SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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KRUPP REALTY LIMITED PARTNERSHIP - V
(Name of Subject Company)
KRUPP REALTY LIMITED PARTNERSHIP - V
(Name of Person Filing Statement)
LIMITED PARTNERSHIP UNITS
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
---------------------------
Laurence Gerber
The Krupp Corporation
470 Atlantic Avenue
Boston, Massachusetts 02210
(617) 423-2233
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person(s) filing Statement)
COPY TO:
Scott D. Spelfogel, Esq. James M. Dubin, Esq.
The Berkshire Group Paul, Weiss, Rifkind, Wharton & Garrison
470 Atlantic Avenue 1285 Avenue of the Americas
Boston, Massachusetts 02210 New York, New York 10019-6064
(617) 423-2233 (212) 373-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject partnership is Krupp Realty Limited
Partnership - V, a Massachusetts limited partnership (the "Partnership"), and
the address of its principal executive offices is c/o The Krupp Corporation, 470
Atlantic Avenue, Boston, Massachusetts 02210. The title of the class of equity
securities to which this statement relates is the Partnership's Units of
Investor Limited Partnership Interests ("Units").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to an unsolicited offer by Krescent
Partners L.L.C., a Delaware limited liability company (the "Purchaser"),
disclosed in a Tender Offer Statement on Schedule 14D-1 dated November 21, 1996
(the "Schedule 14D-1"), to purchase up to 8,380 issued and outstanding Units at
a purchase price of $375 per Unit, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated November 21, 1996 and the related Letter of Transmittal, as each
may be supplemented, modified or amended from time to time (which collectively
constitute the "Krescent Offer" and are contained within the Schedule 14D-1).
The address of the Purchaser's principal executive offices is
1301 Avenue of the Americas, 38th Floor, New York, New York 10019.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Partnership, which is
the person filing this statement, are set forth in Item 1 above.
(b)(i) The general partners responsible for management of the
Partnership's business are The Krupp Corporation, a Massachusetts corporation
(the "Corporate General Partner"), and The Krupp Company Limited Partnership -
II, a Massachusetts limited partnership (together with the Corporate General
Partner, the "General Partners"). Except as described below, there are no
material contracts, agreements, arrangements or understandings or any actual or
potential conflicts of interest between the General Partners or their affiliates
and the Partnership, its executive officers, directors or affiliates.
Pursuant to the Partnership Agreement of the Partnership (the
"Partnership Agreement"), the General Partners are entitled to certain cash
distributions in respect of their interests in the Partnership. The General
Partners have received aggregate cash distributions in respect of such interests
of $0, $0 and $7,570, respectively, for the years ended December 31, 1994, 1995
and 1996 (projected).
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Pursuant to certain management agreements, an affiliate of the
General Partners receives property management fees for its services as
management agent for the Partnership's properties. Such agreements provide for
the payment of monthly management fees payable at the rate of up to 5% of rents
and other income actually received by the Partnership. In addition, although the
General Partners and their affiliates do not receive any fees from the
Partnership for the partnership administration services they provide, affiliates
of the General Partners are reimbursed by the Partnership for the expenses they
incur in connection with providing those services, which include accounting,
computer, insurance, travel, payroll, legal and the preparation and mailing of
reports and other communication to the Unit holders. The Partnership paid such
affiliates property management fees and reimbursement of expenses aggregating
$887,600, $779,600 and $560,300, respectively, for the three years ended
December 31, 1994, 1995 and 1996 (projected).
Pursuant to the Partnership Agreement, the General Partners
are entitled to a brokerage fee in an amount equal to 3% of the contract sales
price of any real estate acquired by the Partnership, subject to certain
limitations. No brokerage fees have been paid or are projected to be paid to the
General Partners or their affiliates during the three-year period ending
December 31, 1996.
The General Partners are subject to certain conflicts of
interests in connection with the response to the Krescent Offer contained in
this Schedule 14D-9. The Partnership Agreement provides that, without the
concurrence of the General Partners, a majority in interest of the "Investor
Limited Partners" (a person who has been admitted to the Partnership as, and has
the rights afforded to, an Investor Limited Partner, as provided in the
Partnership Agreement) may vote to remove the General Partners or amend the
Partnership Agreement (including amending certain fees and compensation payable
or authorized to be payable to the General Partners or their affiliates), and
the ownership of a large block of Units by any person increases the likelihood
that the General Partners may be removed or that the Partnership Agreement may
be amended should that person become an Investor Limited Partner or otherwise
acquire the voting rights of an Investor Limited Partner. In addition, since
property management agreements between affiliates of the General Partners and
the Partnership are terminable without penalty on not more than 180 days notice,
the removal of the General Partners or the amendment of the Partnership
Agreement could result in a reduction of management fee income from the
Partnership to such affiliates. If a large number of Units were tendered
pursuant to the Krescent Offer, the likelihood of such removal or amendment
would increase. However, as described in Items 3(b)(ii) and 8 below, the
Purchaser is subject to a standstill agreement pursuant to which it has agreed,
among other things, not to acquire more than 25% of the outstanding Units for
the period ending 30 months after receipt from the Partnership and certain other
partnerships affiliated with the General Partners of any list of its unit
holders or investors. Accordingly, during such 30 month period the Purchaser
will not be in a position to unilaterally remove the General Partners or amend
the Partnership Agreement.
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(b)(ii) Except as described below, there are no material
contracts, agreements, arrangements or understandings or any actual or potential
conflicts of interests between the Partnership or its affiliates and the
Purchaser, its executive officers, directors or affiliates.
The Corporate General Partner and Liquidity Financial Group,
L.P., the financial advisor of the Purchaser ("Liquidity"), are parties to a
Settlement Agreement and Release, dated as of June 27, 1996, as amended as of
October 8, 1996 (the "Standstill Agreement"), pursuant to which Liquidity and
any of its affiliates are restricted from, among other things, acquiring more
than 25% of the outstanding Units for the period ending 30 months after receipt
from the Partnership and certain other partnerships affiliated with the General
Partners of any list of its unit holders or investors. Such a list was last
provided on November 20, 1996 and, pursuant to the Standstill Agreement,
additional lists may be requested through June 27, 1997. The Krescent Offer
states that, pursuant to an Assumption Agreement dated November 21, 1996 between
the Purchaser and Liquidity, the Purchaser has agreed to be bound by the
restrictions set forth in the Standstill Agreement.
On October 24, 1996, a representative of Liquidity contacted a
representative of the Partnership to request, on behalf of the Purchaser, that
the General Partners agree to admit the Purchaser as a "Limited Partner" (an
assignee of a Unit holder who, at the discretion of the General Partners, is
admitted as a Unit holder pursuant to the terms of the Partnership Agreement) or
as a recognized or registered owner of Units in the event the Purchaser made an
offer to purchase Units and the Purchaser accepted Units for payment pursuant to
the terms of such offer. During that conversation, the Partnership's
representative indicated that in order to agree to such treatment, the
Partnership had to be satisfied that the consummation of such offer and such
treatment would not cause the Partnership to be classified as a "publicly-traded
partnership" for tax purposes (a "PTP"). Later that day, the Partnership
received a memorandum from counsel to the Purchaser concluding that such a
tender offer would not cause the Partnership to be classified as a PTP and a
letter agreement was sent to the Corporate General Partner requesting that the
Purchaser be treated as a Limited Partner or a recognized or registered owner of
Units upon the acceptance of Units for payment pursuant to an offer anticipated
to be made by the Purchaser. On October 29, 1996, counsel for the Partnership,
in a letter to Liquidity, responded to the memorandum prepared by the
Purchaser's counsel. During the week of November 4th, counsel for the Purchaser
and counsel for the Partnership continued to discuss the PTP status issue. On
November 11, 1996, counsel for the Purchaser and counsel for the Partnership
agreed on a form of opinion letter regarding the PTP issue that would be
delivered upon the treatment of the Purchaser as a Limited Partner or recognized
or registered owner of Units. On November 12, 1996, the Partnership was notified
by Liquidity that the Purchaser planned to commence the Krescent Offer five
business days after the Partnership's receipt of such notice. On November 14,
1996, the Partnership received a request from Liquidity for a current list of
Unit holders and the lists of securityholders of
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various entities affiliated with the Partnership, which lists were delivered to
Liquidity on November 19, 1996 and November 20, 1996. Also on November 19, 1996,
the Corporate General Partner executed a letter to the Purchaser indicating its
agreement to admit the Purchaser, or cause the Purchaser to be admitted, as a
Limited Partner or a recognized or registered owner of Units (i) upon the
Purchaser's payment for Units pursuant to the Krescent Offer, (ii) upon delivery
of an opinion of the Purchaser's counsel (in the agreed form) that the Krescent
Offer would not cause the Partnership to be classified as a PTP and (iii) upon
delivery, in satisfactory form, of the Partnership's standard transfer
paperwork, payment of standard transfer fee and satisfaction of any other
standard ministerial matters. On November 20, 1996, a representative of the
Purchaser contacted a representative of the Partnership for the stated purpose
of confirming the commencement date of the Krescent Offer and to confirm the
fact that the Purchaser did not have any current plan to change the current
management or the operations of the Partnership.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Following receipt of the Krescent Offer, the Corporate
General Partner reviewed and considered the Krescent Offer. The Corporate
General Partner has determined that the Krescent Offer is inadequate and not in
the best interests of the Unit holders, and recommends that the holders of Units
reject the Krescent Offer and not tender their Units pursuant thereto.
(b) In reaching its conclusion described in paragraph (a)
above, the Corporate General Partner considered a number of factors, including
the following:
(i) While the value of the Units is not readily
ascertainable, since there is neither an established trading
market nor a consistent historical pattern of making annual or
periodic distributions in respect of the Units, the price
specified in the Krescent Offer of $375 per Unit represents a
significant discount from the Corporate General Partner's
estimate of the inherent value of such Units. Based on
estimated values of the Partnership's properties and current
market conditions, the Corporate General Partner has estimated
the net asset value of each Unit to be $787. (Such net asset
value assumes a sale of all of the Partnership's properties at
net asset value, after deduction for estimated transaction
costs, and the distribution of the net proceeds of such sale
to the Unit holders. Actual transaction costs and market
conditions will affect the actual amount available for
distribution.) While the actual amount of liquidation proceeds
distributed in respect of a Unit may be either above or below
the estimate, the Corporate General Partner believes its
estimate of the net asset value of a Unit is representative of
current value. The Krescent Offer is less than 48% of such
estimate. The Corporate General Partner recognizes that, in
exchange for receiving the certainty of a cash purchase price
from the Purchaser in
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connection with the Krescent Offer, Unit holders may prefer to
forego the opportunity to hold their Units and receive
proceeds upon the potential future liquidation of the
Partnership's assets in excess of the amount being offered by
the Purchaser. However, the Corporate General Partner believes
that the price specified in the Krescent Offer reflects too
great a discount to value.
(ii) As stated by the Purchaser in the Krescent
Offer, Unit holders who tender Units acquired from the
Partnership in connection with the original issuance thereof
are expected to recognize taxable gain, which will be in
excess of the purchase price received by them from the
Purchaser.
(iii) As stated by the Purchaser in the Krescent
Offer, the Partnership currently is paying a semi-annual cash
distribution of $10.00, or $20.00 annually, per Unit. Unit
holders who sell their Units to the Purchaser will lose their
right to receive future semi-annual distributions from
operations that are payable in respect of Units. Furthermore,
Unit holders who sell their Units to the Purchaser will lose
the right to future distributions from future sales of
Partnership properties.
(iv) As stated by the Purchaser in the Krescent
Offer, the Purchaser is making the Krescent Offer with a view
to making a profit. Accordingly, there is a conflict of
interest between the Purchaser's desire to purchase the Units
at a low price and a Unit holder's desire to sell its Units at
a high price.
(v) As stated by the Purchaser in the Krescent Offer,
if the Krescent Offer is successful, the Purchaser may be in a
position to influence control over the Partnership and to
influence voting decisions, including the removal of the
General Partners.
ITEM 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED
Neither the Partnership nor any person acting on its behalf
has employed, retained or compensated, or intends to employ, retain or
compensate, any person to make solicitations or recommendations to Unit holders
on its behalf concerning the Krescent Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Neither the Partnership nor the General Partners have
effected any transactions in the Units during the past 60 days. The General
Partners are not
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aware of any transactions in the Units during the past 60 days by any of its
executive officers, directors, affiliates or subsidiaries.
(b) Neither the General Partners nor, to the knowledge of the
General Partners, any of their executive officers, directors, affiliates or
subsidiaries intend to tender Units owned by them to the Purchaser pursuant to
the Krescent Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) No negotiation is being undertaken or is underway by the
Partnership in response to the Krescent Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Partnership; (ii) a purchase, sale or transfer of a material
amount of assets by the Partnership; (iii) a tender offer for or other
acquisition of securities by or of the Partnership; or (iv) any material change
in the present capitalization or dividend policy of the Partnership.
The General Partners and their affiliates may explore
transactions such as asset sales, a consolidation, a merger, financings of
Partnership properties followed by distributions, or possibly a tender offer for
Units at a price in excess of the Krescent Offer. However, no plans for, or
negotiations relating to, any of these types of transactions have been made, and
there can be no assurances that any such discussions or plans will be developed
or that any such transactions could be successfully consummated.
(b) There are no transactions, board resolutions, agreements
in principle or signed contracts in response to the Krescent Offer which relate
to or would result in one or more of the matters referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The General Partners have in the past received numerous
requests from third parties requesting that such parties be provided with a list
of the Partnership's Unit holders. Such a list has only been provided by the
General Partners to parties in cases where the General Partners have been
satisfied that such list has been properly requested by a person entitled by the
Partnership Agreement to receive such a list and/or the party requesting the
list has demonstrated that such party has a proper partnership business purpose
in connection with such request, or the General Partners have been satisfied
that the Partnership and the Unit holders have obtained appropriate protections
from such party with respect to the use of such list. The Corporate General
Partner agreed to provide a list of the Partnership's Unit holders to Liquidity,
the Purchaser's financial advisor, in connection with obtaining the agreement by
such advisor, pursuant to the Standstill Agreement, that such advisor and its
affiliates, among other things, would refrain from acquiring in excess of 25% of
the Units for
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the period ending 30 months after receipt from the Partnership of any list of
its Unit holders. The Krescent Offer states that, pursuant to the Assumption
Agreement dated November 21, 1996 between the Purchaser and Liquidity, the
Purchaser has agreed to become bound by the same standstill restrictions
applicable to Liquidity.
By letter dated November 4, 1996, Longacre Corp. ("Longacre")
requested that the Partnership provide to it a list of the Partnership's Unit
holders. The letter stated that the request was being made to facilitate a
tender offer by an affiliate of Longacre. As a result of negotiations, the
Corporate General Partner agreed to provide a list of the Partnership's Unit
holders to Longacre in connection with obtaining the agreement by Longacre,
pursuant to a Standstill Agreement dated as of November 26, 1996, that Longacre
and its affiliates, among other things, would refrain from acquiring in excess
of 25% of the Units for a period ending 30 months after receipt from the
Partnership of any list of its Unit holders. The Corporate General Partner was
subsequently advised by Longacre that its affiliate, American Holdings I, L.P.
("American Holdings"), intended to commence an offer to acquire up to 4.9% of
the outstanding Units at a price of $390 per Unit, which is in excess of the
purchase price specified in the Krescent Offer. On December 4, 1996, a
representative of Liquidity advised a representative of the Partnership that an
agreement had been reached between persons affiliated with each of Longacre and
Krescent and that, as a result of such agreement, the offer by American Holdings
"would be withdrawn."
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(a)(i) Form of cover letter to Unit holders from the
Partnership dated December 5, 1996.
(ii) Press release of the Partnership dated December 5,
1996.
(b) Letter of the Partnership to Unit holders dated
November 25, 1996.
(c)(i) Amended Agreement, dated as of July 27, 1983 (the
"Partnership Agreement"), by and among The Krupp
Corporation and The Krupp Company Limited Partnership
- II, as general partners, The Krupp Company Limited
Partnership -II, as the Original Limited Partner, and
those persons who have been admitted to the
Partnership as Investor Limited Partners pursuant to
the terms of the Partnership Agreement.
(ii) Form of Property Management Agreement between the
Partnership and Berkshire Property Management
Company.
(iii) Settlement Agreement and Release, dated as
of June 27, 1996, between the Corporate
General Partner and Liquidity Financial
Group, L.P.
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(iv) First Amendment to Settlement Agreement and
Release, dated as of October 8, 1996,
between the Corporate General Partner and
Liquidity Financial Group, L.P.
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SIGNATURE
After reasonable 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: December 5, 1996
KRUPP REALTY LIMITED
PARTNERSHIP - V
By: The Krupp Corporation, a
general partner
By: s/Laurence Gerber
---------------------------------------
Name: Laurence Gerber
Title: President
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EXHIBIT INDEX
Exhibit Description Page
1. Form of cover letter to Unit holders from
the Partnership dated December 5, 1996
2. Letter of the Partnership to Unit holders
dated November 25, 1996
3. Press release of the Partnership dated
December 5, 1996
4. Amended Agreement, dated as of July 27,
1983 (the "Partnership Agreement"), by and
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among The Krupp Corporation and The
Krupp Company Limited Partnership - II, as
general partners, The Krupp Company
Limited Partnership-II, as the Original
Limited Partner, and those persons who have
been admitted to the Partnership as Investor
Limited Partners pursuant to the terms of the
Partnership Agreement
5. Form of Property Management Agreement
between the Partnership and Berkshire
Property Management Company
6. Settlement Agreement and Release, dated as
of June 27, 1996, between the Corporate
General Partner and Liquidity Financial
Group, L.P.
7. First Amendment to Settlement Agreement
and Release, dated as of October 8, 1996,
between the Corporate General Partner and
Liquidity Financial Group, L.P.
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Exhibit 1
KRUPP REALTY LIMITED PARTNERSHIP - V
December 5, 1996
Dear Limited Partner:
As you are by now aware, Krescent Partners L.L.C., a Delaware
limited liability company (the "Purchaser"), has made an offer (the "Krescent
Offer") to purchase limited partnership units ("Units") of Krupp Realty Limited
Partnership - V (the "Partnership") for $375 per Unit.
THE KRUPP CORPORATION, A GENERAL PARTNER OF THE PARTNERSHIP (A
"GENERAL PARTNER"), IN LIGHT OF ALL RELEVANT CIRCUMSTANCES, HAS DETERMINED THAT
THE KRESCENT OFFER IS INADEQUATE AND NOT IN THE BEST INTERESTS OF THE UNIT
HOLDERS. THE GENERAL PARTNER RECOMMENDS THAT THE HOLDERS OF UNITS REJECT THE
KRESCENT OFFER AND NOT TENDER THEIR UNITS PURSUANT THERETO. The General Partner
reached this conclusion after considering a number of factors, including, but
not limited to, the following:
o THE PRICE PER UNIT OFFERED BY THE PURCHASER
DOES NOT REFLECT THE VALUE INHERENT IN THE UNITS. The
price being offered by the Purchaser is less than 48%
of the General Partner's estimate of the
Partnership's net asset value of $787 per Unit. (Such
net asset value assumes a sale of all of the
Partnership's properties at net asset value, after
deduction for estimated transaction costs, and the
distribution of the net proceeds of such sale to the
Unit holders. Actual transaction costs and market
conditions will affect the actual amount available
for distribution.) Although Unit holders, in exchange
for receiving the certainty of a cash purchase price
from the Purchaser, may prefer to forego the
opportunity to hold their Units and receive proceeds
upon the potential future liquidation of the
Partnership's assets in excess of the amount being
offered by the Purchaser, the General Partner
believes that the price specified in the Krescent
Offer reflects too great a discount to value.
o AS STATED BY THE PURCHASER IN THE KRESCENT
OFFER, THE PURCHASER IS MAKING THE KRESCENT OFFER
WITH A VIEW TO MAKING A PROFIT. Accordingly, there is
a conflict of interest between the
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Purchaser's desire to purchase the Units at a low
price and the Unit holders' desire to sell their
Units at a high price.
o UNIT HOLDERS WHO ACCEPT THE KRESCENT OFFER
WILL NO LONGER RECEIVE CASH DISTRIBUTIONS. The
Partnership currently is paying a semi-annual cash
distribution of $10.00 or $20.00 annually, per Unit.
Unit holders who sell their Units to the Purchaser
will lose their right to receive future semi-annual
distributions from operations that are payable in
respect of Units. Furthermore, Unit holders who sell
their Units to the Purchaser will lose their right to
future distributions from future sales of Partnership
properties.
o AS STATED BY THE PURCHASER IN THE KRESCENT OFFER,
UNIT HOLDERS WHO TENDER UNITS ACQUIRED FROM THE
PARTNERSHIP IN CONNECTION WITH THE ORIGINAL ISSUANCE
THEREOF ARE EXPECTED TO RECOGNIZE TAXABLE GAIN, WHICH
WILL BE IN EXCESS OF THE PURCHASE PRICE RECEIVED BY
THEM FROM THE PURCHASER.
