UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
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COMMISSION FILE NUMBER: 33-3657
GLENBOROUGH PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
as successor to Glenborough Limited pursuant to Rule 15d-5
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2997842
-------------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100 94402-1708
San Mateo, California ----------
------------------------------------- (Zip Code)
(Address of principal
executive offices)
Partnership's telephone number, including area code: (415) 343-9300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
No market for the Limited Partnership Units exists and therefore a market value
for such Units cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE: See Exhibit Index in Item 14
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PART I
ITEM 1. BUSINESS.
Organization
Glenborough Partners, A California Limited Partnership ("Partners"), successor
to Glenborough Limited, A California Limited Partnership pursuant to section
15d-5 of the Securities Exchange Act of 1934, was originally formed in 1986
generally to acquire, own, operate, develop and lease commercial and residential
real estate. To facilitate compliance with certain recording and filing
requirements, a second limited partnership, GOCO Realty Fund I, a California
Limited Partnership formerly known as Glenborough Operating Co. Ltd., A
California Limited Partnership ("GOCO"), was formed in April 1986 to hold and
operate all real and personal property then or thereafter owned by the
Partnership (the "Partnership Property"). Partners and GOCO operated as an
economic unit and unless specifically designated otherwise, were referred to
collectively as the "Partnership". The present general partners of both Partners
and GOCO are Glenborough Realty Corporation, a California corporation, and
Robert Batinovich (collectively "Glenborough" or "General Partner"). Glenborough
Realty Corporation is the managing general partner of the Partnership (the
"Managing General Partner"). Glenborough Partners is the sole limited partner of
GOCO.
In June 1986, the Partnership acquired (the "Roll Up") 66 real estate projects
(the "Original Projects"), subject to non-recourse institutional debt secured by
the Original Projects and certain assets, subject to certain liabilities, most
of which were related to the operation of the Original Projects ("Net Other
Assets"). The Original Projects and the Net Other Assets (collectively, the
"Original Assets") were acquired by the Partnership from 21 limited partnerships
and one individual (collectively, the "Predecessor Owners"). The Partnership
acquired the Original Assets in exchange for 4,948,891 limited partnership units
(the "Exchange Transaction").
To facilitate the Partnership's holding and transfer of real property as set
forth under the plan of reorganization discussed below, two partnerships were
created in February 1994: (i) GPA West, L.P.; and (ii) GPA Industrial, L.P.
Subsequently, a third partnership was created in 1994, GPA Bond, L.P., to hold a
property purchased on December 29, 1994.
All three partnerships are subsidiaries of GOCO Realty Fund I and as such, the
financial statements are consolidated with Glenborough Partners. The general
partners of each of these partnerships are Glenborough Realty Corporation and
Robert Batinovich while the sole limited partner of each is GOCO Realty Fund I.
Chapter 11 - Reorganization
On May 21, 1992, GOCO Realty Fund I, the partnership holding and operating the
Partnership's real property, filed a petition in the
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United States Bankruptcy Court for the Northern District of California ("the
Bankruptcy Court") for reorganization under Chapter 11 of the Federal Bankruptcy
Code. The Partnership filed a plan of reorganization with the Bankruptcy Court
which became effective January 24, 1994 (see Note 10 of the Notes to
Consolidated Financial Statements).
The following is a brief description of the principal points of the
reorganization plan:
1. The claims of all creditors were satisfied in full.
2. Transfer to Brazos Asset Management, Inc. or its affiliates ("Brazos"),
successor to New West Federal which succeeded American Savings and Loan,
("American"), the original lender, (see Note 3 of the Notes to the
Consolidated Financial Statements) of the Partnership's interest in the
restricted cash and Griffin note receivable from Griffin Investments
(Griffin"), successor to Mariani Financial Company ("MFCo"), the original
contributor of 15 properties to the Partnership in the Roll-Up (see Note 4
of the Notes to the Consolidated Financial Statements).
3. Twelve properties have been transferred into two separate rollouts, four to
Griffin Investments (Phase II Rollout), and eight to a Griffin affiliate
(Phase III Rollout), in redemption of all of Griffin's (and its
affiliates') 448,894 units in Glenborough Partners (which is successor to
Glenborough Limited). These redemptions reduced Glenborough Partners'
outstanding equity securities from 3,410,747 limited partner units to
2,961,853 limited partner units. Those entities were given options to pay
off Brazos' lien on those properties, at negotiated prices, or transfer
them to Brazos.
