnership or sell, transfer or assign its
Interest shall be and remain liable for all obligations and liabilities
incurred by it as General Partner prior to the time such withdrawal, sale,
transfer or assignment shall, as provided in Section 6.1, have become
effective, but it shall be free of any obligation or liability incurred on
account of the activities of the Partnership from and after the time such
withdrawal, sale, transfer or assignment shall have become effective.
SECTION 6.4 Restrictions on Transfer of General Partner's Interest
A. Notwithstanding anything to the contrary in this Article Six, a
General Partner's Interest shall at all times be subject to the
restrictions on transfer set forth in Sections 7.1A, 7.1B and 7.2D.
<PAGE>
B. Notwithstanding the provisions of Sections 6.1 and 6.5, unless
at the time of the operation of Sections 6.1 or 6.5 counsel satisfactory to
the Limited Partners (as defined in Section 10.3) shall have delivered to
the Partnership an opinion to the effect that the giving of the Consent of
the Limited Partners pursuant to Section 6.1 by express Consent of a
majority in interest of the Limited Partners, or that the giving of the
Consent in advance to the event specified in Section 6.1B, is permitted by
the Uniform Limited Partnership Act of the State of Illinois and by the
laws of such other jurisdictions in which the Partnership is formed or
qualified, will not impair the limited liability of the Limited Partners
and will not adversely affect the classification of the Partnership as a
partnership for Federal income tax purposes, the Consent of the Limited
Partners pursuant to Section 6.1 may then be given only by the express
Consent at that time of such required number of Limited Partners as shall
be set forth in said opinion.
C. No assignee or transferee of all or any part of the Interest of
a General Partner shall have any right to become a General Partner except
as provided in this Article Six.
SECTION 6.5 Consent of Limited Partners to Admission of Successor
or Additional General Partners
Subject to the provisions of Sections 6.1 and 6.4, each of the
Limited Partners by the execution of this Agreement hereby Consents to the
admission of any Person as a successor or additional General Partner to
which there has at the time been express Consent of a majority in interest
of the Limited Partners pursuant to Section 6.1. Upon receipt pursuant to
Section 6.1 of the Consent of a majority in interest of the Limited
Partners to such admission, subject to the provisions of Section 6.4, such
admission shall, without any further Consent or approval of the Limited
Partners, be an act of all the Limited Partners.
SECTION 6.6 Valuation of Interest of General Partner
In the event of the removal of any General Partner, its Interest as a
General Partner in the Partnership shall be appraised by two independent
appraisers, one selected by the removed General Partner and one by the
Limited Partners. In the event that such two appraisers are unable to agree
on the value of the removed General Partner's Interest, they shall jointly
appoint a third independent appraiser whose determination shall be final
and binding. The Partnership shall pay the removed General Partner for the
value of its Interest as so determined by delivery of a promissory note
bearing interest at the rate of 6% per annum, with interest payable
annually and principal payable, if at all, from any cash distribution which
the removed General Partner otherwise would have been entitled to receive
pursuant to Section 4.2 of this Agreement. Any amounts received pursuant to
this Section 6.6 shall constitute complete and full discharge for all
amounts owing to the removed General Partner on account of its Interest in
the Partnership. For purposes of this Section 6.6, the independent
appraiser selected by the Limited Partners shall be selected in the
following manner: A list of three qualified MAI appraisers shall be
obtained (by a General Partner not being removed) from the Chicago Board
of Real Estate Appraisers and one of said three appraisers shall be
selected by random number and proposed by such General Partner for
selection by the Limited Partners. Such appraiser shall be deemed selected
by the Limited Partners unless objected to in writing by a majority in
interest of the Limited Partners within 45 days after Notification thereof
is sent by such General Partner.
<PAGE>
ARTICLE SEVEN
TRANSFERABILITY OF PARTNERS' INTERESTS
SECTION 7.1 Restrictions on Transfers of Interests
A. No sale or exchange of any Interest, or any fraction thereof,
may be made if the Interest sought to be sold or exchanged, when added to
the total of all other Interests sold or exchanged within the period of 12
consecutive months prior thereto, would, in the opinion of counsel for the
Partnership, result in the Partnership being considered to have been
terminated within the meaning of Section 708 of the Code.
B. No transfer or assignment of any Interest, or any fraction
thereof, may be made if counsel for the Partnership shall be of the opinion
that such transfer or assignment would be in violation of any state
securities or "Blue Sky" laws (including any investment suitability
standards) applicable to the Partnership.
C. No purported sale, assignment or transfer by a Limited Partner
of an Interest after which the transferor or the transferee would hold an
Interest representing a Capital Contribution of less than $5,000 will be
permitted or recognized (except for transfers by gift, inheritance,
intra-family transfers, family dissolutions and transfers to Affiliates).
SECTION 7.2 Assignees and Substituted Limited Partners
A. If a Limited Partner dies, his executor, administrator or
trustee, or, if he is adjudicated incompetent or insane, his committee,
guardian or conservator, shall have all the rights of a Limited Partner for
the purpose of settling or managing his estate and such power as the
decedent or incompetent possessed to assign all or any part of his Interest
and to join with the assignee thereof in satisfying conditions precedent to
such assignee becoming a Substituted Limited Partner. The death,
dissolution, adjudication of incompetence or bankruptcy of a Limited
Partner shall not dissolve the Partnership.