Enclosed is a copy of the Partnership's Statement on Schedule
14D-9 which has been filed with the Securities and Exchange Commission and sets
forth the Partnership's response to the Krescent Offer. Limited partners are
advised to carefully read the Schedule 14D-9.
Unit holders also should be advised that, by letter dated
November 4, 1996, Longacre Corp. ("Longacre") requested that the Partnership
provide to it a list of the Partnership's Unit holders. The letter stated that
the request was being made to facilitate a tender offer by an affiliate of
Longacre. As a result of negotiations, the General Partner agreed to provide a
list of the Partnership's Unit holders to Longacre in connection with obtaining
the agreement by Longacre, pursuant to a Standstill Agreement dated as of
November 26, 1996, that Longacre and its affiliates, among other things, would
refrain from acquiring in excess of 25% of the Units for a period ending 30
months after receipt from the Partnership of any list of its Unit holders. The
General Partner was subsequently advised by Longacre that its affiliate,
American Holdings I, L.P.("American Holdings"), intended to commence an offer to
acquire up to 4.9% of the outstanding Units at a price of $390 per Unit, which
is in excess of the purchase price specified in the Krescent Offer. On December
4, 1996, a representative of Liquidity advised a representative of the
Partnership that an agreement had been reached between persons affiliated with
each of Longacre and Krescent and that, as a result of such agreement, the offer
by American Holdings "would be withdrawn."
The General Partner believes that the market value of the
Partnership's assets have recently begun to recover. As you may know, real
estate values fell precipitously during the late 1980's and early 1990's. The
Partnership survived this turbulent period by adopting various measures,
including the suspension of
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distributions in 1990, the sale of certain properties, and the refinancing of
the remaining properties at favorable rates. The Partnership's properties have
begun to generate greater revenues and reflect increased property values.
Encouraged by this improvement, the General Partner authorized the reinstatement
of distributions in 1995.
The General Partner looks forward to continued success in
recovering the loss in value that occurred in the late 1980's and early 1990's.
The General Partner's strategy is to aggressively manage the Partnership's
properties to maximize their value and prepare the properties for sale when this
goal is reached.
Please do not hesitate to call our Investor Communication
representatives at 1-800-255-7877 for assistance in any Partnership matter.
Sincerely yours,
Laurence Gerber
The Krupp Corporation, a General
Partner
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Exhibit 2
Krupp Funds Group
470 Atlantic Avenue, Boston, Massachusetts 02210
Telephone (800) 25-KRUPP (800-255-7877)
Krupp Realty Limited Partnership - V
November 25, 1996
Dear Limited Partner:
As you are probably aware by now, Krescent Partners L.L.C., a Delaware limited
liability company, has made an offer (the "Krescent Offer") to purchase limited
partnership units of Krupp Realty Fund Ltd. - V (the "Partnership").
The General Partners of the Partnership will be carefully studying the Krescent
Offer in consultation with the Partnership's outside advisors and, after
completing their evaluation, will announce their conclusion and recommendation
on or before December 9, 1996. Prior to that time, you are urged not to take any
action with respect to the Krescent Offer.
Krupp Realty Fund, Ltd. - V
Exhibit 3
NEWS RELEASE
GENERAL PARTNER OF KRUPP REALTY LIMITED PARTNERSHIP - V
RECOMMENDS REJECTION OF KRESCENT PARTNERS L.L.C. OFFER
BOSTON, MA -- December 5, 1996. Laurence Gerber, President of
the General Partner of Krupp Realty Limited Partnership - V, said today that,
after carefully considering the unsolicited cash tender offer by Krescent
Partners L.L.C. of $375 per Unit of Limited Partnership Interest, the General
Partner has determined that the Krescent offer is inadequate and not in the best
interests of the Unit holders. The General Partner recommends that the holders
of Units reject the Krescent offer and not tender their Units pursuant to such
offer.
In a letter to Unit holders accompanying a recommendation
statement on Schedule 14D-9 filed today with the Securities and Exchange
Commission, Mr. Gerber said that the General Partner had recommended that
holders of Units reject the offer after considering a number of factors,
including, but not limited to the following:
o The General Partner believes the price offered by Krescent
is less than 48% of the General Partner's estimate of the
Fund's net asset value of $787 per Unit.
o Unit holders who accept the Krescent offer will no longer
receive the semi-annual cash distributions currently paid
in respect of Units and will forego any claim to future
distributions from sales of the Fund's properties.
o As noted by Krescent in its offer, Unit holders who
purchased Units at the original offering are expected to
recognize taxable gain in excess of the purchase price
offered by Krescent.
For further information, Unit holders may contact Investor
Communications of the Krupp Funds Group at 1-800-343-0989.
For information on the press release contact: Maryann Merigan
(617) 423-2233
Exhibit 4
KRUPP REALTY LIMITED PARTNERSHIP-V
AMENDED AGREEMENT OF LIMITED PARTNERSHIP
AGREEMENT dated as of the 27th day of July, 1983, by and among The
Krupp Corporation, a Massachusetts corporation, and The Krupp Company Limited
Partnership-II, a Massachusetts limited partnership, each as a General Partner;
The Krupp Company Limited Partnership-II, as the Original Limited Partner; and
those Persons who shall thereafter be admitted to the Partnership as Investor
Limited Partners. The Original Limited Partner and the Investor Limited Partners
are collectively referred to herein as the "Limited Partners" and, together with
the General Partners, as the "Partners." Certain other terms used throughout
this Agreement are defined in Section 17 hereof.
WHEREAS, the General partners and the Original Limited Partner have
formed a limited partnership (the "Partnership") under an Agreement of Limited
Partnership dated as of June 16, 1983 (the "Original Agreement") and the
provisions of the Massachusetts Uniform Limited Partnership Act; and
WHEREAS, the Partners now wish to amend the Original Agreement to
provide, among other matters, for the admission of Investor Limited Partners
subject to the revised terms and conditions herein specified;
NOW THEREFORE, the parties thereto agree as follows:
Section 1. Continuation. The parties agree to continue the Partnership
formed pursuant to the Original Agreement and the provisions of the Uniform
Limited Partnership Act of the Commonwealth of Massachusetts.
Section 2. Name and Office. The Partnership shall be conducted under
the name and style of "Krupp Realty Limited Partnership-V." The principal office
and place of business of the Partnership shall be located at One Liberty Square,
Boston, Massachusetts 02109, or at such other place as the General Partners may
from time to time determine and specify by written notice to all of the
Partners. The Partnership shall at all times maintain in Massachusetts (i) an
office at which shall be kept the basic Partnership documents described in
Section 12.2 hereof, and (ii) an agent for service of process selected by the
General Partners in accordance with any relevant provisions of the Massachusetts
Uniform Limited Partnership Act as then in effect.
Section 3. Purposes and Powers.
3.1 Purposes. The purposes of the Partnership are to acquire, invest
in, maintain, operate, lease, improve, hold, encumber, sell, manage and
otherwise deal with the Properties of the Partnership.
3.2 Powers. In furtherance of the above purposes, the Partnership shall
have the powers:
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2
(a) to acquire, improve, mortgage, holder, sell, exchange, and
otherwise deal in Properties situated in any location in the United States and
in any real property appurtenant thereto and in interests therein as may be
necessary or desirable to carry out the operation, leasing and maintenance of
such Properties;
(b) subject to any applicable statutes and regulations, to borrow money
to further the purposes of the Partnership, to issue evidence of indebtedness in
respect thereof and to secure the same by mortgage or pledge or grant of lien on
or other security interest in a Property or any other assets of the Partnership;
and
(c) to do all things, carry on any activities and enter into, perform
modify, supplement or terminate any contracts necessary to, in connection with
or incidental to the furtherance of the purposes of the Partnership, all so long
as such things, activities and contracts may be lawfully done, carried on or
entered into by the Partnership under the laws of the Commonwealth of
Massachusetts and the United States of America and under the terms of this
Agreement.
The Partnership shall not engage in any business not provided for in
this Section 3.2 without the Consent of a majority in interest of the Investor
Limited Partners.
Section 4. Term. The term of the Partnership commenced upon the filing
on June 16, 1983 of the Certificate of Limited Partnership with the Secretary of
State of the Commonwealth of Massachusetts, and shall terminate at midnight on
December 31, 2020, unless sooner dissolved or terminated as provided in Section
11 hereof.
Section 5. Capital Contributions.
5.1 Contributions of General Partners. The General Partners have
contributed in cash in respect of their General Partnership Interests an
aggregate of $1,000, in the respective amounts set forth opposite their names in
Schedule A hereto. If upon termination of the Partnership, the General Partners
have a deficit balance in their Capital Accounts, they shall contribute in the
aggregate to the capital of the Partnership an amount equal to the amount, if
any, by which one and one-hundredths percent (1.01%) of the total Capital
Contributions of the Limited Partners exceeds the total amount of the General
Partners' Capital Contributions prior to such termination.
5.2 Contribution of the Original Limited Partner. The Original Limited
Partner has contributed $4,000 in cash in respect of its Original Limited
Partnership Interests. The Original Limited Partner shall not be obligated to
make any further Capital Contributions to the Partnership.
5.3 Contributions of Investor Limited Partners. The Investor Limited
Partnership Interests in the Partnership shall consist of up to forty thousand
(40,000) Units of Investor Limited Partnership Interests which shall initially
be held by the Investor Limited Partners who shall be admitted to the
Partnership as provided in
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3
Sections 6.1(b)(3), 7.2 and 7.5 hereof. The Investor Limited Partner or Partners
acquiring each such Unit shall contribute One Thousand Dollars ($1,000) per Unit
in cash to the capital of the Partnership with respect to such Unit in the
manner and subject to the conditions described in the aforesaid Sections. No
Investor Limited Partner shall initially acquire or thereafter own a fractional
Unit.
5.4 Capital Accounts. A Capital Account shall be established and
maintained for each General Partner and Limited Partner. The Capital Account of
each Partner shall be (a) credited with all payments made to the Partnership by
such Partner on account of Capital Contributions and with allocations to such
Partner of Partnership Profits for Tax Purposes, and (b) charged with
allocations to such Partner of Partnership Losses for Tax Purposes and with cash
distributions made to such Partner as distributions of Cash Flow or of Net Cash
Proceeds of Capital Transactions and the Terminating Capital Transaction, and
shall otherwise appropriately reflect transactions of the Partnership and the
Partners.
5.5 Additional Capital Contributions; Interpretation. A Partner shall
not be required to make any Capital Contribution, or be entitled to bring an
action for partition against the Partnership, or to demand or receive any
distribution of or with respect to his Capital Contribution except as is
specifically provided under this Agreement. For the purposes of this Section
5.5, a substitute Partner shall be deemed to have made the Capital Contributions
to the Partnership which were made by the Partner who such substitute Partner
succeeds, and to have received from the Partnership the allocations and
distributions received from the Partnership by such former Partner. No loan made
by a General Partner or a Limited Partner to the Partnership as permitted by
this Agreement shall constitute a Capital Contribution for any purpose.
Section 6. General Partners.
6.1 Extent of Powers and Duties.
(a) General. Except as expressly limited by the provisions of this
Agreement, the General Partners shall have complete and exclusive discretion in
the management and control of the affairs and business of the Partnership and
all powers necessary, convenient or appropriate to carry out the purposes,
conduct the business and exercise the powers of the Partnership. Except as so
expressly limited, the General Partners shall possess and enjoy with respect to
the Partnership all of the rights and powers of partners of a partnership
without limited partners to the extent permitted by Massachusetts law.
(b) Powers and Duties.
(1) General Powers and Duties. The General Partners shall diligently
and faithfully exercise their discretion to the best of their ability and use
their best efforts during so much of their time as may be necessary to carry out
the purpose and conduct the business of the Partnership in accordance with this
Agreement and in the best
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4
interests of the Partnership and so as, consistent therewith, to protect the
interests of the Limited Partners as a group. The General Partners shall have
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Partnership, whether or not in their immediate possession or control, and
they shall not employ or permit another Person to employ such funds or assets in
any manner except for the exclusive benefit of the Partnership. In particular,
the General partners, solely, shall be responsible for and shall use their best
efforts and exercise discretion to the best of their ability: (i) to cause
properties to be acquired, held, financed and refinanced, and sold, exchanged or
otherwise disposed of; (ii) to rent, maintain and operate the Properties so as
to comply with the provisions of any mortgage instruments, other indebtedness,
and/or regulatory agreements with governmental bodies or agencies relating
thereto; (iii) to select and supervise the activities of the real estate
management agent(s) for the Partnership including, without limitation, the
periodic inspection of the Properties in corder to assure their proper
maintenance and repair; (iv) to assure the proper application of revenues of the
Partnership; (v) to maintain proper books of account for the Partnership and to
prepare all reports of operations and tax returns which are to be furnished to
the Partners pursuant to this Agreement or which are required by taxing bodies
or other governmental agencies; (vi) to maintain adequate insurance with respect
to the properties and any other insurable property of the Partnership pursuant
to policies of insurance in form and coverage customary for property similar to
the Properties and such other insurable property; and (vii) to assure the doing
of all other things which may be necessary or advisable in connection with the
supervision of the affairs, business and property of the Partnership.
(2) Amplification of Powers and Duties. As amplification, and not by
way of limitation on the powers expressed herein, the General Partners shall
have, subject to the provisions of this Agreement, full power and authority on
behalf of the Partnership, in order to carry out and accomplish its purposes and
functions: (i) to expend Partnership capital and income; (ii) to purchase,
lease, sell, exchange, improve, divide, combine and otherwise transact business
with respect to interests in real estate and personal property, and in that
connection to employ engineers, contractors, attorneys, accountants, brokers
appraisers, and such other consultants, advisors, artisans, and workmen as may
be necessary or advisable for the purpose; (iii) to designate depositories of
the Partnership's funds, and the terms and conditions of such deposits and
drawings thereon; (iv) to borrow money or otherwise to procure extensions of
credit for the Partnership, and in connection therewith to execute, seal,
acknowledge, and deliver agreements, promissory notes, guaranties and other
written documents constituting obligations or evidences of indebtedness, and as
security therefor to pledge, hypothecate, mortgage, assign, transfer, or convey
mortgages or security interests in the Properties and other assets of the
Partnership; (v) to execute and deliver documents and instruments relating to
real and personal property of whatever kind and description, including, but not
limited to, deeds, mortgages, leases and other documents of title or conveyance,
regulatory agreements with governmental bodies and agencies, powers of attorney,
and other contracts, instruments and agreements of all kinds; (vi) to hold all
or any portion of the Properties and other assets of the Partnership in the name
of one or more trustees,
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5
nominees or other agents of or for the Partnership for the purpose of
facilitating transactions involving said assets; (vii) to establish reserves for
normal repairs, replacements and contingencies and, in their discretion, for any
other proper Partnership purpose; and (viii) in general to do all things and
execute all documents the General Partners shall deem necessary or convenient to
accomplish the purposes of the Partnership, or to protect and preserve the
Partnership assets, to the same extent as if they owned such assets
individually.
(3) Admission of Investor Limited Partners. The General Partners shall
have the right to admit to the Partnership as Investor Limited Partners such
Persons (including a General Partner or the Original Limited Partner) as may
acquire the respective Units in consideration of their Capital Contributions to
the Partnership pursuant to Section 5.3 hereof, provided (i) that each person so
admitted shall, in connection with such acquisition, agree to be bound by the
provisions of this Agreement in the manner specified in Section 7.2 hereof and
(ii) that no Investor Limited Partners shall be admitted unless and until the
class of Investor Limited Partners has made aggregate Capital Contributions
totaling not less than $4,000,000.
(4) Authority to Enter into Certain Agreements. The General Partners
are specifically authorized to enter into the following agreements on behalf of
the Partnership, and to pay the following fees and expenses:
(i) Commencing with the month of acquisition of any Property,
the General Partners are authorized to enter into a property management
agreement with respect to such Property. Under any such agreements with a
General Partner or any Affiliate of the General Partners, the Partnership shall
pay a monthly management fee equal to the amount customarily charged in
arm's-length transactions by other firms rendering comparable services for
comparable properties in the localities where such Properties are located, but
in no event to exceed (i) 5% of the gross receipts from residential properties
under management (including all rent-up, leasing, and re-leasing fees and
bonuses, and leasing related services, paid to any Person), (ii) 6% of the gross
receipts from commercial properties under management if such property management
firm provides leasing, re-leasing and leasing related services at its own
expense, or (iii) 3% of the gross receipts from commercial properties under
management if such property management firm does not provide leasing, re-leasing
and leasing related services at its own expense. Such fee shall include, with
respect to the Property subject to such agreement, any fees paid to a
non-related Person for bookkeeping or property management services. Under any
such agreement, the management agent shall agree to perform services in
connection with day-to-day operations of the Partnership Property subject to the
Agreement including, but not limited to: (i) collection of rent payable under
outstanding leases of the Partnership Property; (ii) supervision of the
maintenance, repair, remodeling, and refurbishing of the Partnership Property;
(iii) review of rental schedules and recommendations with respect to changes
thereto; (iv) employment and supervision of on-site property managers and other
property management personnel on behalf of the Partnership, together with the
establishment of procedures regarding the
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6
management of the Partnership Property; (v) negotiation and review of leases
with respect to the Partnership Property if the management agent is responsible
for leasing, re-leasing and leasing related services; (vi) negotiation and
review of maintenance agreements; (vii) review of replacement and working
capital reserves and recommendations with respect to changes thereto; (viii)
preparation and review of budgets and cash flow projections for the Partnership
Property; (ix) periodic physical inspections and market surveys; and (x)
determination and implementation of capital improvements.
(ii) Subject to the limitations set forth in Section 12.4
hereof, the General Partners are authorized to reimburse the entity or entities
which manage any Property pursuant to a management agreement for proper
expenditures, obligations and liabilities (including the salaries of on-site
property managers and personnel) incurred by such agent in connection with the
operation of such Property.
Any agreements, contracts and arrangements authorized by clauses (i)
and (ii) of this Section 6.1(b)(4) may be entered into with a General Partner or
an Affiliate of the General Partners subject to the following additional
conditions:
(A) 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;
(B) neither a General Partner (in any capacity other than as
General Partner) nor any such Affiliate 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 Affiliate by way of reimbursement for Partnership expenses
except as permitted by Section 12.4 hereof;
(C) any such agreements, contracts or arrangements shall be
fully and promptly disclosed to all Partners in the reports provided for in
Section 12.6(a) hereof (stating the compensation paid and to be paid by the
Partnership); and
(D) any such agreements, contracts or arrangements shall be
terminable by either party, without penalty, upon 60 days' prior written notice.
(iii) The General Partners are authorized to enter into a
Sales Agent Agreement with Smith Barney under which Smith Barney shall agree to
act as sales agent for the offering of Units made pursuant to Section 6.1(b)(3)
hereof. Pursuant to such Agreement, Smith Barney shall be entitled to receive
out of the gross proceeds of such offering the following compensation: (i) a
sales commission of $80 for each Unit sold, (ii) a financial consulting fee
equal to an additional $10 for each Unit sold, and (iii) reimbursement of the
expenses incurred by Smith Barney up to a maximum of $100,000. In addition,
Smith Barney shall be entitled under the Sales Agent Agreement to receive out of
the Net Cash Proceeds of sales and refinancings of Partnership Properties over
the
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7
life of the Partnership a Subordinated Financial Consulting Fee equal to 7.5% of
any Net Cash Proceeds from such sales or refinancings which remain after all
distributions of such proceeds have been made to the Partners to the extent
necessary to return the Invested Capital of all Partners and to pay to the
Investor Limited Partners their Cumulative Return on Investment, provided,
however, that in no event shall the maximum amount of the Subordinated Financial
Consulting Fee exceed 1.5% of the gross proceeds of the offering of Units.
(5) Maintenance of Net Worth. The General Partners shall at all times
use their best efforts to maintain their combined net worth (including the net
worth of the general partners of any partnership which serves as a General
Partner including, without limitation, The Krupp Company Limited Partnership-II)
at a sufficient level to meet all requirements of the Code 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 permit the Partnership to 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 such
combined net worth on a fair market basis at an amount at least equal to
$1,000,000.
(c) Delegation of Powers. Each General Partner, while there are more
than one, may act on behalf of the Partnership in connection with any particular
matter affecting the Partnership, including the authority to execute notes,
deeds, mortgages and other instruments. Except as otherwise provided under this
Agreement or by law, the General Partners may delegate all or any of their
duties under this Agreement to any of their own respective partners, officers or
employees, and in furtherance of such delegation may elect, employ, contract or
deal with any Person (including any General Partner or any Affiliate of a
General Partner).
(d) Reliance by Third Parties. No Person dealing with the Partnership,
or its assets, whether as mortgagee, assignee, purchaser, lessee, grantee or
otherwise, shall be required to investigate the authority of the General
Partners, or any General Partner purporting to act in behalf of the other
General Partners, in selling, assigning, leasing, mortgaging, conveying or
otherwise dealing with any Partnership Property or other assets or any part
thereof, nor shall any such assignee, lessee, purchaser, mortgagee, grantee or
other Person entering into a contract with the Partnership be required to
inquire as to whether the approval of the Partners for any such sale,
assignment, lease, mortgage, transfer or other transaction has been first
obtained. Any such Person shall be conclusively protected in relying upon a
certificate of authority or any other material fact signed by any General
Partner, or in accepting any instrument signed by any General Partner in the
name and behalf of the Partnership or the General Partners.