4. GOCO's obligation to deliver the property known as Burlingame Plaza to
Robert Fraser was satisfied through the payment by GOCO Realty Fund I of
$750,000 toward the price charged by Brazos for release of Burlingame
Plaza, which was then delivered to Mr. Fraser free and clear following his
payment of $150,000 owed by him to GOCO. GOCO paid this amount over to
Brazos against the balance of the release price.
5. The claims of Brazos were satisfied through a multipart transaction
including the following:
a. Brazos unconditionally released its lien on two properties; (i) a
50,000-foot industrial facility in Auburn, California, which was
leased to Coherent, Inc. - the release of this lien occurred on
February 4, 1994, as part of a sale of the property to the tenant; and
(ii) a vacant 95,500 square foot industrial/office facility in the
Stanford Business Park in Palo Alto, California.
b. GOCO paid Brazos the sum of $500,000, from the Coherent Auburn sale,
discussed below, in return for which Brazos released its lien on the
property known as Rosemead
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Springs Business Park in El Monte, California - this transaction
occurred on February 4, 1994.
c. GOCO had an option (exercisable at any time prior to April 30, 1994)
to obtain a release of the Brazos lien as to any of the remaining
properties (the "Option Properties") subject to Brazos' lien by paying
a negotiated release price to Brazos. The Partnership exercised its
option on eight properties as discussed in paragraph 4, 5.a and 5.b
above and 6. below. The remaining options were not exercised and those
properties were transferred to Brazos in satisfaction of the remaining
balance of Brazos claims in May 1994.
6. GOCO closed the sale of the Coherent Auburn facility to the tenant for
$3,650,000 on February 4, 1994, and applied a portion of the net proceeds
from the sale toward the payment of the release price for the Rosemead
Springs property referred to in paragraph 5.b., above. Most of the
remaining proceeds were applied toward the partial paydown of Brazos'
discounted lien release price for four of the Option Properties referred to
in paragraph 5.c., above. The balance of the funds required for the payment
of those release prices were financed through a $12 million loan obtained
by GPA Industrial, L.P. from Heller Financial, Inc. Such financing was
applied to the release of the liens on the two properties known as the J.I.
Case buildings and the two properties known as the Navistar buildings. The
total release price for these properties and the Rosemead property was
$14,500,000.
7. Included in the above transactions, was $962,000 in net transaction fees
payable to a general partner which was paid in August 1994.
Material Disposition of Properties
MFCo. Phase I Rollout - Effective January 1, 1987, the Partnership transferred
to MFCo., under an installment land contract, equitable title to nine of the 15
properties originally contributed by MFCo. and its affiliates to the Partnership
in the Exchange Transaction. These properties had an original exchange value of
$73,852,000. In consideration for the properties and related net assets and
liabilities, David W. Mariani and MFCo. transferred back 1,110,863 units of
partnership interest in Limited and gave Limited a note in the original
principal amount of $53,172,000, which included undrawn reserves of $1,960,000.
This amount approximated the prorata share of refinanced New West Federal Debt
(now known as the "Brazos Debt")(see Note 3 - Notes Payable) attributable to the
MFCo. Rollout properties. This note has an original maturity date of June 30,
1996.
The difference between the promissory note received from MFCo. and the book
value of the assets transferred/rolled out was recorded on the Partnership's
books as deferred gain. MFCo. Rollout price adjustments affecting deferred gain
have been made subsequent to the Rollout, due to a provision in the original
Master Lease on one
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of the properties rolled-out. The note receivable was discounted to yield the
same effective interest rate as the Brazos Debt, 7.44%. No accounting
recognition has been given to the surrender of Partnership Units.
This transaction substantially reduced MFCo.'s interest in the Partnership from
approximately 31% to approximately 11%. In addition, David W. Mariani withdrew
as a general partner of both Glenborough Limited and GOCO and also resigned as
an officer and director of Glenborough Realty Corporation, the managing general
partner of Glenborough Limited and GOCO, effective July 9, 1987.
In January 1988, MFCo. assigned to Griffin Investments, a California limited
partnership, its interest in the installment sale land contract. Interest only
payments (originally five percent increasing over time to ten percent) are due
monthly. Effective July 1, 1991, the Partnership agreed to forbear from
collecting from Griffin Investments the increased interest payments which would
otherwise have taken effect on that date, in the approximate amount of $77,000
per month.
