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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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High Equity Partners L.P. - Series 86
(Name of Subject Company)
High Equity Partners L.P. - Series 86
(Name of Person Filing Statement)
Units of Limited Partnership Interest
(Title of Class of Securities)
None
(CUSIP Number of Class of Securities)
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Edward W. Kerson, Esq.
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person(s) Filing Statement)
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<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject partnership is High Equity
Partners L.P. - Series 86 (the "Partnership"), and the address
of its principal executive offices is 411 West Putnam Avenue,
Greenwich, Connecticut 06830. The title of the class of equity
securities to which this statement relates is Units of Limited
Partnership Interest ("Units").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to an offer by Olympia Investors
L.P., a Delaware limited partnership (the "Purchaser"), disclosed
in a Tender Offer Statement on Schedule 14D-1 dated March 12,
1998 (the "Schedule 14D-1"), to purchase up to 235,000 Units at a
purchase price of $85.00 per Unit, net to the seller in cash,
without interest, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated March 12, 1998 and the
related Letter of Transmittal, as each may be supplemented,
modified or amended from time to time (which collectively
constitute the "Offer" and are contained within the Schedule.
14D-1).
The address of the Purchaser's principal office is 100
South Bedford Road, Mount Kisco, New York 10549.
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 Resources High
Equity, Inc., Resources Capital Corp. and Presidio AGP Corp.,
each a Delaware corporation (collectively, 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.
The Partnership has a property management services
agreement with Resources Supervisory Management Corp. ("Resources
Supervisory"), an affiliate of the General Partners, to perform
certain functions relating to the management of the properties of
the Partnership. A portion of the property management fees are
paid to unaffiliated management companies, which perform certain
management functions for certain properties. For the years ended
December 31,1997, 1996 and 1995, Resources Supervisory was
entitled to $416,428, $435,467 and $379,720, respectively, of
which $287,466, $254,005 and $196,480 respectively, was paid to
unaffiliated management companies. For the administration of the
Partnership, Resources Capital Corp., the Administrative General
Partner, received $200,000 for each of the years ended December
31, 1997, 1996 and 1995. For managing the affairs of the
Partnership, Resources Capital Corp. received a partnership asset
management fee of $1,376,011, $1,406,204 and $1,406,204 for the
years ended December 31, 1997, 1996 and 1995, respectively.
The General Partners have been allocated 5% of the net
income (losses) of the Partnership, which amounted to $142,281,
$112,226 and ($1,104,245) for the years ended December 31, 1997,
1996 and 1995, respectively, and received $124,721, $76,752 and
$76,752 as its 5% share of distributions for such respective
periods. During 1997, Wexford Management LLC, formerly an
affiliate of the General Partners, received expense
reimbursements of $43,361 for performing administrative services
for the Partnership.
Under the Partnership's partnership agreement, if the
compensation paid to the General Partners and their affiliates
over the term of the Partnership exceeds certain maximum amounts
determined by formula under the partnership agreement, then, in
connection with the liquidation of the Partnership, the General
Partners are obligated to repay such excess to the limited
partners. Although such amount can only be determined at the
time of liquidation (which is not required for a number of
years), it is estimated that, if the Partnership were liquidated
now and realized the appraised values set forth in Item 4 below,
the General Partners would be obligated to pay $4,143,191 to the
limited partners. However, such amount could be reduced in
connection with future Partnership operations. Through ownership
of an aggregate of 45,320 Units (i.e., 7.7% of the outstanding
Units) by affiliates of the General Partners (excluding Units
affiliates of the General Partners may acquire from the
Purchaser, as described in (b)(ii) below), the potential
liability of the General Partners is effectively reduced.
The General Partners are subject to certain conflicts
of interest in connection with the Offer. Under the agreement
with the Purchaser described in (b)(ii) below, an affiliate of
the General Partners has agreed, among other things, to
cooperate, and to cause the General Partners to cooperate, to
facilitate the Offer and to take a neutral stance with respect to
the Offer. In addition, the partnership agreement provides that,
without the concurrence of the General Partners, a majority in
interest of the limited partners 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); the ownership of a
large block of Units by any person increases the likelihood the
General Partners may be removed or the partnership agreement may
be amended, should that person become a limited partner or
otherwise acquire the voting rights of a limited partner. In
addition, since the property management arrangements between
affiliates of the General Partners and the Partnership are
terminable, 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 are tendered pursuant to the Offer,
the likelihood of such removal or amendment could increase.
However, as described in (b)(ii) below, the Purchaser has agreed,
among other things, (i) subject to certain terms and conditions,
to permit an affiliate of the General Partners to purchase Units
the Purchaser acquires in the Offer and (ii) not to acquire
Units, other than in the Offer, or take certain other action for
approximately three years. Accordingly, during that three-year
period, the Purchaser will not be in a position unilaterally to
remove the General Partners or amend the partnership agreement,
and if affiliates of the General Partners acquire Units from the
Purchaser that the Purchaser acquires in the Offer, it may become
increasingly difficult for any other party to acquire a large
block of Units and affect management of the Partnership.
(b)(ii) Except as described below, there are no
material contracts, agreements, arrangements or understandings or
any actual or potential conflicts of interest between the
Partnership or its affiliates and the Purchaser or its
affiliates.
On September 11, 1997 and February 13, 1998, an
affiliate of the Purchaser sent letters to the General Partners
of the Partnership and the general partners of two related
partnerships, Integrated Resources High Equity Partners,
Series 85, A California Limited Partnership, and High Equity
Partners L.P. - Series 88 (collectively, the "Related
Partnerships") requesting lists of limited partners of the
Partnership and the Related Partnerships (collectively, the
"Partnerships") to enable one of its affiliates to make a tender
offer for units of limited partnership interest in each of the
Partnerships (collectively, "HEP Units"). The Purchaser received
the lists on March 10, 1998.
In late October 1997, an affiliate of the Purchaser
contacted the managing partner of Northstar Capital Partners
("Northstar"), which indirectly controls the general partners of
the Partnerships (collectively, the "HEP General Partners"), to
discuss a joint tender offer for HEP Units. That party met with
the managing partner of Northstar on November 3, 1997 to discuss
the subject. The parties were unable to reach agreement at that
time. Thereafter, affiliates of the Purchaser and Northstar
discussed the matter from time to time.
At various times from late December 1997 to early
March 1998, affiliates of Northstar and the Purchaser and their
respective counsel attended meetings and discussed and negotiated
the terms of the agreement described below. The agreement
provides, among other things, for: (i) the Purchaser's tender
offers for up to 40% of the outstanding HEP Units of the
Partnerships, and the cooperation of the General Partners to
facilitate such offers (including furnishing the Purchaser with
limited partner lists for use in connection with the tender
offers and taking a neutral stance with respect to the tender
offers) and the transfer of tendered HEP Units to the Purchaser
without transfer fees; (ii) an agreement by the Purchaser and its
affiliates to limit their acquisition of HEP Units to those
acquired in the tender offers and to limit their acquisition of
assets or properties of the Partnerships to properties or assets
the General Partners or their affiliates have publicly announced
their intention to sell or in respect of which they have hired a
broker; (iii) an agreement by the Purchaser and its affiliates
not to (A) seek the removal of the HEP General Partners or call
any meeting of limited partners of the Partnerships; (B) make any
proposal to or seek proxies from limited partners of the
Partnerships; or (C) act, either alone or in concert with others,
to seek to control the management, policies or affairs of the
Partnerships or to effect any business combination or other
extraordinary transaction with the Partnerships or the HEP
General Partners; (iv) an agreement by the Purchaser and its
affiliates to vote all HEP Units owned by them in favor of a
proposal, if any, by the HEP General Partners resulting in
limited partners receiving securities listed on NASDAQ or a
national securities exchange; (v) the Purchaser's grant to an
affiliate of the HEP General Partners of an option to purchase
50% of the Units acquired in the Offer at a price equal to the
lesser of the price paid by the Purchaser or $99.97 per Unit
(except that the $99.97 per Unit limitation does not apply, if
the purchase price in the Offer is increased to more than $99.97
in response to a competing bid), plus 50% of the Purchaser's
costs associated with the Offer; (vi) the grant to that same
affiliate of the General Partners of a similar option to purchase
50% of the HEP Units in the Related Partnerships acquired
pursuant to the tender offers; and (vii) an agreement pursuant to
which either party can initiate so-called "buy/sell" procedures
by notifying the other of a specified price per HEP Unit (not to
exceed the then current net asset value of the HEP Units) and the
other terms and conditions on which the non-initiating party
would then be required to elect (subject to certain exceptions)
either to buy the HEP Units acquired in connection with the
tender offer from the initiating party or to sell the HEP Units
to the initiating party. The agreements of the Purchaser and its
affiliates described in clauses (ii), (iii) and (iv) above expire
on March 6, 2001 (the "Standstill Expiration Date"), but may
expire earlier under certain circumstances. In connection with
the negotiation of the agreement, Northstar and its affiliates
furnished the Purchaser appraisals of each of the Partnerships'
properties prepared by an independent appraisal firm in the
summer of 1997 (the "Appraisal Information"). See Item 4 below.
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) The General Partners are expressing no opinion and
are remaining neutral with respect to the Offer.
(b) The purchase price being offered by the Purchaser
is 27% less than $116.68, which is an amount (the "Deemed Net
Asset Value Per Unit") equal to (i) the sum of the appraisal
value of the partnership's real asset (based on the Appraisal
Information) plus the Partnership's net current assets at
December 31, 1997 (based on the Partnership's balance sheet at
that date), divided by (ii) the number of outstanding Units at
December 31, 1997. However, the Offer provides Unitholders with
the immediate opportunity to liquidate their investment in the
Partnership at a price that generally exceeds recent secondary
market selling prices for Units. Certain Unitholders may find
that 27% discount acceptable, if they want the certainty of an
immediate cash purchase in exchange for their Units. Other
Unitholders who do not want immediate cash, however, may prefer
to continue to retain their investment in the Partnership and
potentially receive a greater amount for their Units. Because of
differing motivations Unitholders may have, the General Partners
are not making a recommendation and are remaining neutral with
respect to the Offer. See Item 3(b)(i) above regarding certain
conflicts of interest to which the General Partners are subject.
Although the General Partners are not making a
recommendation with respect to the Offer, the General Partners
believe Unitholders should consider, among others, the following
factors in deciding whether to accept or reject the Offer:
1. Although the value of the Units is not certain and
there is no established public trading market for the Units, the
Deemed Net Asset Value Per Unit estimated by the General Partners
is $116.68, compared with the $85.00 per Unit price in the Offer.
The Deemed Net Asset Value Per Unit was determined based on
independent third party appraisals obtained by the Partnerships
in the summer of 1997, and take into account the other assets and
liabilities of the Partnership reflected on the Partnership's
December 31, 1997 balance sheet. The Deemed Net Asset Value Per
Unit does not necessarily reflect the amount a Unitholder would
receive if the Partnership were liquidated, and does not take
into account transaction costs relating to the sale of the
Partnership's properties, which would reduce the amounts
available for distribution. There can be no assurance that the
actual value of a Unit was not more or less than the Deemed Net
Asset Value Per Unit, or that the value of a Unit will not
increase or decrease.
The Appraisal Information was obtained in connection
with the General Partners' consideration of a possible plan to
reorganize the Partnerships. The following table sets forth the
market value of each of the Partnership's properties as specified
in the Appraisal Information. (In the case of joint venture
investments, the value represents the Partnership's proportionate
interest in the joint venture. There is no discount to reflect
the fact that certain real estate in which the Partnership has an
interest is held by joint ventures with affiliated partnerships
in which the Partnership itself does not have a controlling
interest or the unilateral power to effect a sale of the entire
property.)
Percentage
Value of Aggregate of
Partnership's Appraised Interest of
Property Interest Value Partnership
- ---------- -------------- ----------- ------------
Century Park I $ 8,000,000 $16,000,000 50.000%
568 Broadway 9,731,250 25,000,000 38.925
Seattle Tower 5,500,000 11,000,000 50.000
Commonwealth
Industrial Park $ 7,200,000 $ 7,200,000 100.000
Commerce Plaza I 7,200,000 7,200,000 100.000
Melrose Crossing 3,000,000 3,000,000 100.000
Matthews Township
Festival 9,800,000 9,800,000 100.000
Sutton Square
Shopping Center 10,300,000 10,300,000 100.000
TMR Warehouse 4,379,920 21,200,000 20.660
TOTAL $65,111,170 $110,700,000
The sum of the appraised value of the Partnership's
real estate plus the Partnership's net current assets at December
31, 1997 equals $72,218,105, or $116.68 per Unit.
2. Secondary market sales activity for the Units,
including privately negotiated sales, has been limited. At
present, privately negotiated sales and sales through
intermediaries (e.g., through the trading system operated by
American Partnership Board, Inc., which publishes sell offers by
holders of Units) are the only means available to a Unitholder to
liquidate an investment in Units (other than the Offer and other
possible tender offers) because the Units are not listed or
traded on any exchange or quoted on any NASDAQ list or system.
According to Partnership Spectrum, an independent industry
publication, between December 1, 1997 and January 31, 1998, there
were 982 Units traded in the secondary market between a high of
$95.00 per Unit and a low of $60.00 per Unit, with a weighted
average price of $66.08 per Unit. Such prices do not take into
account commissions and other transactional costs payable by
sellers of Units (which typically range between 8% and 10% of the
reported selling price). In addition, such prices do not reflect
the prices per Unit paid by an affiliate of the General Partners
in that period ranging from $71.75 per Unit to $81.00 per Unit,
or the $100.00 per Unit and $113.00 per Unit paid by an affiliate
of the General Partners in mid-February 1998. See Item 6 below.
3. Three tender offers for Units have occurred since
1996. Each offer has been for fewer than 5% of the outstanding
Units. The offer prices have been $25.00 per Unit (in an April
1996 tender offer), $51.00 per Unit (in a February 1997 tender
offer) and $65.00 per Unit (in a December 1997 tender offer).
These tender offers have afforded only a modest amount of
liquidity to limited partners, and, in each case, the General
Partners have recommended that limited partners reject the offer.
4. The General Partners are actively considering a
variety of plans to enhance the value and liquidity of the Units.
The plans have included possible conversion of the Partnership
into an actively traded real estate investment trust (the
"Reorganization Plan"), in which, the General Partners believe,
the trading price for the securities that would be issued in
exchange for the Units could be greater than the trading price
currently available in the secondary market. The Reorganization
Plan would require as a condition to its consummation, among
other things, the approval by holders of a majority of the
outstanding Units. There can be no assurance the Reorganization
Plan, or any other plan, will actually be proposed by the General
Partners, or, if proposed, will be approved by holders of a
majority of the outstanding Units or consummated.
5. Unitholders who tender their Units will be giving
up the opportunity to participate in any potential benefits
represented by ownership of such Units, including participation
in possible future tender offers by the Purchaser or its
affiliates, possible distributions by the Partnership, possible
appreciation in the value of the Units and participation in any
reorganization of the Partnership, including the Reorganization
Plan, or resolution or disposition of the litigation described in
paragraph 10 below.
6. The agreement among the Purchaser and affiliates
of the General Partners described in Item 3 above creates certain
conflicts of interest for the General Partners with respect to
the Offer.
7. Unitholders could, as an alternative to tendering
their Units, propose a variety of possible actions, including
liquidation of the Partnership or removal and replacement of the
General Partners.
8. Depending upon the number of Units tendered
pursuant to the Offer and whether the Purchaser or its
affiliates, on the one hand, or affiliates of the General
Partners, on the other hand, acquire Units from the other
pursuant to the agreement described in Item 3 above, the
Purchaser or its affiliates, on the one hand, or the General
Partners or their affiliates, on the other hand, could be in a
stronger position to influence significantly all Partnership
decisions on which Unitholders may vote, including decisions
regarding removal of the General Partners, merger, sales of
assets and liquidation. Accordingly, (i) non-tendering
Unitholders could be prevented from taking action they desire
that the Purchaser or the General Partners, as the case may be,
oppose, and (ii) the Purchaser or the General Partners, as the
case may be, may be able to take action opposed by non-tendering
Unitholders.
9. Pursuant to the partnership agreement, transfers
of Units that would cause a termination of the Partnership for
federal income tax purposes (which may occur when 50% or more of
the Units are transferred in a 12-month period) are not
permitted. Depending upon the number of Units tendered pursuant
to the Offer, sales of Units on the secondary market for the 12-
month period following completion of the Offer may be limited.
The Partnership will not process a request for transfer of Units
during that 12-month period, if the General Partners believe the
transfer may cause a tax termination. In determining the number
of Units subject to the Offer, the parties to the agreement
described in Item 3 above took this restriction into account to
permit historical levels of transfers to occur after consummation
of the Offer without violating this restriction.
10. In May 1993, limited partners in the Partnerships
commenced a class action (the "California Action") on behalf of
all investors against the HEP General Partners and certain
related persons and entities asserting various claims arising
from alleged mismanagement of the Partnerships. On November 30,
1995, the original plaintiffs and intervening plaintiffs filed a
consolidated class and derivative action complaint (the "
Complaint") alleging various state law class and derivative
claims, including claims for breach of fiduciary duty; breach of
contract; unfair and fraudulent business practices under
California Bus. & Prof. Code Section 17200; negligence; dissolution,
accounting, receivership and removal of general partner; fraud;
and negligent misrepresentation. The Consolidated Complaint
alleges, among other things, that the HEP General Partners caused
a waste of the Partnerships' assets by collecting management fees
in lieu of pursuing a strategy to maximize the value of the
investments owned by the investors in the Partnerships, that the
HEP General Partners breached their duty of loyalty and due care
to the investors by expropriating management fees from the
Partnerships without trying to run the Partnerships for the
purposes for which they were intended; that the HEP General
Partners were acting improperly to entrench themselves in their
position of control over the Partnerships and that their actions
prevented non-affiliated entities from making and completing
tender offers to purchase HEP Units; that, by refusing to seek
the sale of the Partnerships' properties, the HEP General
Partners diminished the value of the investors' equity in the
Partnerships; that the HEP General Partners took heavily
overvalued asset management fees; and that HEP Units were sold
and marketed through the use of false and misleading statements.
In early 1996, the parties submitted a proposed
settlement to the court (the "Proposed Settlement"), which
contemplated a reorganization of the three Partnerships into a
single real estate investment trust, pursuant to which
approximately 85% of the shares of the real estate investment
trust would have been allocated to investors in the aggregate
(assuming each of the HEP Partnerships participated in the
reorganization) and approximately 15% of the shares would have
been allocated to the HEP General Partners. In February 1997,
the Court declined to grant final approval of the Proposed
Settlement.
The plaintiffs have filed an amended complaint, which
generally asserts the same claims as the earlier Consolidated
Complaint but contains more detailed factual assertions and
eliminates some claims they had previously asserted. The HEP
General Partners believe that the amended complaint was subject
to challenge on legal grounds and filed demurrers and a motion to
strike. In October 1997, the Court granted substantial portions
of the HEP General Partners' motions. Thereafter, the HEP
General Partners served answers denying the allegations and
asserting numerous defenses.
The plaintiffs and the HEP General Partners recently
have engaged in discussions relating to a possible settlement of
the California Action, including discussions regarding a possible
tender offer by the Partnership or the General Partners or their
affiliates for Units at a price that may exceed the price in the
Offer. There can be no assurance the parties will enter into a
settlement agreement, or that the court will approve any such
settlement agreement.
The HEP General Partners believe each of the claims
asserted is meritless and intend to continue vigorously to defend
the California Action. The partnership agreement provides for
indemnification of the General Partner and their affiliates in
certain circumstances. The Partnership has agreed to reimburse
the General Partners for the actual costs incurred in defending
the California Action and the costs of preparing settlement
materials. Through December 31, 1997, the General Partners had
billed the Partnership a total of $1,058,511 for these costs, of
which $824,511 was paid in February 1997.
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 Unitholders on its behalf concerning the
Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO
SECURITIES
(a) Except as set forth below, neither the Partnership
nor the General Partners have effected any transactions in the
Units during the past 60 days. Except as set forth below, the
General Partners are not 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 Offer.
Within the past 60 days, Millenium Funding III Corp. (a
wholly-owned subsidiary of Presidio Capital Corp., of which the
General Partners are themselves wholly-owned subsidiaries)
purchased the numbers of Units set forth below at the prices
indicated. Each transaction was effected in a brokerage
transaction, except for the transactions on February 5, 1998 and
February 18, 1998, which were privately negotiated transactions.
Date Number of Units Price Per Unit Aggregate Price
- -------- --------------- -------------- ---------------
1/26/98 60 $81.00 $4,860.00
1/27/98 400 80.00 32,000.00
1/27/98 126 80.34 10,122.50
1/28/98 330 73.29 24,184.88
1/28/98 257 75.08 19,294.28
2/2/98 100 80.00 8,000.00
2/5/98 12,166 100.00 1,216,600.00
2/10/98 20 80.00 1,600.00
Date Number of Units Price Per Unit Aggregate Price
- -------- --------------- -------------- ---------------
2/11/98 550 73.29 40,308.13
2/11/98 152 73.29 11,139.70
2/16/98 408 74.31 30,319.50
2/16/98 247 80.85 19,969.95
2/18/98 20,000 113.00 2,260,000.00
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT
COMPANY
(a) Except as set forth in Item 3 or 4 above, no
negotiation is being undertaken or is underway by the Partnership
in response to the Offer that 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; (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.
As set forth in Item 4 above, the General Partners are
actively considering a variety of plans to explore on value and
liquidity from Units. These may include a sale of all or
substantially all the Partnership's assets, a consolidation, a
merger, financings of Partnership properties followed by
distributions or a tender offer for Units at a price in excess of
the Offer. However, except as set forth in Item 3 or 4 above, 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
Offer that relate to or would result in one or more of the
matters referred to in (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 Unitholders. Such a
list has been provided by the General Partners to parties only
where the General Partners have been satisfied that such list has
been properly requested by a person entitled by the partnership
agreement to receive the 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
Unitholders have obtained appropriate protections from such party
with respect to the use of the list. The General Partners agreed
to provide a list of the Partnership's Unitholders to the
Purchasers in connection with the agreement by the Purchaser and
its parent that such parties and their affiliates, among other
things, would refrain from acquiring Units in the next three
years, except pursuant to the Offer. See Item 3 above.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(a) Form of letter to Unitholders from the Partnership
dated March 25, 1998.