6.2 Limitations on the Exercise of Powers of General Partners. The
General Partners shall have no power to take any action prohibited by this
Agreement or by the Massachusetts Uniform Limited Partnership Act. Furthermore,
in their administration
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8
of the Partnership's affairs, the General Partners shall be subject to the
following specific limitations:
(a) Investment Objectives and Policies. The Partnership's
Investment in Properties shall not be less than eighty percent (80%) of the
gross proceeds of the Partnership's offering of Units made pursuant to Section
6.1(b)(3) hereof. The Properties to be acquired by the Partnership shall consist
primarily of apartment complexes, but may include other types of properties such
as office buildings or shopping centers. All of the Properties shall be located
in the United States. The Partnership shall not invest in properties under
construction or to be constructed, except for expansion or improvement of
existing Properties. The Partnership may, however, commit to purchase properties
upon their physical completion and at pre-agreed prices or pricing formulas. The
Partnership shall not invest in single family residential homes, low income
housing or other properties subject to government housing assistance payments,
secondary homes, resort or recreational properties, hotels, nursing homes,
gaming facilities, mobile home parks or property subject to sale-leaseback
transactions involving single tenants. No unimproved or non-income producing
property shall be acquired where the aggregate Purchase Price for all such
unimproved or non-income producing properties would exceed 10% of the gross
proceeds of the offering of Units made pursuant to Section 6.1(b)(3) hereof, and
unimproved or non-income producing property shall not be acquired except in
amounts and upon terms which can be financed by the net proceeds of the
Partnership's offering of Units or by cash flow from operations. On an interim
basis, the Partnership may invest its funds either in (i) United States
Government securities, other United States Government guaranteed money
instruments, certificates of deposit of banks located in the United States
having total assets in excess of $100 million, bank repurchase agreements
collateralized by securities of the United States Government or governmental
agencies, bankers' acceptances, and similar money market investments, or (ii)
shares of public investment companies registered with the Securities and
Exchange Commission whose assets exceed $50,000,000 and are invested in the
foregoing types of investments and held by an independent custodian. The
Partnership shall not invest in mortgages, 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 second mortgages
or similar obligations may be taken back from purchases of Properties in
connection with the sale thereof by the Partnership. The aggregate Leverage on
the Partnership Properties incurred in connection with the acquisition of
Properties shall not be less than 60% nor more than 80% of the Purchase Price of
all Properties determined on a combined basis. The Partnership shall not redeem
or repurchase Units and shall not underwrite the securities of other issuers.
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 the
Investment Company Act of 1940.
(b) Sales and Leases of Properties from or to the General Partners and
their Affiliates. The Partnership shall not purchase, lease or acquire any
Property from any General Partner or any Affiliate of any General Partner or any
Person in which any
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9
General Partner or Affiliate has a material interest including, without
limitation, any partnership of which any General Partner or Affiliate of a
General Partner is a partner. Notwithstanding the foregoing, the General
Partners or their Affiliates may purchase Property in their 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 (i) such Property is purchased by the partnership for a Purchase
Price (and related cash investment) no greater than the Purchase Price (and
related cash investment) in such property (including, without limitation, equity
payments, financing and closing costs) made or agreed to be made by the General
Partners or their Affiliates, (ii) there is no difference in interest rates of
the loans secured by the Property at the time acquired by the General Partners
or their Affiliates and the time acquired by the Partnership, and (iii) no other
payment directly or indirectly arising out of such transaction is received by,
nor any other benefit conferred upon, any General Partner or Affiliate thereof
apart from compensation otherwise permitted by this Agreement. In the event the
Partnership is not successful in selling sufficient Units of Investor Limited
Partnership Interests to permit the Partnership to make any payments required in
connection with obligations or indebtedness incurred by the Partnership in
connection with the acquisition of any Property, the Partnership may sell such
Property to the General Partners or any Affiliate of the General Partners for a
Purchase Price (and related cash investment as described above) not less than
the total Purchase Price (and related cash investment) paid by the Partnership
for such Property. The General Partners or their Affiliates may lease office or
other space in any Property owned by the Partnership; provided, however, that
any such lease (i) shall be on terms and conditions no less favorable to the
Partnership than those which would have been determined by arm's-length
negotiations with a non-affiliated person for comparable space in the area where
the Property is located, which determination may be made on the basis of, and
shall take into account, the terms, conditions and rentals agreed to by any
other tenants of the Property, (ii) shall be terminable on 60 days' prior
written notice by the Partnership without penalty, and (iii) shall provide that
any rentals from subleases relating thereto which are in excess of the rentals
from such lease shall be paid to the Partnership and, provided further, that no
more than 15% of the office space of the Partnership Properties shall be leased
to the General Partners or their Affiliates. Except as otherwise provided
herein, the Partnership shall not sell or lease any Property to any General
Partner or any Affiliate of a General Partner.
(c) Loans to or from the General Partners and their Affiliates. No
loans may be made by the Partnership to any General Partner or any Affiliate of
a General Partner. A General Partner or any Affiliate of a General Partner may
loan funds to the Partnership but only with interest rates and other finance
charges and fees not in excess of the amounts that are charged by unrelated
banks on comparable loans for the same purpose in the locality of the Property
in connection with which the loan was made, and in no event shall the annual
interest rate charged on any such loan exceed by more than 2% the then prime
rate of such an unrelated local bank. In addition, (i) to the extent that
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10
the General Partners or their Affiliates shall themselves borrow the funds which
they loan to the Partnership, the interest rates and other finance charges
charged to the Partnership shall not exceed the corresponding amounts paid by
the General Partners or their Affiliates, and (ii) neither any General Partner
no any Affiliate of a General Partner shall make loans to the Partnership with a
prepayment charge or penalty which is 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.
Neither any General Partner or Affiliate of a General Partner shall provide
permanent financing for the Partnership, and all payments of principal and
interest on any financing provided by the General Partners or any Affiliate of a
General Partner shall be due and payable within 12 months after the date of the
loan. In the event the Partnership utilizes any all-inclusive (or "wrap-around")
note issued by the Partnership to the General Partners or an Affiliate thereof,
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 amount 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. In addition, no General Partner or Affiliate of a General Partner
shall receive interest on the amount of the underlying encumbrance included in
any all-inclusive note in excess of that payable to the lender on that
underlying encumbrance.
(d) Exchange of Interests for Properties. The Partnership shall not
acquire any Property in exchange for Interests in the Partnership.
(e) Joint Venture Investments. The Partnership shall not make
investments in the general or limited partnership interests of any other
program, or enter into any joint venture or partnership which owns or operates a
particular Property except for (i) any such partnership or venture entered into
to facilitate the holding of title to any Property and in which the Partnership
holds all or substantially all of the beneficial interest, or (ii) a partnership
or joint venture to acquire and hold a Property entered into with a partnership
subsequently sponsored by the General Partners or their Affiliates if such other
partnership has substantial identical investment objectives and management
compensation provisions to those of the Partnership and the investments by the
Partnership and such other partnership are on substantially the same terms and
conditions, except as result from varying percentage interests in the joint
venture. The Partnership shall acquire a controlling interest in any such
partnership or venture, and in no event shall any duplicate property management
or other fees be paid by the Partnership as a result thereof. For purposes
hereof, the term "controlling interest" shall means an interest of not less than
50% in the capital and profits of the joint venture and the inclusion of
appropriate provisions in the joint venture agreement or related documents
giving the Partnership the joint right to make basic management decisions
concerning the sale, leasing, refinancing or expansion of the Property. The
Partnership
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11
may not act indirectly through any such joint venture if the Partnership would
be prohibited from doing so directly be reason of restrictions in this
Agreement. In the event of a proposed sale of the Property initiated by either
joint venture partner, the Partnership must have a right of first refusal to
purchase the other party's interest. Finally, in no event shall the
Partnership's equity investment in all such joint ventures exceed 50% of the
Partnership's total equity investment in all of its Properties.
(f) Property Appraisals. No Property shall be acquired at a Purchase
Price to the Partnership in excess of its value as determined by an appraisal
prepared by a competent independent appraiser, which appraisals shall be
maintained in the records of the Partnership for not less than five years after
the date of acquisition and which shall be available for inspection and
duplication by any Partner or his representative at his cost.
6.3 Liability for Acts or Omissions and Indemnification. No General
Partner or Affiliate of a General Partner shall be liable, responsible or
accountable in damages to any of the Partners or the Partnership for any act or
omission of any General Partner in good faith on behalf of the Partnership and
in a manner reasonably believed by such General Partner to be within the scope
of the authority granted to the General Partners by this Agreement and in the
best interests of the Partnership, except for acts or omissions constituting
negligence, misconduct or breach of fiduciary duty. The General Partners and
their respective Affiliates shall be entitled to indemnity from the Partnership
for any loss, damage, or claim by reason of any act or omission performed or
omitted by the General Partners in good faith on behalf of the Partnership and
in a manner reasonably believed by the General Partners to be within the scope
of the authority granted to the General Partners by this Agreement and in the
best interests of the Partnership, except that they shall not be entitled to be
indemnified in respect of any loss, damage or claim incurred by reason of
negligence, misconduct, or breach of fiduciary duty. Any indemnity under this
Section shall be provided out of and to the extent of Partnership assets only,
and no Partner shall have or incur any personal liability on account thereof. In
no event shall the Partnership assume the cost of any portion of liability
insurance which would insure the General Partners for any liability as to which
the General Partners are prohibited from being indemnified by the Partnership.
6.4 Compensation of General Partners. The General Partners shall not,
in their capacities as General Partners, receive any salary, fees, profits or
distributions except:
(a) The General Partners shall be entitled to receive the
allocations and distributions which are provided under Section 8 hereof in
respect of their General Partnership Interests.
(b) Neither the General Partners nor their Affiliates shall
receive any Acquisition Fees in connection with the acquisition of Partnership
Properties, and the Partnership shall not acquire any Property if the seller of
such Property or any other
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12
Person is paying any real estate brokerage commission or other Acquisition Fees
to any Person in connection with such transaction. In no event shall the
aggregate of the Acquisition Expenses paid by the Partnership in connection with
the acquisition of Partnership Properties exceed one percent (1%) of gross
proceeds of the Partnership's offering of Units made pursuant to Section
6.1(b)(3) hereof. Subject to the foregoing limitations and to the additional
limitations set forth in Section 12.4 hereof, the General Partners and their
Affiliates shall be entitled to receive reimbursement for organizational and
offering expenses, Acquisition Expenses respecting the acquisition of
Partnership Properties, and other expenses incurred by them in connection with
the organization and operation of the Partnership.
(c) Upon the sale of any Property, the General Partners shall
receive for their actual services in connection with such sale a brokerage fee
in an amount equal to three percent (3%) of the contract sales price of the
Property, provided that in no event shall (1) any such brokerage fee exceed 50%
of the competitive real estate commission in the area where the Property sold is
located and, together with any other brokerage fees payable to or by any other
Person, exceed 6% of the contract price for the sale of such Property, and (2)
any such brokerage fee be paid until after all Investor Limited Partners shall
first have received a return of their total Invested Capital and any previously
unpaid Cumulative Return on Investment as determined in accordance with Section
8.3(a) Second and Section 8.3(b) Second hereof. If and when such a return has
been achieved, any and all brokerage fees previously earned by the General
Partners shall be paid by the Partnership to the General Partners prior to any
other distributions to the Partners. If the General Partners participate with an
independent broker on resale, the aforesaid subordination requirement shall
apply only to the commission earned by the General Partners.
6.5 Other Interests of the General Partners and their Affiliates. Any
General Partner and any Affiliate of a General Partner may engage in or possess
an interest in other business ventures (unconnected with the Partnership) of
every kind and description, independently or with others including, but not
limited to, serving as general partner of other partnerships and participating
in the real estate business in all of its phases, which shall include, without
limitation, ownership, operation, financing, construction, management,
syndication and development of real property and which may include properties
competitive with any Property. The General Partners will devote such time to the
affairs of the Partnership and each other such partnership as they, within their
sole discretion, deem necessary for the proper performance of their duties.
Neither the Partnership nor the Limited Partners (except for the General
Partners and their Affiliates) shall have any rights in and to such independent
ventures or the income or profits therefrom by reason of the General Partners'
position with the Partnership. Neither the General Partners 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
the General Partners and their Affiliates shall have the right to take for its
own account (individually or otherwise) or to recommend to others any such
particular invest-
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13
ment opportunity. Notwithstanding the foregoing, while the Partnership has
available uncommitted funds to invest in additional Properties (other than funds
of the Partnership which became available because of a Capital Transaction or
because of the failure to close on a property acquisition originally allocated
to the Partnership), the General Partners shall not commit any real property for
investment to their own account or to any non-specified real estate partnership
subsequently sponsored by the General Partners or their Affiliates unless the
General Partners determine that such property would not be a suitable investment
for the Partnership or that the Partnership then has insufficient funds to make
such investment. The General Partners shall make such determination on the basis
of the investment policies and objectives set forth in Section 6.2(a) hereof.
Subject to the other provisions of this Agreement, the Partnership may employ or
transact business with any Person, notwithstanding the fact that any Partner or
any of his Affiliates may have (or have had) an interest in or connection with
such Person, and neither the Partnership nor the other Partners shall have any
rights by virtue of this Agreement in or to any income or profits derived
therefrom.
6.6 Other Transactions Involving the General Partners and their
Affiliates. Except as specifically permitted by this Agreement, the General
Partners are prohibited from entering into any agreements, contracts or
arrangements on behalf of the Partnership with any General Partner or any
Affiliate of any General Partner. Such prohibition shall include, without
limitation, the following: (a) neither a General Partner nor any such Affiliate
shall be given an exclusive right to sell or exclusive employment to sell
Property for the Partnership; (b) neither any General Partner nor any such
Affiliate shall receive directly or indirectly a commission or fee (except as
permitted by Section 6.4 hereof) in connection with the reinvestment of the
proceeds of the sale, exchange or refinancing of any Property; and (c) neither
any General Partner nor any such Affiliate shall enter into an agreement or
contract with the Partnership for the development of any Property or the
construction of improvements on any Property. In addition, in connection with
any property management or other agreements entered into by the Partnership with
any General Partner or any Affiliate of the General Partners, no rebates or
"give-ups" may be received by a General Partner or any such Affiliate, nor may
the General Partner or any such Affiliate participate in any reciprocal business
arrangements which would have the effect of circumventing any of the provisions
of this Agreement.
Section 7. Limited Partners.
7.1 Classes of Limited Partners. There shall be two classes of Limited
Partnership Interests, namely, (a) Investor Limited Partnership Interests which
shall be acquired and held by the Investor Limited Partners, and (b) Original
Limited Partnership Interests which have been acquired and shall be held by the
Original Limited Partner. Subject to the provisions of Section 9 of this
Agreement, a Withdrawn General Partner, or his estate or legal representatives,
may also be treated as a Limited Partner (but not as an Investor or Original
Limited Partner) in respect of any Interest formerly held as a General Partner
in the manner specified in Section 9.3(b) hereof.
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14
7.2 Requirements for Admission as an Investor Limited Partner. Each
Person desiring to become an Investor Limited Partner, except for an assignee
desiring to be admitted as a Substitute Limited Partner in accordance with
Section 10 hereof, shall execute and deliver to the General Partners a
subscription agreement and such other documents as shall be deemed appropriate
by the General Partners. Under such subscription agreement and other documents,
such subscriber shall, subject to acceptance of his subscription by the General
Partners, execute and agree to be bound by this Agreement. If the General
Partner shall accept such subscription, and if, in connection with the offering
of Units made pursuant to Section 6.1(b)(3) hereof, subscriptions are received
and accepted respecting not less than $4,000,000 of Units (excluding Units
subscribed for by the General Partners and their Affiliates and by residents of
Texas), the subscribers whose subscriptions are accepted shall be admitted as
Investor Limited Partners in accordance with Section 7.5 hereof. The General
Partners shall accept or reject each subscription for Units within 30 days after
its receipt by the Partnership; if rejected, all subscription payments which
accompanied such rejected subscription shall be returned forthwith to the
subscriber. No General Partner or Affiliate of a General Partner or any
underwriter, dealer or salesman of Units 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 Units; 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 Units.
7.3 Absence of Control Over Partnership Business. The Limited Partners
hereby consent to the exercise by the General Partners of the powers conferred
on them by this Agreement. No Limited Partner (except one who may also be a
General Partner, and then only in his capacity as General Partner) shall
participate in or have any control over the Partnership business or have any
right or authority to act for or to bind the Partnership. No Limited Partner
shall have the right to have the Partnership dissolved and liquidated or to have
his Capital Contribution returned except as provided in this Agreement.
7.4 Limited Liability. The liability of each Limited Partner in his
capacity as a Limited Partner shall be limited to the amount of the Capital
Contributions as described in Sections 5.2 and 5.3 hereof. Except as may
otherwise be required by law, no Limited Partner shall, in his capacity as
Limited Partner, have any further obligations to the Partnership or be required
to contribute any capital or loan any funds to the Partnership.
7.5 Admission of Investor and Substitute Limited Partners. Each
Investor Limited Partner shall become a Partner simultaneously with the filing
of the first amendment of the Certificate of Limited Partnership which shall
reflect the respective name, address and Capital Contribution of such Investor
Limited Partner. The General Partners shall prepare and file the first amendment
to the Certificate of Limited Partnership admitting Investor Limited Partners to
the Partnership within 15 days after a successful completion of the minimum
offering of $4,000,000 of Units, as specified in
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15
Section 7.2 hereof. Thereafter, the General Partners shall prepare and file from
time to time during the initial offering of Units, and in any event not less
frequently than each month during such offering period, and promptly upon the
completion thereof, further amendments to admit additional Investor Limited
Partners whose subscriptions for Units shall have been accepted by the General
Partners. Until they are admitted into the Partnership through the filing of an
amendment to the Certificate of Limited Partnership, the subscribers will not be
Partners but instead will be creditors of the Partnership entitled to a return
of their respective subscription payments in the event they are not admitted as
Investor Limited Partners. Following the completion of the initial offering of
Units, the General Partners shall prepare and file not less often than
quarterly, as specified in Section 10.3 hereof, further amendments to the
Certificate of Limited Partnership to reflect the admission of Substitute
Limited Partners admitted to the Partnership in accordance with Section 10
hereof.
Section 8. Allocations and Distributions.
8.1 Allocations of Profits or Losses for Tax Purposes.
(a) Operating Profits or Losses. Prior to the admission of any Investor
Limited Partner, the Profits or Losses for Tax Purposes of the Partnership shall
be allocated to the Original Limited Partner and the General Partners in
proportion to their respective Capital Contributions. Commencing with the first
day of the month in which the initial admission of an Investor Limited Partner
occurs, the Profits or Losses for Tax Purposes of the Partnership, other than
Profits or Losses of the Partnership arising from a Capital Transaction and the
Terminating Capital Transaction, for each fiscal year (or portion thereof in the
case of the initial fiscal year in which any Investor Limited Partner shall be
admitted) shall be determined as of the end of such fiscal year, or portion
thereof, and allocated among the classes comprised of the Investor Limited
Partners, the Original Limited Partner, and the General Partners as follows:
such profits for Tax Purposes shall be allocated in the same proportions as
distributions of Cash Flow are made pursuant to Section 8.2(b) hereof, or, in
the event no Cash Flow is then available for distribution, in the respective
proportions in which Cash Flow would have been distributed under that Section if
then available in the amount of such Profits; such Losses shall be allocated
ninety-nine percent (99%) of the class comprised of the Investor Limited
Partners, and one percent (1%) to the class comprised of the General Partners.
(b) Profits for Tax Purposes from a Capital Transaction. The Profits
for Tax Purposes of the Partnership arising from a Capital Transaction shall be
allocated as follows:
First, to the class comprised of the Investor Limited Partners
to the extent of cash distributions pursuant to Section 8.3(a) First
attributable to the return of Invested Capital;
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16
Second, to the class comprised of the Investor Limited
Partners to the extent of cash distributions pursuant to Section 8.3(a) Second
attributable to payment of the Cumulative Return on Investment;
Third, to the classes comprised of the Original Limited
Partner and the General Partners to the extent of cash distributions pursuant to
Section 8.3(a) Third attributable to the return of Invested Capital; and
Fourth, until such time as the class comprised of the Investor
Limited Partners shall have received a return of its total Invested Capital plus
the Cumulative Return on Investment required by Section 8.3(a) Second, any
remaining Profits for Tax Purposes shall be allocated ninety-nine percent (99%)
to the class comprised of the Investor Limited Partners, and one percent (1%) to
the class comprised of the General Partners; and subsequent to such time as the
class comprised of the Investor Limited Partners shall have received a return of
its total Invested Capital plus such Cumulative Return on Investment, any
remaining Profits shall be allocated sixty-five percent (65%) to the class
comprised of the Investor Limited Partners, twenty-eight percent (28%) to the
class comprised of the Original Limited Partner, and seven percent (7%) to the
class comprised to the General Partners.