At December 31, 1993, the Partnership remained primarily liable for the full
amount of the Brazos Debt and the MFCo. Rollout properties remained collateral
for that debt. Griffin Investments had the right to partially reinstate its
prorata share of the Brazos Debt in the event of a default by the Partnership.
The Partnership also had the right to transfer title of the properties to
Griffin Investments. On January 24, 1994, pursuant to the plan of reorganization
discussed above, the claims of Brazos were satisfied through a multipart
transaction which included a transfer by the Partnership to Brazos of the
Griffin note receivable.
Business Plan
In general, the Partnership's intentions were to acquire and hold properties for
the long term, with the objective of providing a strong, growing, diversified
portfolio that can generate predictable cash distributions.
The business of the Partnership consists primarily of owning and operating as a
continuing business, the current projects ("Partnership Properties" or
"Properties") and mortgages (the "Partnership Assets"). Information regarding
the Partnership Properties is incorporated herein by reference to Item 2
- -Properties.
Management and Operation
Glenborough Partners operates through GOCO Realty Fund I, GPA Industrial L.P.,
GPA West L.P., and GPA Bond L.P. (collectively "the Operating Partnerships").
The Operating Partnerships have engaged Glenborough Corporation, a California
corporation controlled by Robert Batinovich, to act as property manager (the
"Property Manager") to manage the Partnership Assets. Pursuant to a written
management agreement, Glenborough Corporation has broad managerial
responsibility for all Partnership Assets, including
Page 5 of 54
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collection of all rental and other charges due from tenants. The agreement as
amended, expires in 1996, except that the Partnership may terminate the
agreement without cause on 30-days written notice or immediately if Glenborough
Realty Corporation ceases to be the managing general partner.
Federal, state and local statutes, ordinances and regulations which have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment do not presently have a
material effect on the operations of the Properties nor on the capital
expenditures, earnings or competitive position of the Partnership.
The Partnership does not directly employ any individuals. All regular employees
rendering services on behalf of the Partnership are employees of Glenborough
Corporation or its affiliates.
The business of the Partnership to date has involved only one industry segment.
The partnership has no foreign operations and the business of the partnership is
not seasonal.
Competition
The Managing General Partner believes that characteristics influencing the
competitiveness of a real estate project are the geographic location of the
property, the professionalism of the property manager and the maintenance and
appearance of the property, in addition to external factors such as general
economic circumstances, trends, and the existence of new, competing properties
in the vicinity. Additional competitive factors with respect to commercial and
industrial properties are the ease of access to the property, the adequacy of
related facilities, such as parking, and the ability to provide rent concessions
and additional tenant improvements commensurate with local market conditions.
Such competition may lead to rent concessions that could adversely affect the
Partnership's cash flow. Although the Managing General Partner believes the
Partnership Properties are competitive with comparable properties as to those
factors within the Partnership's control, continued over-building and other
external factors could adversely affect the ability of the Partnership to
attract and retain tenants. The marketability of the Properties may also be
affected (either positively or negatively) by these factors as well as by
changes in general or local economic conditions, including prevailing interest
rates.
Depending on future market and economic conditions, the Partnership may be
required to retain ownership of its current Properties for periods longer than
originally anticipated, or may need to dispose earlier than anticipated, or
refinance a property, at a time or under terms and conditions that are less
advantageous than would be the case if unfavorable economic or market conditions
did not exist.
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ITEM 2. PROPERTIES.
As discussed above under Chapter 11 - Reorganization, the Partnership exercised
its option to obtain a release of the Brazos lien on eight properties. The
options on the remaining properties were not exercised and those properties were
transferred to Brazos in satisfaction of the remaining balance of Brazos' claims
in May 1994.
As of December 31, 1994, the Partnership has a total of 6 projects. There are
170,000 rentable square feet of multi-tenant office space located in suburban
areas of Los Angeles and Detroit with aggregate occupancy of 34%.
Industrial/warehouse facilities, totaling 1.2 million rentable square feet are
located in Memphis, Chicago, Kansas City, and Baltimore. The
industrial/warehouse space is 100% leased. The overall property occupancy is
92%.