B. The Partnership need not recognize for any purpose any
assignment of all or any fraction of the Interest of a Limited Partner
unless there shall have been filed with the Partnership a duly executed and
acknowledged counterpart of the instrument making such assignment and such
instrument evidences the written acceptance by the assignee of all of the
terms and provisions of this Agreement and represents that such assignment
was made in accordance with all applicable laws and regulations (including
investment suitability requirements).
C. Any Limited Partner who shall assign all his Interest shall
cease to be a Limited Partner of the Partnership, except that unless and
until a Substituted Limited Partner is admitted in his stead, such
assigning Limited Partner shall retain the statutory rights of an assignor
of a limited partnership interest under the Uniform Limited Partnership Act
of the State of Illinois.
D. Any Person who is an assignee of all or any fraction of the
Interest of a Limited Partner and who has satisfied the requirements of
Section 7.2B shall become a Substituted Limited Partner when such Person
shall have satisfied the conditions of Section 11.2 and shall have paid all
reasonable legal fees and filing costs in connection with his substitution
as a Limited Partner; provided, however, that the substitution of any
assignee of an Interest as a Substituted Limited Partner shall be subject
to the consent of the Managing General Partner, which consent may be
granted or withheld in its sole discretion. Notwithstanding the time at
which the conditions of Section 11.2 shall have been satisfied or such
legal fees and filing costs shall have been paid and notwithstanding
whether any assignee of an Interest shall have become a Substituted Limited
<PAGE>
Partner, any assignee of an Interest shall, (i) for the purposes of
Section 4.4C, be recognized as a holder of Interests as of the first day of
the calendar quarter in which such assignment occurs and (ii) for the
purposes of Section 4.4D, be recognized as a holder of Interests as of the
date specified by the parties in the instrument of assignment provided for
in Section 7.2B. Notwithstanding the foregoing, the rights of an assignee
of an Interest who does not become a Substituted Limited Partner by reason
of nonconsent thereto by the Managing General Partner shall be limited to
receipt of his share of Disbursable Cash, Sale or Refinancing Proceeds and
Partnership Profits and Losses for Tax Purposes as determined under Article
Four, and the assignment to such an assignee shall be recognized not later
than the last day of the calendar month following receipt of the instrument
of assignment provided for in Section 7.2B.
E. A Person who is the assignee of all or any fraction of the
Interest of a Limited Partner, but does not become a Substituted Limited
Partner and desires to make a further assignment of such Interest, shall be
subject to all the provisions of this Article Seven to the same extent and
in the same manner as any Limited Partner desiring to make an assignment of
his Interest.
F. There shall be no restrictions on the assignment of Interests
except as provided in this Article Seven.
ARTICLE EIGHT
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
SECTION 8.1 Events Causing Dissolution
The Partnership shall terminate upon the happening of any of the
following events:
(i) the bankruptcy, death, dissolution or adjudication of
incompetence of a sole General Partner;
(ii) the sale or other disposition of all the interests in
real estate (including purchase money security interests) of the
Partnership;
(iii) the election by the Managing General Partner pursuant to
Section 5.4B(ii), or the vote by the Limited Partners pursuant to Section
10.2(ii), to dissolve the Partnership; or
(iv) the happening of any other event causing the dissolution
of the Partnership under the laws of the State of Illinois.
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 Partnership's certificate of limited partnership
shall have been cancelled and the assets of the Partnership shall have been
distributed as provided in Section 8.3. Notwithstanding the dissolution of
the Partnership, prior to the termination of the Partnership, as aforesaid,
the business of the Partnership and the affairs of the Partners, as such,
shall continue to be governed by this Agreement.
<PAGE>
SECTION 8.2 Capital Contribution upon Dissolution.
Each holder of an Interest shall look solely to the assets of the
Partnership for all distributions with respect to the Partnership and his
Capital Contribution thereto and share of Profits or Losses for Tax
Purposes thereof, and shall have no recourse therefor (upon dissolution or
otherwise) against any General Partner or any Limited Partner; provided,
however, that upon dissolution and termination of the Partnership, the
General Partners shall contribute to the Partnership in the proportion set
forth below an aggregate amount equal to (and shall in no event be
obligated to contribute more than) the lesser of (i) the deficit balance in
their capital accounts at such termination, (ii) 1.01% of the Capital
Contributions made by the Limited Partners, or (iii) the deficit in a
hypothetical capital account of the General Partners assuming they had only
an aggregate 1% of each material item of Partnership income, gain, loss,
deduction or credit at all times during the existence of the Partnership.
Such Capital Contribution under clauses (i), (ii) or (iii) shall be made
90% by the Managing General Partner and 10% by the Individual General
Partners. The hypothetical capital account under clause (iii) above shall
not take into account any actual distribution of cash during the life of
the Partnership. No holder of an Interest shall have any right to demand or
receive property other than cash upon dissolution and termination of the
Partnership.