Notwithstanding anything in this Section 8.1(b) to the contrary, the
class comprise of the General Partners shall be allocated, to the extent no
otherwise allocated, at least one percent (1%) of all Profits for Tax Purposes
allocated pursuant to this Section 8.1(b).
(c) Profits for Tax Purposes from the Terminating Capital Transaction.
Subsequent to the charging to Capital Accounts of (i) all distributions of Cash
Flow pursuant to Section 8.2 and (ii) and the Net Cash Proceeds of any Capital
Transactions distributed pursuant to Section 8.3(a), but prior to charging to
Capital Accounts of the Net Cash Proceeds of the Terminating Capital Transaction
distributed pursuant to Section 8.3(b) and as set forth in Section 8.4 (with
regard to the allocations within the classes of Partners), the Profits for Tax
Purposes arising from such Terminating Capital Transaction and the winding up of
the affairs of the Partnership shall be allocated among the Partners (treating
the classes comprised of the Investor Limited Partners, the Original Limited
Partner, and the General Partners as separate classes for such allocation) as
follows:
First, to each class of Partners (without preference over any
other class of Partners) in the amount as to each class equal to (or if less
than, in proportion to) the aggregate of the then negative balances (if any) in
the Capital Accounts of the Partners of such class;
Second, to the class comprised of the Investor Limited
Partners until such class shall have been allocated an amount of Profits equal
to the Cumulative Return on Investment in respect of all fiscal years of the
Partnership from the initial admission of the Investor Limited Partners through
the most recent fiscal year completed prior to the
<PAGE>
17
Terminating Capital Transaction, less the sum of (i) all amounts of Cash Flow
whenever distributed to such class pursuant to Section 8.2(b) First, and (ii)
all amounts of cash whenever distributed to such class pursuant to Section
8.3(a) Second arising from prior Capital Transactions;
Third, to the class comprised of the Investor Limited Partners
until such class has been allocated an amount of Profits equal to its unreturned
Invested Capital;
Fourth, to the class comprised of the Original Limited Partner
and the General Partners until each such class has been allocated an amount of
Profits equal to its unreturned Invested Capital; and
Fifth, any remaining Profits shall be allocated sixty-five
percent (65%) to the class comprised of the Investor Limited Partners,
twenty-eight per cent (28%) to the class comprised of the Original Limited
Partner, and seven percent (7%) to the class comprised of the General Partners.
Notwithstanding anything in this Section 8.1(c) to the contrary, the
class comprised of the General Partners shall be allocated, to the extent not
otherwise allocated, at least one percent (1%) of all Profits for Tax Purposes
arising from the Terminating Capital Transaction. Any such allocation shall be
treated for all purposes as though it were otherwise receivable by the General
Partners under this Section.
(d) Losses for Tax Purposes from a Capital Transaction. All Losses for
Tax Purposes attributable to a Capital Transaction shall be allocated
ninety-nine percent (99%) to the class comprised of the Investor Limited
Partners, and one percent (1%) to the class comprised of the General Partners.
(e) Losses for Tax Purposes from the Terminating Capital Transaction.
Losses for Tax Purposes attributable to the Terminating Capital Transaction and
the winding-up of the affairs of the Partnership shall be allocated to the
Partners to the extent of, and any excess in proportion to, the positive
balances in their Capital Accounts (adjusted as though the Partnership's fiscal
year ended immediately prior to the event giving rise to such Losses).
Notwithstanding anything in this Section 8.1(e) to the contrary, the
class comprises of the General Partners shall be allocated, to the extent not
otherwise allocated, at least one percent (1%) of all Losses for Tax Purposes
allocated pursuant to this Section 8.1(a). Any such allocation shall be treated
for all purposes as though it were otherwise allocable to the General Partners
under this Section.
8.2 Cash Flow of the Partnership.
(a) "Cash Flow". The term "Cash Flow" of the Partnership for a
particular fiscal year shall include all Profits or Losses for Tax Purposes from
the operation of the
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18
Partnership for such fiscal year, excluding Profits or Losses for Tax Purposes
for such fiscal year arising from a Capital Transaction or the Terminating
Capital Transaction, and shall be determined by adjusting such Profits or Losses
(to the extent not otherwise adjusted) as follows:
(1) Depreciation of buildings, improvements and personal
property shall not be considered a deduction;
(2) Amortization of any item for which there is not an
associated cash payment shall not be considered a deduction;
(3) Principal and interest payments on a mortgage or other
loan payable by the Partnership shall be considered deductions;
(4) Principal payments on all conditional sales contracts and
other secured obligations shall be considered a deduction;
(5) If the General Partners shall so determine, reasonable
reserves established in accordance with generally accepted accounting principles
shall be deducted to provide for replacements, improvements, capital
improvements or any other contingency of the Partnership;
(6) Any amounts paid by the Partnership for capital
expenditures or replacements (and not withdrawn from a reserve fund established
for such purpose) shall be considered a deduction;
(7) Amounts equal to accounts payable and accrued items
payable at the close of the Partnership fiscal year, to the extent not already
deducted in calculating Profits or Losses for Tax Purposes, shall be considered
a deduction;
(8) Amounts required to maintain reasonable working capital
reserves shall be considered a deduction;
(9) The reimbursement and fees payable to the General Partners
hereunder shall be considered a deduction, whether or not then payable to the
General Partners;
(10) Property management fees and reimbursement paid to
property managers shall be considered a deduction;
(11) Capital Contributions to the Partnership and the Net Cash
Proceeds of any Capital Transaction or the Terminating Capital Transaction shall
not be included in Cash Flow of the Partnership and payments made from such
sources of funds shall be excluded in determining Cash Flow of the Partnership;
and
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19
(12) Any other cash receipts from the operation of the
Partnership not properly includable in Profits or Losses for Tax Purposes, and
any amounts released from operating reserve accounts described in this Section
8.2(a) and available for distribution, shall be included in Cash Flow of the
Partnership.
(b) Cash Flow Distributions. Within 45 days after the completion of the
first half of each of the Partnership's fiscal years, commencing with the first
fiscal year in which any Investor Limited Partner shall be admitted to the
Partnership, the Partnership will make a distribution of Cash Flow to the
Partners, which distribution will be based upon an estimate by the General
Partners of the Partnership's total Cash Flow for such year. Within 90 days
after the end of each fiscal year, the Partnership's Cash Flow for such year
will be determined and, after giving effect to the amount of Cash Flow
previously distributed, the remainder will then be distributed to the Partners.
Each such distribution of Cash Flow will be described in a Cash Flow statement
distributed as required by Section 12.6(a) hereof. Each distribution of Cash
Flow of the Partnership shall be made in the manner and amounts as follows:
First, for years ending prior to the year in which the class
comprised of the Investor Limited Partners shall have received a return of its
total Invested Capital, plus the Cumulative Return on Investment required by
either Section 8.3(a) Second or 8.3(b) Second, ninety-three percent (93%) to the
class comprised of the Investor Limited Partners, six percent (6%) to the class
comprised of the Original Limited Partner, and one percent (1%) to the class
comprised of the General Partners; and
Second, for years commencing with the year in which the class
comprised of the Investor Limited Partners shall have received a return of its
total Invested Capital plus such Cumulative Return on Investment, sixty-five
percent (65%) to the class comprised of the Investor Limited Partners,
twenty-eight percent (28%) to the class comprised of the Original Limited
Partner, and seven percent (7%) to the class comprised of the General Partners.
8.3 Proceeds of Capital Transactions and the Terminating Capital
Transactions.
(a) Capital Transaction Proceeds. All cash which is determined by the
General Partners to be available for distribution as a result of a Capital
Transaction and any cash other than Cash Flow distributable pursuant to Section
8.2(b), and other than proceeds of the Terminating Cash Transaction
distributable pursuant to Section 8.3(b), shall first be applied to the payment
of all debts and liabilities of the Partnership then due (or required by any
lender or creditor to be repaid on account of the event referred to in this
Section 8.3(a) which makes such cash available), including any fees and expenses
then payable pursuant to Section 6.4 hereof but excluding any Subordinated
Financial Consulting Fee, and then to fund reserves for contingent liabilities
(including fees then earned but not yet payable pursuant to Section 6.4 hereof,
but excluding any Subordinated Financial Consulting Fee) to the extent deemed
reasonable by the General Partners, provided, that at the expiration of such
period of time as the General Partners
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20
shall deem advisable, the balance of such reserves remaining after payment (or
other satisfaction) of such contingencies shall be distributed in the manner
hereinafter set forth in this Section 8.3(a). The remaining Net Cash Proceeds,
if any, shall then be distributed as follows:
First, to the class comprised of the Investor Limited Partners
until such class has received a return on its total Invested Capital;
Second, to the class comprised of the Investor Limited
Partners until such class shall have received an amount which, when added to the
sum of (i) all amounts of Cash Flow whenever distributed to such class pursuant
to Section 8.2(b) First, and (ii) all amounts of cash distributed to such class
pursuant to this Section 8.3(a) Second (which distributions were made due to a
prior Cash Transaction) equals the amount which such class would have received,
in the aggregate, if it had received the Cumulative Return on Investment in
respect of all fiscal years of the Partnership from the initial admission of the
Investor Limited Partners through the most recent fiscal year completed prior to
the Cash Transaction giving rise to the distribution made pursuant to this
clause Second;
Third, to the classes comprised of the Original Limited
Partner and the General Partners until each such class has received a return of
its total Invested Capital;
Fourth, to Smith Barney to the extent of any Subordinated
Financial Consulting Fee then due; and
Fifth, any remaining Net Cash Proceeds shall be distributed
sixty-five (65%) to the class comprised of the Investor Limited Partners,
twenty-eight percent (28%) to the class comprised of the Original Limited
Partner, and seven percent (7%) to the class comprised of the General Partners.
Notwithstanding anything in this Section 8.3(a) to the contrary, the
class comprised of General Partners shall be entitled to receive, to the extent
not otherwise entitled, at least one percent (1%) of all Net Cash Proceeds
arising from a Capital Transaction. Any such distribution shall be treated for
all purposes as though it were otherwise distributable to the General Partners
under this Section.
(b) Terminating Capital Transaction Proceeds. All cash available from a
Terminating Capital Transaction and the winding up of the affairs of the
Partnership which is determined by the General Partners to be available for
distribution shall first be applied to the payment of all debts and liabilities
of the Partnership then due (or required by any lender or creditor to be repaid
on account of the event referred to in this Section 8.3(b) which makes such cash
available), including the fees and expenses payable pursuant to Section 6.4
hereof but excluding any Subordinated Financial Consulting Fee, and then to fund
such reserves for contingent liabilities (including fees then earned but not yet
payable pursuant to Section 6.4 hereof, but excluding any Subordinated Financial
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21
Consulting Fee) to the extent deemed reasonable by the General Partners,
provided, that at the expiration of such period of time as the General Partners
shall deem advisable, the balance of such reserves remaining after payment (or
other satisfaction) of such contingencies shall be distributed in the manner
hereinafter set forth in this Section 8.3(b). The remaining Net Cash Reserves,
if any, shall then be distributed as follows:
First, to each class Partners in the amount as to each class
equal to (or if less than, in proportion to) the aggregate of the then positive
balances (if any) in the Capital Accounts of the Partners of such class;
Second, to the class comprised of the Investor Limited
Partners until such class shall have received an amount which, when added to the
sum of (i) all amounts of Cash Flow whenever distributed to such class pursuant
to Section 8.2(b) First, and (ii) all amounts of cash whenever distributed to
such class pursuant to Section 8.3(a) Second arising from Capital Transactions,
equals the amount which such class would have received, in the aggregate, if it
had received the Cumulative Return on Investment in respect of all fiscal years
of the Partnership from the initial admission of the Investor Limited Partners
through the most recent fiscal year completed prior to the Terminating Capital
Transaction;
Third, to the class comprised of the Investor Limited Partners
until such class has received a return on its total Invested Capital;
Fourth, to the classes comprised of the Original Limited
Partner and the General Partners until each such class has received a return of
its total Invested Capital; and
Fifth, any remaining Net Cash Proceeds shall be distributed
sixty-five (65%) to the class comprised of the Investor Limited Partners,
twenty-eight percent (28%) to the class comprised of the Original Limited
Partner, and seven percent (7%) to the class comprised of the General Partners.
Notwithstanding anything in this Section 8.3(b) to the contrary, (i)
Smith Barney shall be paid its Subordinated Financial Consulting Fee to the
extent then due immediately after the class comprised of Investor Limited
Partners has received an amount of cash equal to its Cumulative Return on
Investment plus a return of its Invested Capital and after the classes comprised
of the Original Limited Partner and the General Partners, respectively, have
received a return of their Invested Capital, and immediately before any other
distributions of cash are made pursuant to Section 8.3(b), and (ii) the General
Partners shall be entitled to receive, to the extent not otherwise entitled, at
least one percent (1%) of all Net Cash Proceeds arising from the Terminating
Capital Transaction. Any such distribution to the General Partners shall be
treated for all purposes as though it were otherwise distributable to the
General Partners under this Section.
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22
8.4 Allocations and Distributions Within Classes of Partners.
(a) Subject to the provisions of Section 8.4(c) hereof, which shall
govern with respect to allocations of Profits or Losses from normal operations
and distributions of Cash Flow derived from the Partnership's operations during
any fiscal year in which any Investor Limited Partner shall initially be
admitted to the Partnership, and to allocation (if appropriate) to the Partners
in accordance with their respective Capital Accounts of Profits and Net Cash
Proceeds from the Terminating Cash Transaction pursuant to Sections 8.1(c) First
and 8.3(b) First, all Profits or Losses for Tax Purposes of the Partnership
allocated to, and distributions of cash made to, the classes of Partners
consisting of the Investor Limited Partners and the General Partners shall be
allocated among the respective members of such classes as follows: (i) among the
Investor Limited Partners, in proportion to their respective number of Units;
and (ii) among the General Partners, in proportion to their respective Invested
Capital. All distribution of Cash Flow of Net Cash Proceeds from Cash
Transactions and the Terminating Capital Transactions which are distributable to
the Investor Limited Partners shall be made to the Investor Limited Partners or
(their respective assignees) of record on the dates such distributions are made.
Except for allocations of Profits or Losses for Tax Purposes from normal
operations which are allocated in accordance with Section 8.4(d) hereof, all
allocations of Profits or Losses shall be made to the Investor Limited Partners
(or their respective assignees) of record entitled to receive any corresponding
distributions of cash.
(b) All Profits or Losses for Tax Purposes allocated to, and
distributions of cash made to, the Partners shall be credited or charged, as the
case may be, to their Capital Accounts as of the date as of which such Profits
or Losses for Tax Purposes are allocated and the date as of which distributions
of cash are made. All distributions made to the Partners pursuant to the
provisions of Section 8.2 hereof shall be treated as having been made and
charged to their respective Capital Accounts prior to the allocation of Profits
or Losses for Tax Purposes pursuant to Section 8.1(a); distributions under
Section 8.3(a) shall be treated as having been made and charged to their
respective Capital Accounts prior to the allocation of Profits or Losses for Tax
Purposes pursuant to Section 8.1(b) First; distributions under Section 8.3(b)
shall be treated as having been made and charged to their respective Capital
Accounts after the allocation of Profits or Losses for Tax Purposes pursuant to
Section 8.1(c) and after the allocation of Losses for Tax Purposes pursuant to
Section 8.1(e); and all cash distributions pursuant to Sections 8.2(b) and
8.3(a) shall be treated as having been made and charged to their respective
Capital Accounts prior to the allocation of Losses for Tax Purposes pursuant to
Section 8.1(d) and Section 8.1(e). The Profits or Losses for Tax Purposes of the
Partnership allocated among the Partners pursuant to Section 8.1(a) shall be
credited or charged to their respective Capital Accounts prior to the allocation
of Profits or Losses for Tax Purposes of the Partnership pursuant to Sections
8.1(b), (c) and (d).
(c) All Profits or Losses for Tax Purposes which are allocated to the
class of Investor Limited Partners pursuant to Section 8.1(a) hereof, and all
distributions, if any, of Cash Flow made to the class of Investor Limited
Partners pursuant to Section 8.2(b)
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23
hereof, shall, to the extent such allocations or distributions are based upon
the Partnership's operations during any fiscal year in which Investor Limited
Partners are initially admitted to the Partnership, be allocated among Investor
Limited Partners as follows. First, each such fiscal year shall be divided into
twelve segments of one month each, and the operations of the Partnership shall
be deemed as having occurred on a pro rata basis over each of such twelve
segments irrespective of the actual operations of the Partnership during any
given month. Second, each Investor Limited Partner who was admitted to the
Partnership prior to the commencement of such fiscal year shall be deemed to
have held his respective Units during each of such twelve segments, and each
Investor Limited Partner who was admitted to the Partnership during such fiscal
year shall be deemed to have held his respective Units during the appropriate
number of such segments as shall commence with the first day of the month in
which his respective admission to the Partnership as an Investor Limited Partner
occurred. Third, all Profits or Losses which are allocated to the class of
Investor Limited Partners pursuant to Section 8.1(a) hereof, and all
distributions, if any, of Cash Flow made to the class of Investor Limited
Partners pursuant to Section 8.1(b) hereof, shall, to the extent such
allocations or distributions are based upon the Partnership's operations during
such fiscal year, be allocated among the Investor Limited Partners in proportion
to the respective products produced by multiplying (i) their respective number
of Units by (ii) the respective number of segments of such year in which such
Units were held.
(d) Upon the transfer of a Partnership Interest, which shall be deemed
to have occurred as set forth below, the transferor and transferee shall be
allocated a pro rata share of the Partnership's Profits or Losses for Tax
Purposes from normal operations (which shall exclude Profits or Losses from Cash
Transactions or the Terminating Capital Transaction, which shall be allocated in
accordance with Section 8.4(a) hereof). Each item of income, gain, cost,
deduction or credit entering into the computation of Profits or Losses from
normal operations shall be pro-rated for the fiscal year in which the transfer
occurs, and such pro-ration between the transferor and the transferee shall be
based on the portion of the fiscal year that the transferred Partnership
Interest was held by the transferor and transferee, respectively. Such
pro-ration shall be based upon dividing each fiscal year of the Partnership into
twelve even segments of one month each and without regard to the actual
operations of the Partnership during any specified month, as specified in
Section 8.4(c) hereof. For the purpose of such allocations, such transfer shall
be deemed to have been made on the first day of the month following which
written evidence respecting the assignment is received by the Partnership in
form satisfactory to the General Partners or, if such date shall not be
permitted for allocation purposes under the Code, on the nearest date otherwise
permitted under the Code.
8.5 Return of Partners, Capital Contributions. All Partners shall look
solely to the assets of the Partnership for the return of their respective
Capital Contributions or any other distributions with respect to their
Partnership Interests. If the assets remaining after payment or discharge, or
provisions for payment or discharge, of its debt and liabilities are
insufficient to return the Capital Contributions or to make any other
distributions to the Partners, no Partner shall have any recourse against the
personal
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24
assets of any other Partner for that purpose, except to the limited extent set
forth in Section 6.3 hereof.
8.6 Reinvestment of Cash Flows and Net Cash Proceeds. The Partnership
shall not invest Cash Flow in Properties. No Net Cash Proceeds of a Cash
Transaction or the Terminating Capital Transaction may be reinvested by the
Partnership except for the Net Cash Proceeds of a Capital Transaction which
occurs in the two year period following the completion of the offering of Units.
In the event of such Capital Transaction, the General Partners may elect, in
their sole discretion based upon real estate market conditions then in effect,
either to distribute all or any portion of such Net Cash Proceeds to the
Partners or to reinvest such Net Cash Proceeds in reserves or in one or more
Properties. Notwithstanding the foregoing, if such a Cash Transaction shall
create any federal or state income tax liability for the Investor Limited
Partners, no such Net Cash Proceeds shall be reinvested unless sufficient such
Net Cash Proceeds are distributed to the Investor Limited Partners to pay any
such federal or state income taxes (assuming the Investor Limited Partners are
taxable at a 40% rate on ordinary income and a 16% rate on capital gains).
8.7 Return of Uninvested Capital Contributions. In the event that any
portion of the Investor Limited Partners' Capital Contributions derived from
offering of Units is not invested or committed for investment by the Partnership
within 24 months from the date on which such public offering of Units commenced
(except for any amounts utilized to pay expenses of the Partnership and amounts
set aside for reserves), such portion of Capital Contributions shall promptly be
distributed to the Investor Limited Partners by the Partnership as a return of
capital. For the purpose of this Agreement, funds will be deemed to have been
committed to investment and will not be returned to the Investor 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 but not terminated during the
aforesaid 24 month period, regardless of whether any such investment is or is
not ultimately 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 are or are not ultimately made. In the event that any Investor
Limited Partners' Capital Contributions shall be returned pursuant to this
Section, the respective Capital Contributions (and Invested Capital) of such
Partners shall thereupon be deemed to have been reduced by the amount of such
distribution.