In the opinion of management, the insurance coverage on each of the real estate
projects has been and continues to be adequate.
There are four leases which occupied ten percent or more of the total net
rentable square footage available at year end. See "Material Leases" below for
the lease and option provisions for these leases. On a cumulative basis, these
light industrial warehouse projects produced gross revenue of $2,101,000 for the
last fiscal year equal to approximately 34% of the aggregate gross revenues of
the Partnership.
Information regarding encumbrances on Partnership Projects is incorporated
herein by reference to Item 8, Note 3 - Notes Payable in the Notes to
Consolidated Financial Statements.
The following table sets forth information regarding the Partnership Projects
which were owned as of December 31, 1994, grouped by type of project, including
project name, location, general physical characteristics, and total amount of
leasable square feet.
Page 7 of 54
<PAGE>
<TABLE>
<CAPTION>
PARTNERSHIP PROJECTS - OFFICE COMPLEXES
Leasable
Square Occupancy
Project Name General Description Feet % Location
- ------------ ------------------- -------- --------- --------
<S> <C> <C> <C> <C>
Rosemead Springs Seven, one-story and 129,503 16% El Monte,
Business Center two-story buildings CA
(GPA West, L.P.)
Bond Street One, one-story 40,594 97% Farmington
Building connected to one, Hills,
(GPA Bond, L.P.) two-story building MI
</TABLE>
<TABLE>
<CAPTION>
PARTNERSHIP PROJECTS - LIGHT INDUSTRIAL WAREHOUSE PROJECTS
Leasable
Square Occupancy
Project Name General Description Feet % Location
- ------------ ------------------- -------- --------- --------
<S> <C> <C> <C> <C>
Navistar One-story building 474,426 100% West
International Chicago,
Corp., Parts IL
Distribution Center
(GPA Industrial, L.P.)
Navistar One-story building 274,000 100% Baltimore,
International MD
Corp., Parts
Distribution Center
(GPA Industrial, L.P.)
J. I. Case One-story building 205,594 100% Memphis,
Company Building TN
(GPA Industrial, L.P.)
J. I. Case One-story building 199,750 100% Kansas
Company Building City,
(GPA Industrial, L.P.) KS
</TABLE>
Page 8 of 54
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Material Leases
The following is a description of leases containing an option to purchase the
project. Currently, the Partnership is not a party to any leases with any
General Partner of the Partnership, or officers, directors or affiliates of a
General Partner of the Partnership.
J. I. Case Company Building, Kansas City, KS - J. I. Case Company occupies 100%
of the leasable space under a lease assigned by Navistar International
Corporation that commenced in 1984 and expires on February 29, 2004, with an
option to extend for two five-year terms. Gross base rent annualized is
currently $360,000. The lessee did not exercise its option to purchase the
property on March 1, 1993. On March 1, 1997, the Lessee has another option to
purchase the property for the greater of fair market value of the property at
the time of exercise or $2,061,000.
J. I. Case Company Building, Memphis, TN - J. I. Case Company leases but does
not occupy 100% of the leasable space under a lease assigned by Navistar
International Corporation that commenced in 1984 and expires on February 29,
2004, with an option to extend for two five-year terms. Gross base rent
annualized is currently $316,000. The lessee did not exercise its option to
purchase the property on March 1, 1993. On March 1, 1997, the Lessee has another
option to purchase the property for the greater of fair market value of the
property at the time of exercise or $1,664,000.
Navistar International Corporation Building, Baltimore, MD -Navistar
International Corporation occupies 100% of the leasable space under a lease that
commenced in 1984 and expires on February 29, 2004, with an option to extend for
two five-year terms. The rental amounts payable under the lease were modified in
1989 and 1990 in consideration of waiver by the tenant of purchase options
exercisable in those years. Gross annual rent, triple net, is $422,000. The
lessee did not exercise its option to purchase the property on March 1, 1993,
but has an option to purchase the property every three years thereafter, at a
price equal to fair market value, but not less than $3,700,000 and not more than
$4,200,000, a figure determined in accordance with a formula specified in the
1990 modification. This figure may change in future years based on the formula
specified in the modification.