SECTION 8.3 Liquidation
A. Upon dissolution of the Partnership, the Managing General
Partner shall liquidate the assets of the Partnership, apply and distribute
the proceeds thereof as contemplated by this Agreement and cause the
cancellation of the Partnership's certificate of limited partnership.
B. Notwithstanding the foregoing, in the event the Managing
General Partner shall determine that an immediate sale of part or all of
the Partnership assets would cause undue loss to the Partners, the Managing
General Partner, in order to avoid such loss, may, after having given
Notification to all the Limited Partners, to the extent not then prohibited
by the Limited Partnership Act of any jurisdiction in which the Partnership
is then formed or qualified and applicable in the circumstances, either
defer liquidation of and withhold from distribution for a reasonable time
any assets of the Partnership except those necessary to satisfy the
Partnership's debts and obligations, or distribute the assets to the
Partners in kind.
C. If any assets of the Partnership are to be distributed in kind,
such assets shall be distributed on the basis of the fair market value
thereof and any Partner entitled to any interest in such assets shall
receive such interest therein as a tenant-in-common with all other Partners
so entitled. The fair market value of such assets shall be determined by an
independent appraiser to be selected by the Accountants.
D. All distributions upon liquidation of the Partnership,
including distributions in kind, shall be deemed to be distributions
arising from Sales or Refinancings and shall be made as distributions of
Sale or Refinancing Proceeds in accordance with Section 4.2. Each holder of
an Interest shall look solely to the assets of the Partnership for all
distributions with respect to the Partnership and his Capital Contribution
thereto and share of Disbursable Cash and Profits or Losses for Tax
Purposes thereof, and shall have no recourse therefor (upon dissolution or
otherwise) against any General Partner or any Limited Partner.
<PAGE>
ARTICLE NINE
BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS, ETC.
SECTION 9.1 Books and Records
A. The books and records of the Partnership shall be maintained at
the principal office of the Partnership and shall be available for
examination there by any Partner or his duly authorized representatives at
any and all reasonable times. The Partnership may maintain such books and
records and may provide such financial or other statements as the Managing
General Partner in its sole discretion deems advisable. Any Partner, or his
duly authorized representative, upon paying the costs of collection,
duplication and mailing, shall be entitled to a copy of the list of the
names and addresses of the Limited Partners (including the number of
Interests owned by each of them).
B. The Accountants shall audit all annual financial statements and
reports to the Partners, which will be prepared in accordance with
generally accepted accounting principles, and shall prepare for execution
by the Managing General Partners all tax returns of the Partnership.
SECTION 9.2 Cash Basis and Fiscal Year
The books of the Partnership shall be kept on the cash basis. The
fiscal year of the Partnership shall be the calendar year.
SECTION 9.3 Bank Accounts
The bank accounts of the Partnership shall be maintained in such
banking institutions as the Managing General Partner shall determine, and
withdrawals shall be made only in the regular course of Partnership
business on such signature or signatures as the Managing General Partner
may determine. All deposits and other funds not needed in the operation of
the business may be invested in U.S. government securities, securities
issued or guaranteed by U.S. government agencies, securities issued or
guaranteed by states or municipalities, certificates of deposit and time or
demand deposits in commercial banks, bankers' acceptances, savings and loan
association deposits or deposits in members of the Federal Home Loan Bank
System. The funds of the Partnership shall not be commingled with the funds
of any other Person.
SECTION 9.4 Reports
A. Within 60 days after the end of each fiscal quarter, the
Managing General Partner shall send to each Person who was a Limited
Partner at any time during the quarter then ended (i) a balance sheet
(which need not be audited), (ii) a profit and loss statement (which need
not be audited), (iii) a cash flow statement (which need not be audited),
(iv) a detailed statement describing (a) any new agreement, contract or
arrangement required to be reported by Section 5.3C (iv) and (b) the amount
of all fees and other compensation and distributions paid by the
Partnership for such quarter to any General Partner or any Affiliated
Person of any General Partner, (v) a report in narrative form summarizing
the status of the Partnership's investments, (vi) until the Capital
Contributions of the Partnership shall be fully invested, a special report
of real property acquisitions including (a) a description of the properties
purchased, (b) a description of the geographic locale and of the market
upon which success of operation is dependent, (c) the date of appraisal and
amount thereof, (d) the actual purchase price and terms, (e) the cash
expended from Capital Contributions to acquire each Property and (f) the
amount which then remains unexpended, stated in terms of both dollar amount
and percentage of the total amount of Capital Contributions, and (vii) a
report of the activities of the Partnership during such fiscal quarter.
<PAGE>
B. Within 75 days after the end of each fiscal year, the Managing
General Partner shall send to each Person who was a Limited Partner at any
time during the fiscal year then ended such tax information as shall be
necessary for the preparation by such Limited Partner of his Federal income
tax return, and required state income and other tax returns with regard to
jurisdictions in which the Partnership is formed or qualified or owns
Properties.