Section 9. Withdrawal of General Partners.
9.1 Voluntary Withdrawal. Any General Partner may Voluntarily Withdraw
as a General Partner from the Partnership at any time provided that (a) the
Partnership shall have received the opinion of Counsel to the Partnership to the
effect that such Withdrawal will not constitute a termination of the Partnership
or otherwise materially adversely affect the status of the Partnership for
federal income tax purposes and (b) if the General Partner proposing to withdraw
is then the sole General Partner, or if such
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25
Voluntary Withdrawal shall require the admission of a new General Partner in
order to preserve the status of the Partnership as a partnership for federal
income tax purposes, a new General Partner shall have been selected who, or
which, (i) shall have stated willingness to be admitted, (ii) shall satisfy the
then applicable provisions of the Code and any applicable procedures,
regulations, rules and rulings (including published private rulings) thereunder,
including applicable net worth requirements so that the Partnership shall be
classified as a partnership for tax purposes, and (iii) shall have received the
specific written consent of any remaining General Partner, of the Original
Limited Partner, and of Investor Limited Partners holding not less than
two-thirds of the Units with respect to such admission. Notwithstanding the
foregoing, in no event shall either The Krupp Corporation or The Krupp Company
Limited Partnership-II Voluntarily Withdraw as a General Partner from the
Partnership prior to December 31, 1985.
9.2 Involuntary Withdrawal. A General Partner shall be deemed
Involuntarily Withdrawn as a General Partner from the Partnership upon the
occurrence of any of the following events: (a) in the case of The Krupp Company
Limited Partnership-II or an additional or Substitute General Partner which is a
partnership, upon the death, physical or mental incapacity (as determined by
certificate of a licensed physician), dissolution or bankruptcy of all general
partners of such partnership, (b) in the case of The Krupp Corporation or an
additional of Substitute General Partner which is a corporation, the filing of a
certificate of dissolution, or its equivalent, for such General Partner or the
revocation of its charter, (c) the removal of the General Partner to a vote of
the Limited Partners made in accordance with Section 13 of this Agreement, (d)
the making of an assignment for the benefit of creditors, the filing of a
voluntary petition in bankruptcy, or an adjudication of bankruptcy, or (e) any
other event which constitutes an event of withdrawal under the Massachusetts
Uniform Limited Partnership Act as then in effect.
9.3 Consequences of Withdrawal.
(a) Upon the Withdrawal of any General Partner, the Withdrawn General
Partner or his estate or legal representatives shall be entitled to receive from
the Partnership (i) any positive balance in his or its Capital Account (as
adjusted to the date of such Withdrawal), (ii) any amounts due and owing to it
or him by the Partnership less any amounts due and owing by it or him to the
Partnership, and (iii) the remaining balance, if any, of fees payable as and
when due pursuant to this Agreement or any other written agreements between the
Partnership and such General Partner in his capacity as General Partner;
however, the Withdrawn General Partner shall not be entitled to any such fees
which had not yet been earned by him prior to his Withdrawal. The right of a
General Partner, his estate or legal representatives to payment of said amounts
and fees shall be subject to any claim for damages which the Partnership or any
Partner may have against such General Partner, his estate or legal
representatives if such Withdrawal is in contravention of this Agreement.
(b) Each General Partner hereby covenants and agrees, in the event of
his Withdrawal, to transfer to a Substitute General Partner selected as provided
in Section
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26
9.5 hereof or to the remaining General Partner or General Partners, such
portion, if any, of his General Partnership Interest as may be required to
assure that the Partnership will meet the minimum general partnership interest
requirement for the continued treatment of the Partnership as a partnership
under the then applicable provisions of the Code and any applicable procedures,
regulations, rules and rulings (including published private rulings) thereunder.
Any such transfer will be made in consideration of the payment by the Substitute
General Partner or the remaining General Partner or Partners to the Withdrawn
General Partner, his estate or legal representatives, of the fair market value
of such interest. Such payments shall be in addition to any amounts payable
pursuant to Section 9.3(a) hereof by the Partnership. Any portion of such
Withdrawn General Partner's Interest which is not required to be transferred as
aforesaid may be retained by such Withdrawn General Partner, or his estate or
legal representatives as appropriate. Such Withdrawn General Partner, or his
estate or legal representatives, shall be treated as a Limited Partner in the
Partnership in respect to any such retained Interest.
(c) If the Withdrawal of a General Partner shall occur as part of a
removal and replacement of such General Partner effected in accordance with
Section 13 hereof, the provisions of said Section 13 shall govern to the extent
(if any) that the provisions of said Section 13 are inconsistent with the
provisions of this Section 9.3.
9.4 Liability of Withdrawn General Partner. If the business of the
Partnership is continued after Withdrawal of a General Partner, the Withdrawn
General Partner, his estate and legal representatives shall remain liable for
all obligations and liabilities incurred by him while a General Partner and for
which he was liable as a General Partner but shall be free of any obligations or
liability incurred on account of or arising from the activities of the
Partnership from and after the time such Withdrawal shall have become effective.
9.5 Continuation of Partnership Business.
(a) Procedure if there is a Remaining General Partner. Upon the
Withdrawal of a General Partner, the remaining General Partner or Partners, if
any, shall promptly notify the Limited Partners of such Withdrawal. The
remaining General Partner or Partners may elect to continue the Partnership
business. If at any time The Krupp Company Limited Partnership-II or a successor
General Partner with substantial net worth shall Withdraw as a General Partner,
the remaining General Partners or Partner may (but shall not be obligated to),
propose for admission a Substitute General Partner or General Partners, unless a
Substitute General Partner shall have already been proposed by the Investor
Limited Partners pursuant to Section 13 hereof. Any such proposed Substitute
General Partner shall, with the specific written consent of the other General
Partners, of the Original Limited Partner, and of Investor Limited Partners
holding not less than two-thirds of the Units, become a Substitute General
Partner upon his or its execution of this Agreement.
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27
(b) Procedure if there is no Remaining General Partner. If, following
the Withdrawal of a General Partner, there is no remaining General Partner or
Substitute General Partner, any Investor Limited Partner may notify the other
Limited Partners of such circumstances and may propose for admission a
Substitute General Partner, unless a Substitute General Partner shall have
already been proposed by the Investor Limited Partner pursuant to Section 13
hereof. Any Substitute General Partner proposed by such Investor Limited Partner
pursuant to this Section 9.5(b) or Section 13.2 hereof, shall, with the specific
written consent of Investor Limited Partners holding not less than two-thirds of
the Units, become a Substitute General Partner upon his or its execution of this
Agreement and may thereupon elect to continue the Partnership business. If no
Substitute General Partner has received the consent of Investor Limited Partners
holding not less than two-thirds of the Units, executed this Agreement, and
elected to continue the Partnership business within one-hundred eighty (180)
days from the date of the last remaining General Partner's Withdrawal, then the
Partnership shall thereupon Terminate.
Section 10. Assignment of Limited Partnership Interests.
10.1 Withdrawal of a Limited Partner. Subject to compliance with this
Agreement, an Original or Investor Limited Partner may withdraw from the
Partnership only by assigning or otherwise transferring his or its Interest as
specified in this Section 10. The withdrawal of a Limited Partner shall not
dissolve or terminate the Partnership. In the event of a Limited Partner's
withdrawal because of death, legal incompetence, dissolution or other
termination, the estate, legal representative or successor of such withdrawn
Limited Partner shall be deemed to be the assignee of such withdrawn Limited
Partner's Interest and may become a Substitute Limited Partner upon compliance
with the provisions of Section 10.3 hereof.
10.2 Assignment. Except as provided in Section 10.4 below, any Limited
Partner may Assign all or any part of his Limited Partnership Interests,
provided such Limited Partner shall file with the Partnership, in form
satisfactory to the General Partners, a duly executed counterpart of the
instrument making such Assignment and such instrument (a) evidences the written
acceptance by the assignee of all of the terms and provisions of this Agreement,
(b) represents that such Assignment was made in accordance with all applicable
laws and regulations (including, without limitation, such minimum investment and
investor suitability requirements as may then be applicable under state
securities laws), and (c) is accompanied by a fee of not in excess of $50.00 to
reimburse the Partnership for its costs respecting the Assignment.
10.3 Substitution. An assignee of a Limited Partnership Interest
assigned in accordance with the provisions of Section 10.1 or 10.2 hereof shall
become a Substitute Limited Partner of the same class as his assignor if:
(a) the General Partners, in their sole discretion, shall consent in
writing to such substitution (which consent may be withheld);
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28
(b) such assignee executes an instrument reasonably satisfactory to the
General Partners accepting and adopting the terms and provisions of this
Agreement; and
(c) in the case of Assignments other than by operation of law, the
assignor states his intention in writing to have his assignee become a
Substitute Limited Partner.
If all of the conditions of Sections 10.2 and 10.3 shall have been met,
the assignee of a Unit shall become a Substitute Limited Partner on the date as
of which the General Partners consent in writing to his admission to the
Partnership as a Substitute Limited Partner, which consent shall be evidenced by
the filing of an amendment to the Certificate of Limited Partnership listing the
name of such Substitute Limited Partner. Such an amendment shall be filed no
later than 15 days after the completion of any fiscal quarter of the Partnership
in which an Assignment has occurred which will give rise to the admission of a
Substitute Limited Partner.
An assignee of a Limited Partnership Interest who does not become a
Substitute Limited Partner in accordance with this Section 10.3 and who desires
to make a further Assignment of his Interest shall be subject to all the
provisions of Sections 10.2, 10.3 and 10.4 hereof, to the same extent and in the
same manner as any Limited Partner of his class desiring to make an Assignment
of his Interest. Failure or refusal of the General Partners to admit an assignee
as a Substitute Limited Partner shall in no way affect the right of such
assignee to receive the share of the Profits or Losses for Tax Purposes and
distributions of Cash Flow and Net Cash Proceeds to which his predecessor in
interest would have been entitled in accordance with Section 8 hereof.
10.4 Prohibited Assignment. Unless in each of the following instances
the General Partners shall give their written consent, no Units may be Assigned
or otherwise transferred:
(a) to a minor or incompetent (unless a guardian, custodian or
conservator has been appointed to handle the affairs of such Person);
(b) to any Person not permitted to be a transferee under law including,
in particular but without limitation, applicable state securities laws which
generally provide that, except in the case of a transfer by gift, inheritance,
intra-family transfer, or family dissolution, each transferee of Units must
acquire not less than five Units, and that following a transfer of less than all
his Units, each transferor must retain a sufficient number of Units to satisfy
the minimum investment standards applicable to his initial purchase of Units;
(c) in the case of a proposed assignment of Units, to any assignee if
such assignee would hold after such Assignment a fraction of a Unit; or
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29
(d) to any Person if, in the opinion of Counsel to the Partnership,
such transfer would result in the termination under the Code of the
Partnership's taxable year or of its status as a partnership.
Any such attempted Assignment without the express written consent of
the General Partners shall be void and ineffectual and shall not bind the
Partnership. In the case of a proposed Assignment which is prohibited solely
under clause (d) above, however, the Partnership shall be obligated to permit
such Assignment to become effective if and when, in the opinion of Counsel to
the Partnership, such Assignment would not longer have either of the adverse
consequences under the Code which are specified in that clause.
10.5 Status of an Assigning Limited Partner. Any Limited Partner who
shall Assign all of his Interest shall cease to be a Limited Partner of the
Partnership, and shall not longer have any of the rights or privileges of a
Limited Partner, except that unless and until a Substitute 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 Massachusetts
Uniform Limited Partnership Act.
Section 11. Dissolution and Winding-up.
11.1 Events Causing Dissolution. The Partnership shall be dissolved and
its affairs would up on the first to occur of the following:
(a) the Withdrawal of any General Partner, unless the remaining General
Partner or Partners, if any, or a Substitute General Partner admitted in
accordance with Section 9.5 or Section 13 hereof, agree to continue the
Partnership business pursuant to Section 9.5; or
(b) an election to dissolve the Partnership made in writing by the
General Partners with the Consent of a majority in interest of the Investor
Limited Partners, or, subject to compliance with Section 13 hereof, made by a
majority in interest of the Investor Limited Partners without action by the
General Partners; or
(c) the sale or other disposition of all or substantially all of the
assets of the Partnership unless the General Partners elect to continue the
Partnership business for the purpose of receipt and collection of a note and
payments thereon or the collection of any other consideration to be received in
exchange for the assets of the Partnership (which activities shall be deemed to
be a part of the Terminating Capital Transaction and the winding up of the
affairs of the Partnership); and
(d) the expiration of the Partnership term; or
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30
(e) any other event which causes the dissolution and/or winding up of
the Partnership under the Massachusetts Uniform Limited Partnership Act to the
extent not otherwise provided herein.
11.2 Distributions Upon Dissolution. Upon the dissolution of the
Partnership, the General Partners, or if there is none, such other Person
required by law to wind up the Partnership's affairs, shall proceed with the
liquidation of the Partnership (including, without limitation, the sale or other
disposition of any remaining Properties and cancellation of the Certificate of
Limited Partnership), and the net proceeds of such liquidation shall be applied
and distributed in accordance with the provisions of Section 8.3(b) hereof.
During the period of dissolution and winding up of the Partnership, the General
Partners or any Person performing such actions may exercise all of the powers
granted to the General Partners herein, and they may adopt such plan, method or
procedures as they may deem reasonable in order to effectuate an orderly winding
up. If the General Partners shall perform the foregoing functions, they shall be
compensated therefor as provided in Section 6.4 and 8 hereof, and if such
functions shall be performed by Persons other than the General Partners, such
Persons shall be entitled to reasonable compensation from the Partnership for
their services.
Section 12. Fiscal Matters.
12.1 Title to Property and Bank Accounts. Except to the extent that
trustees, nominees or other agents are utilized as specified in Section
6.1(b)(2) hereof, the Properties and other assets of the Partnership shall be
held in the name of the Partnership. The funds of the Partnership shall be
deposited in the name of the Partnership in such bank account or accounts as
shall be designated by the General Partners, and withdrawals therefrom shall be
made upon the signature of any General Partner or such Person or Persons as
shall be designated in writing by an General Partner. The funds of the
Partnership shall not be commingled with the funds of any other Person.
12.2 Maintenance of and Access to Basic Partnership Documents. The
General Partners shall maintain at the Partnership's principal office in
Massachusetts the following documents: (i) a current list of the full name and
last known business address of each Partner set forth in alphabetical order,
(ii) a copy of the Certificate of Limited Partnership and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which the Certificate or any such amendment has been executed, (iii) copies of
the Partnership's federal, state and local income tax returns and reports, if
any, for the three most recent years, and (iv) copies of this Agreement as then
if effect and of any financial statements of the Partnership for the three most
recent years. Such documents are subject to inspection and copying at the
reasonable request, and at the expense, of any Partner during ordinary business
hours. In addition, the Partnership will furnish a list of names and addresses
of all Limited Partners, together with their respective Capital Contributions,
to any Limited Partner who makes a written request therefor to the Partnership,
provided such Partner shall pay the cost of reproducing and
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31
delivering such list. Except to the extent requested by any Limited Partner, the
General Partners shall have no obligation to deliver or mail a copy of the
Partnership's Certificate of Limited Partnership or any amendment thereto to the
Limited Partners. Each Limited Partner shall also have the right to obtain from
the General Partners from time to time upon reasonable demand: (i) true and full
information regarding the status of the business and financial condition of the
Partnership, (ii) promptly after becoming available, a copy of the Partnership's
federal, state and local income tax returns for each year, and (iii) other
information regarding the affairs of the Partnership as is just and reasonable.
12.3 Financial Books and Accounting. The General Partners shall keep or
cause to be kept complete and accurate financial books with respect to the
Partnership's business. Such books shall be kept on an accrual basis and the
Profits or Losses for Tax Purposes of the Partnership shall be determined for
each fiscal year in accordance with accounting methods followed for federal
income tax purposes and otherwise in accordance with generally accepted
accounting principles applied in a consistent manner. Except as otherwise
provided herein, whenever a proportionate part of the Profits or Losses for Tax
Purposes of the Partnership is credited or charged to a Partner's Capital
Account, every item of income, gain, loss or deduction entering into the
computation of such Profits or Losses shall be considered either credited or
charged, as the case may be, and every item of credit or tax preference related
to such Profits or Losses and applicable to the period during which such Profits
or Losses were realized shall be allocated to such Capital Account in the same
proportion.
12.4 Partnership Expenses. No reimbursement shall be permitted to the
General Partners or any of their Affiliates for services which the General
Partners or any such Affiliate are entitled to compensation by way of a separate
fee. The Partnership shall reimburse the General Partners for organizational and
offering expenses incurred by the General Partners, provided that in no event
shall the amount of organizational and offering expenses paid directly or
indirectly by the Partnership exceed 4.0% of the Capital Contributions received
by the Partnership as a result of its offering of Units. For purposes hereof,
"organizational and offering expenses" shall mean those expenses incurred in
connection with, and in preparing the Partnership for, qualification under the
federal and state securities laws and subsequently offering and distributing the
Units to the public, except for sales commissions and financial consulting fees
paid by the Partnership to Smith Barney in connection with the offering of
Units. Except for organizational and offering expenses, the Partnership shall
not reimburse the General Partners or their Affiliates except for reimbursement
of the actual cost to the General Partners or their Affiliates of goods and
materials used for or by the Partnership and obtained from Persons unaffiliated
with the General Partners and their Affiliates; provided, however, the General
Partners and their Affiliates may receive reimbursement for the administrative
services necessary to the prudent operation of the Partnership, such as legal,
accounting, computer, transfer agent and other services which could be performed
directly for the Partnership by independent parties. The amounts charged to the
Partnership for such administrative services will not exceed the lesser of (i)
the actual costs to the General Partners or their Affiliates, or (ii) those
which the Partnership would
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32
be required to pay to independent parties for comparable services in the same or
comparable geographic locations. As part of the Partnership's annual report to
the Limited Partners, an itemized breakdown will be included of such
reimbursements, all of which shall be verified by the Accountants. Subject to
the foregoing, the Partnership shall pay all expenses (which expenses shall be
billed directly to the Partnership) of the Partnership which may include but are
not limited to: (i) all costs of personnel (excluding rent or depreciation,
utilities, capital equipment, and other administrative items) employed full- or
part-time by the Partnership and involved in the business of the Partnership and
allocated pro rata to their services performed on behalf of the Partnership,
including Persons who may also be officers or employees of the General Partners
or their Affiliates (other than Controlling Persons); (ii) all costs of borrowed
money, taxes and assessments on Partnership Properties and other taxes
applicable to the Partnership; (iii) legal, audit, accounting, brokerage and
other fees; (iv) printing, engraving and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, registration and recording
of documents evidencing ownership of an Interest in the Partnership or in
connection with the business of the Partnership; (v) fees and expenses paid to
independent contractors, mortgage bankers, brokers and services, leasing agents,
consultants, on-site property managers and other property management personnel,
real estate brokers, insurance brokers and other agents; (vi) expenses in
connection with the disposition, replacement, alteration, repair, remodeling,
refurbishment, leasing, refinancing and operation of Partnership Properties
(including the costs and expenses of foreclosures, insurance premiums, real
estate brokerage and leasing commissions and of maintenance of such property);
(vii) expenses of organizing, revising, amending, converting, modifying or
terminating the Partnership; (viii) expenses in connection with distributions
made by Partnership to, and communications and bookkeeping and clerical work
necessary in maintaining relations with Limited Partners, including the costs of
printing and mailing to such Persons evidences of ownership of Units and reports
of meetings of the Partnership, and of preparation of proxy statements and
solicitations of proxies in connection therewith; (ix) expenses in connection
with preparing and mailing reports required to be furnished to Limited Partners
for investor, tax reporting or other purposes, or which reports the General
Partners deem the furnishing thereof to Limited Partners to be in the best
interest of the Partnership; (x) accounting, computer, statistical or
bookkeeping costs necessary for the maintenance of the books and records of the
Partnership; and (xi) the cost of preparation and dissemination of the
informational material and documentation relating to potential sale, refinancing
or other disposition of Partnership Properties. Other than as specifically
described above in this Section 6.4 hereof, the Partnership shall not pay the
General Partners for any other items generally considered to be the General
Partners' overhead and expenses.
12.5 Fiscal Year. Except as may otherwise be determined from time to
time by the General Partners, the Partnership's fiscal year for federal income
tax and financial reporting purposes shall end on December 31 of each year.
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33
12.6 Reports, Accounting Decisions and Federal Tax Elections.
(a) Reports to Limited Partners.