Navistar International Corporation Building, West Chicago, IL -Navistar
International Corporation occupies 100% of the leasable space under a lease that
commenced in 1984 and expires on February 29, 2004, with an option to extend for
two five-year terms. The rental amounts payable under the lease were modified in
1989 and 1990 in consideration of waiver by the tenant of purchase options
exercisable in those years. Gross annual rent, triple net, is $1,003,000. The
lessee did not exercise its option to purchase the property on March 1, 1993,
but has an option to purchase the property every three years thereafter, at a
price equal to fair market value, but not less than $8,195,000 and not more than
$9,952,000, a figure determined in accordance with a formula
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specified in the 1990 modification. This figure may change in future years based
on the formula specified in the modification.
ITEM 3. LEGAL PROCEEDINGS.
On May 21, 1992, New West Federal Savings and Loan Association filed a judicial
foreclosure action in Superior Court in Orange County. Also on May 21, the
Partnership (i) filed a civil action against New West Federal in Superior Court
in San Mateo County, seeking in excess of $30 million in damages for a variety
of claims, including misrepresentation and breach of contract, and (ii) filed a
petition in the United States Bankruptcy Court ("the Court") for the Northern
District of California for reorganization under Chapter 11 of the Federal
Bankruptcy Code. On January 13, 1994, the Court entered an order confirming a
plan of reorganization (the "Plan") (see Item 8 - Note 10). The Plan became
effective on January 24, 1994.
Pursuant to the Plan, the lawsuits were dropped in 1994 after all the terms of
the Plan were met.
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS.
During the fourth quarter of fiscal year 1994, no matters were submitted to a
vote of security holders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY AND RELATED SECURITY
HOLDER MATTERS.
Market Information
There is no public market for units of limited partnership interest in the
Partnership (the "Units") and it is not expected that any will develop. The
Units have limited transferability. Restrictions on transfer may be imposed
under certain state securities laws. Consequently, holders of Units may not be
able to liquidate their investments and the Units may not be readily acceptable
as collateral.
Holders
As of December 31, 1994, 414 holders of record held 2,961,853 Limited
Partnership Units.
Cash Distributions
The Partnership began paying quarterly cash distributions on April 30, 1987, at
a quarterly rate of $0.375 per Limited Partnership Unit and continued paying the
same quarterly cash distribution through the fourth quarter 1988 distribution on
January 31, 1989. In 1989, the Partnership lowered its quarterly cash
distribution rate to $0.25 per Unit for the first quarter distribution and to
$0.1875 per Unit beginning with the second quarter 1989
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distribution. Distributions were suspended as of the second quarter of 1990. It
is not known when they will be resumed.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data should be read in conjunction with the financial
statements and related notes contained elsewhere in this report. This selected
financial data is not covered by the reports of the independent public
accountants.
<TABLE>
<CAPTION>
Condensed Consolidated Operating Data
(in thousands, except for Per Unit Data
and actual number of assets)
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Revenues $ 6,098 $ 22,061 $ 24,963 $ 30,567 $ 30,096
Operating Expenses (9,126) (28,389) (31,140) (40,412) (39,031)
Income (Loss) from Operations (3,028) (6,328) (6,177) 11,745 12,313
Gain (Loss) on Property
Sales 1,631 --- --- --- (1,028)
Loss on Investment in Real
Estate (1,000) --- --- --- ---
Loss Before Extraordinary
Items (2,397) (6,328) (6,177) (9,845) (9,963)
Extraordinary Items
(Note 1) 119,954 (30) (40) --- ---
------- ------ ------ ------ ------
Net Income (Loss) $117,557 $(6,358) $(6,217) $(9,845) $(9,963)
======= ====== ====== ====== ======
Cash Distributed
(Note 2) --- --- --- --- 1,318
Per Limited Partnership
Unit (Note 3):
Loss before
Extraordinary
Items $ (.74) $ (1.81) $ (1.77) $ (2.80) $ (2.84)
Net Income (Loss) 36.52 (1.82) (1.78) (2.80) (2.84)
Distributions --- --- --- --- .38
At December 31, actual number of:
Projects held 6 30 30 30 30
Mortgage Notes
Receivable held - 1 1 1 1
<FN>
See accompanying notes.