C. Within 120 days after the end of each fiscal year, the Managing
General Partner shall send to each Person who was a Limited Partner at any
time during the fiscal year then ended (i) a balance sheet as of the end of
such fiscal year and statements of income, partners' equity and changes in
financial position for such fiscal year, all of which shall be prepared in
accordance with generally accepted accounting principles and accompanied by
an auditor's report containing an opinion of the Accountants, (ii) a cash
flow statement (which need not be audited), (iii) a report summarizing the
fees and other remuneration paid by the Partnership for such fiscal year to
any General Partner or any Affiliated Person of any General Partner, and
(iv) a statement (which need not be audited) showing the Disbursable Cash
and Sale or Refinancing Proceeds distributed to each Person who was a
Limited Partner at any time during such fiscal year in respect of such
year, which statement shall identify Disbursable Cash distributed from
operations during the year (including payments under management agreements
and lease payments under net leases, if any, with sellers), Disbursable
Cash from operations during the prior year and from uninvested reserves
held from the proceeds of the offering of Interests.
D. Within 30 days after the "occurrence of any Sale or Refinancing
the Managing General Partner shall send to each Person who was a Limited
Partner at the time of the occurrence of such Sale or financing a report as
to the nature of such Sale or Refinancing and as to the Profit for Tax
Purposes (including the amount of any recapture income) or Loss for Tax
Purposes and Sale or Refinancing Proceeds arising from such Sale or
Refinancing.
E. Within 90 days after the end of each fiscal year of the
Partnership, the Managing General Partner shall prepare and Me with the
books and records of the Partnership available for inspection by Limited
Partners a report containing a statement of the net worth of each General
Partner, computed on the same basis as the statements of such net worth
filed with the Securities and Exchange Commission in connection with the
offering of Interests.
F. The Managing General Partner shall prepare, and file with
appropriate state authorities, all reports required to be so filed by state
securities or "blue sky" authorities.
SECTION 9.5 Depreciation and Elections
With respect to all depreciable assets of the Partnership, the
Partnership may elect to use, so far as permitted by the provisions of the
Code, accelerated depreciation methods; however, the Partnership may change
to or elect some other method of depreciation so long as such other method
is, in the opinion of the Managing General Partner, most advantageous to a
majority in interest of the Limited Partners.
<PAGE>
ARTICLE TEN
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS
SECTION 10.1 Meetings
A. Meetings of the Limited Partners for any purpose may be called
by the Managing General Partner and shall be called by the Managing General
Partner upon receipt of a request in writing signed by 10% or more m
interest of the Limited Partners. Notice of such meeting shall be sent
within ten days after receipt of such request. Such request shall state the
purpose of the proposed meeting and the matters proposed to be acted upon
thereat. Such meeting shall be held at the principal office of the
Partnership, or at such other place as may be designated by the Managing
General Partner or, if called upon the request of Limited Partners, as
designated by such Limited Partners. In addition, upon receipt of a request
in writing signed by 10% or more in interest of the Limited Partners, the
Managing General Partner shall submit any matter (upon which the Limited
Partners are entitled to act) to the Limited Partners for a vote by written
Consent without a meeting.
B. A notice of any such meeting shall be given either personally
or by mail, not less than 15 days nor more than 60 days before the date of
the meeting, to each Limited Partner at his record address, or at such
other address which he may have furnished in writing to the Managing
General Partner. Such notice shall be in writing, and shall state the
place, date and hour of the meeting, and shall indicate that it is being
issued at or by the direction of the Partner or Partners calling the
meeting. The notice shall state the purpose or purposes of the meeting. If
a meeting is adjourned to another time or place, and if any announcement of
the adjournment of time or place is made at the meeting, it shall not be
necessary to give notice of the adjourned meeting. The presence in person
or by proxy of a majority in interest of the Limited Partners shall
constitute a quorum at all meetings of the Limited Partners; provided,
however, that if there be no such quorum, holders of a majority in interest
of such Limited Partners so present or so represented may adjourn the
meeting from time to time without further notice, until a quorum shall have
been obtained. No notice of the time, place or purpose of any meeting of
Limited Partners need be given to any Limited Partner who attends in person
or is represented by proxy (except when the Limited Partner attends a
meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business on the ground that the meeting
is not lawfully called or convened), or to any Limited Partner entitled to
such notice who, in writing, executed and filed with the records of the
meeting, either before or after the time thereof, waives such notice.
C. For the purpose of determining the Limited Partners entitled to
vote on, or to vote at, any meeting of the Partnership or any adjournment
thereof, the Managing General Partner or the Limited Partners requesting
such meeting may fix, in advance, a date as the record date for any such
determination of Limited Partners. Such date shall not be more than 50 days
nor less than ten days before any such meeting.
D. Each Limited Partner may authorize any person or persons to act
for him by proxy in all matters in which a Limited Partner is entitled to
participate, whether by waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited
Partner or his attorney-in-fact. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the Limited
Partner executing it.
E. At each meeting of Limited Partners, the Limited Partners
present or represented by proxy shall elect such officers and adopt such
rules for the conduct of such meeting as they shall deem appropriate.