(1) Quarterly Reports. Within 45 days after the end
of the first three quarters of each fiscal year, the General Partners shall send
to each Person who was a Limited Partner at any time during the quarter the
ended (i) a balance sheet (which need not be audited), (ii) a statement of
operations (which need not be audited), (iii) a Cash Flow statement (which need
not be audited), (iv) a statement describing (A) any new agreement, contract or
arrangement required to be reported by Section 6.1(b)(4), 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 Affiliate of any General Partner, (v)
a report in narrative form summarizing the status of the Partnership's
investments, (vi) until the Capital Contributions to Partnership derived from
the initial offering of Units 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 the
success of operations 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 of Capital
Contributions which then remains unexpended, stated in terms of both dollar
amount and percentage of the total amount of Capital Contributions derived from
the initial offering of Units, (vii) a report of the activities of the
Partnership during such fiscal quarter, and (viii) if the Partnership is then
required to file quarterly reports on Form 10-Q with the Securities and Exchange
Commission, a copy of each such report.
(2) Annual Reports. Within 90 days after the end of
each fiscal year, the General Partners shall send to each Person who was a
Limited Partner at any time during the fiscal year then ended a report in
narrative form summarizing the status of the Partnership's investments and
containing (i) a balance sheet as of the end of such fiscal year and statements
of operations, 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 of any Affiliates of any
General Partner, and (iv) a statement (which need not be audited) showing the
Cash Flow and Net Cash Proceeds from any Cash Transaction or Terminating Capital
Transaction distributed per Unit to the Investor Limited Partners during such
fiscal year. Such report shall separately identify (to the extent then
applicable) distributions from (a) cash flow from operations during the period,
(b) cash flow from operations during a prior period which had been held as
reserves, (c) Net Cash Proceeds arising from disposition or refinancing of
property and investments, (d) lease payments on net leases with builders and
sellers, and (e) reserves from the gross proceeds of the offering of Units
originally obtained from the Investor Limited Partners. Until the Capital
Contributions of the Partnership derived from the offering of Units shall be
fully invested, the annual report shall also contain a
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34
special report of real property acquisitions containing the information
specified above for quarterly reports.
(b) Tax Returns and Tax Information. The General Partners
shall:
(i) have the Accountants prepare the tax returns
(federal, state and local, if any) of the Partnership for each fiscal year
within 75 days after the end of each calendar year in which such fiscal year was
completed; and
(ii) deliver to each Partner within 75 days after the
end of each calendar year the information necessary to prepare his federal
income tax return, and a state tax return to the extent required in each state
where the Partnership then owns a Property, for the calendar year during which
such fiscal year was completed.
(c) Accounting decisions. All decisions as to accounting
matters, except as specifically provided to the contrary herein, shall be made
by the General Partners in accordance with the accounting methods adopted by the
Partnership for federal income tax purposes and otherwise in accordance with
generally accepted accounting principles and procedures applied in a consistent
manner. Such decisions must be acceptable to the Accountants, and the General
Partners may rely upon the advice of such Accountants as to whether such
decisions are in accordance with generally accepted accounting principles.
(d) Federal Tax Elections. The Partnership, in the sole
discretion of the General Partners, may make elections for federal tax purposes
as follows:
(i) In case of a transfer of all or part of the
Partnership Interest of a Partner, the Partnership, in the absolute discretion
of the General Partners, may timely elect pursuant to Section 754 of the Code
(or corresponding provisions of future law) and pursuant to similar provisions
of applicable state or local income tax laws, to adjust the basis of the assets
of the Partnership. In such event, any basis adjustment attributable to such
election shall be allocated solely to the transferee.
(ii) All other elections, including but not limited
to the adoption of accelerated depreciation or cost recovery methods, required
or permitted to be made by the Partnership under the Code shall be made by the
General Partners in such manner as will, in the opinion of the Accountants, be
most advantageous to a majority in interest of the Limited Partners. The
Partnership shall, to the extent permitted by applicable law and regulations,
elect to treat as an expense for federal income tax purposes all amounts
incurred by it for real estate taxes, interest and other charges which may, in
accordance with applicable law and regulations, be considered as expenses.
(e) Reports to Federal and State Authorities. The General
Partners shall cause to be prepared and timely filed with appropriate federal
and state regulatory and administrative bodies, all reports required to be filed
with such entities under then
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35
current applicable laws, rules and regulations. Such reports shall be prepared
on the accounting or reporting basis required by such regulatory bodies. Any
Limited Partner shall be provided with a copy of any such report upon request
without expense to him.
Section 13. Meetings and Voting Rights of Investor Limited Partners.
13.1 Meetings.
(a) Meetings of the Investor Limited Partners for any purpose
may be called by the General Partners and shall be called by the General
Partners upon receipt of a request in writing signed by 10% or more in interest
of the Investor Limited Partners. Notice of any 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 at the
meeting. Such meeting shall be held at the principal office of the Partnership
or at such other place as may be designated by the General Partners or, if
called upon the request of Investor Limited Partners, as designated by such
Investor Limited Partners. In addition, upon receipt of a request in writing
signed by 10% or more in interest of the Investor Limited Partners, the General
Partners shall submit any matter (upon which the Investor Limited Partners are
entitled to act) to the Investor 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 Investor Limited Partners at his record address, or
as such address which he may have furnished in writing to the General Partners.
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 Investor Limited
Partners shall constitute a quorum at all meetings of the Investor Limited
Partners; provided, however, that if there is no such quorum, holders of a
majority in interest of such Investor 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 Investor Limited Partners need be given to any Investor
Limited Partner who attends in person or is represented by proxy (except when an
Investor 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 Investor Limited
Partner entitled to such notice who, in writing, has executed and filed with the
records of the meeting, either before or after the time thereof, waiver of such
notice.
(c) For the purpose of determining the Investor Limited
Partners entitled to vote on, or to vote at, any meeting of the Partnership or
any adjournment
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thereof, the General Partners or the Investor Limited Partners requesting such
meeting may fix, in advance, a date as the record date for any such
determination of Investor Limited Partners. Such date shall not be more than 50
days nor less than ten days before any such meeting.
(d) An Investor Limited Partners shall be entitled to cast one
vote for each Unit which he owns: (i) at a meeting, in person, by written proxy
or by a signed writing directing the manner in which he desires that his vote be
cast, which writing must be received by the General Partners (or the Investor
Limited Partners calling the meeting) prior to such meeting, or (ii) without a
meeting, by a signed writing directing the manner in which he desires that his
vote be cast, which writing must be received by the General Partners (or the
Investor Limited Partners soliciting such vote) prior to the date upon which the
votes of Investor Limited Partners are to be counted. Any Investor Limited
Partners may waive notice of or attendance at any meeting of the Investor
Limited Partners and may attend by telephone or any other electronic
communication device or may execute a signed written consent. Only the votes of
Investor Limited Partners of record on a record date, if established pursuant to
clause (c) above, whether at a meeting or otherwise, shall be counted. The laws
of the Commonwealth of Massachusetts pertaining to the validity and use of
corporate proxies shall govern the validity and use of proxies given by Investor
Limited Partners.
(e) At each meeting of Investor Limited Partners, the Investor
Limited Partners present or represented by proxy may adopt such rules for the
conduct of such meeting as they shall deem appropriate, provided that such rules
shall not be inconsistent with the provisions hereof.
13.2 Voting Rights of Investor Limited Partners. Subject to Section
13.3, a majority in interest of the Investor Limited Partners, without the
concurrence of the General Partners or the Original Limited Partner, may (a)
amend this Agreement, subject to the provisions of Section 14 hereof and to the
conditions that such amendment (i) may not in any manner allow the Limited
Partners to take part in the control of the Partnership's business and (ii) may
not, without the consent of the General Partner affected, alter the rights,
powers and duties of such General Partner as set forth herein, (b) terminate the
Partnership, (c) remove any General Partner and elect a replacement therefor
(provided that the admission of such replacement as a General Partner shall be
specifically consented to in writing by Investor Limited Partners holding not
less than two-thirds of the total Units), or (d) approve or disapprove the sale
of all or substantially all the assets of the Partnership. For purposes of
exercising such rights, the Investor Limited Partners shall be treated as one
class, with the respective rights of each Limited Partner in such class to be
determined in accordance with the proportion which his respective United
represent of the total Units held by all Investor Limited Partners at the
relevant time, provided that the Units held by the General Partners or their
Affiliates shall not be voted and shall be deemed not to be outstanding for
purposes of calculating applicable percentage requirements.
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37
13.3 Conditions to Action by Investor Limited Partner. The rights of
the Investor Limited Partners pursuant to Section 13.2 hereof shall not be
effective or be exercised 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 Investor 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 Investor Limited
Partners, that such action may be effected without subject the Investor Limited
Partners to liability as general partners under the Massachusetts Uniform
Limited Partnership Act or under the laws of such other jurisdictions in which
the Partnership is qualified or owns a Property, or (ii) a Massachusetts court
having appropriate jurisdiction 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 Investor Limited
Partners, that such action may be effected without changing the Partnership's
status for tax purposes or (ii) either a court having appropriate jurisdiction
has entered a judgment, or the Internal Revenue Service has issued a ruling, to
the foregoing effect. For purposes of this Section 13.3, counsel will be deemed
satisfactory to the Investor Limited Partners if proposed by the General
Partners and affirmatively approved in writing within 45 days by a majority in
interest of the Investor Limited Partners; provided that if the holders of 10%
of more of the Investor Limited Partnership 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 Investment Limited
Partners.
13.4 Valuation of Interest of General Partner. In the event of removal
of any General Partner pursuant to Section 13.2 hereof, 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 Investor
Limited Partners. In the event that such two appraisers are unable to agree on
the value of the removed General Partners' 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 then prime rate of The First National Bank of Boston, with interest payable
annually in cash and principal payable from any cash thereafter received by the
Partnership from the sale or refinancing of Partnership Properties and prior to
any distribution being made to the Partners pursuant to Section 8.3 of this
Agreement. Any amounts received pursuant to this Section 13.4 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
13.4, the independent appraiser selected by the Investor Limited Partners shall
be selected in the following manner: a list of three qualified MAI (Member of
Appraisal Institute) appraisers shall be obtained (by a General Partner not
being removed) from the Boston chapter of the American Institute 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 Investor Limited
Partners. Such appraiser shall be deemed selected by the Investor Limited
Partners unless objected
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to in writing by a majority in interest of the Investor Limited Partners within
45 days after notification thereof is sent in writing by such General Partner.
Section 14. Amendments.
(a) In addition to the right of the Investor Limited Partners to amend
this Agreement pursuant to Section 13 hereof, the General Partners may propose
an amendment to this Agreement. The General Partners shall submit to all of the
Partners in writing the text of any such proposed amendment to this Agreement
and a statement by the General Partners of the purpose of any such amendment.
The General Partners may include in any submission a statement of the view of
the General Partners as to the proposed amendment. Upon the Consent of the
General Partners, of the Original Limited Partner, and of a majority in interest
of the Investor Limited Partners, such amendment shall take effect, except that
no such amendment shall increase the liability of any Partner or adversely
affect any Partner's share of distributions of cash or allocations of Profits or
Losses for Tax Purposes of the Partnership without in each case the approval of
the Partner involved, and except that all the Investor Limited Partners must
approve any amendment of this Section 14. A written approval may not be
withdrawn or voided once it is filed with the General Partners.
(b) In addition to any amendments otherwise authorized herein, this
Agreement may be amended from time to time by the General Partners 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 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; (iii) to
preserve the status of the Partnership as a "partnership" for federal income tax
purposes; (iv) 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; or (v) to
permit the Units to fall within any exclusion from the definition of "plan
assets" contained in Section 2550.401b-(1) of Title 29 of the Code of Federal
Regulations.
Section 15. Power of Attorney.
(a) Appointment. Each of the Investor Limited Partners hereby makes,
constitutes, and appoints the General Partners of the Partnership and each of
them, and each person who shall hereafter become a General Partner during the
term of the Partnership and any continuation of the Partnership pursuant to
Section 9.5 and Section 11, with full power of substitution, the true and lawful
attorney-in-fact of, and
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39
in the name, place and stead of, such Limited Partner, with the power from time
to time to execute, acknowledge, make, swear to, verify, deliver, record and/or
publish:
(i) this Agreement of Limited Partnership and the Certificate of
Limited Partnership under the laws of the Commonwealth of Massachusetts or any
other jurisdiction, that may be required by this Agreement or by the laws of
Massachusetts or any other jurisdiction, any subsequent amendment to this
Agreement and the Certificate of Limited Partnership (including, but not limited
to, amendments reflecting the addition of any signatory hereto as a Partner, or
any admission or substitution of other Partners, or reflecting the Capital
Contribution made by any signatory hereto or by any other Partner), or any other
document required from time to time to admit a Partner, to effect the
substitution of a Partner, or to effect the substitution of any Limited
Partner's assignee as a Limited Partner;
(ii) any other document required to reflect any action of the Partners
duly taken in the manner provided for in this Agreement, whether or not such
Limited Partner voted in favor of or otherwise Consented to such action;
(iii) any other instrument, certificate or document which may be
required by any regulatory agency, laws of the United States, any state, or any
other jurisdiction in which the Partnership is doing or intends to do business
or which the General Partners deem advisable to file or record, provided such
instrument, certificate or document is not inconsistent with the terms of this
Agreement as then in effect;
(iv) any certificate of dissolution or cancellation of the Certificate
of Limited Partnership that may be necessary upon the termination of the
Partnership; and
(v) any instrument or papers required to continue or terminate the
business of the Partnership pursuant to Sections 9.5 and 11 hereof;
provided that no General Partner shall take any action as attorney-in-fact for
any Limited Partner which could in any way increase the liability of such
Limited Partner beyond the liability expressly set forth in this Agreement or
alter the rights of Investor Limited Partners under Section 8 of this Agreement,
unless (in either case) the Limited Partner has given a Power of Attorney to a
General Partner expressly for such purpose.
(b) Amendments to Agreement and Certificate.
(i) Each of the Investor Limited Partners is aware that the
terms of this Agreement permit certain amendments of this Agreement to be
effected and certain other actions to be taken or omitted by, or with respect
to, the Partnership, in each case with the approval of less than all the
Investor Limited Partners if a specified percentage of the partners shall have
voted in favor of, or otherwise Consented to, such action. If, as, and when:
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(A) an amendment to this Agreement is proposed or an
action is proposed to be taken or omitted by, or with respect to, the
Partnership which requires, under the terms of this Agreement, the Consent of a
specified percentage in interest (but less than all) of the Partners;
(B) Partners holding the percentage of interests
specified in this Agreement as being required for such amendment or action have
Consented to such amendment or action in the manner contemplated by this
Agreement; and
(C) a Limited Partner has failed or refused to
Consent to such amendment or action (hereinafter referred to as a
"non-consenting Limited Partner"), then each non-consenting Limited Partner
agrees that each attorney-in-fact specified in Section 15(a) above, with full
power of substitution, is hereby authorized and empowered to execute,
acknowledge, make, swear to, verify, deliver, record, file and/or publish, for
and in behalf of such non-consenting Limited Partner, and in his name, place and
stead, any and all instruments and documents which may be necessary or
appropriate to permit such amendment to be lawfully made or action lawfully
taken or omitted. Each consenting and non-consenting Limited Partner is fully
aware that he and each other Limited Partner have executed this special power of
attorney and that each Limited Partner will rely on the effectiveness of such
powers with a view to the orderly administration of the Partnership's affairs.
(ii) Any amendment to this Agreement (and to the Certificate
of Limited Partnership) substituting a Limited Partner, or adding a Limited or
General Partner, may be signed by any General Partner and by the Person to be
substituted as a Limited Partner, or added as a Limited or General Partner. Any
amendment reflecting the determination of the remaining General Partner or
Partners to continue the business of the Partnership upon the Withdrawal of a
General Partner need be signed only by one General Partner. The execution of any
such amendment on behalf of a Limited Partner or any proposed substitute or
added Limited Partner may be effected by his attorney-in-fact.
(c) Power Coupled With an Interest. The foregoing grant of authority:
(i) is a special power of attorney coupled with an interest in
favor of the General Partners and as such shall be irrevocable and shall survive
the death or insanity of each Limited Partner;
(ii) may be exercised for each Limited Partner by a signature
of any General Partner of the Partnership or by listing the names of all of the
Investor Limited Partners, including such Limited Partner, and executing any
instrument with a single signature of any General Partner acting as
attorney-in-fact for all of them; and
(iii) shall survive the Assignment by any Limited Partner of
the whole or any portion of his Interest, except that, where the assignee of the
whole thereof has
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furnished a power of attorney and has been approved by the General Partners for
admission to the Partnership as a Substitute Limited Partner, this power of
attorney shall survive such Assignment with respect to the assignor for the sole
purpose of enabling a General Partner to execute, acknowledge and file any
instrument necessary to effect such substitution and shall thereafter terminate
with respect to any Partner who assigns his entire Interest.
(d) Power of Attorney by Substitute Investor Limited Partners. A
similar power of attorney shall be one of the instruments which the General
Partners shall require an assignee of a Limited Partner to execute as a
condition to the admission of such assignee as a Substitute Limited Partner.
Section 16. General Provisions.
16.1 Notices, Approvals and Consents. All notices, approvals, Consents
or other communications hereunder shall be in writing and signed by the party
giving the same, and shall be deemed to have been given when the same are (a)
deposited in the United States mail and sent by first class mail, postage
prepaid, or (b) delivered. In each case, said mailing or delivering shall be
made to the parties at the addresses set forth below or at such other addresses
as such parties may designate by notice to the Partnership:
(i) If to the Partnership or any General Partner, at the
principal office of the Partnership;
(ii) If to the Original Limited Partner, at the address set
forth in Schedule A hereto or to such other addresses as may be designated by
notice from such Partner; and
(iii) If to an Investor Limited Partner, at the address set
forth in Schedule A hereto or to such other address as may be designated by
notice from such Partner given in the manner hereby specified.
16.2 Further Assurances. The Partners will execute, acknowledge and
deliver such further instruments and do such further acts and things as may be
required to carry out the intent and purpose of this Agreement.
16.3 Captions. Captions contained in this Agreement are inserted only
as a matter of convenience and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any of the provisions thereof.
16.4 Binding Effect. Except to the extent required under the
Massachusetts Uniform Limited Partnership Act and for fees, rights to
reimbursement, and other compensation provided as such, none of the provisions
of this Agreement shall be for the benefit of or be enforceable by any creditor
of the Partnership.
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16.5 Separability. If one or more of the provisions of this Agreement
or any application thereof shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and any other application thereof shall not in any way be
affected or impaired thereby, and such remaining provisions shall be interpreted
consistently with the omission of such invalid, illegal or unenforceable
provisions.
16.6 Integration. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter and supersedes all prior
contemporaneous agreements and understandings of the parties in connection
therewith which conflict with the express terms of this Agreement. No covenant,
representation or condition not expressed in this Agreement shall affect or be
effective to interpret, change or restrict the express provisions of this
Agreement.
16.7 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of Massachusetts.
16.8 Counterparts. This Agreement may be signed by each party hereto
upon a separate copy (including, in the case of the Investor Limited Partners, a
separate subscription agreement or signature page executed by one or more such
Partners), in which event all such copies shall constitute a single counterpart
of this Agreement. However, no counterpart shall be binding unless accepted by
one or more of the General Partners, which acceptance shall be evidenced by the
filing of the Certificate of Limited Partnership or an appropriate amendment
thereto.
16.9 HUD Controls and Provisions. So long as any of the Partnership
Properties shall be subject to a mortgage held or insured by the Secretary of
Housing and Urban Development ("Secretary") (a "HUD Regulated Property"), or so
long as the Secretary shall have any interest in a HUD Regulated Property, the
following provisions and controls shall not be altered or amended without the
written consent of the Secretary:
A. All applicable regulations, rules, restrictions and
procedures of the Department of Housing and Urban Development ("HUD") (all of
such regulations, rules, restrictions and procedures being herein called "HUD
Regulations"), including, without limitation, any provisions contained in any
applicable Regulatory Agreement, shall control each HUD Regulated Property
hereunder, and in the event any provision of this Partnership Agreement shall be
in conflict with any of the HUD Regulations, this Partnership Agreement shall be
deemed amended to conform with the HUD Regulations in every way.
B. In no event shall any action be taken under this
Partnership which relates to any HUD Regulated Property unless the same shall
conform in all respects with all applicable HUD Regulations.
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C. In no event shall any Person be permitted to acquire any
interest in any HUD Regulated Property, whether as a Partner or otherwise,
except in conformity with all applicable HUD Regulations.
D. No payment in excess of any allowed management fee, and no
"Distributions" (as defined by HUD) shall be made to anyone based upon
operations of a HUD Regulated Property except from "Surplus Cash" (as defined by
HUD), and no reimbursement for expenses based upon operations of a HUD Regulated
Property will be allowed except in conformity with HUD Regulations.
E. Except as permitted by the Secretary under applicable HUD
Regulations the Partnership shall engage in no business except as set forth in
Section 3 hereof.
F. Upon termination of the Partnership, no title or right to
possession and control of any HUD Regulated Property, and no right to collect
the rents therefrom, shall pass to any Person who is not bound by the Regulatory
Agreement respecting such HUD Regulated Property in an manner satisfactory to
the Secretary.