(c)(i) Agreement dated as of March 6, 1998 among
Presidio Capital Corp., American Real Estate
Holdings, L.P. and Olympia Investors L.P.
(ii) Agreement of limited partnership of the
Partnership, as amended.
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: March 25, 1998
HIGH EQUITY PARTNERS L.P. - SERIES 86
By: RESOURCES CAPITAL CORP.,
administrative general partner
By: /s/ Allan B. Rothschild
Name: Allan B. Rothschild
Title: Executive Vice President
Exhibit (a)
HIGH EQUITY PARTNERS L.P. - SERIES 86
March 25, 1998
Dear Unitholder:
As you are probably aware, Olympia Investors, L.P., a
Delaware limited partnership (the "Purchaser"), has made an offer
(the "Offer") to purchase units of limited partnership interest
of High Equity Partners L.P. - Series 86 (the "Partnership") for
$85.00 per Unit.
Although the General Partners are not making a
recommendation with respect to the Offer, the General Partners
believe that Unitholders, in making a decision of whether to
accept or reject the Offer, should consider the information set
forth in the enclosed copy of the Partnership's Statement on
Schedule 14D-9, particularly in Items 3 and 4.
The enclosed copy of the Partnership's Statement on
Schedule 14D-9, which has been filed with the Securities and
Exchange Commission, sets forth the Partnership's response to the
Offer. Limited partners are advised to read the Schedule 14D-9
carefully.
Very truly yours,
RESOURCES CAPITAL CORP.
AGREEMENT
Dated March 6, 1998
The parties to this agreement are Presidio Capital
Corp., a corporation organized in the British Virgin Islands
("Presidio"), American Real Estate Holdings L.P., a Delaware
limited partnership ("AREH") and Olympia Investors, L.P., a
Delaware limited partnership ("Olympia").
Presidio, directly or indirectly, controls the general
partners of each of Integrated Resources High Equity Partners,
Series 85, a California limited partnership ("HEP 85"), High
Equity Partners L.P. - Series 86, a Delaware limited partnership
("HEP 86"), and High Equity Partners L.P. - Series 88, a Delaware
limited partnership ("HEP 88", and collectively with HEP 85 and
HEP 86, the "Partnerships"). On the date of this agreement, AREH
and its affiliates beneficially own 1,657 units of limited
partnership interest ("Units") of HEP 85, 3,243 Units of HEP 86
and 2,346 Units of HEP 88. Olympia, a newly-formed Delaware
limited partnership affiliated with AREH, wishes to make tender
offers (the "Offers") to acquire up to approximately 40% of the
outstanding Units of each of the Partnerships and, in that
connection, proposes to file with the Securities and Exchange
Cownission (the "Commission") a Tender Offer Statement on
Schedule 14D-1 relating to each Offer (collectively, the
"Schedule 14D-l's") substantially in the forms set forth on
schedule A.
The parties agree as follows:
1. Offers. (a) Olympia intends to file the Schedule
14D-l's with the Commission, and to cause the related Offers to
Purchase, Assignments of Partnership Interest and Cover Letters
included as exhibits to such Schedule 14D-l's (such Offers to
Purchase, Assignments of Partnership Interest and Cover Letters,
together with any amendments or supplements thereto or any other
communications proposed to be sent to holders of Units of any
Partnership being collectively referred to as the "Offering
Materials") to be mailed to holders of Units, on or before the
fifth business day following delivery by the Partnerships to
Olympia of the Lists referred to in section l(b) hereof. Olympia
shall cause each Offer to expire on or before May 12, 1998 (the
date on which an Offer expires in accordance with this sentence,
as the same may be extended in accordance with the proviso set
forth below, the "Final Expiration Date"); provided, however,
that the Final Expiration Date with respect to any Offer may be
extended, upon notice by Olympia to Presidio, under the following
circumstances: (i) if there is in effect, on such date, any
preliminary or permanent injunction or other order of any federal
or state court, government or governmental authority or agency of
the type described in paragraph (a) of Section 14 of the
applicable Offer to Purchase (such preliminary or permanent
injunction or other order being hereinafter referred to as an
"Injunction"), the Final Expiration Date of such Offer may be
extended to the earliest practicable date on which such Offer may
expire in accordance with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations
promulgated by the commission thereunder (the Exchange Act and
such rules and regulations being hereinafter collectively
referred to as the "Rules"), following the vacation or
dissolution of such Injunction and the dissemination to limited
partners of additional Offering Materials containing any
necessary disclosure relating thereto; (ii) subject to clause (i)
above, if there is pending, on such date, any action or
proceeding of the type described in paragraph (h) of Section 14
of the applicable Offer to Purchase, the Final Expiration Date of
such offer may be extended to the earlier of (A) the earliest
practicable date on which such Offer may expire in accordance
with the Rules following the final resolution of such action or
proceeding and the dissemination to limited partners of
additional offering Materials containing any necessary disclosure
relating thereto or (B) June 11, 1998; (iii) the Final Expiration
Date of such Offer may be extended to the earliest practicable
date on which such Offer may expire in accordance with the Rules
following the dissemination to limited partners of additional
Offering Materials prepared for the purpose of complying with
comments by the staff of the Commission, provided that Olympia
uses its best efforts to comply with such comments expeditiously;
or (iv) in the event that a competing offer for Units is
commenced by a third party bidder who is not affiliated with AREH
(a "Competing Offer"), the Final Expiration Date of such Offer
may be extended, on one or more occasions, to the earliest
practicable date on which such Offer may expire in accordance
with the Rules following an increase in the offering price to a
price equal to or higher than the price offered by the competing
bidder and the dissemination to limited partners of amended
Offering Materials disclosing such increase, provided, however,
that if such Competing Offer is for less than 5% of the
outstanding Units of a Partnership, the Final Expiration Date may
not be extended for more than ten business days beyond June 11,
1998 pursuant to this clause (iv). Presidio will not
unreasonably withhold or delay its consent to any request by
Olympia to extend the Final Expiration Date of any Offer, for any
reason other than those set forth in the immediately preceding
sentence, provided that such request does not seek to extend such
Final Expiration Date beyond June 11, 1998.
(b) Concurrently herewith, Presidio has caused the
Partnerships to furnish Olympia with lists, as of the most recent
practicable date and in computer readable form, of the names,
addresses and numbers of Units held by limited partners of the
Partnerships (the "Lists"), together with such computer
processing data as is necessary to make use of such computer
readable Lists and printouts of such Lists for verifications
purposes. AREH shall not, and shall cause its affiliates, agents
and representatives not to, use the Lists for any purpose other
than to acquire Units pursuant to the offers.
(c) Olympia shall make all decisions regarding the
conduct of the offers and the acquisition and transfer of Units
pursuant thereto, including without limitation decisions
regarding any change in the terms or waiver of any of the
conditions thereof; provided, however, that, without obtaining
the prior written approval of Presidio, Olympia shall not amend
or otherwise modify the terms of any Offer: (i) to increase the
number of Units of any Partnership sought to be purchased in such
offer to a number in excess of 40% of the outstanding Units of
such Partnership; or (ii) in a manner that violates or is
inconsistent with its obligations under this agreement. Olympia
shall provide Presidio with copies of Offering materials
describing any proposed change in the terms of, or waiver of any
condition to, an Offer not less than two business days prior to
the date such Offering Materials are first mailed to holders of
Units. Each party shall, and shall cause its affiliates to,
comply with the Rules in connection with the Offers.
(d) Presidio will not, and will cause its affiliates
not to, directly or indirectly, purchase or otherwise acquire
beneficial ownership of Units in any Partnership, enter into any
agreement with a third party to purchase or otherwise acquire
beneficial ownership of any Units in any Partnership, or make any
offer to purchase or otherwise acquire beneficial ownership of,
or solicit any offer to sell, Units in any Partnership, at any
time commencing on the date hereof through and including the
Final Expiration Date of the Offer with respect to such
Partnership.
2. Standstill. (a) Prior to the Standstill
Expiration Date (as hereinafter defined), except to the extent
AREH or its affiliates is invited to do otherwise by Presidio,
AREH shall not, and shall not permit any of its affiliates to,
directly or indirectly:
(i) acquire, announce an intention to acquire, offer
or propose to acquire, solicit an offer to sell or agree to
acquire, by purchase, by gift, by joining a partnership, a
limited partnership, a syndicate or any group or otherwise (other
than any partnership, limited partnership, syndicate or group
consisting solely of AREH and its affiliates and, in such event,
only to the extent permitted pursuant to section 2(b) below), (A)
any Units in any Partnership or (B) any assets, businesses or
properties of any Partnership;
(ii) participate in the formation or encourage the
formation of, or join or in any way participate with, any
partnership, limited partnership, syndicate, group or other
person or entity that beneficially owns or seeks to acquire
beneficial ownership of Units in any Partnership for the purpose
of beneficially owning or acquiring beneficial ownership of any
such Units (other than any group consisting solely of AREH and
its affiliates);
(iii) solicit, or participate in the solicitation of,
proxies or become a participant in any election contest (the
terms used in this section 2.3 having the respective meanings
given them to Regulation 14A under the Exchange Act) with respect
to any Partnership;
(iv) initiate, propose or otherwise solicit limited
partners for the approval of one or more proposals with respect
to any Partnership or induce any other person to initiate any
such proposal;
(v) seek the removal of any general partner of any
Partnership or seek to have called any meeting of limited
partners of any Partnership;
(vi) deposit any Units of any Partnership in a voting
trust or subject them to a voting agreement or other agreement or
arrangement with respect to voting (other than this agreement or
any agreement or arrangement solely among AREH and its
affiliates); or
(vii) otherwise act, alone or in concert with others,
to seek to control the management, policies or affairs of any
Partnership or solicit, propose, seek to effect or negotiate with
any other person or entity (including, without limitation, any
Partnership) with respect to any form of business combination or
other extraordinary transaction with any Partnership or any of
its general partners; solicit, make or propose, or negotiate with
any other person or entity with respect to, or announce an intent
to make, any tender offer or exchange offer for any units in any
Partnership; publicly disclose an intent, purpose, plan or
proposal with respect to any Partnership or any securities or
assets of any Partnership that would violate the provisions of
this section 2; or assist, participate in, facilitate or solicit
any effort or attempt by any person or entity to do or seek to do
any of the foregoing.
(b) Notwithstanding the provisions of section 2(a):
(i) AREH and its affiliates: may conduct the Offers,
and acquire Units pursuant to the offers, in accordance with
section 1 hereof and may exercise their rights and perform their
obligations under this Agreement;
(ii) Olympia and/or any Permitted Transferee may
acquire from any Partnership, as a distribution from the
Partnership, any securities or other assets or properties the
Partnership distributes to its partners in any such distribution.
(iii) Except as to the matters expressly referred to
in section 2(a) and except as provided in section 5, Olympia and
any Permitted Transferee of Units shall be entitled to exercise
their rights as a limited partner of each Partnership in which
they own Units, including, without limitation, the rights to
access books and records of the Partnership and to vote.
(iv) Neither AREH nor any affiliate of AREH shall be
deemed to have violated section 2 of this Agreement in the event
that such person acquires beneficial ownership of Units of any
Partnership pursuant to a transaction in which such person
acquires another entity, in circumstances in which the principal
purpose of such transaction is not to acquire Units of such
Partnership or otherwise to circumvent the intent of this
agreement, provided that the number of Units so acquired,
together with the aggregate number of Units of such Partnership
acquired by AREH or any affiliate of AREH in any other
transactions permitted pursuant to this paragraph (iv), represent
a de minimis amount of the total outstanding Units of such
Partnership.
(v) AREH and its affiliates may acquire, offer or
propose to acquire, or agree to acquire one or more assets,
businesses or properties of any Partnership if, prior to AREH or
any affiliate taking action with respect to such acquisition, the
general partners of the Partnership owning such assets,
businesses or properties or their affiliates have publicly
announced such Partnership's intention to offer such assets,
businesses or properties for sale or to solicit offers for the
purchase thereof or have retained a broker for such purpose.
(c) For purposes of this agreement, "Standstill
Expiration Date", with respect to any Partnership, shall mean the
earliest to occur of: (i) the third anniversary of the date
hereof; (ii) the date of a Default (as hereinafter defined) by
Presidio in its obligation to purchase Units of such Partnership
pursuant to the buy/sell agreements set forth in section 4
hereof; and (iii) the closing date of the purchase by Olympia
and/or any affiliate of Units from Presidio pursuant to the
buy/sell agreements set forth in section 4 hereof.
3. Restrictions on Transfer
3.1 Transfers to be made only as Permitted or
Required by this Agreement. Olympia and its affiliates shall
not, directly or indirectly, sell, assign, transfer, pledge or
otherwise encumber or dispose of (collectively, "transfer") any
Units any of them acquires pursuant to the Offers, except as
specifically permitted or required by this agreement. Any other
purported transfer shall be void and of no effect. The foregoing
provisions shall not be deemed to prohibit (a) the transfer of
the capital stock or other equity interest in Olympia, AREH or
any of their respective affiliates in circumstances in which the
principal purpose of such transfer is not to dispose of Units or
otherwise to circumvent the intent of this agreement; or (b) the
pledge of any Units acquired pursuant to the Offers or any
capital stock or other equity interest in Olympia, AREH or any
such affiliates from being pledged to collateralize or otherwise
support general corporate or partnership obligations of Olympia,
AREH or such affiliate existing of the date or incurred during
the term of this agreement, provided that the foregoing shall not
relieve Olympia, AREH or such affiliate from its obligations to
fully perform its undertakings hereunder and provided further
that any direct pledgee of Units shall agree to be bound by the
provisions of this agreement to the same extent as Olympia is so
bound as a condition to foreclosing upon such Units.
3.2 Permitted Transfers. Olympia and its
affiliates may, at any time or from time to time, transfer some
or all of the Units they acquire pursuant to the Offers (or the
right to acquire Units pursuant to the Offers) to any of their
affiliates (Olympia and each such affiliate being hereinafter
referred to as a "Permitted Transferee"). No transfer to a
Permitted Transferee shall be effective, however, unless the
Permitted Transferee agrees, in a writing that is reasonably
satisfactory to Presidio, to be bound by all the terms of this
agreement to the same extent that Olympia and AREH are so bound.
3.3 Termination of Restrictions. The provisions
of section 3.1 shall terminate, as to a Partnership, on the
earlier to occur of: (a) the third anniversary of this agreement;
or (b) the closing of any purchase of Units of such Partnership
by Olympia or an affiliate upon exercise of the buy/sell
provisions set forth in section 4 hereof. In addition, the
provisions of section 3.1 shall not apply to any of the
Partnerships at any time following the occurrence and during the
continuance of a Default by Presidio in its obligation to
purchase Units of one or more Partnerships upon exercise of the
buy/sell provisions set forth in section 4 hereof. If Units are
transferred to a third party other than a Permitted Transferee at
any time when the restrictions on transfer do not apply (as
provided in the immediately preceding sentence) or transferred to
any third party following the termination of such restrictions,
the transferee will not be bound by any of the obligations
applicable to the transferor of such Units under this Agreement.
4. Call; Buy/Sell
4.1 Call. At any time after the Final Expiration
Date and before the ninety-first day following the Final
Expiration Date, Presidio shall have the option (the "Call
Option") to purchase 50% (but not less than 50%) of the Units in
each Partnership acquired pursuant to the Offers by Olympia and
its affiliates for a price determined in accordance with schedule
4.1. The Call Option will be exercisable only by written notice
by Presidio to Olympia and AREH, which notice must be given, if
at all, prior to the expiration of such option.
4.2 Buy/Sell. (a) Either Olympia or Presidio
may initiate buy/sell procedures with respect to one or more
Partnerships at any time commencing on the Buy/Sell Effective
Date (as-hereinafter defined) through and including the
Standstill Expiration Date. Anything herein to the contrary
notwithstanding, buy/sell procedures may not be instituted more
than once with respect to any Partnership (except that the
delivery of a Buy/Sell Offer that is rescinded pursuant to
section 4.2(d) hereof shall not constitute the institution of
buy/sell procedures for this purpose). Such buy/sell procedures
shall cover, in the case of Olympia, all Units of a Partnership
acquired by Olympia and/or any Permitted Transferee pursuant to
an Offer (other than units purchased by Presidio upon exercise of
the Call Option) and all other Units owned by Olympia or any
affiliate of Olympia at the time the buy/sell procedures are
initiated (collectively, the "Olympia Covered Units") and, in the
case of Presidio, all Units of such Partnership acquired by
Presidio or any affiliate of Presidio upon exercise of the Call
Option (collectively, the "Presidio Covered Units").
(b) Either Olympia or Presidio may initiate the
buy/sell procedures with respect to one or more Partnerships by
delivering to the other a written offer (the "Buy/Sell Offer")
stating the buy/sell price on a per unit/per Partnership basis
(which buy/sell price shall be payable solely in cash and shall
not exceed, for any Partnership, the net asset value per Unit for
such Partnership as of the date of the Buy/Sell Offer (the
"Maximum Price")) and other material terms and conditions on
which the initiating party is willing to purchase all, but not
less than all, Olympia Covered Units or Presidio Covered Units,
as the case may be, of such Partnership. The non-initiating
party shall then be obligated to elect to sell Units to the
initiating party at the per unit price ard upon the other terms
and conditions set forth in the Buy/Sell Offer, or to purchase
Units from the initiating party upon such terms and conditions.
(If the Buy/Sell Offer relates to more than one Partnership, the
non-initiating party may, in its discretion, elect to buy Units
of one Partnership and sell Units of another, subject to Section
4.2(c) below). The non-initiating party shall have fifteen days
from the date the Buy/Sell Notice is delivered to it (the "Reply
Period") to decide whether to buy or sell. Failure to notify the
initiating party of such decision at or prior to the end of the
Reply Period shall be deemed a decision to buy Units.
Notwithstanding the foregoing, in the event that the
non-initiating party wishes to buy Units of a Partnership but
believes that the buy/sell price named in the Buy/Sell Offer
exceeds the maximum Price for such Partnership, the
non-initiating party shall notify the initiating party during the
Reply Period of its election to buy such Units at the Maximum
Price, which notice (the "Appraisal Notice") shall set forth the
Maximum Price (in the opinion of the non-initiating party) and
shall name an appraiser with a minimum of ten years experience in
the appraisal of properties of the type owned by the
Partnership(s) whose Units are subject to appraisal (a "Qualified
Appraiser"). If the parties cannot agree upon the Maximum Price,
the initiating party shall name a Qualified Appraiser (and shall
so notify the non-initiating party in writing) within ten days
following its receipt of the Appraisal Notice, and the two
Qualified Appraisers shall choose a third impartial Qualified
Appraiser (the "Impartial Appraiser") within ten days following
selection of the second Qualified Appraiser. If the initiating
party fails timely to select (and to notify the non-initiating
party of its selection of) a Qualified Appraiser in accordance
the immediately preceding sentence, the Qualified Appraiser
selected by the non-initiating party shall select the Impartial
Appraiser. The Impartial Appraiser so selected shall perform an
appraisal to determine the Maximum Price of Units of the
Partnership(s) subject to the dispute between the parties and
shall present the results of such appraisal and his determination
of the Maximum Price to the parties in writing within 90 days
following such appraiser's selection. The determination of such
Impartial Appraiser shall be final and binding on the parties
hereto. Each party shall bear any costs and expenses of the
Qualified Appraiser selected by such party and Presidio shall
bear 50% and AREH shall bear 50% of the costs and expenses of the
Impartial Appraiser.
(c) If Presidio or an affiliate does not exercise the
Call Option with respect to one or more Partnerships (and, as a
result, there are no Presidio Covered Units of such
Partnership(s)) or if, at the time buy/sell procedures are
initiated, Presidio and its affiliates collectively own more than
15% of the outstanding Units of the Partnership(s) with respect
to which such buy/sell procedures are initiated, then,
notwithstanding the provisions of section 4.2 hereof to the
contrary: (i) if AREH or an affiliate initiates buy/sell
procedures with respect to such Partnership(s), AREH or such
affiliate may require Presidio to buy the Units of such
Partnership(s) covered by AREH's or such affiliate's Buy/Sell
Offer at the maximum Price then applicable to such Units, and
(ii) if Presidio initiates buy/sell procedures with respect to
such Partnership(s), AREH and its affiliates may, in their
discretion, elect to sell the Units covered by Presidio's
Buy/Sell Offer at the Maximum Price then applicable to such Units
or to retain such Units. The appraisal procedures set forth in
paragraph (b) above shall apply to buy/sell procedures governed
by this paragraph (c), if applicable.
(d) As used herein, "Buy/Sell Effective Date," shall
mean, as to Units of any Partnership, the earlier to occur of:
(a) the six-month anniversary of the Final Expiration Date; and
(b) the date on which Presidio gives notice (in accordance with
Section 8.7 hereof) to Olympia and AREH of a proposal by or on
behalf of the general partners of any Partnership or any
affiliate of such general partners to effect a "roll-up"
transaction (within the meaning of Item 901 of Regulation S-K
promulgated by the Commission under the Exchange Act) involving
such Partnership (it being agreed by Presidio that it will not
permit any such "roll-up" transaction to be consummated less than
sixty days following the giving of such notice (in accordance
with Section 8.7 hereof) to Olympia and AREH). Any notice given
pursuant to clause (b) of the immediately preceding sentence
shall set forth, in reasonable detail, all material terms of the
"roll-up" transaction being proposed. Notwithstanding the
foregoing, in the event that Presidio makes a Buy/Sell Offer at a
time when either the purchase or sale of Units by Olympia or its
affiliates pursuant to the buy/sell procedures set forth in this
section 4 would cause Olympia or any such affiliate to incur
liability under Section 16(b) of the Exchange Act, Olympia may so
notify Presidio (which notice shall state the earliest date (the
"Trigger Date") on which Olympia or such affiliate could commit
either to purchase or sell Units without incurring such
liability, provided that such Trigger Date shall not be more than
six months and one day following the date of Presidio's Buy/Sell
Offer), in which event Presidio's Buy/Sell Offer shall be deemed
to be rescinded for all purposes of this agreement, and Presidio
may not initiate another Buy/Sell Offer prior to the Trigger
Date. Olympia may not cause a Buy/Sell Offer to be rescinded
pursuant to this section 4.2(c) more than once.