<PAGE>
SECTION 10.2 Voting Rights of Limited Partners
Subject to Section 10.3, a majority in interest of the Limited
Partners, without the concurrence of the General Partners, may (i) amend
this Agreement, subject to the provisions of Section 11.2B and to the
conditions that such amendment (a) may not in any manner allow the Limited
Partners to take part in the control of the Partnership's business and (b)
may not, without the consent of the General Partner affected, alter the
rights, powers and duties of such General Partner as set forth in Article
Five, the interest of the General Partners in Profits or Losses for Tax
Purposes or in Disbursable Cash or Sale or Refinancing Proceeds or the
valuation of the Interest of a General Partner as provided in Section 6.6;
(ii) dissolve the Partnership; or (iii) remove any General Partner and
(unless such General Partner was the sole remaining General Partner) elect
a replacement therefor.
SECTION 10.3 Conditions to Action by Limited Partners
The right of the Limited Partners to vote to amend this Agreement, to
dissolve the Partnership, to remove a General Partner and elect a
replacement therefor and to approve the sale of all or substantially all
the assets of the Partnership pursuant to Sections 5.4 and 10.2 shall not
come into existence or be effective in any manner unless and until (A) the
Partnership has received an opinion of counsel, which counsel is
satisfactory to a majority in interest of the Limited Partners, as to the
legality of such action and (B) either (i) the Partnership has received an
opinion of counsel, which counsel is satisfactory to a majority in interest
of the Limited Partners, that such action may be effected without
subjecting the Limited Partners to liability as general partners under the
Uniform Limited Partnership Act of the State of Illinois or under the laws
of such other jurisdictions in which the Partnership is formed or
qualified, or (ii) an Illinois court having original jurisdiction in the
premises has entered a judgment to the foregoing effect, and (C) either (i)
the Partnership has received an opinion of counsel, which counsel is
satisfactory to a majority in interest of the Limited Partners, that such
action may be effected without changing the Partnership's status for tax
purposes or (ii) either a court having original jurisdiction has entered a
judgment, or the Internal Revenue Service has issued a ruling, to the
foregoing effect. For purposes of this Section 10.3, counsel will be deemed
satisfactory to the Limited Partners if proposed by the Managing General
Partner and affirmatively approved in writing within 45 days by a majority
in interest of the Limited Partners; provided that if the holders of 10% or
more of the outstanding Interests propose counsel for this purpose, such
proposed counsel, and not counsel proposed by the General Partners, shall
be submitted for such approval by the Limited Partners.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.1 Appointment of Managing General Partner as Attorney-in-Fact
A. Each Limited Partner, including each Additional and Substituted
Limited Partner, by the execution of this Agreement, irrevocably
constitutes and appoints the Managing General Partner his true and lawful
attorney-in-fact with full power and authority in his name, place and stead
to execute, acknowledge, deliver, swear to, file and record at the
appropriate public offices such documents as may be necessary or
appropriate to carry out the provisions of this Agreement, including but
not limited to:
(i) all certificates and other instruments (including
counterparts of this Agreement), and any amendment thereof, which the
Managing General Partner deems appropriate to form, qualify or continue the
Partnership as a limited partnership (or a partnership in which the Limited
Partners will have limited liability comparable
<PAGE>
to that provided by the Uniform Limited Partnership Act of the State
of Illinois) in the jurisdictions in which the Partnership may conduct
business or in which such formation, qualification or continuation is, in
the opinion of the Managing General Partner, necessary to protect the
limited liability of the Limited Partners;
(ii) all amendments to this Agreement adopted in accordance
with the terms hereof and all instruments which the Managing General
Partner deems appropriate to reflect a change or modification of the
Partnership in accordance with the terms of this Agreement; and
(iii) all conveyances and other instruments which the Managing
General Partner deems appropriate to reflect the dissolution and
termination of the Partnership.
B. The appointment by all Limited Partners of the Managing General
Partner as attorney-in-fact shall be deemed to be a power coupled with an
interest, in recognition of the fact that each of the Partners under this
Agreement will be relying upon the power of the Managing General Partner to
act as contemplated by this Agreement in any filing and other action by it
on behalf of the Partnership, and shall survive the bankruptcy, death,
incompetence or dissolution of any Person hereby giving such power and the
transfer or assignment of all or any part of the Interest of such Person;
provided, however, that in the event of the transfer by a Limited Partner
of all or any part of his Interest, the foregoing power of attorney of a
transferor Limited Partner shall survive such transfer only until such time
as the transferee shall have been admitted to the Partnership as a
Substituted Limited Partner and all required documents and instruments
shall have been duly executed, filed and recorded to effect such
substitution.
SECTION 11.2 Amendments
A. Each Additional Limited Partner, Substituted Limited Partner,
additional General Partner and successor General Partner shall become a
signatory hereof by signing such number of counterpart signature pages to
this Agreement and such other instrument or instruments, and in such
manner, as the Managing General Partner shall determine. By so signing,
each Additional Limited Partner, Substituted Limited Partner, successor
General Partner or additional General Partner, as the case may be, shall be
deemed to have adopted, and to have agreed to be bound by all the
provisions of, this Agreement, as amended from time to time in accordance
with the provisions of this Agreement; provided, however, that no such
counterpart shall be binding until it shall have been accepted by the
Managing General Partner pursuant to the provisions of Sections 3.3D or
7.2D.