</TABLE>
Page 11 of 54
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<TABLE>
<CAPTION>
Condensed Consolidated Balance Sheet Data
(in thousands)
December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Assets
Net Real Estate
Investment (Note 4) $ 19,778 $123,701 $127,395 $131,236 $137,379
Net Notes Receivable - 44,951 45,635 45,656 45,316
Other Assets 3,407 16,630 19,618 19,638 18,489
------- ------- ------- ------- -------
Total Assets $ 23,185 $185,282 $192,648 $196,530 $201,184
======= ======= ======= ======= =======
Liabilities and Partners'
Equity (Deficit)
Notes Payable and
Accrued Interest $ 17,267 $295,380 $295,310 $294,004 $288,936
Other Liabilities 629 2,170 3,248 2,219 2,096
------- ------- ------- ------- -------
Total Liabilities 17,896 297,550 298,558 296,223 291,032
Total Partners'
Equity (Deficit) 5,289 (112,268) (105,910) (99,693) (89,848)
------- ------- ------- ------- -------
Total Liabilities
Partners' Equity
(Deficit) $ 23,185 $185,282 $192,648 $196,530 $210,184
======= ======= ======= ======= =======
<FN>
See accompanying notes.
</TABLE>
NOTES TO SELECTED FINANCIAL DATA
1. The Partnership recognized extraordinary items from the Chapter 11
bankruptcy reorganization, early extinguishment of debt, and related costs.
2. The Partnership suspended distributions in the second quarter of 1990.
3. In 1990 and 1991, the per unit data is based on 98.01% of the subject
divided by 3,442,110 total limited partner units outstanding. In 1992 and
1993, with a limited partner reassigning 27,271 units back to Glenborough
Limited (a predecessor to Glenborough Partners) at the close of business
December 31, 1991, the per unit data is based on 98.01% of the subject
divided by 3,414,839 limited partner units outstanding. In 1994, after the
redemption of a total of 449,894 units as part of the reorganization plan
(see Note 10 of the Notes to the Consolidated Financial Statements), the
per unit data is based on 97.73% of the subject divided by 3,146,492
weighted average limited partner units.
4. Real Estate Investment additions at cost, were $2,767,000, $595,000,
$980,000, $633,000 and $440,000 for the years ended
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December 31, 1990, 1991, 1992, 1993 and 1994 respectively. Net Real Estate
Investment deletions due to sales were $9,842,000 and $6,182,000 for the
years ended December 31, 1990 and 1994, respectively. In 1994, the
Partnership transferred back to the lender, Brazos Asset Management Inc.,
net real estate investments of $106,049,000 in satisfaction of the
remaining balance of Brazos' claims (see Legal Proceedings and Item 1.
Chapter 11 - Reorganization).
The comparability of the Consolidated Financial Data reflected in the above
table has been affected by the reduction of total assets and related debt
resulting from the bankruptcy reorganization and early extinguishment of debt in
1994 and by the Statement of Position 90-7 - Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code ("SOP 90-7") in 1993 and 1992. Interest
on secured claims accrues only to the extent that the value of the underlying
collateral exceeds the principal amount of the secured claim. Therefore,
interest is accrued only through May 21, 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Introduction
The predecessor partnership commenced operations as of June 30, 1986, following
its acquisition of 66 real estate projects subject to non-recourse institutional
debt secured by the projects and certain other assets, subject to certain
liabilities, most of which related to the operation of the projects. The
predecessor partnership acquired the projects and other assets in exchange for
the Units, in an Exchange Transaction involving 21 limited partnerships and one
individual property owner. At the end of 1993, there was a technical termination
of the predecessor partnership and Glenborough Partners commenced as successor
to Glenborough Limited (collectively, "the Partnership").
The following discussion addresses the Partnership's financial condition at
December 31, 1994 and its results of operations for the years ended December 31,
1994, 1993 and 1992. This information should be read in conjunction with the
Consolidated Financial Statements, notes thereto and other information contained
elsewhere in this report.
LIQUIDITY AND CAPITAL RESOURCES
On May 21, 1992, New West Federal Savings and Loan Association ("New West")
filed a judicial foreclosure action in Superior Court in Orange County. Also on
May 21, the Partnership (i) filed a civil action against New West in Superior
Court in San Mateo County, seeking in excess of $30 million in damages for a
variety of claims, including misrepresentation and breach of contract, and (ii)
filed a petition in the United States Bankruptcy Court for the Northern District
of California for reorganization under Chapter 11 of the Federal Bankruptcy Code
(see Results of Operations below). The Bankruptcy Court approved the Partnership
as debtor in possession, the continuation of Glenborough as manager of the
Page 13 of 54
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Partnership's assets, and an agreement between the Partnership and New West
relating to the use of cash collateral, as well as ruling on a variety of other
miscellaneous issues. On December 23, 1992, the Partnership and New West agreed
on the terms of a litigation moratorium under which virtually all activity in
the civil actions and in the Bankruptcy Court (other than routine matters
relating to day-to-day operations) were suspended while the parties attempted to
negotiate a settlement.