4.3 Closing. The closing of any purchase and
sale of Units of a Partnership upon exercise of the Call Option
or pursuant to the buy/sell procedures, as the case may be, shall
be held in New York City during normal business hours at a place
and date specified by Presidio in writing to Olympia and AREH,
but not fewer than 10 days or more than 30 days after: (x) the
exercise of the Call Option or with respect to such Partnership;
or (y) the end of the Reply Period following delivery of a
Buy/Sell Offer covering such Partnership (or, if an Appraisal
Notice is timely given relating to Units of such Partnership,
then the final determination by the Impartial Appraiser of, or
the mutual agreement of the parties as to, the Maximum Price).
Once scheduled, such closing shall not be postponed or adjourned
except by mutual consent of the parties hereto. At such closing,
(a) the party selling Units shall deliver to the party purchasing
units instruments of transfer with respect to the Units being
sold, which instruments shall be substantially in the form set
forth in schedule 4.3, and (b) the party purchasing Units shall
pay the full purchase price for the Units being purchased by wire
transfer of immediately available funds to an account specified
in writing by party selling Units at least two days before the
closing. As used herein, a "Default" by Presidio in its
obligation to purchase Units upon exercise of the buy/sell
procedures means the failure by Presidio timely to schedule a
closing for such purchase as required by this section 4.3 or to
pay the full purchase price for any or all of the Units required
to be purchased by Presidio at such closing in the manner
required by this section, provided that Olympia and/or any
Olympia affiliate owning the Units required to be purchased at
such closing are ready, willing and able to perform their
obligations to transfer such Units to Presidio. Anything herein
to the contrary notwithstanding, if, between the date a Buy/Sell
Offer is made and the date of the closing pursuant to this
section 4.3, a transaction has been consummated as a result of
which the Units required to be transferred at such closing (and
all other Units of the subject Partnership) have been exchanged
for or converted into another security, the party required to
sell such Units shall deliver at the closing the securities so
received by it in connection with such exchange or conversion and
the purchase price payable to such party shall be unaffected by
such exchange or conversion.
5. Agreement to Vote. If, at any time or from time to
time before the Standstill Expiration Date, the general partners
of a Partnership submit to the limited partners of that
Partnership a proposal that would result in such limited partners
receiving securities that, upon consummation of the proposal, are
listed on a national securities exchange or NASDAQ, AREH shall
cause all the Units in that Partnership owned by AREH or any
affiliate of AREH and not theretofore purchased by Presidio to be
voted in favor of the proposal.
6. Neutrality. Presidio will not, and will not cause
or permit its affiliates to, take any action that would result in
the conditions to the Offers set forth in Section 14 of each
Offer to Purchase not to be satisfied and will not, and will not
cause or permit its affiliates to, actively oppose the Offers,
but rather will take, and will cause its affiliates to take, a
neutral stance with respect thereto, except that in the case of
(i) a competing third party bid (i.e., a bid made by or on behalf
of a party other than AREH or an affiliate or Presidio or an
affiliate that is not topped by Olympia) made prior to the
expiration date of the Offers or (ii) the occurrence of any event
materially adversely affecting the Offers, Presidio or any
affiliate of Presidio may change any recommendation they have
made to limited partners with respect to the offers to reflect
such competing bid or the occurrence of such event. In
furtherance and not in limitation of the foregoing, Presidio will
cause the general partners of the Partnerships to admit Olympia
or a Permitted Transferee as a limited partner of each
Partnership in which it purchases Units pursuant to an Offer upon
delivery of each Partnership's standard transfer paperwork, such
admission to be effective as of the first day of the calendar
quarter next following the date of such delivery by Olympia.
Presidio shall cause each of the Partnerships to waive applicable
transfer fees in connection with transfers to Olympia or a
Permitted Transferee of Units acquired pursuant to the Offers.
7. Termination. (a) Anything herein to the contrary
notwithstanding, Olympia and AREH shall have the right to
terminate this agreement, by giving written notice of such
termination to Presidio (without any liability on the part of any
party hereto to any other party hereto, other than liability for
breaches occurring prior to such termination), in the event that
Presidio and/or any affiliate of Presidio fails or refuses to
comply with (a) any comment made by the staff of the Commission
to amend the Offers to the extent necessary to include Presidio
and/or affiliate of Presidio as co-bidders and to make any
related disclosures in the Offering Materials or (b) any other
reasonable comment made by the staff relating to the Offers which
comment applies to and contemplates the taking of certain action
or making certain disclosures by Presidio and/or any affiliate of
Presidio (and, in the case of clause (a) or (b) above, after
counsel for Presidio has had reasonable opportunity to persuade
the staff of the correctness of Presidio's position on such
matter, if different than that of the staff). The obligations of
Presidio pursuant to section 6 hereof will survive such
termination.
(b) Anything herein to the contrary notwithstanding,
Presidio shall have the right to terminate this agreement
(without any liability on the part of any party hereto to any
other party hereto, other than liability for breaches occurring
prior to such termination), by giving written notice of such
termination to AREH and Olympia, at any time on or after the
sixty-first day following the entry of an Injunction (but in no
event prior to June 11, 1998), provided that the Final Expiration
Date has not occurred and such Injunction remains in effect on
the date Presidio terminates such agreement.
8. Miscellaneous
8.1 Definitions. As used in this agreement: the
terms "affiliate" and "control" have the respective meanings
given them in Rule 12b-2 under the Exchange Act; the terms
"beneficially own," "beneficial ownership" and "group" have the
respective meanings given them in Rule 13d-3 under the Exchange
Act; the term "Partnership" refers to each of the Partnerships
(as defined in the preface to this agreement) and also includes
each entity whose securities are issued to limited partners of a
Partnership pursuant to a transaction of the type described in
section 5 hereof; and the term "Unit" refers to Units of each
Partnership (as defined in the preface to this agreement) and
also includes any securities of the type described in section 5
hereof issued to limited partners of a Partnership in exchange
for Units.
8.2 Benefit. This agreement shall be binding
upon, and inure to the benefit of, the respective successors and
assigns of the parties. Notwithstanding the foregoing, no party
may assign its rights or obligations under this Agreement without
obtaining the prior written consent of the other parties;
provided, however, that any party may assign its right or
obligation to purchase or sell Units pursuant to Section 4
hereof, provided that such assignment will not relieve the
assigning party of any liability hereunder.
8.3 Governing Law; Jurisdiction. This agreement
shall be governed by and construed in accordance with the law of
the state of New York applicable to agreements made and to be
performed wholly in New York. Any litigation based on, or
arising out of, under or in connection with this Agreement or the
consummation of the transactions contemplated hereby shall be
brought and maintained exclusively (to the extent permitted under
applicable law) in the courts of the State of New York, New York
County or in the United States District Court for the Southern
District of New York. The parties expressly and irrevocably
submit to the jurisdiction of the courts of the State of New
York, New York County, and of the United States District Court
for the Southern District of New York for the purpose of any such
litigation as set forth such litigation. Each of the parties
irrevocably consents to the service of process by registered
mail, postage prepaid, or by personal service within or without
the State of new York.
8.4 Remedies. The parties to this agreement will
be irreparably damaged if this agreement is not specifically
enforced. If any dispute arises under this agreement concerning
any transfer of Units or any other right or obligation, that
right or obligation shall be enforceable in a court of equity by
an injunction or a decree of specific performance without any
bond or other security being required. These remedies shall not
be exclusive, and shall be in addition to any other remedies the
parties may have.
8.5 Separability. If any provision of this
agreement, or the application of any provision to any person or
circumstance, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this agreement and the
application of that provision to other persons or circumstances
shall not be affected, but shall be enforced to the full extent
permitted by law.
8.6 Waiver. The failure of a party to insist
upon strict adherence to any term of this agreement on any
occasion shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that
Term or any other term of this agreement. Any waiver must be in
writing.
8.7 Notices. Any notice or other communication
under this agreement shall be in writing and shall be considered
given when delivered by hand. Notice may also be given by
electronic facsimile transmission, but in such case will be
deemed given only when received by the addressee. Notices shall
be directed to the parties at their respective addresses set
forth below (or such other address as the party to be notified
may have requested in writing): (a) if to Presidio, to it c/o
Northstar Capital Partners LLC, 527 Madison Avenue, New York, New
York 10022, Attn: Richard Sabella (Tel. No. (212)319-3400; Fax
No. (212)319-4557), with a copy to: Edward W. Kerson, Esq.,
Proskauer Rose LLP, 1585 Broadway, New York, New York 10036 (Tel.
No. (212)969-3290; Fax No. (212)969-2900); and (b) if to AREH or
Olympia, to it c/o Icahn Associates Corp., 767 Fifth Avenue, 47th
Floor, New York, New York 10153, Attn: Martin L. Hirsch (Tel. No.
(212)702-4343; Fax No. (212)750-5841) with a copy to: Theodore
Altman, Esq., Gordon Altman Butowsky Weitzen Shalov & Wein, 114
W. 47th Street, New York, New York 10036 (Tel. No. (212)626-0812;
Fax No. (212)626-0799).
8.8 Counterparts. This agreement may be executed
in counterparts, each of which shall be considered an original,
but both of which together shall constitute the same instrument.
8.9 Complete Agreement. This agreement contains
a complete statement of all the arrangement between the parties
with respect to its subject matter, supersedes all existing
agreements between them relating to that subject matter and
cannot be changed or terminated orally. Except as expressly set
forth herein, there are no contracts, arrangements,
understandings or relationships between the parties hereto with
respect to the Units.
8.10 Joint and Several Liability. AREH shall be
jointly and severally liable for the obligations of AREH and of
its affiliates (including Olympia) hereunder (and, in this
regard, any action or inaction required hereunder to be taken or
not taken, or which AREH is required to cause or prevent or not
permit by such affiliate shall be deemed to be an obligation of
both such affiliate and AREH hereunder), and Presidio shall have
the right to enforce this Agreement with respect to all such
matters directly against AREH, without first being required to
file suit or seek recourse of any kind against any other person.
Presidio shall be jointly and severally liable for the
obligations of Presidio and its affiliates (including the general
partners of each Partnership) hereunder (and, in this regard, any
action or inaction required hereunder to be taken or not taken,
or which Presidio is required to cause or prevent or not permit
by such affiliate shall be deemed to be an obligation of both
such affiliate and Presidio hereunder), and AREH and Olympia
shall have the right to enforce this Agreement with respect to
all such matters directly against Presidio, without first being
required to file suit or seek recourse of any kind against any
other person.
8.11 Delivery of Offering Materials. Presidio
hereby agrees on behalf of the Partnerships and their general
partners that, for purposes of compliance by Olympia (and any
affiliates who are co-bidders in the Offers) with Rule
14d-3(a)(2) and (b) of the Rules, Olympia may hand deliver a copy
of its Schedule 14D-l's together with all exhibits thereto and
any amendments thereto to the Partnerships c/o Edward W. Kerson,
Esq., Proskauer Rose, LLP, 1585 Broadway, New York, New York
10036 and shall send a copy of such materials to the Partnerships
at their principal executive offices for delivery on the next
business day.
IN WITNESS WHEREOF, the undersigned have caused this
agreement to be executed by their duly authorized representatives
as of the date first above written.
PRESIDIO CAPITAL CORP.
By: /S/ Richard Sabella
Name: Richard Sabella
Title:
OLYMPIA INVESTORS, L.P.
By: Olympia-GP, Inc.
By: /s/ Martin L. Hirsch
Name: Martin L. Hirsch
Title: Vice President
AMERICAN REAL ESTATE HOLDINGS, L.P.
By: American Property Investors, Inc.
By: /s/ Martin L. Hirsch
Name: Martin L. Hirsch
Title: Vice President
[Signature Page of Agreement, dated March 6, 1998, among Presidio
Capital Corp., Olympia Investors, L.P. and American Real Estate
Holdings L.P.]<PAGE>
Schedule 4.1
The purchase price per Unit payable upon exercise of the Call
Option will be the sum of: (i) the Purchase Price per Unit (as
hereinafter defined); and (ii) Expenses per Unit (as hereinafter
defined). The Purchase Price per Unit will equal the lesser of
(A) the price per Unit paid by Olympia in the Offers or (B)
$110.68 per Unit for Units of HEP 85, $99.97 per Unit for Units
of HEP 86, and $124.13 per Unit for Units of HEP 88.
Notwithstanding the foregoing, in the event that Olympia
increases its offering price per Unit in order to equal or top a
competing bidder, then the Purchase Price per Unit will equal the
price per Unit paid by Olympia in the offers. Expenses per Unit
will equal (i) the sum of all out-of-pocket costs and expenses
incurred by Olympia and its affiliates (including attorneys fees
and expenses) with respect to the Offers and the purchase and
transfer to Olympia or an affiliate of Units purchased pursuant
thereto, including without limitation the fees and expenses of
Beacon Hill Partners (the information agent for the
offer)(including without Limitation fees and expenses incurred in
connection with telephone calls to limited partners of the
Partnerships), Harris Trust Company (the depositary for the
Offer), printing and mailing expenses, Commission filing fees,
and any out-of-pocket costs and expenses attributable to the
admission of Olympia or an affiliate as a substitute limited
partner (but will not include (x) any costs and expenses or
attorneys fees and expenses attributable to the negotiation,
execution and delivery of this agreement or any litigation
arising out of or in connection with this agreement or the Offers
or (y) the Purchase Price per Unit) divided by (ii) the total
number of Units of the Partnerships purchased by Olympia and its
affiliates pursuant to the Offers.
________________________________________________________________
HIGH EQUITY PARTNERS L.P. - SERIES 86
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
________________________________________________________________
HIGH EQUITY PARTNERS L.P. - SERIES 86
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
AMENDED AND RESTATED AGREEMENT ("Agreement") dated as of
November 14, 1985, as amended and restated as of April 22, 1986,
among RESOURCES HIGH EQUITY, INC., a Delaware corporation,
RESOURCES CAPITAL CORP., a Delaware corporation, and SECOND GROUP
PARTNERS, each as a General Partner, and HOWARD GELBTUCH, as the
initial Limited Partner, all of whom continue a limited
partnership formed pursuant to the Delaware Revised Uniform
Limited Partnership Act upon the following terms and conditions.
1. NAME AND PLACE OF BUSINESS
The name of the Partnership is High Equity Partners L.P. -
Series 86; its registered office in Delaware is Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware 19801 and the
name of the Partnership's registered agent for service of process
at that address is The Corporation Trust Company. Its principal
place of business is 666 Third Avenue, New York, New York 10017,
or such other place as the Administrative General Partner may
hereafter determine.
2. DEFINITIONS
The following terms used in this Agreement shall (unless
otherwise expressly provided herein or unless the context
otherwise requires) have the following respective meanings:
"Acquisition Expenses" shall mean expenses including
but not limited to legal fees and expenses, travel and
communications expenses, costs of appraisals, nonrefundable
option payments on property not acquired, accounting fees and
expenses, title insurance, and miscellaneous expenses related to
selection and acquisition of properties, whether or not acquired.
"Acquisition Fees" shall mean the total of all fees and
commissions paid by any person to any person, including any
Sponsor, in connection with the purchase or development of any
Property by the Partnership, whether designated as real estate
commission, selection fee, nonrecurring management fee,
nonrecurring start-up fee, development fee (which is defined as a
fee for the packaging of a partnership's 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),
or any fee of a similar nature, however, designated.
"Adjusted Cash From Operations" shall mean the excess
of cash revenue from operation of Partnership Asset Property over
cash disbursements, including the Partnership Asset Management
Fee, without deduction for depreciation and amortization of
intangibles such as organization and debt placement costs but
after a reasonable allowance for cash reserves for repairs,
replacements, contingencies and anticipated obligations
(including debt service), as determined by the Administrative
General Partner.
"Adjusted Contribution" shall mean the Original
Contribution paid by the original purchaser of a Unit, reduced by
the total of cash distributed from Cash From Sales or Financings
and from initial working capital reserves with respect thereto.
"Administrative General Partner" shall mean Resources
Capital Corp., a Delaware corporation, or any other person or
entity which succeeds it in such capacity.
"Affiliate" of a person shall mean: (i) any person
directly or indirectly controlling, controlled by or under common
control with another person; (ii) any person owning or
controlling 10% or more of the outstanding voting securities of
such other person; (iii) any officer, director, trustee or
partner or such person; and (iv) if such other person is an
officer, director, trustee or partner, any company for which such
person acts in any such capacity; provided, however, that a
partner in a partnership or joint venture with (a) the
Partnership or (b) an Affiliate of a General Partner, shall not
by virtue of such relationship necessarily be deemed an Affiliate
of such General Partner. For purposes of this definition, the
term "control" shall include the control or ownership of 10% or
more of the outstanding voting securities of the person referred
to.
"Appraised Value" shall mean the fair market value of
any real property according to an MAI Appraisal.
"Associate General Partner" shall mean Second Group
Partners, or any other person or entity which succeeds it in such
capacity.
"Cash From Sales or Financings" shall mean the net cash
realized by the Partnership from any financing of any Partnership
Property or from the Sale or Disposition of any Partnership
Property after retirement of applicable mortgage debt and all
expenses related to the transaction (including required payments
of the unsubordinated portion of the Mortgage Placement Fee),
together with interest on any note taken back by the Partnership
upon the sale of a Property; however, Cash From Sales or
Financings shall not include cash from working capital reserves
to the extent such reserves come from Net Proceeds.
"Closing Date" shall mean each date designated by the
Administrative General Partner on which subscribers for Units
sold pursuant to the Prospectus are admitted as Limited Partners
as a result of purchases occurring during the offering period.
"Initial Closing Date" shall mean the first date on which the
subscribers for Units are admitted as Limited Partners. "Final
Closing Date" shall mean the last date on which the subscribers
for Units are admitted as Limited Partners. "Additional Closing
Date" shall mean each date between the Initial Closing Date and
the Final Closing Date on which subscribers for Units are
admitted as Limited Partners.
"Code" shall mean the Internal Revenue Code of 1954, as
amended, or corresponding provisions of subsequent revenue laws.
"Distributions" shall mean any cash distributed to the
Limited Partners and the General Partners arising from their
interests in the Partnership, but shall not include any payment
to the General Partners under the provisions of Articles 9 or 10.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder.
"Front-End Fees" shall mean fees and expenses paid by
any party for any service rendered in connection with and during
the Partnership's organizational or acquisition phase including
Organization and Offering Expenses, Acquisition Fees, Acquisition
Expenses and any other similar fee, but excluding any
underwriting or selling commissions with respect to sales of
Units to the extent not paid by the Partnership.
"General Partners" shall mean Resources High Equity,
Inc., Resources Capital Corp. and Second Group Partners, or any
other person, corporation or other entity which succeeds any of
them in such capacity, including the Successor Associate General
Partner as well as any additional general partner. Reference to
a "General Partner" shall refer to any one of them.
"Gross Proceeds" shall mean the total proceeds from the
sale of Units before deductions for Organization and Offering
Expenses.
"Gross Revenues" shall mean all revenues from the
operation of real property owned by the Partnership other than
from security deposits paid by lessees thereof, but shall not
include revenues from the Sale or Disposition of Partnership
Properties.
"Integrated" shall mean Integrated Resources, Inc., a
Delaware corporation.
"Invested Assets" shall mean the amount of Gross
Proceeds actually paid or allocable to the purchase, development,
construction and/or improvement of Properties acquired by the
Partnership (including working capital reserves, Property
Evaluation Fees, Acquisition Fees and Acquisition Expenses
actually paid or allocable thereto).
"Investment in Properties" shall refer to the amount of
Gross Proceeds actually paid or allocated to the purchase,
development, construction or improvement of Properties acquired
by the Partnership (including working capital reserves allocable
thereto in an amount of up to 5% of the Gross Proceeds, and other
cash payments such as interest and taxes, but excluding "Front-
End Fees").
"Investment General Partner" shall mean Resources High
Equity, Inc., a Delaware corporation, or any other person or
entity which succeeds it in such capacity.
"IRA" shall mean an Individual Retirement Account
established under Section 408 of the Code.
"Limited Partners" shall mean the initial Limited
Partner, and any other person who is admitted to the Partnership
as an additional or substituted Limited Partner. Reference to a
"Limited Partner" shall refer to any one of them.
"MAI Appraisal" shall mean an appraisal made by an
independent qualified appraiser who is a member in good standing
of the American Institute of Real Estate Appraisers.
"Majority Vote" shall mean the affirmative vote of the
holders of more than 50% of the outstanding Units.
"Mortgage Placement Fee" shall mean the fee which may
be payable to the Investment General Partner or its Affiliates
under the provisions of Section 9.6.
"Net Income" or "Net Loss" shall mean the taxable
income or taxable loss of the Partnership (including the
Partnership's share of income or loss of any partnership, venture
or other entity which owns a Property), as determined for federal
income tax purposes, computed (i) by taking into account each
item of Partnership income, gain, loss, deduction or credit not
already included in the computation of taxable income and taxable
loss and (ii) by excluding each such Partnership item which is
separately allocated pursuant to Article 11 hereof.
"Net Proceeds" shall mean total Gross Proceeds less
Organization and Offering Expenses.
"Organization and Offering Expenses" shall mean those
expenses incurred and payable by the Partnership in connection
with the formation, qualification and registration of the
Partnership and in marketing, distributing and processing Units,
including (a) fees and expenses paid to attorneys in connection
with the offering, (b) registration free, filing fees and taxes,
(c) the costs of qualifying, printing, amending, supplementing,
mailing and distributing the Partnership's registration statement
and Prospectus, including telephone and telegraphic costs, (d)
the costs of qualifying, printing, amending, supplementing,
mailing and distributing sales materials used in connection with
the issuance of Units, including telephone and telegraphic costs,
and (e) accounting and legal fees and expenses incurred in
connection therewith.
"Original Contribution" shall mean the amount of $250
for each Unit, which amount shall be attributed to such Unit in
the hands of subsequent holders thereof.
"Partners" shall mean collectively the General Partners
and the Limited Partners and reference to a "Partner" shall be to
any one of the Partners.
"Partnership" shall mean the limited partnership
created under this Agreement.