B. In addition to the amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the General
Partners with the Consent of a majority in interest of the Limited
Partners; provided, however, that without the Consent of the Partners to be
adversely affected by the amendment, this Agreement may not be amended so
as to (i) convert a Limited Partner's Interest into a General Partner's
Interest; (ii) modify the limited liability of a Limited Partner; or (iii)
alter the Interest of a Partner in Profits or Losses for Tax Purposes or in
Disbursable Cash or Sale or Refinancing Proceeds.
C. In addition to any amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the Managing
General Partner, without the consent of any of the Limited Partners, (i) to
add to the representations, duties or obligations of the General Partners
or surrender any right or power granted to the General Partners herein, for
the benefit of the Limited Partners; (ii) to cure any ambiguity, to correct
<PAGE>
or supplement any provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to matters
or questions arising under this Agreement which will not be inconsistent
with the provisions of this Agreement; and (iii) to delete or add any
provision of this Agreement required to be so deleted or added by the Staff
of the Securities and Exchange Commission or other Federal agency or by a
State "Blue Sky" commissioner or similar such official, which addition or
deletion is deemed by such Commission, agency or official to be for the
benefit or protection of the Limited Partners; provided, however, that no
amendment shall be adopted pursuant to this Section 11.2C unless the
adoption thereof (1) is for the benefit of or not adverse to the interests
of the Limited Partners; (2) is consistent with Section 5.1; (3) does not
affect the distribution of Disbursable Cash or Sale or Refinancing Proceeds
or the allocation of Profits and Losses for Tax Purposes among the Limited
Partners or between the Limited Partners and the General Partners; and (4)
does not affect the limited liability of the Limited Partners or the status
of the Partnership as a partnership for Federal income tax purposes.
D. If this Agreement shall be amended as a result of adding or
substituting a Limited Partner, the amendment to this Agreement shall be
signed by the Managing General Partner and by the Person to he substituted
or added and, if a Limited Partner is to be substituted, by the assigning
Limited Partner. If this Agreement shall be amended to reflect the
designation of an additional General Partner, such amendment shall be
signed by the other General Partner or Partners and by such additional
General Partner. If this Agreement shall be amended to reflect the
withdrawal of a General Partner when the business of the Partnership is
being continued, such amendment shall be signed by the withdrawing General
Partner (and such General Partner hereby so agrees) and by the remaining or
successor General Partner or Partners.
E. In making any amendments, there shall be prepared and filed by
the Managing General Partner for recording such documents and certificates
as shall be required to be prepared and filed under the Uniform Limited
Partnership Act of the State of Illinois and under the laws of the other
jurisdictions under the laws of which the Partnership is then formed or
qualified, not less frequently, in the case of substitution of a Limited
Partner, than once each calendar quarter.
SECTION 11.3 Ownership by Limited Partner of General Partners
or Affiliated Persons
No Limited Partner shall at any time, either directly or indirectly,
own any stock or other interest in any General Partner or in any Affiliated
Person of any General Partner if such ownership by itself or in conjunction
with the stock or other interest owned by other Limited Partners would, in
the opinion of counsel for the Partnership, jeopardize the classification
of the Partnership as a partnership for Federal income tax purposes. The
Managing General Partner shall be entitled to make such reasonable inquiry
of the Limited Partners as is required to establish compliance by the
Limited Partners with the provisions of this Section 11.3.
SECTION 11.4 Limitation on Joint Venture Investments
With respect to any partnership or joint venture organized to hold
title to any of the Properties and which the Partnership, the General
Partners or Affiliated Persons of the General Partners or any of them
control directly or indirectly, the General Partners shall obtain, prior to
the taking of title to such Property, an opinion of either Mayer, Brown &
Plait or Lawler, Felix & Hall to the effect that such partnership will be a
partnership for Federal income tax purposes and the General Partners will
use their best efforts to insure that such partnership or joint venture is
or shall be duly organized, holds or shall hold good title to such Property
and is or shall be taxable as a partnership for Federal income tax
purposes.
<PAGE>
SECTION 11.5 Binding Provisions
The covenants and agreements contained herein shall be binding upon,
and inure to the benefit of, the heirs, executors, administrators, personal
representatives, successors and assigns of the respective parties hereto.
SECTION 11.6 Applicable Law
This Agreement shall be construed and enforced in accordance with the
laws of the State of Illinois.
SECTION 11.7 Counterparts
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart.
SECTION 11.8 Separability of Provisions
Each provision of this Agreement shall be considered separable and if
for any reason any provision or provisions hereof are determined to be
invalid and contrary to any existing or future law, such invalidity shall
not impair the operation of or affect those portions of this Agreement
which are valid.
SECTION 11.9 Section Titles
Section titles are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
GENERAL PARTNERS:
JMB PROPERTIES-V INC.