G. The General Partners are specifically authorized:
(i) to deal with HUD and to comply with all of its
requirements, including the submission of such financial and other data as may
from time to time be required by HUD;
(ii) to enter into such regulatory and other
agreements as may be required by HUD; and
(iii) any one of the General Partners is authorized
to execute and deliver to the Secretary any note, mortgage, regulatory or other
agreement required by the HUD Regulations in accordance with the transfer of a
HUD Regulated Property to the Partnership and to execute and to deliver any
document, instrument or report which may at any time be required by HUD
Regulations.
16.10 Creditors. No creditor who makes a non-recourse loan to the
Partnership shall have or acquire at any time, as a result of making such loan,
any direct or indirect interest in the profits, capital or property of the
Partnership other than as a secured creditor.
16.11 Interpretation. Unless the context in which words are used in
this Agreement otherwise indicates that such is the intent, words in the
singular shall include the plural and in the masculine shall include the
feminine and neuter and vice versa.
Section 17. Definitions. The defined terms used in this Agreement
shall have the meanings specified below:
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"Accountants" means Coopers & Lybrand, Boston, Massachusetts, or a
successor thereto, or another firm of independent certified public accountants
selected by the General Partners.
"Acquisition Expenses" means expenses (other than Acquisition Fees)
incurred by the Partnership relating to selection and acquisition of properties,
whether or not acquired, including legal fees and expenses, travel and
communications expenses, costs of appraisals, non-refundable option payments on
property not acquired, accounting fees and expenses, title insurance, and
miscellaneous other expenses.
"Acquisition Fees" means the total of all fees and commissions paid by
any Person to any Person 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, but not any loan fees ("points"), independent appraisal
fees, engineering fees, architectural fees or other Acquisition Expenses
incurred in connection with the selection, purchase or initial operation of any
Property by the Partnership.
"Affiliate" 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 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 Immediate Family
Member of the specified Person.
"Agreement" means this Agreement of Limited Partnership, as the same
may hereafter be amended from time to time.
"Assign" means, with respect to a Partnership Interest or part thereof,
to offer, sell, assign, transfer, give, or otherwise dispose of, wether
voluntarily or involuntarily or by operation of law, except that in the case of
a bona fide pledge or other hypothecation, no Assignment shall be deemed to have
occurred unless and until the secured party has exercised any of his rights of
foreclosure with respect thereto. "Assignment" means any of the aforesaid
transactions involving a Partnership Interest or any part thereof.
"Capital Account" means the capital account of each Partner established
and maintained in accordance with Section 5.4 hereof.
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"Capital Contribution" means the amount of cash contributed to the
Partnership by a Partner, prior to the deduction of any offering expenses or
selling commissions.
"Capital Transaction" means the sale, exchange, refinancing,
condemnation, eminent domain taking, casualty or other disposition of a
Partnership Property, but not including the Terminating Capital Transaction.
"Cash Flow" has the meaning given in Section 8.2(a) hereof.
"Certificate of Limited Partnership" means the certificate of limited
partnership filed with the Secretary of State of the Commonwealth of
Massachusetts pursuant to this Agreement, as the same may be amended from time
to time.
"Code" means the Internal Revenue Code of 1954, as amended, or
corresponding provisions of subsequent laws.
"Consent" means either the consent given by vote at a meeting called
and held in accordance with the provisions of Section 13.1 hereof or the 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.
"Controlling Person" means, with respect to any General Partner or its
Affiliates, any of its general partners, chairman, directors, president,
secretary, treasurer, or vice presidents, or any Person holding a 5% or more
equity interest in the General Partner or such Affiliate or having the power to
direct or cause the direction of the General Partner or such Affiliate, whether
through the ownership of voting securities, by contract, or otherwise.
"Counsel to the Partnership" means Messrs. Gaston Snow & Ely Bartlett,
Boston, Massachusetts, or another law firm selected by the General Partners.
"Cumulative Return on Investment" means a return equal to nine percent
(9%) per annum (and pro rated based upon time and dollar amount with respect to
any portion of a year in which the Invested Capital of the Investor Limited
Partners is held by the Partnership for less than the full year commencing as of
their respective dates of admission to the Partnership) of the Invested Capital
of the class comprised of the Investor Limited Partners. In calculating whether
the 9% annual Cumulative Return on Investment payable to the Investor Limited
Partners has been satisfied, only distributions by the Partnership of cash will
be considered and no credit will be given for tax benefits allocated to the
Investor Limited Partners.
"Development Fee" means a fee for the packaging of a Partnership
Property, including negotiating and approving plans, and undertaking to assist
in obtaining zoning and necessary variances and necessary financing for the
specific Property, either initially or at a later date.
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"Front-End Fees and Expenses" means fees and expenses paid by any
Person for any services rendered during the Partnership's organizational or
acquisition phase including, without limitation, organizational and offering
expenses, Acquisition Fees, and Acquisition Expenses. In no event shall the
Partnership's contingent obligation to pay the Subordinated Financial Consulting
Fee out of the Net Cash Proceeds of sales or refinancings of Partnership
Properties over the life of the Partnership be treated as part of Front-End Fees
and Expenses.
"General Partner" means any Person designated as a General Partner in
Schedule A of this Agreement or who becomes an additional or Substitute General
Partner as provided in this Agreement, in such Person's capacity as a General
Partner of the Partnership.
"General Partners" means every Person or Persons who serve(s) as a
General Partner, whether there be one or several.
"Immediate Family Member" means with respect to any person, his spouse,
parent, parent-in-law, issue, brother, sister, brother-in-law, sister-in-law, or
child-in-law.
"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, but excluding any claims which such
Partner may have against the Partnership as a creditor.
"Invested Capital" means, with respect to each class of Partners, the
Capital Contributions by such class of Partners less any amounts of cash
distributed to such class pursuant to: (i) Clauses First and Third of Section
8.3(a) hereof from a Capital Transaction; and (ii) Clauses First, Third, and
Fourth of Section 8.3(b) hereof from the Terminating Capital Transaction. With
respect to each Partner in a class of Partners, the respective Invested Capital
of such Partner shall be determined by the proportion which such Partner's
Invested Capital bears to the total Invested Capital held by such class.
"Investment in Properties" means the amount of Capital Contributions
actually paid for or allocated to the purchase, development, construction, or
improvement of Properties acquired by the Partnership, including amounts paid
for or allocated to the purchase of Properties, working capital reserves
allocable thereto (except that working capital reserves in excess of 5% of the
total Capital Contributions shall not be included), and other cash payments such
as interest and taxes, but excluding Front-End Fees and Expenses.
"Investor Limited Partner" means any Person who shall purchase a Unit
and be admitted to the Partnership as an Investor Limited Partner, or any Person
who becomes a Substitute Investor Limited Partner, in the capacity of such
Person as an Investor Limited Partner.
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"Involuntary Withdrawal" means, with respect to any General Partner,
the Withdrawal of such General Partner from the Partnership pursuant to Section
9.2 hereof.
"Leverage on the Partnership Properties" means the quotient produced by
dividing (i) the aggregate principal amount of the indebtedness encumbering the
Partnership Properties on their respective dates of acquisition, by (ii) the
aggregate Purchase Price of the Partnership Properties, after excluding from
such Purchase Price any Front-End Fees and Expenses included therein. For
purposes of such calculation, if the Partnership shall have on the date of
acquisition of any Property a written commitment from a lender to provide either
initial financing or refinancing of then existing indebtedness for such
Property, the principal amount of the indebtedness encumbering such Property
shall be adjusted to reflect such financing or refinancing, provided that such
transaction shall be closed within one year of the date the Property is acquired
by the Partnership.
"Limited Partner" means any Original Limited Partner or Investor
Limited Partner or any Person admitted to the Partnership as a Substitute
Limited Partner in such Person's capacity as an Original or Investor Limited
Partner of the Partnership.
"Net Cash Proceeds" of a Capital Transaction or the Terminating Capital
Transaction means the cash received by the Partnership as a result of such
Transaction, less (i) all debts and liabilities of the Partnership required to
be paid as a result of the Transaction (including, among other liabilities, any
fees and expenses payable pursuant to Section 6.4 hereof, exclusive of any
Subordinated Consulting Fee), and (ii) any reserves for contingent liabilities
(including fees then earned but not yet payable pursuant to Section 6.4 hereof,
exclusive of any Subordinated Consulting Fee), to the extent deemed reasonable
by the General Partners provided that, at the expiration of such period as the
General Partners shall deem advisable, the balance of such reserves remaining
after payment of such contingencies shall be distributed in the manner provided
in this Agreement for Net Cash Proceeds. In the event the Partnership takes back
a mortgage note in connection with any Capital Transaction or the Terminating
Capital Transaction, all payments subsequently received in cash by the
Partnership with respect to such note shall be included in the Net Cash Proceeds
of that Transaction, irrespective of the extent to which any portion of such
payments shall be treated by the Partnership as principal or interest for tax or
accounting purposes.
"Original Agreement" means the Agreement of Limited Partnership
executed and delivered on June 16, 1983 by the General Partners and the Original
Limited Partner.
"Original Limited Partner" means The Krupp Company Limited
Partnership-II, a Massachusetts limited partnership, or a Substitute Original
Limited Partner admitted to the Partnership in accordance with this Agreement,
in its capacity as the Original Limited Partner of the Partnership.
"Partner" means any General Partner or Limited Partner.
<PAGE>
48
"Partnership" means the limited partnership as formed and as amended in
accordance with this Agreement, as said limited partnership may from time to
time be constituted.
"Person" means any individual, partnership, corporation, trust,
governmental official, body or agency, or other entity of any type.
"Profits or Losses for Tax Purposes" means profits or losses as
determined by the Partnership for federal income tax purposes, and items of
income, gain, loss, deduction, or credit entering into the computation thereof.
"Property" means any real estate, buildings, improvements, fixtures and
related personal property acquired by the Partnership, and any equity interest
of the Partnership therein, whether direct or indirect through a nominee, joint
venture or otherwise.
"Purchase Price of a Property" means the price paid upon or in
connection with the purchase or improvement of a particular Property, including
the amount of Acquisition Fees and Acquisition Expenses and all liens and
mortgages on the Property, but excluding points and prepaid interest. For
purposes of such calculation, if the Partnership shall have on the date of
acquisition of any Property a written commitment from any holder of a mortgage
then encumbering such Property to permit the prepayment or refinancing of such
mortgage, the Purchase Price of such Property shall be adjusted to reflect any
net increase or decrease in the principal amount of the mortgage indebtedness
encumbering such Property, provided that all transactions involved in such
prepayment or refinancing are closed within one year of the date of acquisition.
"Sales Agent Agreement" means the Sales Agent Agreement between the
Partnership and Smith Barney entered into pursuant to Section 6.1(b)(4)(iii)
hereof.
"Schedule A" means Schedule A to this Agreement as amended from time to
time.
"Smith Barney" means Smith Barney, Harris Upham & Co. Incorporated, a
New York corporation, and any successor thereto by statutory merger or other
reorganization.
"Subordinated Financial Consulting Fee" means the subordinated
financial consulting fee payable by the Partnership to Smith Barney pursuant to
the Sales Agent Agreement over the life of the Partnership out of the Net Cash
Proceeds of sales and refinancings of Partnership Properties.
"Substitute General Partner" means the assignee of a General
Partnership Interest who is admitted to the Partnership as a General Partner
pursuant to Section 9.5 or Section 13.2 of this Agreement.
<PAGE>
49
"Substitute Limited Partner" means the assignee of a Limited
Partnership Interest who is admitted to the Partnership as a Limited Partner
pursuant to Section 10.3 of this Agreement.
"Terminating Capital Transaction" means the sale, exchange,
condemnation, eminent domain taking, casualty or other disposition of all or
substantially all of the assets of the Partnership which results in the
termination of the Partnership pursuant to Section 11 of this Agreement. The
Terminating Capital Transaction shall also include the receipt and collection of
notes, if any, and payments thereon or any other consideration received or to be
received by the Partnership upon a sale or other disposition of all or
substantially all of the assets of the Partnership and all activities reasonably
related thereto. Such activities are deemed to be included in the winding up of
Partnership affairs, and all allocations and distributions therefrom shall be
governed by Sections 8.1(c) and (e) and 8.3(b) hereof.
"Unit" means the Investor Limited Partnership Interest of an Investor
Limited Partner representing an initial Capital Contribution of One Thousand
Dollars ($1,000).
"Voluntary Withdrawal" means, with respect to a General Partner, the
voluntary retirement or withdrawal of a General Partner from the Partnership, or
the voluntary sale, assignment, encumbrance or other disposition of all of his
General Partnership Interest pursuant to Section 9.1 hereof.
"Withdrawal" means, with respect to a General Partner, the Voluntary or
Involuntary Withdrawal of such General Partner.
<PAGE>
50
"Withdrawn General Partner" means a General Partner whose Withdrawal in
accordance with the provisions of this Agreement is effective.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amended Agreement of Limited Partnership as of the date first specified above.
GENERAL PARTNERS ORIGINAL LIMITED PARTNER
THE KRUPP CORPORATION THE KRUPP COMPANY LIMITED
PARTNERSHIP-II
By: s/Douglas Krupp By: s/George Krupp
----------------------- -----------------------
Douglas Krupp, Co-Chairman of the George Krupp, a
Board of Directors General Partner
THE KRUPP COMPANY LIMITED
PARTNERSHIP-II
By: s/George Krupp
-----------------------
George Krupp, a
General Partner
<PAGE>
51
SCHEDULE A
NAMES, BUSINESS ADDRESSES AND
CAPITAL CONTRIBUTIONS OF PARTNERS
Capital
Contribution
Name and Business Address Made
I. General Partners
The Krupp Corporation $ 25
One Liberty Square
Boston, Massachusetts 02109
The Krupp Company Limited Partnership-II 975
One Liberty Square
Boston, Massachusetts 02109
-------
Total $ 1,000
II. Original Limited Partner
The Krupp Company Limited Partnership-II $ 4,000
One Liberty Square
Boston, Massachusetts 02109
III. Investor Limited Partners
[To be determined] [To be determined]
Exhibit 5
PROPERTY MANAGEMENT AGREEMENT
This Agreement is made as of the ____ day of ________________, 199___ between
the undersigned KRUPP REALTY LIMITED PARTNERSHIP-V, (The "Owner") and the
undersigned BERKSHIRE REALTY ENTERPRISES LIMITED PARTNERSHIP, (the "Agent").
1. APPOINTMENT AND ACCEPTANCE. The Owner appoints the Agent as exclusive
agent for the management of the property described in Section 2 of this
Agreement, and the Agent accepts the appointment, subject to the terms and
conditions set forth in this Agreement.
2. DESCRIPTION OF THE PROJECT. The property to be managed by the Agent
under this Agreement (the "Project") is a housing development consisting of the
land, buildings, and other improvements located in ______________ and known as
________________ Apartments, containing ______ dwelling units.
3. BASIC INFORMATION. The Agent will thoroughly familiarize itself with
the character, location, construction, layout, plan and operation of the
Project, and especially the electrical, plumbing, air-conditioning and
ventilating systems, the elevators and all other mechanical equipment.
4. MARKETING. The Agent will carry out the marketing activities designed
to attract tenants as described below.
5. RENTALS. The Agent will offer for rent and will rent the dwelling
units and commercial space, if any, in the Project. Incident thereto, the
following provisions will apply:
a. The Agent will show the Project to prospective tenants;
b. The Agent will take and process applications for rentals.
If an application is rejected, the applicant will be told
the reason for rejection, and will be given the rejected
application, with reason for rejection noted. A current
list of prospective tenants will be maintained;
c. The Agent will prepare all dwelling leases and, unless
otherwise directed by the Owner, will execute the same in
its name, identifying itself thereon as agent for the
<PAGE>
Owner. Dwelling leases will be in a form approved by the
Owner;
d. The Owner will furnish the Agent with rent schedules, showing
contract rents for dwelling units, and other charges for
facilities and services. The Agent will periodically review such
rent schedules and make recommendations to the Owner with respect
to changes thereto;
e. The Agent will collect, deposit, and disburse security
deposits, if required, in accordance with the terms of
each tenant's lease;
f. The Agent will negotiate and prepare commercial leases and
concession agreements, if the Project shall now or hereafter
contain any commercial space, and will execute the same in its
name, identified thereon as agent for the Owner, subject to the
Owner's prior approval of all terms and conditions; and
g. The Agent will perform periodic market surveys with
respect to the market area in which the Project is
located.
6. COLLECTION OF RENTS AND OTHER RECEIPTS. The Agent will collect, when
due, all rents, charges and other amounts receivable for the Owner's account in
connection with the management and operation of the Project. Such receipts will
be deposited in an account, separate from all other accounts and funds, with a
bank whose deposits are insured by the Federal Deposit Insurance Corporation.
This account will be carried in the Owner's name and designated of record as
"KRUPP REALTY LIMITED PARTNERSHIP-V dba _____________ Apartments" (the "Project
Rental Account"). Subject to compliance with Section 11 hereof, the Agent is,
however, hereby authorized to make deposits to and withdrawals from the Project
Rental Account as agent for the Owner.
7. ENFORCEMENT OF LEASES. The Agent will secure full compliance by each
tenant with the terms of such tenant's lease. Voluntary compliance will be
emphasized, but the Agent may lawfully terminate any tenancy when, in the
Agent's judgment, sufficient cause (including but not limited to non-payment of
rent) for such termination occurs under the terms of the tenant's lease. For
this purpose, the Agent is authorized to consult with legal counsel, to be
designated by the Owner, to bring actions for eviction against such tenants;
provided, however, the Agent shall keep the Owner informed of such actions and
shall follow such instructions as the Owner may prescribe for the conduct of any
such action. Subject to the Owner's approval, attorney fees and other necessary
costs incurred in connection with such actions will be paid out of the Project
Rental Account as Project expenses.
8. MAINTENANCE AND REPAIR. The Agent will maintain the Project in good
repair and in compliance with local codes, and in a condition at all times
<PAGE>
acceptable to the Owner, including, but not limited to, cleaning, painting,
decorating, plumbing, carpentry, grounds care, and such other maintenance,
repair, remodeling and refurbishing work as may be necessary, subject to any
limitations imposed by the Owner in addition to those contained herein. The
Agent will also assist the Owner in identifying and implementing capital
improvements to the Project. The Agent will perform such periodic physical
inspections as shall be appropriate in connection therewith. Incident thereto,
the following additional provisions will apply:
a. Special attention will be given to preventive maintenance,
and, to the extent feasible, the services of regular
maintenance employees will be used;
b. Subject to the Owner's prior approval, the Agent will negotiate,
review and sign, on behalf of the Owner, contracts with qualified
independent contractors for the maintenance and repair of heating
and air-conditioning systems and elevators, and for extraordinary
repairs to such items and other assets of the Project, which are
beyond the capability of regular maintenance employees;
c. The Agent will systematically and promptly receive and
investigate all service requests from tenants, take such action
thereon as may be justified, and will keep records of the same.
Emergency requests will be received and serviced on a twenty-four
(24) hour basis. Complaints of a serious nature will be reported
to the Owner after investigation;
d. The Agent is authorized to purchase all materials,
equipment, tools, appliances, supplies and services
necessary to the proper maintenance and repair of the
Project; and
e. Notwithstanding any of the foregoing provisions, the prior
approval of the Owner will be required for any expenditure
which exceeds Five Thousand Dollars ($5,000) in any one
instance for labor, materials or otherwise, in connection
with the maintenance and repair of the Project, except for
recurring expenses within the limits of the operating
budget and emergency repairs involving manifest danger to
persons or property or required to avoid suspension of any
necessary service to the Project. In the latter event,
the Agent will inform the Owner of the facts as promptly
as possible.
9. UTILITIES AND SERVICES. In accordance with the operating budget, the
Agent will make arrangements for water, electricity, gas, sewage and trash
<PAGE>
disposal, vermin extermination, decorating, laundry facilities, and telephone
service. Subject to the Owner's prior approval, the Agent will make such
contracts as may be necessary to secure such utilities and services.
10. NONCUSTOMARY SERVICES. Notwithstanding any contrary provision in
this Agreement, the Owner shall cause any services, in connection with the
rental of the Project, that are not customarily furnished to tenants of
comparable buildings in the region (including, but not limited to, the provision
of maid service and the furnishing of parking facilities, other than on a
complimentary, unreserved basis), to be performed by an entity qualifying as an
independent contractor.
11. EMPLOYEES. Except as otherwise agreed, all on-site personnel will be
employees of the Owner, for purposes of their compensation, and not the Agent,
but will be hired, paid, supervised, and discharged through the Agent, in the
Agent's sole discretion, subject to the following conditions:
a. The resident manager will have duties of the type usually
associated with this position;
b. Compensation (including fringe benefits) of bookkeeping,
clerical, and other managerial personnel will be within
the Agent's sole discretion, provided minimum wage
standards are met;
c. The Owner will reimburse the Agent for the compensation
(including fringe benefits) payable to the on-site
management and maintenance employees, and for all local,
state and federal taxes and assessments (including, but
not limited to, Social Security taxes, unemployment
insurance, and Workman's Compensation insurance) incident
to the employment of such personnel. Such reimbursements
will be paid out of the Project Rental Account and will
be treated as Project expenses; and
d. Compensation (including fringe benefits) payable to the
on-site staff, and all bookkeeping, clerical and other
managerial personnel, plus all local, state and federal
taxes and assessments incident to the employment of such
personnel will be borne solely by the Project, and will
not be paid out of the Agent's management fee. The
rental value of any dwelling unit furnished rent-free to
on-site personnel will be treated as a cost of the
Project.