"Partnership Act" shall mean the Delaware Revised
Uniform Limited Partnership Act as in effect on the date hereof
and as amended from time to time.
"Partnership Asset Management Fee" shall refer to the
fee payable to the Administrative General Partner under the
provisions of Section 9.4 hereof.
"Properties" shall refer to all properties or any
interest therein acquired directly or indirectly by the
Partnership, in whole or in part, with Net Proceeds. Reference
to "Property" shall be to any one of them.
"Property Evaluation Fee" shall mean the fee payable to
the Investment General Partner or its Affiliates under the
provisions of Section 9.3.
"Property Management Fee" shall mean the fee which may
be payable to an Affiliate of the Investment General Partner
pursuant to Section 9.5.
"Prospectus" shall mean the final prospectus relating
to the registration of the Units as filed with the Securities and
Exchange Commission pursuant to Section 424(b) of the Securities
Act of 1933, as such Prospectus may subsequently be supplemented.
"Qualified Plans" shall mean qualified pension, profit-
sharing and other employee retirement benefit plans (including
Keogh [H.R.10] Plans) and trusts, bank commingled trust funds for
such plans and IRAs.
"Sale or Disposition" shall mean any of the following
Partnership transactions: sales, exchanges, or other
dispositions of real or personal property, condemnations or any
recovery or damage awards and insurance proceeds (other than
business or rental interruption insurance proceeds).
"Sponsor" shall mean any person directly or indirectly
instrumental in organizing, wholly or in part, the Partnership or
any person who will manage or participate in the management of
the Partnership and any Affiliate of such person, but does not
include (i) any person whose only relationship with the
Partnership or a General Partner is that of an independent asset
manager whose only compensation from the Partnership is as such,
and (ii) wholly independent third parties such as attorneys,
accountants and underwriters whose only compensation from the
Partnership is for professional services rendered in connection
with the offering of Units or the operations of the Partnership.
"Subordinated Incentive Fee" shall mean the fee which
may be payable to the Investment General Partner or its
Affiliates under the provisions of Section 9.7.
"Substantially all of the Assets" shall mean, unless
the context otherwise dictates, Properties representing 66-2/3%
or more of the net book value of Partnership assets as of the end
of the most recently completed fiscal quarter.
"Successor Associate General Partner" shall mean
Integrated or anyone designated as such by Integrated pursuant to
this Agreement.
"Taxable Limited Partner" shall mean (a) a Limited
Partner who purchases Units from the Partnership during the
offering period and who at the time of such purchase is not a
Tax-Exempt Limited Partner and (b) each subsequent transferee of
any Units from a person described in (a) above.
"Tax-Exempt Limited Partner" shall mean (a) a Limited
Partner who purchases Units from the Partnership during the
offering period and who at the time of such purchase is (i) a
Qualified Plan, (ii) an organization (other than a co-operative
described in Section 521 of the Code) which is exempt from tax
imposed by Chapter 1 (Normal Taxes and Sur-taxes) of the Code, or
(iii) a foreign person or entity, unless more than 50% of the
gross income derived by the foreign person or entity from the
Partnership is subject to U.S. income tax, and (b) each
subsequent transferee of any Units from a person described in (a)
above.
"Terminating Sale or Disposition" shall mean the
earlier to occur of (i) the Sale or Disposition of the
Partnership's last three Properties commencing with the first
such sale or (ii) the Sale or Disposition of a Partnership
Property which causes the aggregate acquisition cost of all
Partnership Properties which have been sold or disposed of to
exceed 66-2/3% of the aggregate original acquisition cost of all
Partnership Properties.
"Underwriter" shall mean Integrated Resources
Marketing, Inc., the underwriter for the public offering of
Units.
"Unit" shall mean a unit of limited partnership
interest representing an Original contribution of $250. A Unit
shall entitle the holder thereof to an interest in Net Income,
Net Loss and Distributions of the Partnership as specified in
Article 11 without regard to capital accounts.
3. PURPOSE AND RESERVES
3.1 Purpose. The primary purpose of the Partnership is to
invest in, hold, manage, sell, dispose of and otherwise act with
respect to existing or to-be-constructed office buildings,
shopping centers and other commercial and industrial properties
and possibly residential properties. The Partnership may, in
some cases, take title to the improvements and lease the land
with respect to the above-described Properties. The Partnership
may enter into ventures, partnerships and other business
arrangements with respect to real estate deemed prudent by the
General Partners in order to achieve successful operations for
the Partnership; provided, however, that such arrangements are
subject to the provisions of Sections 15.4.4 and 15.4.5.
3.2 Reserves. The Partnership shall initially maintain
cash reserves for major repairs, replacements, capital
improvements, contingencies and accruals required for insurance,
real estate taxes and related items in an amount equal to 2% of
the Gross Proceeds. The General Partners may increase or
decrease reserves as they deem necessary for the proper operation
of the business of the Partnership. Any cash reserve used need
not be restored and if restored, shall be restored from cash
generated from operations, from borrowings or from Sales or
Dispositions of Properties. In any fiscal quarter after the
Partnership is fully invested in Properties and operating income
and expense levels have been ascertained, but in no event earlier
than one year following the Final Closing Date, the General
Partners may determine that reserves of the Partnership are in
excess of the amount deemed sufficient in connection with the
Partnership's operations and such reserves may be reduced, but in
no event to less than 1% of the Gross Proceeds, and the amount of
such reduction for a particular quarter shall be allocated and
distributed either (i) in the same manner as Adjusted Cash From
Operations to the extent such reserves are attributable to cash
generated from Partnership operations or (ii) as a return of
Original Contributions to Limited Partners to the extent such
reserves are attributable to Net Proceeds.
4. TERM
The Partnership commenced on November 14, 1985 and shall
continue until December 31, 2015, unless previously terminated in
accordance with the provisions of this Agreement.
5. GENERAL PARTNERS
5.1 Capital Contributions of General Partners. The
Administrative General Partner, Investment General Partner and
Associate General Partner have contributed $960, $20 and $20,
respectively, in cash to the Partnership. At all times during
the existence of the Partnership, the General Partners shall have
an aggregate present and continuing interest in Net Income, Net
Loss and Distributions according to the provisions of Article 11.
5.2 Capital Accounts. A separate capital account shall be
maintained for each General Partner pursuant to Section 11.11
hereof.
5.3 Deficiencies. In the event that, immediately prior to
the dissolution of the Partnership referred to in Section 19.1,
the General Partners shall have a deficiency in their capital
accounts as determined in accordance with tax accounting
principles, then the General Partners shall contribute in cash to
the capital of the Partnership in amount equal to the lesser of
(a) the deficiency in the General Partners' capital accounts or
(b) the excess of 1.01% of the total Original Contributions over
the total capital contributions of the General Partners. Any
deficit payment shall be borne 96% by the Administrative General
Partner and 2% each by the Investment General Partner and the
Associate General Partner.
6 LIMITED PARTNERS
6.1 Authorization of Units. The Partnership is authorized
to sell and issue not more than 1,500,000 Units.
6.2 Initial Limited Partner. The initial Limited Partner
has contributed the sum of $2,500 to the capital of the
Partnership and has received ten Units.
6.3 Additional Limited Partners. Each person who acquires
Units in accordance with this Agreement and the Prospectus shall
become a Limited Partner in the Partnership at such time as he
has: (i) contributed the sum of $250 in cash for each Unit
purchased, (ii) executed and filed with the Partnership a written
instrument which sets forth an intention to become a Limited
Partner and requests admission to the Partnership in that
capacity, together with such other instruments as the
Administrative General Partner may deem necessary or desirable to
effect such admission, including the written acceptance and
adoption by such person of the provisions of this Agreement, and
the execution, acknowledgment and delivery to the Administrative
General Partner of a special power of attorney, the form, style
and content of which are more fully described herein, and (iii)
the Administrative General Partner accepts such person as a
Limited Partner in the Partnership and causes an appropriate
amendment to this Agreement and, if required by law, any separate
certificate of limited partnership. All Original Contributions
shall be received by the Partnership in trust, and, commencing on
the effective date of the registration statement of which the
Prospectus is part and continuing until the minimum proceeds are
received, shall be deposited in an escrow account as set forth in
the Prospectus. Upon receipt of the minimum of $2,500,000 in
Original contributions from a minimum of 150 purchasers within
the period specified in the Prospectus, the escrow agent shall
release such funds to the Partnership. Investors shall be
admitted to the Partnership as Limited Partners promptly after
receipt of such minimum Original Contributions and within 15 days
after release of the funds to the Partnership (as to the Initial
closing Date) and on a monthly or more frequent basis thereafter.
Subscriptions of Original Contributions shall be accepted or
rejected by the Partnership within thirty days of their receipt;
if rejected, all funds shall be returned to the investors within
ten business days. The Partnership shall not issue any
additional Units after the Final Closing Date.
6.4 Capital Accounts. A separate capital account shall be
maintained for each Limited Partner pursuant to Section 11.11
hereof.
7. LIABILITY OF LIMITED PARTNERS
7.1 General Limitation on Liability. Limited Partners
shall not be bound by, or be personally liable for, the expenses,
liabilities or obligations of the Partnership in excess of their
contributions, and no Limited Partner shall be required to lend
funds to the Partnership, to make any further contribution of
capital to the Partnership or to repay to the Partnership, any
partner, or any creditor of the Partnership all or any portion of
any negative amount of such Limited Partner's capital account.
7.2 Certain Liabilities of Limited Partners. Under state
law, it is possible that a Limited Partner may be liable to the
Partnership to the extent of previous Distribution made to him if
the Partnership does not have sufficient assets to discharge its
liabilities. If a court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Limited
Partner is obligated to make such payment, such obligation shall
be the obligation of such Limited Partner and not of the General
Partners.
8. STATUS OF UNITS
Each Unit shall be fully paid and nonassessable.
9. COMPENSATION TO THE GENERAL PARTNERS AND THEIR AFFILIATES
9.1 Limitations
9.1.1 The General Partners and their Affiliates shall
receive compensation from the Partnership and certain other
entities only as specified by this Agreement and the Prospectus.
9.1.2 No Acquisition Fee shall be paid by the
Partnership to any Affiliate of the Partnership, nor shall any
Affiliate of the Partnership receive a fee, commission or other
benefit from any person, upon any reinvestment of Cash From Sales
or Financings by the Partnership.
9.1.3 Except as set forth in this Article 9, no real
estate commission, property purchase fee, finder's fee or other
compensation shall be paid or payable by the Partnership to the
General Partners or to any other person in connection with the
acquisition of specific Properties, provided, however, in the
event they exceed the limitations in this Section 9.1, the
General Partners may cause Acquisition Fees to be paid to other
persons, which payments will be without cost to the Partnership.
9.2 Acquisition Fees. Subject to the limitations contained
in Section 9.1, the Investment General Partner or its Affiliates
shall receive Acquisition Fees in an amount equal to an aggregate
of 6% of Gross Proceeds, calculated on the amount of the Net
Proceeds invested in Partnership Properties purchased through the
services of the Investment General Partner or its Affiliates and
adjusted to include Acquisition Fees and a pro rata amount of
Property Evaluation Fees, cash reserves and Organization and
Offering Expenses paid by the Partnership or by the sellers of
the Partnership Properties acquired, together with reimbursement
for Acquisition Expenses incurred. The Acquisition Fees shall be
payable at the close of escrow or, if there is no escrow, at the
time legal title to such Property is transferred to the
Partnership, or later if the Investment General Partner
determines that it is in the best interest of the Partnership.
9.3 Property Evaluation Fee. Subject to the limitations
contained in Section 9,1, the Investment General Partner or its
Affiliates shall receive from the Partnership a Property
Evaluation Fee in an amount equal to 2% of Gross Proceeds as
compensation for services rendered in evaluating possible
Property investments which are not ultimately acquired by the
Partnership. The Property Evaluation Fee shall be paid to the
Investment General Partner or its Affiliates on the date which is
the earlier of ten days after the Final Closing Date or the date
on which all Net Proceeds are invested or committed to
investment.
9.4 Partnership Asset Management Fee. As compensation for
services rendered in managing the affairs of the Partnership, the
Administrative General Partner shall be entitled to receive the
Partnership Asset Management Fee which shall be an amount per
annum equal to .5% of Invested Assets during the first two years
of operation of the Partnership and 1.05% of Invested Assets
thereafter. The Partnership Asset Management Fee shall be
calculated and paid quarterly when Adjusted Cash From Operations
is distributed to the Limited Partners.
9.5 Property Management Fee. An Affiliate of the
Investment General Partner shall be entitled to a Property
Management Fee for services in providing continuing professional
property management or supervision of professional property
managers of the Partnership Properties equal to the following:
(a) in the case of residential property, the maximum fee
(including rent-up, leasing and re-leasing fees) shall be 3% of
the annual Gross Revenues from such property; (b) in the case of
industrial and commercial property other than that described in
clause (c) below, the maximum fee shall be 6% of the Gross
Revenues where the Affiliate of the Investment General Partner
includes leasing, re-leasing and leasing related services, or 3%
of the Gross Revenues where the Affiliate of the Investment
General Partner does not perform such services; (c) in the case
of industrial and commercial property which is not leased on a
long term basis (ten or more years) the maximum fee shall be 1%
of the Gross Revenues (except for a one-time initial leasing fee
of 3% of the Gross Revenues on each such lease, which fee shall
be payable over the first five full years of the original term of
the lease); provided, however, that the fees payable hereunder
shall not exceed the competitive rate charged by an independent
third party rendering comparable services which could be
reasonably made available to the Partnership. The Property
Management Fee shall be paid monthly. For purposes of
calculating the maximum Property Management Fee hereunder, fees
paid to unaffiliated third parties for property management
services shall be included and there shall be excluded locator
services performed by unaffiliated third parties in geographical
areas where such locator services are not traditionally included
in property management services.
9.6 Mortgage Placement Fee. As compensation for services
rendered in securing any initial financing of a Partnership
Property, the Investment General Partner or its Affiliates shall
receive a Mortgage Placement Fee in an amount equal to 2.5% of
all Cash From Sales or Financings attributable to such Property,
which fee shall be paid by the Partnership when such Cash From
Sales or Financings is received by the Partnership; provided,
however, that 40% of the Mortgage Placement Fee shall be payable
to the Investment General Partner or its Affiliates only after
Distributions of Cash From Sales or Financings have been made to
Limited Partners in an aggregate amount equal to their Original
Contributions.
9.7 Subordinated Incentive Fee. As compensation for
services rendered in evaluating and selecting Properties for the
Partnership, making decisions as to the nature and terms of the
acquisition and disposition of such Properties, selecting,
retaining and supervising consultants, contractors, architects,
engineers, lenders, borrowers and others and otherwise generally
managing the day-to-day property operations of the Partnership,
the Investment General Partner and its Affiliates shall be
entitled to receive the Subordinated Incentive Fee. The
Subordinated Incentive Fee shall be an amount equal to 15% of
Cash From Sales or Financings and shall be paid when such Cash
From Sales or Financings is distributed; provided, however, that
payment thereof shall be computed on the remainder after the
Partnership has distributed to each Limited Partner an aggregate
amount in cash which is equal to (i) the total of his Original
Contributions and (ii) a sum equal to 10% per annum cumulative
non-compounded on his Adjusted Contributions, commencing on the
last day of the calendar quarter in which the Limited Partner's
Original Contribution is received by the Partnership.
9.8 Subordinated Real Estate Commission. The Partnership
shall pay for real estate brokerage services to all persons
involved in the sale of Partnership Properties, real estate
brokerage fees which are reasonable, customary and competitive,
taking into consideration the size, type and location of the
Property ("Competitive Commission"), and which shall not in the
aggregate exceed 6% of the gross sales price of the Property;
however, as to any Affiliate of the Investment General Partner
such fees shall be paid only if such Affiliate provides a
substantial amount of services in the sales effort and shall not
exceed the lesser of (i) a percentage of the gross sales price of
a Property equal to one-half of the Competitive Commission, or
(ii) 3% of the gross sales price of a Property. The real estate
brokerage fee shall be payable upon the completion of the sale of
each Property; provided, however, the payment thereof to any
Affiliate of the Investment General Partner shall be made only
after the Partnership has distributed to each Limited Partner an
aggregate amount in cash which is equal to: (i) the total of his
Original Contributions and (ii) a sum equal to 6% per annum
cumulative noncompounded on his Adjusted Contributions,
commencing on the last day of the calendar quarter in which the
Limited Partner's Original Contribution is received by the
Partnership. There is no limitation or subordination for any
real estate commission paid only to non-Affiliates. If an
Affiliate participates with a non-Affiliated broker, the
limitations contained in this Section 9.8 shall apply to
commissions paid by the Partnership only to Affiliates.
9.9 Insurance Commissions, IRA and Keogh Plan Fees and
Money Market Fees. Insurance commissions may be payable to
insurance agencies affiliated with the General Partners for
providing insurance brokerage services in connection with the
issuance of insurance covering Partnership Properties, but only
if the conditions set forth in Section 15.2.16 are satisfied. If
at the request of a Limited Partner, an Affiliate of the General
Partners serves as a trustee of an IRA or Keogh Plan through
which Units may be acquired (any such investment decision being
made by the Limited Partner), such Affiliate shall be entitled to
fees from such Limited Partners for initiating and managing such
IRA or Keogh Plan not in excess of amounts customarily charged by
third parties rendering similar services. If funds of the
Partnership are temporarily invested in bank accounts and/or
money market funds sponsored by Affiliates of the General
Partners, as permitted by Section 15.2.7, such Affiliates shall
be entitled to receive the fees customarily charged by such banks
or money market funds to unaffiliated third parties making
similar investments therein.
9.10 Payment Upon Removal. Should a General Partner be
removed from the Partnership, any portion of any of the foregoing
fees or any other fee or reimbursable expense pursuant to Article
10 payable under this Agreement which is then due but not yet
paid, shall be paid by the Partnership to such General Partner or
its Affiliates, as the case may be, in cash within 30 days of the
date of removal as stated in the written notice of removal,
unless such amount is included in the price for the General
Partner's interest in the Partnership as determined under Section
17.4 hereof.
10. PARTNERSHIP EXPENSES
10.1 Reimbursement of Expenses. (a) All Partnership
expenses shall be billed directly to and paid by the Partnership.
The General Partners and their Affiliates may be reimbursed by
the Partnership for (i) Organization and Offering Expenses,
subject to the provisions of Section 10.2.3; (ii) the actual cost
to the General Partners or their Affiliates of goods and
materials used for or by the Partnership and obtained from
unaffiliated parties and (iii) administrative services necessary
to the prudent operation of the Partnership, provided that
reimbursement for administrative services will be at the lesser
of (A) the actual cost of such services of (B) the amount which
the Partnership would be required to pay to independent parties
for comparable services (for purposes of this clause, the cost of
services shall mean the pro rata cost of personnel, including an
allocation of overhead directly attributable to such personnel,
based on the amount of time such personnel spent on such
services, or such other method of allocation acceptable to the
Partnership's independent certified public accountants).
(b) In addition, the Partnership shall pay the
Administrative General Partner at the rate of $0.75 per Unit per
annum based on the total Units outstanding at the end of each
calendar quarter, payable 25% per calendar quarter, on account of
expenses incurred by the Administrative General Partner related
to the administration of the Partnership; provided, however, that
such payment shall in no event be more than $200,000 per annum.
The payments provided for in this Section 10.1(b) shall be
nonaccountable and shall be paid to the Administrative General
Partner at such time as Distributions are made to the Limited
Partners of Adjusted Cash From Operations.
10.2 Limitations on Reimbursement. The General Partners
and their Affiliates shall not be reimbursed by the Partnership
for the following expenses:
10.2.1 services for which the General Partners or
their Affiliates are entitled to compensation in the form of a
separate fee pursuant to Article 9 hereof;
10.2.2 rent, depreciation, utilities or other
administrative items generally constituting overhead;
10.2.3 Organization and Offering Expenses in excess
of 3% of the Gross Proceeds;
10.2.4 salaries, fringe benefits, travel expenses or
other administrative items incurred by or allocated to any
controlling person of the General Partners or their Affiliates;
for purposes of this subparagraph, "controlling person" shall
mean: (a) any person, regardless of title, who performs
executive or senior management functions for the General Partners
or their Affiliates similar to those of executive management or
senior management; (b) directors; (c) persons holding 5% or more
equity interest in the General Partners or their Affiliates; or
(d) persons having the power to direct or cause the direction of
the General Partners or their Affiliates through ownership of
voting securities, by contract or otherwise (it is not intended
that every person who carries a title such as vice president,
senior vice president, secretary or treasurer be considered a
controlling person); or
10.2.5 underwriting or selling commissions paid by
Integrated or its Affiliates except as provided in Section 11.9.
10.3 Partnership Obligations. Subject to Sections 10.1 and
10.2, the Partnership shall pay all expenses of the Partnership
(which expenses shall be billed directly to the Partnership)
which may include, but are not limited to:
10.3.1 all costs of personnel employed by the
Partnership, the General Partners or their Affiliates and
involved in the business of the Partnership;
10.3.2 all costs of borrowed money, taxes and
assessments on Partnership Properties and other taxes applicable
to the Partnership;
10.3.3 legal, audit, accounting, brokerage and other
fees;
10.3.4 printing, engraving and other expenses and
taxes incurred in connection with the issuance, distributions,
transfer, registration and recording of documents evidencing
ownership of an interest in the Partnership or in connection with
the business of the Partnership;
10.3.5 fees and expenses paid to independent
contractors, appraisers, mortgage bankers, brokers and servicers,
leasing agents, consultants, on-site managers, real estate
brokers, insurance brokers and other agents (provided, however,
that this subsection shall not be interpreted to permit the
Partnership to pay underwriting or sales commissions with respect
to sale of the Units);
10.3.6 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, leasing commissions and of
maintenance of any such property, and any tax or assessment
thereon;
10.3.7 the cost of insurance as required in
connection with the business of the Partnership;
10.3.8 expenses of organizing, revising, amending,
converting, modifying or terminating the Partnership;
10.3.9 the cost of preparation and dissemination of
information and documentation relating to potential Sales or
Dispositions of Partnership Properties;
10.3.10 expenses in connection with Distributions
made by the Partnership to, and communications and bookkeeping
and clerical work necessary in maintaining relations with,
Limited Partners and obtained from outside parties, including
reports of meetings of the Partnership, and of preparation of
proxy statements and solicitations of proxies in connection
therewith;
10.3.11 expenses in connection with preparing and
mailing reports required to be furnished to Limited Partners for
investor, tax reporting, federal securities law or other
purposes, of which reports the Administrative General Partner
deems the furnishing thereof to Limited Partners to be in the
best interests of the Partnership;
10.3.12 the cost incurred in connection with any
litigation in which the Partnership is involved, as well as in
the examination, investigation or other proceedings conducted by
any regulatory agency of the Partnership, including legal and
accounting fees incurred in connection therewith;
10.3.13 computer services including the cost of any
computer equipment or services used for or by the Partnership,
including establishment and maintenance of investment records and
processing of accounting records related to the Partnership;
10.3.14 the cost of any accounting, statistical or
bookkeeping equipment necessary for the maintenance of the books
and records of the Partnership; and
10.3.15 supervision and expenses of professionals
retained by the Partnership in connection with any of the
foregoing, including, without limitation, attorneys, accountants
and appraisers.