By /JUDD D. MALKIN/
Judd D. Malkin, Chairman
/NEIL G. BLUHM/
Neil G. Bluhm
/JUDD D. MALKIN
Judd D. Malkin
INITIAL LIMITED PARTNER:
JMB REALTY CORPORATION
By /NEIL G. BLUHM/
Neil G. Bluhm, President
<PAGE>
STATE OF ILLINOIS )
) ss:
COUNTY OF COOK )
BE IT REMEMBERED, that on this 15th day of July, 1977, personally
came before me, a Notary Public in and for the County and State aforesaid,
Judd D. Malkin as Chairman of JMB Properties-V, Inc., an Illinois
corporation, Neil G. Bluhm as President of JMB Realty Corporation, a
Delaware corporation, and Neil G. Bluhm and Judd D. Malkin, individually,
and they duly executed the above Amended and Restated Agreement of Limited
Partnership and acknowledged said Agreement to be their act and deed of
said corporation and individuals.
----------------------------------------
Notary Public
<PAGE>
SCHEDULE A
Capital
Contribution
------------
GENERAL PARTNERS:
JMB Properties-V, Inc. . . . . . . . . . . . . $ 500
875 North Michigan Avenue
Chicago, Illinois 60611
Judd D. Malkin . . . . . . . . . . . . . . . . $ 250
875 North Michigan Avenue
Chicago, Illinois 60611
Neil G. Bluhm. . . . . . . . . . . . . . . . . $ 250
875 North Michigan Avenue
Chicago, Illinois 60611
LIMITED PARTNER:
JMB Realty Corporation . . . . . . . . . . . . $5,000
875 North Michigan Avenue
Chicago, Illinois 60611
------
Total. . . . . . . . . . . . . . . . $6,000
======
<PAGE>
AS AMENDED BY AMENDMENT DATED AS OF DECEMBER 22, 1986
AMENDMENT TO THE CERTIFICATE
OF LIMITED PARTNERSHIP OF
JMB INCOME PROPERTIES, LTD.-V
-----------------------------
Dated: As of December 22, 1986
WHEREAS, the parties hereto are the general partners (the "Partners")
of JMB Income Properties, Ltd.-V, a limited partnership organized under the
laws of the State of Illinois (hereinafter referred to as the
"Partnership"), and
WHEREAS, the Partners have executed the attached Acknowledgment and
desire to embody such Acknowledgement in an amendment to the certificate
and agreement of limited partnership, as amended, of the Partnership.
NOW, THEREFORE, the certificate and agreement of limited partnership
of the Partnership is amended by adding as a part thereof the
Acknowledgment attached hereto.
<PAGE>
JMB INCOME PROPERTIES, LTD.-V
ACKNOWLEDGMENT
--------------
This Acknowledgment is made and executed as of the 22nd day of
December, 1986 by Judd D. Malkin and Neil G. Bluhm (the "Individual General
Partners"), and JMB Realty Corporation, a Delaware corporation (the
"Corporate General Partner").
WHEREAS, the Individual General Partners are general partners of JMB
Income Properties, Ltd.-V, a limited partnership organized under the laws
of the State of Illinois (the "Partnership"); and
WHEREAS, JMB Properties-V, Inc., an Illinois corporation and a wholly
owned subsidiary of the Corporate General Partner, which has served as the
corporate general partner of the Partnership, has been merged into the
Corporate General Partner and the Corporate General Partner has agreed to
continue as the corporate general partner of the Partnership.
NOW, THEREFORE, the parties hereby agree and acknowledge as follows:
1. The Individual General Partners and the Corporate General
Partner shall continue as general partners of the Partnership, each with
all of the rights and powers of general partners therein, as set forth in
<PAGE>
the certificate and agreement of limited partnership of the Partnership,
as amended to date (the "Partnership Agreement") and in the Uniform Limited
Partnership Act of the State of Illinois, and the Partnership and its
business shall be continued in all respects.
2. The Corporate General Partner hereby agrees that it is a
signatory to the Partnership Agreement, together with the Individual
General Partners, and adopts and agrees to be bound by all of the
provisions of the Partnership Agreement, as amended from time to time
in accordance with the provisions of the Partnership Agreement.
3. The Individual General Partners and the Corporate General
Partner agree that the Corporate General Partner is hereby authorized
and empowered, on behalf of the Individual general Partners, the
Corporate General Partner, the Partnership or any of the foregoing,
to execute any and all documents, enter into any and all agreements, or
take any and all other actions, in the name of the Partnership or
otherwise, as shall be necessary or appropriate in connection with the
business of the Partnership at any time. It is further understood and
agreed that the Chairman, President or any Vice President of the Corporate
General Partner (including either
2
<PAGE>
Individual General Partner who is Chairman, President or a Vice President
of the Corporate General Partner) may act for and in the name of the
Corporate General Partner in the exercise by the Corporate General Partner
of any of its rights and powers hereunder. In dealing with the Corporate
General Partner (or the Chairman, President or any Vice President thereof)
so acting on behalf of the Individual General Partners, Corporate General
Partner or Partnership, no person shall be required to inquire into the
authority of the Corporate General Partner or such individual to bind the
Partnership. Persons dealing with the Partnership are entitled to rely
conclusively upon the power and authority of the Corporate General Partner
(and of the Chairman, President or any Vice President of the Corporate
General Partner) as set forth herein.