12. DISBURSEMENTS FROM PROJECT RENTAL ACCOUNT.
<PAGE>
a. From the funds collected and deposited by the Agent in the
Project Rental Account, either the Owner or the Agent, as shall
be determined from time to time by the Owner, will make the
following disbursements, when payable:
(1) Reimbursement to the Agent for compensation payable to
the employees specified in Section 10 above, and for
the taxes and assessments payable to local, state and
federal governmental agencies;
(2) All sums otherwise due and payable by the Owner as
expenses of the Project, including compensation payable
to the Agent for its services hereunder and expenses of
the Project incurred by the Agent under the terms of
this Agreement;
(3) Any payment required to be made monthly by the Owner to
any mortgagee of the Project, including the amounts due
under the mortgage for principal amortization,
interest, ground rents, taxes and assessments, and fire
and other hazard insurance premiums;
b. Except for the disbursements mentioned above, funds will
be disbursed or transferred from the Project Rental
Account only as the Owner may from time to time direct;
and
c. In the event the balance in the Project Rental Account is at any
time insufficient to pay disbursements due and payable under
Section 11(a) above, the Agent will inform the Owner of that
fact and Owner shall immediately deposit sufficient funds. In no
event will the Agent be required to use its own funds to pay
such disbursements.
13. RECORDS AND REPORTS. The Agent will have the following
responsibilities with respect to records and reports:
a. The Agent will establish and maintain a comprehensive
system of records, books and accounts in a manner
satisfactory to the Owner;
b. With respect to each fiscal year ending during the term of this
Agreement, the Agent will furnish an annual financial report.
The Agent will also prepare and review budgets and cash flow
projections for the Project in such manner and at such times as
may be agreed with the Owner;
c. The Agent will furnish such information (including
occupancy reports) as may be reasonably requested by the
<PAGE>
Owner from time to time with respect to the financial,
physical, or operating condition of the Project; and
d. By the twenty-fifth (25th) day of each month, the Agent will
furnish the Owner with a statement of receipts and disbursements
during the previous month, a schedule of accounts receivable and
payable, as of the end of the previous month and reconciled bank
statements for the Project Rental Account, as of the end of the
previous month.
14. ON-SITE MANAGEMENT FACILITIES. Subject to the further agreement of
the Owner and the Agent as to more specific terms, the Agent will maintain a
management office within the Project, for the convenience of the Owner, for the
sole purpose of the Agent's performing its duties under this Agreement, and the
Owner will make no rental charge for such office.
15. INSURANCE. The Owner will inform the Agent of insurance to be
carried with respect to the Project and its operations, and the Agent, when
authorized by the Owner, will cause such insurance to be placed and kept in
effect at all times. The Agent will pay premiums out of the Project Rental
Account, as an expense of the Project. All insurance will be placed with such
companies, on such conditions, in such amounts, and with such beneficial
interests appearing thereon as shall be acceptable to the Owner and shall be
otherwise in conformity with any mortgage relating to the Project, provided that
the same will include public liability coverage, with the Agent designated as
one of the insured, in amounts acceptable to the Owner, Agent and any mortgagee
of the Project. The Agent will investigate and furnish the Owner with full
reports as to all accidents, claims, and potential claims for damage relating to
the Project and will cooperate with the Owner's insurers in connection
therewith.
16. AGENT'S COMPENSATION. The Agent will be compensated for its service
under this Agreement by monthly fees to be paid out of the Project Rental
Account to be treated as Project expenses. Such fees will be payable monthly.
Each such monthly fee will be in an amount equal to five percent (5%) of the
gross receipts (including rentals and other operating income of the Project)
actually received during the preceding month. In addition, the Agent shall
receive reimbursement for all proper expenditures, obligations and liabilities
incurred by the Agent in connection with the operation of the Project. Such
reimbursement shall be limited to the actual cost of goods, services and
materials used for or by the Project, and in no event shall such cost exceed the
cost of such items if supplied by persons or entities other than the Agent or
its affiliates. Such reimbursement shall not include reimbursement for costs of
<PAGE>
services rendered by employees who are not employed in the operation of the
Project (except that employees servicing more than one property (whether or not
owned by the Owner) may have their costs prorated based upon the respective
number of units or square footage in each property), or other expenses for which
managing agents of real estate would not customarily receive reimbursement in
addition to stated compensation.
17. INDEMNIFICATION BY THE OWNER. The Owner shall indemnify and hold
harmless the Agent, to the full extent permitted by the Delaware General
Corporation Law (in effect at the time indemnity is sought), from all liability,
claims, damages or loss arising out of the performance of its duties hereunder,
and related expenses, including reasonable attorneys' fees, to the extent such
liability, claims, damages or losses and related expenses are not fully
reimbursed by insurance; provided, however, that the Agent shall be entitled to
indemnification, under this Section 17, only if the Agent, in connection with
any liability, damages, claim or loss for which it seeks indemnity, acted in a
manner which would not constitute gross negligence or wilfull misfeasance.
18. INDEMNIFICATION BY THE AGENT. The Agent shall indemnify and hold
harmless the Owner from contract or other liability, claims, damages, losses and
related expenses, including attorneys' fees, to the extent that such liability,
claims, damages, losses and related expenses are not fully reimbursed by
insurance and are incurred by the Owner by reason of the Agent's deliberate
dishonesty or gross negligence.
19. RIGHT TO ASSIGN. The Agent may assign some or all of its rights or
obligations under this Agreement, provided that the Agent remains principally
responsible hereunder, and the Owner is given notice of such assignment. The
Owner may assign its rights and obligations under this Agreement to any
successor in title to the Property, and upon any such assignment, the Owner
shall be relived of all liability accruing after the effective date of such
assignment.
20. TERM OF AGREEMENT. This agreement shall be in effect for a period
commencing on the date hereof. This agreement may be terminated, without
penalty, by written notice of either party to the other as of the end of any
calendar month, provided at least sixty (60) days advance notice thereof is
given.
IN WITNESS WHEREOF, the parties hereto (by their duly authorized
representatives) have executed this Agreement on the date first above written.
OWNER: AGENT:
<PAGE>
KRUPP REALTY BERKSHIRE REALTY ENTERPRISES
LIMITED PARTNERSHIP-V LIMITED PARTNERSHIP
By: The Krupp Corporation,
its General Partner
By: By:
------------------------ ------------------------
Exhibit 6
SETTLEMENT AGREEMENT
This Settlement Agreement and Release (this "Agreement") is
made and entered into as of the 27th day of June, 1996, by and between The Krupp
Corporation ("Krupp"), a Massachusetts corporation with a principal place of
business at 470 Atlantic Avenue, Boston, Massachusetts 02210, and Liquidity
Financial Group, L.P. ("Liquidity") individually and on behalf of certain
Affiliates as hereinafter defined, a California limited partnership with a
principal place of business at 2200 Powell Street, Suite 700, Emeryville,
California 94608.
W I T N E S S E T H
WHEREAS, Liquidity is engaged in the business of sponsoring
and managing funds which invest in, among other things, real estate limited
partnerships;
WHEREAS, Krupp and certain affiliates sponsored and are
engaged in the business of managing, among other things, real estate limited
partnerships;
WHEREAS, Liquidity sponsored and manages Liquidity Fund #33 LP
as well as other investment funds, and may in the future sponsor and manage
and/or provide investment advice to additional investment funds (collectively,
the "Liquidity Funds"), and Krupp sponsored and manages Krupp Realty Fund,
Ltd.-III ("Realty III") and Krupp Realty Limited Partnership-V ("Realty-V") as
well as other investment funds, and may in the future sponsor or manage
additional investment funds (individually a "Krupp Fund" and collectively, the
"Krupp Funds");
WHEREAS, Liquidity has, on behalf of certain of the Liquidity
Funds sought to obtain from Krupp lists of the investors in certain of the Krupp
Funds for the stated purpose of contacting such investors in order to attempt to
acquire their units in the Krupp Funds;
WHEREAS, Krupp has refused to provide lists of the investors
to Liquidity, alleging that they are not entitled to obtain such lists and
Liquidity has stated that, absent a satisfactory resolution, its present
intention is to litigate the issue;
WHEREAS, the parties have conferred through their respective
counsel and are desirous of resolving and settling Liquidity's claims, upon the
terms and conditions hereinafter set forth.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE>
1. DELIVERY OF LISTS: Within ten (10) business days of the date of this
Agreement, Krupp will deliver to Liquidity lists of investors (containing the
names, addresses and capital contributions of such investors) in Realty III and
Realty V. The lists will be sorted alphabetically and delivered in both paper
format and on 3.5" IBM Compatible computer diskette in ASCII format. Any
additional lists delivered pursuant to paragraph 3 below will also be delivered
in both paper format and on 3.5" IBM Compatible computer diskette in ASCII
format.
2. PAYMENT FOR LISTS: Within ten (10) business days of the date of
this Agreement, Liquidity will deliver to Krupp payment for the estimated cost
of reproducing and delivering such lists in the total amount of $600.00.
3. PROVISION OF ADDITIONAL LISTS: From time to time during the twelve
(12) month period commencing on the date hereof and expiring on the first
anniversary date of this Agreement, Krupp will, upon written request from
Liquidity, deliver to Liquidity within fifteen (15) business days of receipt of
such written request, updated lists of investors in Realty III and Realty V, or,
to the extent a Liquidity Fund is a Limited Partner or Shareholder (as the case
may be) in any other Krupp Fund, current lists of investors in such other Krupp
Fund, provided such request includes an undertaking by Liquidity to pay the cost
of reproducing and delivering such lists within ten business days after receipt
of such lists.
4. RESTRICTION ON ACTIVITIES: For a period commencing on the date
hereof and continuing for thirty (30) months from the last date an investor list
in a Krupp Fund is delivered to Liquidity in response to Liquidity's request,
Liquidity and any person or entity controlling, controlled, managed or advised
by Liquidity or its subsidiaries (including the Liquidity Funds) or under common
control with Liquidity ("Liquidity Affiliates") shall not, without the prior
written consent of Krupp, which may be granted or withheld in Krupp's sole and
exclusive discretion and for any reason, or no reason:
(a) vote its interests in any Krupp Fund on any issue other
than in proportion to the votes of all other interest holders who vote on such
issue;
(b) in any manner acquire, attempt to acquire, or make a
proposal to acquire, directly or indirectly, more than a 25% interest in any
Krupp Fund;
(c) propose, or propose to enter into, directly or indirectly,
any merger, consolidation, business combination, sale or acquisition of assets,
liquidation or other similar transaction involving any Krupp Fund;
(d) form, join or otherwise participate in a "group" within
the meaning of Section 13(d)(3) of the Securities and Exchange Act of 1934, as
amended, with respect to any voting securities of a Krupp Fund;
2
<PAGE>
(e) make or participate in any way, directly or indirectly, in
any solicitation of "proxies" or "consents" (as such terms are used in the proxy
rules of the Securities and Exchange Commission) to vote, or seek to advise or
influence any person with respect to the voting of any voting securities of any
Krupp Fund.
(f) sell, transfer or assign any interests in any Krupp Fund
to any person or entity not bound by the terms and conditions of this Agreement;
(g) disclose any intention, plan or arrangement inconsistent
with the terms of this Agreement;
(h) loan money to, advise, assist or encourage any person in
connection with any of the actions restricted or prohibited by this Agreement.
5. USE OF LISTS, PROHIBITION ON FURNISHING TO OTHERS: Any investor list
obtained by Liquidity or Liquidity Affiliates relative to any Krupp Fund will be
utilized only for the purpose of contacting investors to inquire as to whether
they wish to sell their units in such Krupp Fund to a Liquidity Fund, and for no
other purpose. The lists will not be furnished by Liquidity or Liquidity
Affiliates to any other person or entity.
6. THIRD PARTIES: If at any time Liquidity or Liquidity Affiliates is
approached or contacted by any third party concerning participation in a
transaction involving the assets, businesses or securities of any Krupp Fund or
involving any of the actions proscribed by Section 4 hereof or otherwise by this
Agreement, Liquidity or Liquidity Affiliates, as the case may be, will
immediately notify such party of its inability to participate in such a
transaction and its obligation to notify Krupp and will thereafter promptly (and
in any event, within five (5) business days) notify Krupp of the nature of such
contact and the parties thereto. Krupp will indemnify, defend and hold harmless
Liquidity and the Liquidity Affiliates from and against any and all claims,
demands or liabilities that may arise as a result of Liquidity's or any
Liquidity Affiliates' strict compliance with the terms of this paragraph.
7. COMPLIANCE WITH SECURITIES AND OTHER LAWS: Liquidity and Liquidity
Affiliates acknowledge their obligations under the Securities Laws and Rules of
the Securities and Exchange Commission.
8. PROVISION OF COPIES OF ALL COMMUNICATIONS: Liquidity and Liquidity
Affiliates covenant and agree that they shall deliver to Krupp at least five (5)
business days before mailing or otherwise distributing to investors in any Krupp
Fund any communication to be given to one or more investors in any Krupp Fund.
3
<PAGE>
9. FIDUCIARY DUTIES OF KRUPP; SAFE HARBOR PROVISION, PROTECTION OF
PARTNERSHIP STATUS: Liquidity acknowledges that:
(a) Krupp and its affiliates have significant fiduciary
obligations to the investors in the Krupp Funds, and has stated that it is
entering into this Agreement to, among other things, fulfill those fiduciary
obligations;
(b) Krupp may need to take certain further action to meet its
fiduciary obligations, including, without limitation, suspending the acceptance
of transfer paperwork in one or more Krupp Funds to avoid the termination of
such Krupp Fund's status as a partnership under the Internal Revenue Code of
1986 (the "Code"), as amended; avoid the treatment of such Krupp Fund as a
Publicly Traded Partnership under the Code; or cause the Krupp Fund to fall
outside any so-called "Safe Harbor" provision relating to taxation or tax
status, including provisions relating to Publicly Traded Partnerships; and
(c) That the suspension of the acceptance of transfer
paperwork by Krupp would mean that notwithstanding the presentment of valid
transfer paperwork and the terms of this Agreement, transfers requested by
Liquidity or a Liquidity Affiliate would not be processed nor reflected on the
books and records of the Krupp Fund.
Nothing herein shall be construed, however, as an
acknowledgment or agreement by Liquidity that Krupp has the right under any
particular circumstances to suspend the acceptance of transfer paperwork, or as
a waiver of any future claims of Liquidity arising out of any such suspension or
other similar action.
10. RELEASE: FOR AND IN CONSIDERATION OF THE AGREEMENTS HEREIN MADE,
LIQUIDITY, INDIVIDUALLY AND ON BEHALF OF THE LIQUIDITY AFFILIATES, DOES HEREBY
REMISE, RELEASE AND ACQUIT KRUPP AND ALL OF ITS PARTNERS, OFFICERS, DIRECTORS,
AFFILIATES, PREDECESSORS, SUCCESSORS AND ASSIGNS AND EACH OF THEIR PARTNERS,
OFFICERS, DIRECTORS, AFFILIATES, PREDECESSORS, SUCCESSORS AND ASSIGNS, FROM AND
AGAINST ANY AND ALL CLAIMS, DAMAGES, COSTS, EXPENSES, ACTIONS AND CAUSES OF
ACTION WHICH LIQUIDITY AND THE LIQUIDITY AFFILIATES (INCLUDING THEIR PARTNERS,
OFFICERS, DIRECTORS, AFFILIATES, SUCCESSORS AND ASSIGNS AND ALL OF THEIR
PARTNERS, OFFICERS, DIRECTORS, AFFILIATES, PREDECESSORS, SUCCESSORS AND ASSIGNS)
HAD IN THE PAST, NOW HAS, OR MAY IN THE FUTURE ACQUIRE, ARISING FROM OR RELATED
TO THE FAILURE OR REFUSAL OF KRUPP TO PRODUCE AN INVESTOR LIST OF ANY KRUPP
FUND, EXCEPT FOR SUCH A FAILURE OR REFUSAL IN VIOLATION OF THE PROVISIONS OF
THIS AGREEMENT.
11. NOTICES: Any and all notices required or permitted hereunder shall
be in writing and shall be deemed given or served, as the case may be, upon
actual delivery to the parties at the following addresses:
4
<PAGE>
If to Liquidity: Liquidity Financial Group, L.P.
220 Powell Street, Suite 700
Emeryville, California 94608
Attention: Brent Donaldson
With a copy to: Roger B. Mead, Esq.
Folger & Levin
Embarcadero Center West Tower
275 Battery Park, 23rd Floor
San Francisco, California 94111
If to Krupp: The Krupp Corporation
470 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Laurence Gerber
With a copy to: Scott D. Spelfogel, Esq.
Vice President and General Counsel
The Berkshire Group
470 Atlantic Avenue
Boston, Massachusetts 02210
12. NO ADMISSIONS, CONFIDENTIALITY: The parties agree that this
Agreement is being entered into solely to settle disputed claims, and nothing
herein shall be deemed to constitute an admission of liability on the part of
Krupp, all such liability being expressly contested. The parties agree that
their discussions prior to entering into this Agreement, the nature, existence
and terms of this Agreement, and all matters relating to the dispute and
settlement shall be strictly confidential and not disclosed by either party to
any individual or entity, not be admissible in court for any purpose.
Notwithstanding the foregoing, should either party believe that it must produce
this Agreement in response to subpoena or other lawful process, it shall first
notify the other party and provide the other party with at least fifteen (15)
business days in which to seek to quash or limit any such subpoena or process,
before producing this Agreement. To the extent the second party does not have
standing to seek to quash or limit the subpoena, the first party shall cooperate
in such efforts, provided such cooperation does not result in the incurring of
any costs on the part of said first party.
13. ENFORCEMENT: The parties agree that each shall be entitled to
equitable relief, including injunctive relief and specific performance, in the
event of any breach of the provisions of this Agreement, in addition to all
other remedies available at law or in equity. In the event either party must
refer this Agreement to an attorney for enforcement, the prevailing party shall
be entitled to all costs of enforcement, including attorney's fees.
5
<PAGE>
14. GOVERNING LAW; VENUE AND JURISDICTION: This Agreement shall be
governed by the laws of the Commonwealth of Massachusetts without regard to
principles of conflict of law thereof. The parties agree that the Federal and
state courts located within the Commonwealth of Massachusetts shall have
exclusive jurisdiction over disputes arising hereunder, and the parties hereby
consent to such venue and submit to the jurisdiction of such courts.
15. CAPTIONS: Captions and section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
16. AMENDMENTS: This Agreement may be amended, changed, modified,
altered or terminated only by written instrument or written instruments signed
by all of the parties hereto.
17. SEVERABILITY: In the event any provision of this Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
under seal as of the date first above written.
LIQUIDITY FINANCIAL GROUP, L.P.
By: Liquidity Financial Corporation, its
general partner
By: S/Brent Donaldson
----------------------------
Brent Donaldson
President
THE KRUPP CORPORATION
By: S/Laurence Gerber
----------------------------
Laurence Gerber
President
6
Exhibit 7
FIRST AMENDMENT TO
SETTLEMENT AGREEMENT AND RELEASE
This First Amendment to Settlement Agreement and Release (this
"Amendment") is made and entered into as of the 8th day of October, 1996, by and
between The Krupp Corporation ("Krupp"), a Massachusetts corporation with a
principal place of business at 470 Atlantic Avenue, Boston, Massachusetts
022210, and Liquidity Financial Group, L.P. ("Liquidity") individually and on
behalf of certain Affiliates as defined in the Agreement (as hereinafter
defined), a California limited partnership with a principal place of business at
2200 Powell Street, Suite 700, Emeryville, California 94608.
WITNESSETH:
WHEREAS, the parties entered into a Settlement Agreement and
Release dated the 27th day of June, 1996 (the "Agreement") and desire to amend
the Agreement to eliminate a possible ambiguity, as hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Section 4(d) of the Agreement shall be and hereby is
amended by adding, at the end of said section following the semicolon, the
following clause:
provided, however, that Liquidity and Liquidity
Affiliates shall not be deemed to be acting in a
"group" in violation of this Section 4(d) solely by
virtue of their voting their interests in compliance
with Section 4(a) of this Agreement;
2. Except as expressly set forth above, the Agreement shall
remain in full force and effect without amendment or modification.
IN WITNESS WHEREOF, the parties have executed this Agreement
under seal as of the date first above written.
LIQUIDITY FINANCIAL GROUP, L.P. THE KRUPP CORPORATION
By: Liquidity Financial
Corporation, its general partner
By: s/Brent Donaldson By: s/Laurence Gerber
------------------------ ------------------------
Brent Donaldson Laurence Gerber
President President