11. ALLOCATION OF INCOME AND LOSS AND DISTRIBUTIONS
11.1 Apportionment.
11.1.1 Apportionment of Net Income, Net Loss and
Distributions. That portion of Net Income, Net Loss and
Distributions of the Partnership allocated to Limited Partners as
a group with respect to any calendar quarter shall be apportioned
among the Limited Partners in the ratio in which the number of
Units owned by each of them on the first day of such quarter
bears to the total number of Units owned by all of them as of
that date, without regard to capital accounts or the number of
days during such quarter in which a person was a Limited Partner.
Notwithstanding the foregoing, with respect to any calendar month
during which any Closing Date occurs, Net Income, Net Loss and
Distributions with respect to such month shall be apportioned
among Limited Partners of record as of the first day of such
month in proportion to the number of Units owned by each Limited
Partner of record on the first day of such month, without regard
to capital accounts or the number of days during such month that
such person was a Limited Partner. An investor shall be deemed
to be a Limited Partner of record as of the first day of a
calendar month only if the admission of such investor as a
Limited Partner occurs after the 15th day of the calendar month
preceding such month or on or before the 15th day of the month
for which the allocation is being made; provided, however, that
if the Initial Closing Date occurs after the 15th day of any
calendar month, each investor admitted as a Limited Partner on
the Initial Closing Date shall be deemed to be a Limited Partner
of record as of the 15th day of such calendar month. In the case
of a proposed assignment of Units, the assignment shall be
effective, and the assignee shall be deemed to be the owner of
such Units, from and after the "effective date" of the assignment
of such Units (as defined in Section 12.2), with the assignee
being entitled to allocations of Net Income, Net Loss and
Distributions only with respect to the period commencing with the
effective date of the assignment. That portion of Net Income and
Net Loss allocated to the General Partners shall be apportioned
96% to the Administrative General Partner and 2% each to the
Investment General Partner and the Associate General Partner.
11.1.2 Apportionment of Cash From Sales or
Financings. That portion of Cash From Sales or Financings which
are distributable to the Limited Partners shall be allocated
among, and distributed to, Limited Partners based on the number
of Units owned by each Limited Partner and the period over which
such Units were owned by such Limited Partners determined in the
manner provided in Section 11.1.1, for apportionment of Net
Income, Net Loss and Adjusted Cash From Operations; provided,
however, that to the extent Cash From Sales or Financings are
required to be distributed pursuant to Sections 11.6.2 and 11.6.3
hereof in payment of the cumulative noncompounded return on the
Adjusted Contributions of the Limited Partners, such distribution
shall be apportioned among, and distributed to, Limited Partners
to the extent of and in proportion to the unpaid return due to
each of the Limited Partners.
11.1.3 Allocations Causing Negative Capital
Accounts. Notwithstanding Section 11.1.1, if the capital
accounts of all Limited Partners are not equal and if any
allocation of Net Loss and/or depreciation to a Limited Partner
would reduce such Limited Partner's capital account balance below
zero or would increase the negative balance in such Limited
Partners' capital account at a time when another Limited Partner
has a positive capital account balance, to the extent such
allocation would cause the sum of the negative capital account
balances of all Partners having negative capital accounts
(determined after taking into account all prior Distributions and
all prior allocations of Net Income, Net Loss, depreciation and
the basis of property qualifying for any tax credit) to exceed
the Partnership's "minimum gain" (as hereinafter defined), as
determined at the close of the period in respect of which the Net
Loss or depreciation, as the case may be, is to be allocated,
such excess shall instead be allocated (a) in the case of Net
Loss, pro rata to Limited Partners having positive capital
account balances in proportion to their respective positive
capital account balances until such capital account balances are
reduced to zero, and (b) in the case of depreciation (i) first,
pro rata to Taxable Limited Partners to the extent of and in
proportion to their respective positive capital account balances,
and (ii) thereafter, pro rata to all Limited Partners having
positive capital account balances to the extent of and in
proportion to their respective capital account balances;
provided, however, that in no event shall there be a reallocation
of any item of income, gain, loss or deduction allocated among
the Partners pursuant to this Agreement for prior years.
Notwithstanding any other provision of this Article 11,
if any allocation of Net Loss and/or depreciation would cause the
negative capital accounts balances of all Partners having
negative capital accounts (determined after taking into account
all Distributions and all tax allocations theretofore made) to
exceed the Partnership's minimum gain determined at the close of
the period in respect of which such Net Loss or depreciation, as
the case may be, is to be allocated, then to the extent that any
such allocation would cause the capital account balance of any
Limited Partner to be negative (or would increase the negative
balance of a Limited Partner's capital account) at a time when no
other Limited Partner has a positive capital account balance,
such Net Loss and/or depreciation shall instead be allocated to
the General Partners.
For purposes of determining a Limited Partner's capital
account balance under this Section 11.1.3, Distributions made
prior to or contemporaneous with any allocation to a Limited
Partner shall be reflected in such Partner's capital account
prior to making such allocation to such Partner. The term
"minimum gain" shall have the meaning ascribed to such term under
Treasury Regulations as proposed, reproposed or adopted (as the
case may be) under Code Section 704 (currently, the excess of the
outstanding principal mortgage balance over the adjusted basis of
a Property securing such mortgage). For purposes of this Section
11.1.3, a Partner's capital account shall be reduced for:
(x) allocations of Net Loss (or items thereof) and
depreciation which, as of the end of each Partnership year, are
reasonably expected to be allocated to such Partner pursuant to
Code Section 704(e)(2), Code Section 706(d) and Treas. Reg.
Section 1.751-1(b)(2)(ii), and
(y) Distributions that, as of the end of such year,
reasonably are expected to be made to such Partner to the extent
they exceed offsetting increases to such Partner's capital
account that reasonably are expected to occur during (or prior
to) the Partnership taxable years in which such Distributions
reasonably are expected to be made.
For purposes of determining the amount of expected
Distributions and expected capital account increases described in
(y) above: (A) the rule set forth in Treas. Reg. Section 1.704-
1(b)(2)(iii)(c) concerning the presumed value of Partnership
property shall apply, and (B) gross income or Net Income
allocated to a Partner pursuant to Section 11.4.3 hereof shall be
taken into account. For purposes of this Section 11.1.3 and
Section 11.4.3, a Partner's capital account shall be increased to
the extent that such Partner is obligated to fund deficits in
such Partner's capital account upon liquidation of the
Partnership (or is treated as obligated to so restore such
deficits pursuant to Treas. Reg. Section 1.704-1(b)(2)(ii)(c)).
11.2 Allocation of Net Income and Net Loss and Tax-Exempt
Items. Except as otherwise provided in Sections 11.1.3, 11.2.3
and 11.4.3, Net Income (other than Net Income arising from the
occurrence of a Sale or Disposition of a Partnership Property),
Net Loss and all items of income exempt from federal income tax
shall be allocated 5% to the General Partners and 95% to the
Limited Partners. Any expenditures of the Partnership which are
neither deductible nor properly chargeable to its capital account
under Code Section 705(a)(2)(B), or which are treated as such
expenditures under Treas. Reg. Section 1.704-1(b)(2)(iv)(i), shall be
allocated as follows: (a) to the extent such expenditures
represent selling commissions which constitute syndication
expenditures under Code Section 709 and which are paid by the
Partnership, such expenditures shall be allocated to the Units in
respect of which such commissions were paid, and (b) the balance
of such expenditures shall be allocated among the Limited
Partners on a per Unit basis.
11.2.1 Depreciation. Except as otherwise provided in
Paragraph 11.1.3, all depreciation in each taxable year shall be
allocated 5% to the General Partners and 95% to the Taxable
Limited Partners, and the depreciation allocated to Taxable
Limited Partners shall be allocated among them in accordance with
the provisions of Section 11.1.1.
11.2.2 Allocation of Book Items. In cases where
Partnership Property is, under Treas. Reg. Section 1.704-1(b)(2)(iv),
properly reflected in the capital accounts of the Partners at a
fair market value that differs from the adjusted basis of such
property (such difference is hereinafter referred to as the "Book
Disparity"), then depreciation, amortization and gain or loss as
computed for book purposes with respect to such property ("Book
Depreciation," "Book Amortization," "Book Gain," and "Book Loss,"
respectively) will be greater or less than the depreciation,
amortization or gain or loss as computed for tax purposes. The
Administrative General Partner shall adopt, pursuant to Treas.
Reg. Section 1.704-1(b)(2)(iv)(g), a reasonable method of computing
Book Depreciation and Book Amortization. Such Book Depreciation
and Book Amortization shall be allocated among the Partners and
reflected in Partners' capital accounts under Section 11.11(c)
hereof, in a manner so as to eliminate to the extent possible,
the Book Disparity.
11.2.3 Mandatory Allocations. Any allocation of Net
Income, Net Loss or depreciation for tax purposes which is
required to be allocated among the Partners to take into account
the disparity between the fair market value of a Partnership
asset and its adjusted basis (e.g., allocations under Code
Section 704(c) for contributed property) shall be allocated among
the Partners in accordance with the requirements of the Code and
the regulations promulgated thereunder.
11.3 General Partners' Interest. In no event shall the
General Partners be allocated less than an aggregate of 1% of Net
Income or Net Loss for tax purposes. For this purpose, Units
held by a General Partner as a Limited Partner shall not be taken
into account. To the extent that the Partnership shall be
entitled to any deduction for federal income tax purposes as a
result of any interest in Net Income, Net Loss and Distributions
granted to the General Partners, such deduction shall be
allocated for federal income tax purposes to the General
Partners.
11.4 Allocation of Net Income From a Sale or Disposition.
Except as otherwise provided in Sections 11.2.3, 11.3 and 11.4.3,
Net Income arising from the occurrence of a Sale or Disposition
of Partnership Property (other than in connection with a
Terminating Sale or Disposition) shall be allocated as follows
(for purposes of determining capital account balances, such Net
Income shall be deemed allocated prior to making distributions of
Cash From Sales or Financings arising from such Sale or
Disposition):
11.4.1 First, such Net Income, up to an amount equal
to the depreciation deductions attributable to the Partnership
properties that are the subject of the Sale or Disposition, shall
be allocated to each Unit which has received an allocation of
such depreciation in the same ratio as the amount of such
depreciation previously allocated to such Unit (less Net Income,
if any, in respect of such Sale or Disposition or gross income
(other than gross income which has previously been taken into
account under this Section 11.4.1) allocated to each such Unit
pursuant to Section 11.4.3) bears to the aggregate of such
depreciation deductions so allocated to all Units (less Net
Income, if any, in respect of such Sale or Disposition or gross
income (other than gross income which has previously been taken
into account under this Section 11.4.1) allocated to all such
Units pursuant to Section 11.4.3.
11.4.2 Second, the remainder of such Net Income, if
any, shall be allocated to the Partners in the following order of
priority:
(a) to the Partners to the extent of and in proportion
to the amount of Cash From Sales or Financings which are to be
distributed to each of them pursuant to Section 11.6 (other than
pursuant to Section 11.6.1); and
(b) The remainder of such Net Income, if any, shall be
allocated to the Partners in proportion to the amount of Cash
From Sales or Financings which are to be distributed to the
Partners pursuant to Section 11.6.1.
11.4.3 Capital Account Deficiency and Qualified
Income Offset. This Section 11.4.3 shall apply only if at the
close of any Partnership taxable year (a) the aggregate negative
capital account balances of all Partners having negative capital
account balances (whether caused by distributions or by
allocations of depreciation, Net Loss, Book Depreciation, Book
Amortization, Book Loss or items thereof) ("Negative Balances")
exceed (b) minimum gain, if any, as defined in Section 11.1.3
(the excess of clause (a) over clause (b) hereinafter is referred
to as "Capital Account Deficiency"). Notwithstanding the
provisions of Section 11.4.1 and 11.4.2 hereof, an amount of Net
Income arising from a Sale or Disposition of a Partnership
Property equal to the Capital Account Deficiency shall first be
allocated to each Partner having a Negative Balance in the
proportion in which such Partner's Negative Balance bears to the
aggregate Negative Balances of all Partners ("Negative Balance
Ratio"). In the event that the foregoing allocation would be
insufficient to eliminate the Capital Account Deficiency, an
amount of gross income (as defined in Section 61 of the Code) of
the Partnership necessary to eliminate the Capital Account
Deficiency shall be allocated to each Partner with a Negative
Balance in proportion to the Partner's Negative Balance Ratio.
Any allocation under this Section 11.4.3 shall, to the extent
possible, be made at a time no later than the time at which the
Capital Account Deficiency arises; provided, however, that in no
event shall there be a reallocation of any item of income, gain,
loss, or deduction allocated among the Partners for prior years
pursuant to this Agreement.
11.4.4 Termination Rules. In connection with a
Terminating Sale or Disposition, Net Income shall be allocated as
follows:
(a) first, to Partners having negative capital account
balances, in proportion to and to the extent of their respective
negative capital account balances;
(b) second, 95% to the Limited Partners and 5% to the
General Partners until the capital account balance of each
Limited Partner (determined after making the allocation described
in Section 11.4.4(a) but before distributing the proceeds from
such sale) shall equal his Original Contribution. In the event
the Net Income to be allocated to Limited Partners pursuant to
this Section 11.4.4(b) shall be insufficient to bring the capital
account balance of each Limited Partner to whom such allocation
is required to said balance, then such Net Income shall be
allocated first to Limited Partners having the smallest capital
accounts per Unit so as to equalize, to the extent possible, the
capital accounts per Unit of all Limited Partners;
(c) third, 95% to the Limited Partners and 5% to the
General Partners until the capital account balance of each
Partner (determined after making the allocations described in
Sections 11.4.4(a) and (b) but before distributing the proceeds
from such sale) shall equal the amount which would have been
distributed to such Partner in respect of such Terminating Sale
or Disposition had the proceeds from such sale been distributed
pursuant to the provisions of Sections 11.6.1 and 11.6.2;
(d) fourth, 95% to the Limited Partners and 5% to the
General Partners, until the capital account balance of each
Partner shall equal the amount which would have been distributed
to such Partner had the proceeds from such sale been distributed
pursuant to the provisions of Sections 11.6.1, 11.6.2 and 11.6.3;
and
(e) the remainder of such Net Income, if any, shall be
allocated to the Partners in the ratios provided for in Section
11.6.4. The portion of the Net Income under this Section
11.4.4(e) which is allocated to the Limited Partners as a group
shall, to the extent of any unpaid cumulative noncompounded
return of the Limited Partners under Sections 11.6.2 and 11.6.3,
first be allocated among the Limited Partners in proportion to
such unpaid return due each Limited Partner.
11.4.5 Income Characterization. Such portion of the
Net Income allocated pursuant to Section 11.4 which is treated as
ordinary income attributable to the recapture of depreciation
shall to the extent possible be allocated among the Partners in
the proportion which (i) the amount of depreciation previously
allocated to each Partner relating to the property which is the
subject of the Sale or Disposition bears to (ii) the total of
such depreciation allocated to all Partners. This Section 11.4.5
shall not alter the amount of allocations among the Partners
pursuant to Section 11.4, but merely the character of gain so
allocated. For purposes of determining the amount of
depreciation previously allocated to a Limited Partner, the
depreciation previously allocated to any prior owner of such
Limited Partner's Units shall be deemed to have been allocated to
such Limited Partner.
11.5 Distribution of Adjusted Cash From Operations.
Adjusted Cash From Operations shall be allocated at the close of
each calendar quarter and distributed approximately 45 to 60 days
after the close of such calendar quarter, 5% to the General
Partners and 95% to the Limited Partners.
11.6 Distributions of Cash From Sales or Financings. Cash
From Sales or Financings shall be distributed as soon as is
practicable after the end of each calendar quarter. Cash From
Sales or Financings (other than pursuant to Section 11.7) shall
be distributed in the following order of priority:
11.6.1 first, 95% to the Limited Partners and 5% to
the General Partners, until each Limited Partner has received
aggregate Distributions pursuant to this Section 11.6.1 equal to
his Original Contributions;
11.6.2 second, after payment of the subordinated
portion of the Mortgage Placement Fee, 95% to the Limited
Partners and 5% to the General Partners until each Limited
Partner has received an amount which, when added to all prior
Distributions to such Limited Partners (other than pursuant to
Section 11.6.1) shall be equal to 6% per annum cumulative
noncompounded on his Adjusted Contributions, commencing on the
last day of the calendar quarter in which the Limited Partner's
Original Contribution is received by the Partnership;
11.6.3 third, after payment of the Subordinated Real
Estate Commission, 95% to the Limited Partner and 5% to the
General Partners, until each Limited Partner has received an
amount which, when added to all prior Distributions to such
Limited Partner (other than pursuant to Section 11.6.1), equals
10% per annum cumulative noncompounded on his Adjusted
Contributions, commencing on the last day of the calendar quarter
in which the Limited Partner's Original Contribution is received
by the Partnership; and
11.6.4 fourth, after payment of the Subordinated
Incentive Fee, 95% to the Limited Partners and 5% to the General
Partners.
11.7 Distributions on Termination. In connection with a
Terminating Sale or Disposition, Cash From Sales or Financings
and any remaining working capital reserves shall be allocated
among, and distributed to, the Partners first in proportion to,
and to the extent of, their positive capital accounts after the
Net Income from any Terminating Sale or Disposition has been
allocated pursuant to Section 11.4.4 hereof. Distributions
pursuant to this Section 11.7 shall be deemed to have been made
in satisfaction of the Distributions required by Section 11.6 (in
the case of non-terminating Sales or Dispositions) in the order
of priority described therein.
11.8 Restrictions. The Partnership may be restricted from
making Distributions under the terms of notes, mortgages or other
types of debt obligations which it may issue or assume in
conjunction with borrowed funds. In addition, Distributions are
subject to the payment of Partnership expenses and to the
maintenance of sufficient reserves for alterations, repairs,
improvements, maintenance and replacement of furniture and
fixtures. Distributions may also be restricted or suspended in
circumstances when the General Partners determine, in their
absolute discretion, that such action is in the best interests of
the Partnership.
11.9 Unutilized Net Proceeds. In the event that any
portion of the Net Proceeds are not invested or committed for
investment within 24 months from the effective date of the
registration statement of which the Prospectus is part (except
for any amount set aside for operating expenses or reserves and
an amount equal to the underwriting and selling commissions paid
in respect of such uninvested or uncommitted Net Proceeds, which
amount shall be payable to the Sponsor), such portion of the Net
Proceeds (without reduction for Acquisition Fees, Acquisition
expenses or Property Evaluation Fees which would have been
payable if such funds had been invested in real property) shall
be distributed to the Limited Partners as a return of capital.
For the purposes of this Section 11.9, funds will be deemed to
have been committed to investment and will not be returned to the
extent written agreements in principle or letters of
understanding were at any time executed, regardless of whether
any such investment is consummated, and to the extent any funds
have been reserved to make contingent payments in connection with
any Property, regardless of whether any such payment is made.
11.10 Distributions Subject to Payments. All distributions
are subject to the payment of Partnership expenses, and to the
maintenance of reasonable reserves for alterations, repairs,
improvements, maintenance and replacement of furniture and
fixtures.
11.11 Capital Accounts. (a) A separate capital account
shall be maintained for each Partner. Each Partner's capital
account shall be increased by (1) the amount of money contributed
by such Partner to the capital of the Partnership; (2) such
Partner's share of Partnership gross income or Net Income and any
income or gain that is exempt from federal income taxation; and
(3) such Partner's share of the increase in the basis of the
Partnership's property, if any, arising out of the recapture of
the investment tax credit. Each Partner's capital account shall
be decreased by (i) the amount of money distributed to such
Partner by the Partnership; (ii) such Partner's share of Net Loss
or depreciation for tax purposes; (iii) such Partner's share of
the decrease in basis of the Partnership's property under Code
Section 48(q) arising from the allowance of the investment tax
credit; and (iv) such Partner's share of expenditures of the
Partnership which are neither deductible nor properly chargeable
to capital accounts under Code Section 705(a)(2)(B) or are
treated as such expenditures under Treas. Reg. Section 1.704-
1(b)(2)(iv)(i).
(b) A Partner who has more than one interest in the
Partnership shall have a single capital account that reflects all
such interests, regardless of the class of interests owned by
such Partner (e.g., general or limited) and regardless of the
time or manner in which such interests were required.
(c) In the event that property (other than cash) is
contributed (or deemed contributed pursuant to the provisions of
Code Section 708) by a Partner to the Partnership, the
computation of capital accounts, as set forth in this Section
11.11, shall be adjusted as follows:
(i) the contributing Partner's capital account
shall be increased by the fair market value of the property
contributed to the Partnership by such Partner (net of
liabilities secured by such contributed property that the
Partnership is considered to assume or take subject to under Code
Section 752); and
(ii) as required by Treas. Reg. Sections 1.704-
1(b)(2)(iv)(g) and 1.704-1(b)(4)(i), if any Partner's capital
account reflects a fair market value of property which differs
from such property's adjusted basis, each Partner's capital
account shall be adjusted to take account of the amount of Book
Gain, Book Loss (other than Book Loss attributable to
expenditures of the Partnership described in Section
11.11(a)(iv)), Book Depreciation and Book Amortization allocated
to such Partner pursuant to Section 11.2.2 hereof and shall not
take into account the Net Income, Net Loss and depreciation for
tax purposes allocated to such Partner pursuant to this Article
11.