4. The Individual General Partners and Corporate General Partner
agree to take any and all other actions as shall be necessary or
appropriate to reflect the continuation of the Partnership's business,
including the filing with any agency of this document and any other
documents which shall be necessary or appropriate in connection therewith.
5. Nothing contained herein or contemplated hereby shall be deemed
to render the Individual General
3
<PAGE>
Partners or the Corporate General Partner liable for any obligations for
which they would otherwise not be liable as general partners of the
Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this
Acknowledgement as of the date first above written.
/s/ Judd D. Malkin
- ------------------------------
Judd D. Malkin
/s/ Neil G. Bluhm
- ------------------------------
Neil G. Bluhm
JMB REALTY CORPORATION
By: [ executed signature ]
------------------------
Vice President
4
<PAGE>
STATE OF ILLINOIS )
: ss.:
COUNTY OF COOK )
Before me, the undersigned, a Notary Public in and for said
County and State, on this day personally appeared Neil G. Bluhm, Judd D.
Malkin, and Gary Nickele, the Vice President of JMB Realty Corporation, a
Delaware corporation, personally known to be to be the persons whose names
are subscribed in the foregoing instrument, and acknowledged to me that
they executed the same for the purposes and consideration therein
expressed, and in the capacities and pursuant to authority therein
expressed, and under oath swore that the statements therein are true and
correct.
Given under my hand and seal of office this 22nd day of
December, 1986.
/s/ Kathleen R. Hennessy
------------------------------
Notary Public, in and for
Cook County, Illinois
"OFFICIAL SEAL"
Kathleen R. Hennessy
Notary Public, State of Illinois
My Commission Expires August 25, 1990
<PAGE>
AS AMENDED BY AMENDMENT DATED AS OF JANUARY 1, 1991
AMENDMENT TO
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT OF
JMB INCOME PROPERTIES, LTD.-V
WHEREAS, the parties hereto (the "Partners") have formed, or ratified
the formation of, JMB Income Properties, Ltd.-V, (the "Partnership")
pursuant to the Uniform Limited Partnership act as then in effect in the
State of Illinois and have conformed the Partnership to the Revised Uniform
Limited Partnership act as in effect in the State of Illinois (the "Act");
and
WHEREAS, the Partners deem it to be in the best interests of the
Partners and of the Partnership to add a new Section 4.3F to the Amended
and Restated Agreement of Limited Partnership of the Partnership (the
"Agreement") effective as of January 1, 1991.
NOW, THEREFORE, the Agreement is hereby amended so that the following
Section is hereby added to the Agreement:
"4.3F Notwithstanding any allocation contained in this Agreement, if
at any time profits (including items thereof) are realized by the
Partnership, any current or anticipated reduction of the share of the
Partnership's indebtedness (including the Partnership's share of
partnership or joint venture indebtedness) of the General Partners or any
anticipated cash distribution to the General Partners would cause the
deficit balance in absolute amount in the Capital Account of the General
Partners (as adjusted for gains which have been recognized by the General
Partners related to cash distributions received (either actual or deemed)
from the Partnership prior to January 1, 1991 and not reflected in their
Capital Accounts) to be greater than their share of the Partnership's
indebtedness (including the Partnership's share of partnership or joint
venture indebtedness) after such reduction or distribution, then the
allocation of profits under this Article Four to the General Partners shall
be increased to the extent necessary to cause the deficit balance (in
absolute amount) in the Capital Account of the General Partners (as
adjusted for gains which have been recognized by the General Partners
related to cash distributions received (either actual or deemed) from the
Partnership prior to January 1, 1991 and not reflected in their Capital
Accounts) to be no more than their respective shares of the Partnership's
indebtedness (including the Partnership's share of partnership or joint
venture indebtedness) after such reduction or distribution; provided,
however, that in no event shall allocations under this Section 4.3F be
taken into consideration when making the computation contained in clause
(i) of the first sentence of Section 8.2."
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
Amended and Restated Partnership Agreement effective as of January 1, 1991.
MANAGING GENERAL PARTNER LIMITED PARTNERS
- ------------------------ ----------------
JMB Realty Corporation JMB Realty Corporation
By: /s/ Neil G. Bluhm By: /s/ Neil G. Bluhm
-------------------- --------------------
Neil G. Bluhm Neil G. Bluhm
President President
ASSOCIATE GENERAL PARTNERS As Attorney-in-Fact for the
- -------------------------- Limited Partners of JMB Income
Properties, Ltd.-V in
/s/ Judd D. Malkin possession of, and pursuant
- ------------------------------ to, a duly authorized and
Judd D. Malkin executed Power-of-Attorney
from each of said Limited
Partners.
/s/ Neil G. Bluhm
- ------------------------------
Neil G. Bluhm