(d) In the event that property is distributed (or
deemed distributed pursuant to the provisions of Code Section
708) by the Partnership to a Partner, the following special rules
shall apply:
(i) the capital accounts of the Partners first
shall be adjusted (as provided in Treas. Reg. Sections 1.704-
1(b)(2)(iv)(e)) to reflect the manner in which the unrealized
income, gain, loss and deduction inherent in such property (that
has not already been reflected in the Partners' capital account)
would be allocated to the Partners if there were a taxable
disposition of such property for its fair market value on the
date of distribution; and
(ii) the capital account of the Partner who is
receiving the distribution of property from the Partnership shall
be charged with the fair market value of the property at the time
of distribution (net of liabilities secured by such property that
such Partner is considered to assume or take subject to under
Code Section 752).
(e) The foregoing provisions are intended to satisfy
the capital account maintenance requirements of Treas. Reg.
Section 1.704-1(b)(2)(iv) and such provisions shall be modified to the
extent required by such Section or any successor provision
thereto.
11.12 Distributions for Taxes. The Administrative General
Partner shall also distribute after the completion of each
calendar year such amounts of Cash From Sales or Financings (when
considered with prior Distributions of Adjusted Cash from
Operations) sufficient to allow a Limited Partner in a 25%
federal income tax bracket to pay the income taxes due with
respect to Net Income derived by him from the Sale or Disposition
giving rise to such tax liability.
12. ASSIGNMENT OF UNITS
12.1 Procedures. Subject to Sections 12.3 and 12.4,
Limited Partners shall have the right to assign ten or more whole
Units, provided, however, unless prohibited by any applicable
state securities laws, four Units may be acquired or retained by
an IRA or Keogh Plan, and provided further that a Limited Partner
must assign all of his Units if he would otherwise retain less
than ten Units or four Units in the case of an IRA or Keogh Plan.
Such assignment shall be made by a written instrument, the terms
of which are not in contravention of any of the provisions of
this Agreement, which instrument shall be duly executed by the
assignor of such Units; provided, however, that no proposed
assignment of a Unit shall be effective for any purpose until the
"effective date" (as defined in Section 12.2) of such assignment
shall have occurred. A Limited Partner shall, within thirty days
after assignment, notify the Administrative Partner of such
proposed assignment of a beneficial interest in any Units which
occurs without a transfer of record ownership.
12.2 Treatment of Assignor and Assignee; Effective Date.
An assignee shall be entitled to receive allocations of Net
Income, Net Loss and Distributions from the Partnership
attributable to Units assigned from and after the "effective
date" of the assignment of such Units. The Partnership and the
Administrative General Partner shall be entitled to treat the
assignor of such Units as the absolute owner thereof in all
respects, and shall incur no liability for allocations of Net
Income, Net Loss or Distributions, or transmittal of reports and
notices required to be given to Limited Partners hereunder which
are made in good faith to such assignor until such "effective
date" has passed. The "effective date" of an assignment on which
the assignee shall be deemed an assignee of record shall be the
first day of the calendar quarter following the later of (a) the
date set forth on the written instrument of assignment or (b) the
date on which the Partnership has actual notice of the proposed
assignment of Units.
12.3 Restrictions. Except as provided in this Section
12.3, no assignment of Units by a Limited Partner may be made if
(a) the Units sought to be assigned, when added to the total of
all other Units assigned within the period of twelve consecutive
months prior to the proposed date of assignment would, in the
opinion of counsel for the Partnership, result in the termination
of the Partnership under the Code, or (b) if in the opinion of
counsel for the Partnership, such assignment would be in
violation of any applicable federal or state securities laws
(including any investor suitability standard). However, with
respect to clause (a), such assignment may be made if upon the
application and at the expense of the Limited Partner desiring to
assign his Units, there shall have been granted to the
transferring Limited Partner and the Partnership a private ruling
by the Internal Revenue Service that the proposed assignment
would not cause a termination.
12.4 Ineffective Transfers. Any assignment, sale, exchange
or other transfer in contravention of any of the provisions of
this Article 12 shall be void and deemed ineffectual, and shall
not bind or be recognized by the Partnership.
13. SUBSTITUTED LIMITED PARTNERS
13.1 Requirements. Notwithstanding Article 12, no assignee
shall have the right to become a substituted Limited Partner in
place of his assignor unless all of the following conditions are
first satisfied:
13.1.1 the provisions of Article 12 are complied
with;
13.1.2 the instrument of assignment sets forth the
intention of the assignor that the assignee succeed to the
assignor's interest as a substituted Limited Partner in his
place;
13.1.3 the assignor and assignee shall have executed
and acknowledged such other instruments as the Administrative
General Partner may deem necessary or desirable to effect such
substitution, including the written acceptance and adoption by
the assignee of the provisions of this Agreement, as the same may
be amended, and his execution, acknowledgment and delivery to the
Administrative General Partner of a special power of attorney,
the form and content of which are described herein; and
13.1.4 a transfer fee sufficient to cover all
reasonable expenses connected with such substitution (not to
exceed $100) shall have been paid to the Partnership.
13.2 Consent. By executing or adopting this Agreement,
each Limited Partner hereby consents to the admission of
additional or substituted Limited Partners by the Administrative
General Partner and to an assignee of Units becoming a
substituted Limited Partner in accordance with the foregoing.
13.3 Amendments. The Administrative General Partner shall
cause this Agreement and, if required by the Partnership Act or
any other applicable law, any separate certificate of limited
partnership, to be amended to reflect the admission and/or
substitution of Limited Partners at least once in each calendar
month, but not later than thirty days after the effective date of
the assignment of a Unit.
13.4 Special Exercise of the Rights of a Limited Partner.
If a Limited Partner dies, his executor, administrator or
trustee, or if he is adjudicated incompetent, his committee,
guardian or conservator, or if he is adjudicated bankrupt, the
trustee or receiver of his estate, shall have all the rights of a
Limited Partner for the purpose of settling or managing his
estate and such power as the decedent, incompetent or bankrupt
possessed to assign all or any part of his Units and to join with
the assignee thereof in satisfying conditions precedent to such
assignee becoming a substituted Limited Partner. The death,
dissolution or bankruptcy of a Limited Partner shall not dissolve
the Partnership.
14. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS
14.1 Location of Records. The Partnership's books and
records, this Agreement and any amendment hereto or restatement
thereof, any separate certificate of limited partnership and any
amendment thereto or restatement thereof, and copies of each
appraisal of a Property shall be maintained at the principal
offices of the Partnership or such other place as the
Administrative General Partner may determine and shall be open to
inspection, examination and copying by Limited Partners or their
duly authorized representatives at all reasonable times. A
reasonable charge for copying may be charged by the Partnership.
The Limited Partners shall not receive copies of this Agreement
and any amendment hereto or restatement thereof, the certificate
of limited partnership and any amendment thereto or restatement
thereof or a current list of all Partners in the Partnership
unless they request in writing a copy from the Administrative
General Partner and pay any necessary duplication fee. Each
appraisal of a Property shall be maintained by the Partnership
and available for such inspection and examination for a period of
at least five years following the date of acquisition of the
Property.
14.2 Annual Reports. The Administrative General Partner
shall have prepared at least annually (a) financial statements
(balance sheet, statement of income or loss, partners' equity and
changes in financial position) prepared in accordance with
generally accepted accounting principles and accompanied by a
report thereon containing an opinion of an independent certified
public accounting firm; (b) a statement of cash flow; (c)
Partnership information necessary in the preparation of the
Limited Partners' federal income tax returns; (d) a report of the
business of the Partnership; (e) a statement as to the
compensation received by the General Partners and their
Affiliates during the year from the Partnership, which statement
shall set forth the services rendered or to be rendered by the
General Partners and their Affiliates and the amount of fees
received, and a report identifying Distributions from: (i)
Adjusted Cash From Operations of that year and/or prior years;
(ii) Cash From Sales or Financings; and (iii) cash from working
capital reserve accounts and other sources, together with a
breakdown of all costs reimbursed to the General Partners and
Affiliates from the Partnership. Within the scope of the annual
audit, the independent certified public accountants must verify
the allocation of such costs to the Partnership. The method of
verification shall be in accordance with generally accepted
auditing standards and shall include such tests of the accounting
records and such other auditing procedures which the independent
certified public accountants consider appropriate in the
circumstances. Copies of the annual report shall be distributed
to each Limited Partner within 120 days after the close of each
taxable year of the Partnership; provided, however, all
Partnership information necessary in the preparation of the
Limited Partners' federal income tax returns shall be distributed
to each Limited Partner not later than 75 days subsequent to
December 31 of each year.
14.3 Quarterly Report. The Administrative General Partner
shall prepare commencing with the first fiscal quarter in which
the effective date of the registration statement of which the
Prospectus is a part occurs, quarterly reports covering each of
the first three quarterly fiscal year periods of Partnership
operations in each fiscal year, unaudited financial statements
(balance sheet, statement of income or loss for such quarterly
period and statement of Adjusted Cash From Operations for such
quarterly period), a statement as to the compensation received by
the General Partners and their Affiliates during such quarter
from the Partnership (which statement shall set forth the
services rendered or to be rendered by the General Partners and
their Affiliates and the amount of fees received) and a statement
of other pertinent information regarding the Partnership and its
activities during the quarterly period covered by the report. At
such time as the Partnership is required to file quarterly
reports on Form 10-Q with the Securities and Exchange Commission,
the Partnership may make the reports required by this Section on
such Forms 10-Q. Copies of such statements and other pertinent
information shall be distributed to each Limited Partner within
60 days after the close of the quarterly period covered by the
report of the Partnership.
14.4 Report on Acquisitions. Within 60 days after the end
of each quarter in which Properties are acquired until the Net
Proceeds shall be fully invested, the Administrative General
Partner shall cause to be prepared and distributed a report which
shall describe: (i) the location and a description of the
general character of all materially important Properties acquired
or presently intended to be acquired by the Partnership during
the quarter; (ii) the present or proposed use of such Properties
and their suitability and adequacy for such use; (iii) the terms
of any material lease affecting the Property; (iv) a statement
that title insurance and any required construction and
performance bonds or other assurances with respect to builders
have been or will be obtained on all Properties acquired; and (v)
such other relevant information with respect to the acquisition
of such Properties as the General Partners deem appropriate
(including by way of illustration the date and Appraised Value of
the real property, and the amount of Net Proceeds remaining
uncommitted, in terms of dollars and percentage of Gross
Proceeds).
14.5 ERISA Report. To enable Limited Partners subject to
annual reporting requirements under ERISA to file such annual
reports as they relate to an investment in the Partnership,
within 75 days after the close of the Partnership's fiscal year,
the Administrative General Partner shall furnish Limited Partners
with appraisals or good faith estimates of fair market value of
the Partnership's assets.
14.6 Information Returns. The Administrative General
Partner shall cause information returns for the Partnership to be
prepared and timely filed with the appropriate authorities.
14.7 Miscellaneous Reports. The Administrative General
Partner 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 current applicable laws, rules and regulations. A Limited
Partner shall be provided with a copy of any such report upon
request without expense to him.
14.8 Records on Suitability. The Administrative General
Partner shall maintain for a period of at least four years a
record of the information obtained to indicate that a Limited
Partner meets the suitability standards set forth in the
Prospectus.
15. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND DUTIES OF
THE GENERAL PARTNERS
15.1 Services of the General Partners. The General
Partners shall only be responsible for the following services to
the Partnership:
15.1.1 supervising the organization of the
Partnership and the offering and sale of Units;
15.1.2 arranging for (a) the identification of
suitable investments for the Partnership; (b) a review of the
significant factors in deciding whether to make a particular
investment; and (c) the making of such final investment decision;
15.1.3 supervising Partnership management, which
includes: (a) establishing policies for the operation of the
Partnership; (b) causing the Partnership's agents or employees to
arrange for the provision of services necessary to the operation
of the Partnership (including any necessary property management,
accounting and legal services and services relating to
Distributions by the Partnership); (c) when necessary or
appropriate, approving actions to be taken by the Partnership;
(d) providing advice, consultation, analysis and supervision with
respect to the Partnership acquiring, managing and disposing of
Properties (including compliance with federal, state and local
regulatory requirements and procedures); (e) executing documents
on behalf of the Partnership and (f) making all decisions as to
accounting matters; and
15.1.4 approving the terms of Sales or Dispositions,
including establishing the terms for and arranging any such
transaction.
15.2 Powers of the General Partners. The conduct of the
Partnership's business shall be controlled solely by the General
Partners in accordance with this Agreement. The Investment
General Partner shall be responsible for the selection,
evaluation, negotiation and disposition of Partnership Properties
and for the management of and all other matters relating to such
Properties. The Administrative General Partner shall be
responsible for all administrative functions of the Partnership,
including the following: (a) structuring the offering of Units
and preparing the Prospectus, including all track records for
affiliated programs that appear therein; (b) preparing or
coordinating due diligence information requested by broker-
dealers participating, or considering participating, in the
offering; (c) reviewing and accepting subscriptions; (d)
investing the Net Proceeds in temporary investments; (e)
coordinating Partnership accounting matters; (f) establishing and
maintaining banking relationships for the Partnership; (g) making
all Partnership Distributions to Limited Partners; (h) preparing,
reviewing and distributing all investor communications and tax
reports; (i) preparing and filing all reports and other
information required by law, including those required by
securities, tax and other governmental agencies such as annual,
quarterly and monthly reports to the Securities and Exchange
Commission; (j) reviewing and approving all transfers of Units;
and (k) making decisions about the liquidation of the
Partnership. Provided that neither the Administrative General
Partner nor the Investment General Partner has been removed from
the Partnership, adjudicated a bankrupt, become insolvent,
dissolved or ceased to exist, the Associate General Partner shall
not participate in or exercise control over the affairs of the
Partnership. The General Partners shall have all authority,
rights and powers conferred by law and those required or
appropriate to the management of the Partnership business which,
by way of illustration but not by way of limitation, shall,
subject only to the provisions of Section 15.4, include the
right, authority and power:
15.2.1 to offer and sel Units in the Partnership to
the public directly or through any licensed Affiliate of the
General Partners and to employ personnel, agents and dealers for
such purpose;
15.2.2 to invest the Net Proceeds temporarily prior
to investment in Properties in short-term, highly liquid
investments where there is appropriate safety of principal,
including in bank accounts and money market funds sponsored by
Affiliates of the General Partners;
15.2.3 to allow Integrated to act as the
Partnership's agent in investing in short-term investments;
15.2.4 to acquire, improve, hold and dispose of real
property, interests therein or appurtenances thereto, as well as
personal or mixed property connected therewith, including the
purchase, lease, improvement, maintenance, exchange, trade or
sale of such properties, at such price, rental or amount, for
cash, securities (in compliance with appropriate securities
regulations) or other property, and upon terms as the Investment
General Partner deems, in its sole discretion, to be in the best
interests of the Partnership;
15.2.5 to borrow money and, if security is required
therefor, to mortgage or subject any Partnership investment to
any other security device, to obtain replacements of any mortgage
or other security device and to prepay, in whole or in part,
refinance, increase, modify, consolidate or extend any mortgage
or other security device, all of the foregoing at such terms and
in such amounts as the General Partners, in their sole
discretion, deem to be in the best interests of the Partnership,
subject to the provisions of this Agreement;
15.2.6 to employ persons in the operation and
management of the business of the Partnership including, but not
limited to, supervisory managing agents, building management
agents, insurance, real estate and loan brokers, agents,
employees, managers, accountants, attorneys, consultants and
others, on such terms and for such compensation as the General
Partners shall determine, provided that the General Partners and
their Affiliates shall only receive compensation and
reimbursement as provided in Articles 9 and 10 and provided
further that any such agreement shall be terminated immediately
upon dissolution of the Partnership under Section 19.1;
15.2.7 to open bank accounts and deposit and
maintain funds in the name of the Partnership in banks or savings
and loan associations, including banks or savings and loan
associations affiliated with the General Partners;
15.2.8 to deposit escrows held on behalf of the
Partnership with banks with whom Affiliates have written or
informal requirements which provide that such Affiliates maintain
certain deposits as "compensating balances," as a result of which
such escrow funds are applied for accounting purposes to satisfy
requirements;
15.2.9 to allow the Partnership to borrow money from
a General Partner or its Affiliates, including Integrated, on a
short-term basis, at any time and from time to time, and in
connection therewith to pay interest and other financing charges
or fees which shall not exceed the interest and other financing
charges or fees which would be charged by unrelated lending
institutions on comparable loans for the same purpose, in the
same locality as the Property if the loan is made in connection
with a particular Property; no prepayment charge or penalty shall
be required by the Sponsor on a loan to the Partnership secured
by either a first or a junior or all-inclusive trust deed,
mortgage or encumbrance on the Property, except to the extent
such pre-payment charge or penalty is attributable to the
underlying encumbrance;
15.2.10 to prepare or cause to be prepared reports,
statements and other relevant information for distribution to the
Limited Partners, including annual and quarterly reports;
15.2.11 to require in all Partnership obligations
that the General Partners shall not have any personal liability
thereon but that the person or entity contracting with the
Partnership is to look solely to the Partnership and its assets
for satisfaction, and in the event that any such obligation has
personal liability, the Administrative General Partner may
require its satisfaction prior to contracts without such personal
liability; provided, however, that the inclusion of the aforesaid
provisions shall not materially affect the cost of the service or
material being supplied and all Partnership obligations are
satisfied in accordance with prudent business practices as to
time and manner of payment;
15.2.12 to purchase Property in its own name or in
the name of a nominee, a trust or a corporate "nominee" or
otherwise and hold title thereto temporarily for the purpose of
facilitating the acquisition of such Property for the
Partnership, or completion of construction of the Property, or
any other purpose related to the business of the Partnership;
provided that such Property is purchased by the Partnership for a
purchase price no greater than the cost of such Property to the
General Partner, except for compensation in accordance with
Article 9 of this Agreement; and further provided that there is
no benefit arising out of such transaction to the General Partner
apart from the compensation otherwise permitted by this
Agreement;
15.2.13 to cause the Partnership to make or revoke
any of the elections permitted by the Code;
15.2.14 to select as its accounting year a calendar
year or such fiscal year as approved by the Internal Revenue
Service;
15.2.15 to determine the appropriate accounting
method or methods to be used by the Partnership in maintaining
its books and records;
15.2.16 to purchase insurance brokerage services from
an Affiliate in connection with obtaining insurance on any
property held by the Partnership, but only if (a) the cost of
providing such service, including the cost of the insurance, is
no greater than the lowest quotation obtained from two
unaffiliated insurance agencies, and the coverage and terms are
likewise comparable; and (b) the Affiliate is independently
engaged in the business of providing such services to persons
other than Affiliates and at least 75% of its insurance brokerage
service gross revenue is derived from persons other than
Affiliates;
15.2.17 to assure any person dealing with the
Partnership, the Administrative General Partner or the Investment
General Partner that he may rely upon a certificate signed by the
Administrative General Partner or the Investment General Partner
as authority with respect to: (a) the identity of the
Administrative General Partner or the Investment General Partner
or any Limited Partner; (b) the existence or nonexistence of any
fact which constitutes a condition precedent to acts by the
Administrative General Partner or the Investment General Partner
or in any other manner germane to the affairs of the Partnership;
(c) the persons who are authorized to execute and deliver any
instrument or document of the Partnership; or (d) any act or
failure to act by the Partnership or as to any other matter
whatsoever involving the Partnership or any Partner;
15.2.18 enter into leases for office or other
commercial or industrial space for no more than 15% (and renewals
and/or expansions by an existing Affiliated tenant for no more
than an additional 5% of the space in any Property to any
Affiliate of the General Partners in the normal course of such
Affiliate's business on terms and conditions and at rentals no
less favorable to the Partnership than those which would have
been determined by arm's-length negotiations with a non-
affiliated entity for comparable space in the area where the
Property is located, which determination may be made on the basis
of, and taking into account, the terms, conditions and rentals
agreed to by other tenants of the Property;
15.2.19 to take such steps, including making any
amendment to this Agreement, as the Administrative General
Partner determines is advisable or necessary in order to preserve
the tax status of the Partnership as a pass-through entity for
federal income tax purposes, including, without limitation,
imposing restrictions on transfers of Units (provided such
restrictions on transfers do not cause the Partnership's assets
to be deemed to be "plan assets" with respect to investors which
are Qualified Plans);
15.2.20 in addition to any amendment otherwise
authorized herein, to be made without the consent of the Limited
Partners, to amend this Agreement from time to time,
(a) to add to the representations, duties or
obligations of the General Partners or their Affiliates or
surrender any right or power granted to the General Partners or
their Affiliates herein, for the benefit of the Limited Partners
or to reallocate the responsibilities of the General Partners;
(b) to cure any ambiguity, to correct or
supplement any provision herein which may be inconsistent with
law or with any other provision herein, or to add any other
provision with respect to matters or questions arising under this
Agreement which will not be inconsistent with law or with the
provisions of this Agreement;
(c) to delete from or add any provisions to this
Agreement required to be so deleted or added by the staff of the
Securities and Exchange Commission or by a state securities
commissioner or similar such official, which addition or deletion
is deemed by such commission or official to be for the benefit or
protection of the Limited Partners;
(d) to change the name of the Partnership to any
lawful name which it may select;
(e) to reflect the addition or substitution of
Limited Partners or the reduction of capital accounts upon the
return of capital to Partners or to reflect the admission of new
General Partners (who may be admitted without the consent of the
Limited Partners); and
(f) upon notice to all Limited Partners, (i) to
amend the provisions of Article 11 and any other applicable
provision of this Agreement: (A) so as to revise the date upon
which each Partner's distributive share of Net Income, Net Loss
and Distributions of Adjusted Cash From Operations is determined
and the period of time over which such distributive share
relates, provided that in the opinion of the accountants or
counsel to the Partnership, such amended provisions are
permissible under applicable federal and/or state income tax
legislation, rules or regulations enacted or promulgated
thereunder, or administrative pronouncements or interpretations
thereof; and (B) to the minimum extent necessary to take account
of any amendment to Section 704 of the Code or the regulations
thereunder or any judicial or administrative interpretation
thereof; (ii) to take such steps as the Administrative General
Partner determines is advisable or necessary in order to preserve
the tax status of the Partnership as a pass-through entity for
federal income tax purposes, including, without limitation,
converting to a different form of pass-through entity; and/or
(iii) in the event that either (A) the assets of the Partnership
would constitute "plan assets" for purposes of ERISA or (B) the
transactions contemplated hereunder would constitute "prohibited
transactions" under ERISA or the Code and an exemption for such
transactions is not obtainable, or not sought by the
Administrative General Partner, from the United States Department
of Labor, (I) to restructure the Partnership's activities to the
extent necessary to comply with any exemption in any final plan
asset regulation adopted by the Department of Labor or to comply
with any requirement the Department of Labor might impose as a
condition to granting a prohibited transaction exemption,
including, but not limited to, discontinuing sales to tax-exempt
investors after a given date and/or restructuring the property
management activities of the Partnership, and/or (II) to
terminate the offering of Units or to compel a dissolution and
termination of the Partnership; and (iv) to ensure that the
provisions of this Agreement will comply with any applicable
federal or state legislation enacted after the date of this
Agreement. The General Partners are empowered to amend such
provisions to the minimum extent they believe necessary in
accordance with the advice of accountants and/or counsel to
comply with any applicable federal or state legislation, rules,
regulations, administrative pronouncements or interpretation
and/or judicial interpretation thereof after the date of this
Agreement. Such amendment(s) made by the General Partners in
reliance upon the advice of competent accountants or counsel
described above shall be deemed to be made pursuant to the
fiduciary obligation of the General Partners to the Partnership
and Limited Partners, and no such amendment shall give rise to
any claim or cause of action by any Limited Partner; and
15.2.21 to execute, acknowledge and deliver any and
all instruments to effectuate all of the foregoing, and to take
all such action in connection therewith as the General Partners
shall deem necessary or appropriate.
15.3 Comparison With General Partnership. The General
Partners shall, except as otherwise provided in this Agreement or
the Partnership Act, have all the rights and powers and shall be
subject to all the restrictions of a partner in a partnership
without limited partners.
15.4 Limitations. Neither the General Partners nor any
Affiliate shall have the authority to:
15.4.1 enter into contracts with the Partnership
which would bind the Partnership after the removal, adjudication
of bankruptcy or insolvency of the last remaining General Partner
or continue the business with Partnership assets after the
occurrence of such event;
15.4.2 alter the primary purpose of the Partnership
as set forth in Article 3;
15.4.3 receive any rebate or give-up or participate
in any reciprocal business arrangement which would enable it or
an Affiliate to circumvent any of the provisions of this
Agreement;
15.4.4 cause the Partnership to invest in joint
ventures with an Affiliate unless: (a) the affiliated program
has investment objectives and policies comparable to those of the
Partnership; (b) no duplicate property management or other fees
are paid; (c) the compensation paid to the Sponsor by the
Partnership and the Affiliate is substantially identical with
regard to each program; (d) the Partnership has a right of first
refusal to purchase the investment if the other program wishes to
sell the investment; and (e) the investment of the Partnership
and the Affiliates are made on substantially the same terms and
conditions, although the amounts invested do not have to be
comparable;
15.4.5 cause the Partnership to invest in any
program, partnership or other venture unless: (i) it is a
general partnership or a joint venture; (ii) such general
partnership or venture owns and operates a particular property
and the Partnership alone or with any Affiliate acquires the
controlling interest in such entity, (iii) the Partnership, as a
result of the form of such ownership of a property, is not
charged directly or indirectly, more than once for the same
service; (iv) the agreement of partnership or joint venture does
not authorize the Partnership to do anything as a partner or
joint venturer with respect to the property which the Partnership
or a General Partner could not do directly because of the
policies set forth in this Agreement; and (v) the General
Partners and their Affiliates are prohibited from receiving any
compensation, fees or expenses which are not permitted to be paid
under the terms of this Ag;
15.4.6 cause the Partnership to exchange Units for
real property;
15.4.7 do any act in contravention of this Agreement
or, except as permitted in this Agreement, which would make it
impossible to carry on the ordinary business of the Partnership;
15.4.8 confess a judgment against the Partnership in
connection with any threatened or pending legal action;
15.4.9 possess any Partnership asset or assign the
rights of the Partnership in specific Partnership assets for
other than a Partnership purpose;
15.4.10 perform any act (other than an act required
by this Agreement or any act taken in good faith reliance upon
counsel's opinion) which would, at the time such act occurred,
subject any Limited Partner to liability as a general partner in
any jurisdiction;
15.4.11 reinvest any Adjusted Cash From Operations
or, after seven years from Final Closing Date, Cash From Sales or
Financings or in connection with any reinvestment of Cash From
Sales or Financings during such seven year period, receive any
Acquisition Fee or Property Evaluation Fee;
15.4.12 employ, or permit the employment of, the
funds or assets of the Partnership in any manner except for the
exclusive benefit of te Partnership;
15.4.13 commingle the Partnership funds with those of
any other person or entity except to the extent that funds are
temporarily retained by property managers or mortgage servicers,
that use of a zero balance or clearing account shall not
constitute a commingling of Partnership funds, and except that
funds of the Partnership and funds of other partnerships
sponsored by the General Partners or their Affiliates may be held
in an account or accounts established and maintained for the
purpose of making computerized disbursements and/or short-term
investments; provided, however, that Partnership funds are
protected from claims of such other partnerships and/or their
creditors;
15.4.14 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 purchaser regarding the
purchase of Units; provided, however, that Affiliates of the
General Partners shall not be prohibited from paying the normal
sales commissions payable to a registered broker-dealer or other
properly licensed person for selling Units;
15.4.15 operate the Partnership in such a manner as
to have the Partnership classified as an "investment company" for
purposes of the Investment Company Act of 1940;
15.4.16 except as specifically provided for in this
Agreement, cause the Partnership to invest in or underwrite the
securities of other issuers for any purposes;
15.4.17 cause the Partnership to invest in real
estate contracts of sale unless such contracts of sale are in
recordable form and are appropriately recorded in the chain of
title;
15.4.18 grant the General Partners or any Affiliate
an exclusive right to sell or exclusive employment to sell the
Partnership's investments for the Partnership;
15.4.19 sell Substantially All of the Assets of the
Partnership in a single sale, or in multiple sales in the same
twelve-month period, except in the orderly liquidation and
winding up of the business of the Partnership upon its
termination and dissolution in the ordinary course;
15.4.20 pledge or encumber Substantially All of the
Assets of the Partnership at one time, other than in connection
with the acquisition or improvement of assets or the refinancing
of previous obligations;
15.4.21 except as provided in Sections 15.2.12,
15.2.18 and 15.4.4, purchase or lease real property from the
Partnership or sell or lease real property to the Partnership;
15.4.22 purchase Property for the Partnership without
first having obtained an MAI Appraisal with respect to the value
thereof which provides that the purchase price of such Property
plus any Acquisition Fees paid with respect to such Property by
any person equals or is less than the Appraised Value;
15.4.23 make long-term secured or unsecured loans to
the Partnership; as used herein, "long-term loans" shall mean
indebtedness the principal amount of which is scheduled to be
paid over a period of not less than 48 months, and not more than
50% of the principal amount of which is scheduled to be paid
during the first 25 months;
15.4.24 subject to any restriction contained in this
Agreement, cause the Partnership to finance a Partnership
Property by use of a wrap-around note and mortgage ("all-
inclusive" note and deed of trust) unless: (i) no General
Partner nor any Affiliate thereof shall receive interest in
excess of that payable to the lender on such underlying
encumbrances; (ii) all payments on the underlying obligation
shall be made by the Partnership or, in the alternative, payments
by the Partnership on the wraparound note are made to a third
party collecting agent which in turn disburses such payment,
first to the holder of such underlying obligation, and thereafter
to the holder of the wrap-around note; and (iii) the Partnership
receives credit on its all inclusive note for payments made
directly on the underlying obligations;
15.4.25 incur any nonrecourse indebtedness wherein
the lender will have or acquire, at any time as a result of
making the loan, any direct or indirect interest in the profit,
capital or property of the Partnership other than as a secured
creditor;
15.4.26 obtain financing in connection with the
acquisition of a Property or acquire a Property subject to
mortgage indebtedness or, within seven years after a Property is
acquired by the Partnership, obtain initial financing with
respect to such Property or, after such seven-year period has
ended, obtain initial financing with respect to a Property unless
the Partnership has received an opinion of counsel that such
financing will not result in income derived from the
Partnership's Properties constituting "unrelated business income"
to Qualified Plans;
15.4.27 invest in Properties which are non-income
producing, except in amounts and upon terms which can be financed
by the Partnership's Gross Proceeds or Adjusted Cash From
Operations, but in no event shall such investments exceed 10% of
the Gross Proceeds;
15.4.28 except as provided in Sections 15.2.9,
15.2.12, 15.2.18, 15.4.4, 15.4.5 and Articles 9 and 10, cause the
Partnership to enter into any transaction with any other
partnership in which a General Partner or any Affiliate has an
interest, including, but not limited to, any transaction
involving the sale, lease or purchase of any property to or from
the Partnership, the rendering of services to or from the
Partnership, or the lending of any money or other property to or
from the Partnership;
15.4.29 except as provided in Section 9.6, receive
any commission or fee for the placement of mortgage loans or
trust deed loans on Partnership Property or otherwise act as a
finance broker on behalf of the Partnership;
15.4.30 invest any of the Gross Proceeds in junior
mortgages, deeds of trust or other similar obligations;
15.4.31 use any of the Gross Proceeds to prepay
interest on Partnership mortgages, deeds of trust or other
similar obligations; however, the Investment General Partner may
cause the Partnership to pay "points" to prospective lenders as a
condition to obtaining financing;
15.4.32 cause the Partnership to enter into any
contract to construct or develop Partnership Property without
such contract being guaranteed at the price contracted by an
adequate completion bond or other satisfactory arrangement;
15.4.33 cause the Partnership to lend money to the
General Partners or their Affiliates;
15.4.34 cause the Partnership to incur first mortgage
financing which, with level payments, would amortize such
financing over a period in excess of 30 years; all such
financing, including all inclusive and wraparound loans and
interest-only loans, shall provide that no balloon payments may
become due sooner than the earlier of: (a) ten years from the
date the Partnership acquires the Property, or (b) two years
beyond the anticipated holding period of the Property, provided
in such case that a balloon payment shall not become due sooner
than seven years from the date the Partnership acquires the
Property (the foregoing restrictions shall not apply to financing
representing, in the aggregate, 25% or less of the total purchase
price of the Properties acquired);
15.3.35 incur aggregate borrowing of the Partnership
in excess of 80% of the aggregate value as determined by the
lender as of the date of financing as to all Properties which are
financed;
15.3.36 except as provided in Article 17, admit a
person as a General Partner except with the consent of the
Limited Partners as provided for in this Agreement;
15.4.37 except as permitted by Article 9, receive any
insurance brokerage fee or write any insurance policy covering
any Partnership Property;
15.4.38 redeem or repurchase Units on behalf of the
Partnership, except as required to prevent a prohibited
transaction from occurring under ERISA or as otherwise required
by law;
15.4.39 cause the Partnership to incur that portion
of liability insurance which insures the Sponsor for any
liability from which such persons are prohibited from being
indemnified pursuant to Article 21 of this Agreement; or
15.4.40 cause the Partnership to enter into any
agreement with a General Partner or its Affiliates which shall
not be subject to termination without penalty by either party
upon not more than 60 days' written notice.
15.5 No Personal Liability. The General Partners shall
have no personal liability for the repayment of the Original
Contributions of any Limited Partner or to repay the Partnership
any portion or all of any negative balance in their capital
accounts, except as otherwise provided in Section 5.3.
15.6 Notice of Limitation on Liability. The General
Partners shall use their best efforts, in the conduct of the
Partnership's business, to put all suppliers and other persons
with whom the Partnership does business on notice that the
Limited Partners are not liable for Partnership obligations and
all agreements to which the Partnership is a party shall include
a statement to the effect that the Partnership is a limited
partnership organized under the Partnership Act; but the General
Partners shall not be liable to the Limited Partners for any
failure to give such notice to such suppliers or other persons.
15.7 Investment in Properties. The General Partners shall
commit to Investment in Properties at least 88% of the Gross
Proceeds.
15.8 Accounting Matters. The Administrative General
Partner shall make all decisions as to accounting matters in
connection with the accounting methods adopted by the Partnership
in accordance with generally accepted accounting principles and
procedures applied on a consistent basis and shall make all
decisions with respect to tax accounting matters in accordance
with tax accounting principles. The Administrative General
Partner may rely on the Partnership's independent certified
public accountants to determine whether such decisions are in
accordance with generally accepted accounting principles.
15.9 Tax Matters Partner. The Administrative General
Partner is designated the "Tax Matters Partner" in accordance
with Section 6231(a)(7) of the Code and, in connection therewith
and in addition to all other powers given thereunder, shall have
all other powers needed to perform fully hereunder including,
without limitation, the power to retain all attorneys and
accountants of its choice and the right to settle any audit
without the consent of the Limited Partners.
15.10 Funds and Assets. The General Partners shall have a
fiduciary responsibility for the safekeeping and use of all funds
and assets of the Partnership, whether or not in its immediate
possession or control, and shall not employ, or permit another to
employ, such funds or assets in any manner except for the
exclusive benefit of the Partnership.
15.11 Preservation of Tax Status. The Administrative
General Partner shall use its best efforts to take such actions
as are necessary to preserve the Partnership's status as a
partnership or other pass-through entity for tax purposes in
light of any amendment to the Code or administrative or judicial
interpretations thereof.
15.12 UBI Considerations. The General Partners shall use
their best efforts to operate the Partnership in such fashion as
will cause the Partnership's income not to be regarded as
"unrelated business income;" provided, however, that the
Partnership shall not be prohibited from incurring mortgage
indebtedness with respect to any Property which has been owned by
the Partnership for at least five years, if the Partnership
receives an opinion of counsel that such financing more likely
than not will not result in income derived from the Partnership's
Properties constituting "unrelated business income" to tax-exempt
investors.
15.13 Notice of Withdrawal of General Partner. Following
the receipt by the Administrative General Partner of written
notice of the proposed retirement or withdrawal of any General
Partner, the Administrative General Partner shall promptly send
written notice of such retirement or withdrawal to the Limited
Partners.
15.14 Designated Person. The Administrative General
Partner shall be the "designated person" for maintaining lists of
investors in the Partnership, and shall take such actions as
shall be required to maintain such lists of investors.
Integrated shall be the "designated organizer" responsible for
causing the timely registration of the Partnership in accordance
with the Code.
16. RIGHTS AND POWERS OF THE LIMITED PARTNERS
16.1 Control. Limited Partners shall take no part in or
interfere in any manner with the control, conduct or operation of
the Partnership and shall have no right or authority to act for
or bind the Partnership.
16.2 Voting Rights. Limited Partners shall have the right
to vote only upon the following matters affecting the basic
structure of the Partnership:
16.2.1. removal of a General Partner and election of
a successor General Partner in place thereof;
16.2.2 subject to and in accordance with the
provisions of Article 17 and Section 19.1.1, election of
successor or additional General Partners and continuation of the
business of the Partnership;
16.2.3 termination and dissolution of the
Partnership pursuant to Article 19;
16.2.4 amendment to this Agreement, provided such
amendment is not for any of the purposes set forth in Sections
15.2.19 or 15.2.20;
16.2.5 sale of Substantially All of the Assets of
the Partnership in a single sale, or in multiple sales in the
same twelve-month period, except in the liquidation and winding
up of the business of the Partnership upon its termination and
dissolution or in the ordinary course;
16.2.6 the pledge or encumbrance of Substantially
All of the Assets of the Partnership at one time, other than in
connection with the acquisition or improvement of assets, initial
financing of a Partnership Property, or the refinancing of
previous obligations;
16.2.7 a material change in the Partnership's three
investment objectives described in "Investment Objectives and
Policies - Principal Investment Objectives" in the Prospectus;
16.2.8 voluntary assignment of the Administrative
General Partner's or Investment General Partner's interest in the
Partnership, except as otherwise provided in Section 17.7; and
16.2.9 extension of the term of the Partnership.
16.3 Meetings; Notices. The Administrative General Partner
may at any time call a meeting of the Limited Partners or for a
vote, without a meeting, of the Limited Partners on matters on
which they are entitled to vote, and shall call for such meeting
or vote following receipt of written request therefor of Limited
Partners holding 10% or more of the Units held by all Limited
Partners as of the date of receipt of such written request
("notice date"). Within ten days of such notice date, the
Administrative General Partner shall notify all Limited Partners
of record as of the notice date as to the time and place of the
Partnership meeting, if called, or if no such meeting has been
called, the date upon which the votes will be counted, and shall
deliver a detailed statement of the action proposed, including a
verbatim statement of the wording of any resolution proposed for
adoption by the Limited Partners and of any proposed amendment to
this Agreement. The date of any Partnership meeting or the date
upon which such votes, without a meeting, will be counted shall
be no less than ten nor more than sixty days following mailing of
the notice thereof by the Administrative General Partner. All
expenses of the voting and such notification shall be borne by
the Partnership. If a meeting is adjourned to another time or
place, and if an announcement of the adjournment of time or place
is made at the meeting, it shall not be necessary to give any
notice of the adjourned meeting. The presence in person or by
proxy of a majority in interest of the Limited Partners shall
constitute a quorum at all meetings of the Limited Partners;
provided, however, that if there be no such quorum, holders of a
majority in interest of the Limited Partners present may adjourn
the meeting from time to time without further notice until a
quorum shall have been obtained. No notice of the time, place or
purpose of any meeting of Limited Partners need be given to any
Limited Partner who attends in person or is represented by proxy,
except for a Limited Partner attending a meeting for the express
purpose of objecting at the beginning of the meeting to the
transaction of any business on the ground that the meeting is not
lawfully called or convened, or to any Limited Partner entitled
to such notice who, in writing, executed and filed with the
records of the meeting, either before or after the time thereof,
waives such notice.
16.4 Voting Procedures. A Limited Partner shall be
entitled to cast one vote for each Unit that he owns: (a) 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 Administrative General
Partner prior to such meeting, or (b) 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
Administrative General Partner prior to the date upon which the
votes of Limited Partners of record on the notice date, whether
at a meeting or otherwise, shall be counted. No General Partner
shall be entitled to vote unless and to the extent it owns Units.
The laws of the State of Delaware pertaining to the validity and
use of corporate proxies shall govern the validity and use of
proxies given by Limited Partners. At each meeting of Limited
Partners, the Administrative General Partner shall appoint such
officers and adopt such rules for the conduct of such meeting as
the Administrative General Partner shall deem appropriate. In
connection with each meeting or vote without a meeting of the
Limited Partners, the Partnership shall provide for proxies or
written consents which specify a choice between approval and
disapproval of each matter to be acted upon at the meeting or by
vote without a meeting. For purposes of obtaining a written vote
under this Agreement, the Administrative General Partner may
require a written response within a specified time, but not less
than ten days nor more than 45 days.
16.5 Limitations. No Limited Partner shall have the right
or power to: (a) withdraw or reduce his contribution to the
capital of the Partnership except as a result of the dissolution
of the Partnership, (b) bring an action for partition against the
Partnership, (c) cause the termination and dissolution of the
Partnership by court decree or otherwise, except as set forth in
this Agreement or as provided by law, or (d) demand or receive
property other than cash in return for his contribution. No
Limited Partner shall have priority over any other Limited
Partner either as to the return of contributions of capital or as
to Net Income, Net Loss or Distributions. Other than upon the
termination and dissolution of the Partnership or as otherwise
provided by this Agreement, there has been no time agreed upon
when the contribution of each Limited Partner may be returned.
17. REMOVAL, BANKRUPTCY OR DISSOLUTION OF A GENERAL PARTNER AND
TRANSFER OF A GENERAL PARTNER'S INTEREST
17.1 Removal. A General Partner may be removed from the
Partnership upon a Majority Vote of Limited Partners. Written
notice of the removal of a General Partner shall be served upon
such General Partner either by certified or by registered mail,
return receipt requested, or by personal service. Such notice
shall set forth the date upon which the removal is to become
effective.
17.2 Withdrawal of Associate General Partner. The
Associate General Partner may withdraw from the Partnership,
provided there has been 60 days' prior written notice to the
Limited Partners of such withdrawal. If the Associate General
Partner is a general partnership, it shall be deemed to have
withdrawn as a General Partner, regardless of the lack of notice
to Limited Partners, upon the retirement, removal, adjudication
of bankruptcy, insolvency, insanity or death of any of its
partners. Upon the withdrawal, removal, adjudication of
bankruptcy, insolvency, dissolution or other cessation to exist
of the Associate General Partner, the Partnership shall
repurchase the interest in the Net Income, Net Loss and
Distributions of the Partnership held by the withdrawing
Associate General Partner as a General Partner, but not as a
Limited Partner, for $150, provided there is at least one
remaining General Partner at such time.
17.3 Administrative General Partner and Investment General
Partner. Upon the removal, adjudication of bankruptcy,
dissolution or other cessation to exist of the Administrative
General Partner or the Investment General Partner, its respective
interest in the Net Income, Net Loss and Distributions of the
Partnership shall be purchased by the Partnership for a price
determined according to the provisions of Section 17.4, provided
there is at least one remaining General Partner at such time.
Until the dissolution of the Partnership, neither the
Administrative General Partner nor the Investment General Partner
shall take any voluntary step to dissolve itself or to withdraw
voluntarily from the Partnership. Neither the Administrative
General Partner's nor the Investment General Partner's interest
in the Partnership shall be assignable, except in connection with
any merger, consolidation or sale as provided in Section 17.7,
without a Majority Vote of Limited Partners. Any entity to which
the entire interest of the Administrative General Partner or the
Investment General Partner in the Partnership is assigned in
compliance with this Section shall be substituted by the
Administrative General Partner in its stead as a General Partner
of the Partnership by the filing of appropriate amendments to the
Partnership Agreement and to any separate certificate of
partnership.
17.4 Sales Price. Upon the sale of its interest pursuant
to Section 17.3, a General Partner other than the Associate
General Partner (the "Terminated Partner") shall receive from the
Partnership the fair market value of its interest in the
Partnership, determined by agreement between the Terminated
Partner and the Partnership or, if they cannot agree, by
arbitration in accordance with the then current rules of the
American Arbitration Association in New York, New York. The
expense of arbitration shall be borne equally by the Terminated
Partner and the Partnership. For this purpose, the fair market
value of the interest of the Terminated Partner shall be deemed
to be the amount the Terminated Partner would receive upon
dissolution and termination of the Partnership under Section 19.2
assuming such dissolution or termination occurred on the date of
the dissolving event and assuming the assets of the Partnership
were sold for their then fair market value without compulsion of
the Partnership to sell such assets. In the case of voluntary
withdrawal, payment shall be made by a noninterest bearing
unsecured promissory note with principal payable from
Distributions, if any, which the Terminated Partner otherwise
would have received had the Terminated Partner not withdrawn as a
General Partner in the Partnership. In the case of involuntary
withdrawal, removal, adjudication of bankruptcy or dissolution,
payment shall be made by a promissory note bearing 9% simple
interest per annum on the unpaid principal amount with principal
and all unpaid accrued interest subject to mandatory prepayment
from any Distributions which the Terminated Partner otherwise
would have received and the remaining unpaid principal balance
and unpaid accrued interest on such promissory note due and
payable five years from the date of the occurrence of the
applicable event specified in Section 19.1.
17.5 Purchase Price. Except as set forth in Section 17.6,
should a new General Partner be elected under Section 16.2, such
new General Partner ("Acquiring Partner") shall purchase from the
Partnership, within 60 days of its election, the interest which
the Partnership purchased from the Terminated Partner. For such
interest the Acquiring Partner shall pay the amount determined
pursuant to Section 17.4 to be the fair market value of such
interest. Payment shall be made by a promissory note bearing 9%
simple interest per annum on the unpaid principal amount secured
by assignment by the Acquiring Partner to the Partnership of the
future Distributions by the Partnership to the Acquiring Partner,
which principal amount together with accrued interest shall be
payable at the times and in the amount equal to 75% of such
Distributions until such time as the principal amount together
with accrued interest is paid in full, but shall become due and
payable in full by the Acquiring Partner at such time as the
Partnership is wound up and liquidated.
17.6 Successor Associate General Partner. Upon the
withdrawal of the Associate General Partner, Integrated shall
purchase its interest in the Net Income, Net Loss and
Distributions of the Partnership from the Partnership for $150,
and Integrated shall become the Successor Associate General
Partner. In such event, Integrated shall become the Successor
Associate General Partner itself or shall appoint a Successor
Associate General Partner (who may be an officer or director of
Integrated or an officer or director of any Affiliate of
Integrated or a subsidiary of Integrated) in substitution for
Integrated as the Successor Associate General Partner, provided
that, the Partnership shall receive an opinion of counsel to the
Partnership to the effect that the Partnership will continue to
be treated as a partnership for federal income tax purposes. Any
Successor Associate General Partner appointed pursuant to this
Section shall be entitled to withdraw in the same manner as any
prior Associate General Partner and, while a General Partner, to
receive the interest of the Associate General Partner in Net
Income, Net Loss and Distributions.
17.7 No Limitation on Merger or Reorganization of the
Administrative General Partner or the Investment General Partner.
Nothing in this Agreement shall be deemed to prevent the merger
or reorganization of the Administrative General Partner or the
Investment General Partner into or with any other corporation, or
the transfer of all the capital stock of the Administrative
General Partner or the Investment General Partner and the
assumption of the rights and duties of the Administrative General
Partner or the Investment General Partner, respectively, by, in
the case of a merger, reorganization or consolidation, the
surviving corporation or by operation of law.
18. CERTAIN TRANSACTIONS
The General Partners, any Limited Partner, any Affiliate,
any shareholder, officer, director, partner or employee thereof,
or any person owning a legal or beneficial interest therein, may
engage in or possess an interest in any other business or venture
of every nature and description, independently or with others
including, but not limited to, the ownership, financing, leasing,
operation, management, brokerage and development of real
property. Except as set forth in the Prospectus, neither the
General Partners nor any Affiliate of the General Partners shall
be obligated to present any particular investment opportunity to
the Partnership, even if such opportunity is of a character
which, if presented to the Partnership, could be taken by the
Partnership and each of them shall have the right to make for its
own account (individually or as trustee) or to recommend to
others any such particular investment opportunity.
19. TERMINATION AND DISSOLUTION OF THE PARTNERSHIP
19.1 Terminating Events. The Partnership shall be
terminated and dissolved upon the earliest to occur of the
following:
19.1.1 the withdrawal, removal, adjudication of
bankruptcy, insolvency, dissolution or other cessation of
existence as a legal entity of a General Partner unless all the
remaining General Partners elect, or if there is no remaining
General Partner, within 90 days of the date of such event, the
Limited Partners by Majority Vote elect, to continue the business
of the Partnership, in a reconstituted form, if necessary, and
elect a successor General Partner;
19.1.2 A Majority Vote (which may, but need not, be
solicited by the Administrative General Partner) in favor of
dissolution and termination of the Partnership;
19.1.3 the expiration of the term of the
Partnership;
19.1.4 the disposition of all interests in real
property and other assets (except cash) held by the Partnership
and receipt of final payment of the purchase price therefor;
19.1.5 the election by the Administrative General
Partner, pursuant to Section 15.2.20, without the consent of any
Limited Partner, in the event that either (i) the Partnership's
assets constitute "plan assets," as such term is defined for
purposes of ERISA, or (ii) any of the transactions contemplated
under this Agreement or Prospectus constitutes a "prohibited
transaction" under ERISA and no exemption for such transaction is
obtainable from the United States Department of Labor or the
Administrative General Partner determines not to seek such an
exemption.
19.2 Liquidation and Distribution of Assets. Upon a
dissolution and termination of the Partnership for any reason,
the Administrative General Partner shall take full account of the
Partnership's assets and liabilities, shall liquidate the assets
as promptly as is consistent with obtaining the fair value
thereof, and shall apply and distribute the proceeds therefrom in
the following order:
19.2.1 first, to the payment of creditors of the
Partnership, including General Partners but excluding secured
creditors whose obligations will be assumed or otherwise
transferred on the liquidation of Partnership assets; and
19.2.2 second, after allowance for the expenses of
liquidation and the setting up of any reserves for contingencies
which the Administrative General Partner considers necessary, to
the Partners in accordance with Article 11.
19.2.3 Notwithstanding anything to the contrary, the
Administrative General Partner has the right to defer liquidation
if, in the opinion of the Administrative General Partner, the
sale of Partnership assets in liquidation would result in a
material underrealization on the Partnership's assets.
20. SPECIAL POWER OF ATTORNEY
20.1 Grant of Power of Attorney. By completing and signing
the Partnership's subscription form or any transfer form, each
Limited Partner grants to the Administrative General Partner a
special power of attorney irrevocably making, constituting and
appointing the Administrative General Partner, with full power of
substitution, as the attorney-in-fact for such Limited Partner,
with power and authority to act in his name and on his behalf to
execute, acknowledge and swear to in the execution,
acknowledgment and filing of documents, which shall include, by
way of illustration but not of limitation, the following:
20.1.1 this Agreement, any separate certificate of
limited partnership, as well as any amendment to or the
restatement of the foregoing, which under the laws of the State
of Delaware or the laws of any other state, are required to be
filed or which the Administrative General Partner deems to be
advisable to file:
20.1.2 any other instrument or document which may be
required to be filed by the Partnership under the laws of the any
state or by any governmental agency, or which the Administrative
General Partner deems advisable to file; and
20.1.3 any instrument or document which may be
required to effect the continuation of the Partnership, the
admission of any additional or substituted Limited Partner, or
the dissolution and termination of the Partnership (provided such
continuation, admission or dissolution and termination are in
accordance with the terms of this Agreement), or to reflect any
reduction in amount of contribution of Partners.
20.2 Character of Power of Attorney. The special power of
attorney granted by each Limited Partner:
20.2.1 is a special power of attorney coupled with
an interest, is irrevocable, shall survive the death or legal
incapacity of the granting Limited Partner, and is limited to
those matters herein set forth;
20.2.2 may be exercised by the Administrative
General Partner acting alone for each Limited Partner by a
facsimile signature of the Administrative General Partner or by
one of its officers, or by listing all of the Limited Partners
executing any instrument with a signature of the Administrative
General Partner or one of its officers acting as its attorney-in-
fact; and
20.2.3 shall survive an assignment by a Limited
Partner of all or any portion of his Units except that, where the
assignee of the Units owned by a Limited Partner has requested
admission to the Partnership as a substituted Limited Partner,
the special power of attorney shall survive assignment for the
sole purpose of enabling the Administrative General Partner to
execute, acknowledge and file any instrument or document
necessary to effect such substitution.
21. INDEMNIFICATION
21.1. Agreement to Indemnify. The Partnership, its
receiver or its trustee, shall, to the maximum extent permitted
by law, indemnify, save harmless and pay all judgments and claims
against the Sponsor from any liability, loss or damage incurred
by the Sponsor or by the Partnership by reason of any act
performed or omitted to be performed by the Sponsor, including
costs and reasonable attorneys' fees (which attorneys' fees may
be paid as incurred) and any amount expended in the settlement of
any claim of liability, loss or damage; provided that (i) if such
liability, loss or damage arises out of any action or inaction of
employees, agents, subsidiaries or Affiliated assigns of the
Sponsor, such actions or inactions must have occurred while such
parties were engaged in activities which could have been engaged
in by a General Partner in its capacity as such; (ii) if such
liability, loss or damage arises out of any action or inaction of
the Sponsor, (a) the Sponsor must have determined, in good faith,
that such course of conduct was in the best interests of the
Partnership and (b) such course of conduct did not constitute
negligence or misconduct by the Sponsor; and (iii) any such
indemnification shall be recoverable only from the assets of the
Partnership and not from the assets of the Limited Partners. All
judgments against the Partnership and the Sponsor, wherein the
Sponsor is entitled to indemnification, must first be satisfied
from Partnership assets before such Sponsor is responsible for
these obligations. The Partnership shall not pay for any
insurance covering liability of the Sponsor for actions or
omissions for which indemnification is not permitted hereunder;
provided, however, that nothing contained herein shall preclude
the Partnership from purchasing and paying for such types of
insurance, including extended coverage liability and casualty and
worker's compensation, as would be customary for any person
owning comparable assets and engaged in a similar business, or
from naming the Sponsor as an additional insured party
thereunder, provided that such addition does not add to the
premiums payable by the Partnership. Nothing contained herein
shall constitute a waiver by any Limited Partner of any right
which he may have against any party under federal or state
securities laws.
21.2 Limitations. Notwithstanding Section 21.1, the
Sponsor shall not be indemnified or saved harmless pursuant to
Section 21.1 from any liability, loss or damage incurred by it in
connection with (i) any claim or settlement involving allegations
that federal or state securities laws associated with the offer
and sale of Units were violated by the Sponsor unless: (a) the
Sponsor is successful in defending such action and (b) such
indemnification is specifically approved by a court of competent
jurisdiction which shall have been advised as to the current
position of the Securities and Exchange Commission, and if Units
are offered and/or sold in California, Missouri and/or Tennessee
or such other state as shall desire to have its position stated,
as to such state securities officials' positions regarding
indemnification for violations of securities law, or (ii) any
liability imposed by law, including liability for negligence or
misconduct.
22. MISCELLANEOUS
22.1 Counterparts. This Agreement may be executed in
several counterparts and all so executed shall constitute one
Agreement, binding on all of the parties hereto, notwithstanding
that all of the parties are not signatories to the original or
the same counterpart.
22.2 Binding Provisions. The terms and provisions of
this Agreement shall be binding upon and shall inure to the
benefit of the successors and assign of the respective Partners.
22.3 Severability. In the event any sentence or
paragraph of this Agreement is declared by a court of competent
jurisdiction to be void, such sentence or paragraph shall be
deemed severed from the remainder of the Agreement and the
balance of the Agreement shall remain in effect.
22.4 Notice. All notices under this Agreement shall
be in writing and shall be given to the party entitled thereto by
personal service or by mail, posted to the address maintained by
the Partnership for such person or at such address as he may
specify in writing.
22.5 Headings. Paragraph titles or captions contained
in this Agreement are inserted only as a matter of convenience
and reference and in no way define, limit, extend or describe the
scope of this Agreement nor the intent of any provision hereof.
22.6 Meanings. Whenever required by the context
hereof, the singular shall include the plural, and vice-versa;
the masculine gender shall include the feminine and neuter
genders, and vice-versa; and the word "person" shall include a
corporation, partnership, firm or other form of association.
22.7 List of Partners. The names, addresses and
Original Contributions of the Partners are set forth on Exhibit I
attached hereto, which exhibit shall be maintained at the
principal place of business of the Partnership.
22.8 Governing Law. Notwithstanding the place where
this Agreement may be executed by any of the parties hereto, the
parties expressly agree that all the terms and provisions hereof
shall be construed under the law of the State of Delaware and
that the Partnership Act as now adopted and as hereafter amended
from time to time shall govern the partnership aspects of this
Agreement.
22.9 Other Jurisdictions. In the event the business
of the Partnership is carried on or conducted in states in
addition to the State of Delaware, then the parties agree that
this Partnership shall qualify under the laws of each state in
which business is actually conducted by the Partnership, and they
severally agree to execute such other and further documents as
may be required or requested in order that the Administrative
General Partner legally may qualify this Partnership in such
states. The power of attorney granted to the Administrative
General Partner in Article 20 shall constitute the authority of
the Administrative General Partner to perform the ministerial
duty of qualifying this Partnership under the laws of any state
in which it is necessary to file documents or instruments of
qualification. A Partnership office or principal place of
business in any state may be designated from time to time by the
Administrative General Partner.
22.10 Power to Reconstitute. In the event that the
State of Delaware amends the Partnership Act in any manner which
precludes the Partnership, at any time, from obtaining an opinion
of tax counsel to the effect that the Partnership will be treated
as a pass-through entity for federal income tax purposes and not
as an association taxable as a corporation, then the
Administrative General Partner may, in its sole discretion,
reconstitute the Partnership under the laws of another state.
GENERAL PARTNERS:
INVESTMENT GENERAL PARTNER:
INTEGRATED RESOURCES, INC. RESOURCES HIGH EQUITY, INC.
with respect to Section 17.6
By: /s/
By: /s/ Richard Ader, President
Joel M. Pashcow, Senior
Executive Vice President ADMINISTRATIVE GENERAL
PARTNER:
INITIAL LIMITED PARTNER: RESOURCES CAPITAL CORP.
/s/ By: /s/
Howard Gelbtuch Joel M. Pashcow, President
ASSOCIATE GENERAL PARTNER
SECOND GROUP PARTNERS
By: /s/
Joel M. Pashcow
General Partner
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
AGREEMENT OF HIGH EQUITY PARTNERS L.P. - SERIES 86
AMENDMENT dated as of December 1, 1986 to the Amended and
Restated Agreement of Limited Partnership of High Equity Partners
L.P. - Series 86 (the "Partnership") dated as of November 14,
1985, as amended and restated as of April 22, 1986, as amended
(collectively, the "Partnership Agreement").
W I T N E S S E T H:
WHEREAS, the Partnership has entered into and in the future
enter into joint ventures and joint venture agreements with
Integrated Resources High Equity Partners, Series 85, a
California limited partnership and other Affiliates of the
general partners of the Partnership (the "General Partners"); and
WHEREAS, the General Partners of the Partnership have
determined, and may in the future determine, that Resources
Capital Corp., the Administrative General Partner, should be the
Partnership's representative on any management committee which
will govern the affairs of such joint ventures (a "JV Management
Committee"); and
WHEREAS, the Partnership Agreement presently provides that
Resources High Equity Inc., the Investment General Partner, is
responsible for, among other matters, the selection and
management of the Partnership's investments, which
responsibilities constitute some of the responsibilities which
the Administrative General Partner will be responsible for as the
Partnership's representative on the JV Management Committee; and
WHEREAS, the General Partners have the authority pursuant to
paragraph 15.2.20(a) to reallocate the responsibilities of the
General Partners without the consent of the Partnership's limited
partners.
NOW, THEREFORE, the General Partners, on behalf of all the
partners of the Partnership, agree as follows:
1. Paragraph 15.2 of the Partnership Agreement is hereby
amended by inserting after the third sentence the following:
"Notwithstanding the foregoing, in connection with any joint
venture previously entered into, or to be entered into in the
future, with Affiliates of the General Partners, if the
Administrative General Partner acts as the Partnership's
representative on any management committee which will govern the
affairs of such joint venture, it shall be responsible for all
matters which would have otherwise been the responsibility of the
Investment General Partner. The Administrative General Partner
shall also remain responsible for all administrative functions of
the Partnership with respect to such joint ventures."
2. Terms not otherwise defined herein shall have the same
meaning ascribed to them in the Partnership Agreement.
3. Except as modified by this Amendment, the Partnership
Agreement remains unchanged and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of
the date first above written.
RESOURCES HIGH EQUITY, INC.
By: ______________________________
Name: Frank Garcia
Title: Vice President
RESOURCES CAPITAL CORP.
By: ______________________________
Name: Frank Garcia
Title: First Vice President
Limited Partners
By: Resources High Equity, Inc.,
pursuant to paragraph
15.2.20(a) of the Partnership
Agreement
By: ______________________________
Name: Frank Garcia
Title: Vice President
<PAGE>
FIRST AMENDMENT TO
THE AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF HIGH EQUITY PARTNERS L.P. - SERIES 86
AMENDMENT dated as of July 1, 1986 to the Amended and
Restated Agreement dated as of November 14, 1985, as amended and
restated as of April 22, 1986 and as further amended from time to
time (the "Agreement") among Resources Capital Corp., Resources
High Equity, Inc. and Second Group Partners, each as a General
Partner, and Howard Gelbtuch as the initial limited partner.
1. The definition of "Front-End Fees" in Article 2 is
amended in its entirety to read as follows:
"Front-End Fees" shall mean fees and expenses
paid by any party for any service rendered in
connection with and during the Partnership's
organization or acquisition phase including
Organization and Offering Expenses,
Acquisition Fees, Acquisition Expenses,
Mortgage Placement Fees and any other similar
fee, but excluding any underwriting or
selling commissions with respect to sales of
Units to the extent not paid by the
Partnership."
2. Section 10.1(b) is deleted in its entirety and
Section 9.11 is added, which Section reads in its entirety as
follows:
"9.11 Partnership Administration Fee. The
Partnership shall pay the Administrative
General Partner at the rate of $0.75 per Unit
per annum based on the total Units
outstanding at the end of each calendar
quarter, payable 25% per calendar quarter, as
a Partnership Administration Fee related to
expenses incurred by the Administrative
General Partner related to the administration
of the Partnership; provided, however, that
such fee shall in no event be more than
$200,000 per annum. This fee is
nonaccountable and shall be paid to the
Administrative General Partner at such time
as Distributions are made to the Limited
Partners of Adjusted Cash From Operations."
3. The following sentence is added to the end of
Section 9.9:
"In no event shall the Partnership invest
more that 25% of its assets at any time in
any affiliated money market fund."
4. The Agreement is further amended to set forth the
names of the limited partners admitted as of the date of the
First Closing of Units of the Partnership.
5. Except as otherwise provided above, the
Partnership Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undesigned have executed this
Amendment as of July 1, 1986.
GENERAL PARTNERS:
Resources Capital Corp.
By: _____________________________
Resources High Equity, Inc.
By: ______________________________
Second Group Partners
By: ______________________________
<PAGE>
AMENDMENT TO AMENDED AND
RESTATED PARTNERSHIP AGREEMENT OF
HIGH EQUITY PARTNERS L.P. SERIES 86
AMENDMENT dated as of April 1, 1988 to the Amended and
Restated Partnership Agreement of High Equity Partners L.P. -
Series 86, (the "Partnership") dated as of November 14, 1985 as
amended and restated to date (collectively, the "Partnership
Agreement").
WHEREAS, certain changes in the tax laws may adversely
affect the Partnership if the Administrative General Partner does
not take certain actions; and
WHEREAS, the Administrative General Partner is given the
power and authority, pursuant to Paragraphs 15.2.19, 15.2.20 and
15.11 to amend the Partnership Agreement and take such actions as
it deems necessary to preserve the tax-status of the Partnership.
NOW, THEREFORE, the Administrative General Partner, on
behalf of all the partners of the Partnership, agrees as follows:
1. Paragraph 12.4 of the Partnership Agreement is hereby
amended and restated as follows:
"12.4 Ineffective Transfers. (a) Any assignment, sale,
exchange or other transfer in contravention of any of the
provisions of this Article 12 shall be void and deemed
ineffectual, and shall not bind or be recognized by the
Partnership.
(b) Notwithstanding anything contained herein to
the contrary, in order to prevent the Partnership from being
treated as a publicly traded partnership for federal tax
purposes, the Administrative General Partner has the right to
refuse to recognize any attempted transfer of a Unit (or rights
therein) which would constitute a transfer in a secondary market
(or the substantial equivalent thereof) as defined under Code
Section 7704 and any regulations promulgated thereunder (or under
any similar law or regulation.) The Administrative General
Partner shall exercise such right by taking any actions as it
deems necessary or appropriate in its reasonable discretion so
that such trades or assignments of rights are not in fact
recognized. The right to exercise the foregoing restriction
shall not be exercised if the Administrative General Partner
determines in its reasonable discretion that the exercise of
such restriction would result in the Partnership being deemed to
hold plan assets for purposes of ERISA. The Administrative
General Partner shall incur no liability to any investor or
prospective investor for any action or inaction by it in
connection with the foregoing, provided it acted in good faith."
2. Except as modified by this amendment, the Partnership
Agreement remains unchanged and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of
the date first above written.
RESOURCES CAPITAL CORP.,
Administrative General Partner
By: /s/Frank Goveia
Name: Frank Goveia
Title: Senior Vice President,
Secretary and Treasurer
Limited Partners
By: Resources Capital Corp.,
pursuant to Paragraph
15.2.20(b) and (f) and
Article 20 of the
Partnership Agreement
By: /s/ Frank Goveia
Name: Frank Goveia
Title: Senior Vice President,
Secretary and Treasurer