As a result of the Chapter 11 filing, a cash collateral agreement was
implemented between the Partnership and New West, whereby the Partnership was
required to pay to New West monthly, all but $50,000 of the funds remaining in
the operating cash accounts as of the last day of the previous month. In
accordance with SOP 90-7, such payments have been recognized as interest
expense. Net cash paid to New West, Brazos (discussed below) or its agent for
interest pursuant to the cash collateral agreement was $2,216,000 and
$12,219,000 in 1994 and 1993, respectively.
On November 19, 1993, GOCO and Brazos executed a settlement agreement, which was
incorporated into a Second Amended Plan of Reorganization (incorporated by
reference to Exhibit 2.1 to the Partnership's Current Report on Form 8-K dated
January 24, 1994) ("Amended Plan") for GOCO, which was confirmed by the court on
January 13, 1994, without opposition from any party, and became effective on
January 24, 1994.
The Amended Plan and settlement had five principal components. First, Brazos
unconditionally released its lien on two properties: (i) a 50,000-foot
industrial facility leased to Coherent, Inc. in Auburn, California, which was
sold to the tenant as described more fully below; and (ii) a vacant 95,500
square foot industrial/office facility in the Stanford Business Park in Palo
Alto, California, which was sold to Coherent in December 1994 as described more
fully below. Second, GOCO acquired Rosemead for $500,000. Third, GOCO had an
option (exercisable at any time prior to April 30, 1994) to obtain a release of
the Brazos lien as to any remaining properties subject to Brazos's lien by
paying a negotiated release price to Brazos. The Partnership exercised its
option on a few properties as discussed below. Fourth, by April 30, 1994, GOCO
was to have transferred to Brazos, in satisfaction of the balance of Brazos's
claims, any property as to which GOCO had not exercised the option described
above. This transaction actually closed on May 6, 1994. Fifth, certain
properties were transferred by GOCO to Griffin (see Item 8. note 4 - Griffin
Transfer) or a related party in redemption of Griffin's interest in Glenborough
Partners, which were required to pay negotiated release prices or transfer those
properties to Brazos on or before July 31, 1994. The transfers were effectively
completed by May 31, 1994.
GOCO closed the sale of the Coherent Auburn facility to the tenant for
$3,650,000 on February 4, 1994, and applied a portion of the net proceeds from
the sale toward the payment of the release price for the Rosemead Springs
property. Most of the remaining proceeds were applied toward Brazos's lien
release price for four properties known as the J.I. Case and Navistar buildings
with a portion
Page 14 of 54
<PAGE>
applied to an investment in real estate as described more fully below.
On December 22, 1994, the Partnership sold the property formerly known as
Coherent Palo Alto to the former tenant for $4,300,000. After paying for other
fees, the Partnership received net proceeds from escrow of $4,213,000. The
Partnership then paid off a note payable in the current amount of $1,358,000 on
December 23, 1994 and purchased the Bond Street Building on December 29, 1994.
The remaining balance was added to working capital reserves.
The Bond Street Building was purchased for $3,150,000. The Partnership paid
$308,000, financed $2,835,000 and received operating credits of approximately
$7,000. Monthly interest only payments at three hundred fifty (350) basis points
plus the three month "Libor" rate commenced February 1, 1995 and will continue
until the maturity date of December 31, 1999. In addition, principal payments
are required on a quarterly basis commencing April 15, 1995 at an amount of
excess cash flow, which is defined as net cash flow less: (i) current payments
due ont he loan; (ii) a ten percent (10%) per annum return on equity to the
borrower.
Through the May 1994 escrow related to the Partnership's obtaining free and
clear title from Brazos on the properties known as the J.I.Case and Navistar
buildings (discussed above), the Partnership made a $1,000,000 principal paydown
on a note payable for an affiliated partnership. Financing for the J.I.Case and
Navistar buildings was extremely difficult to find in the current market, so as
an inducement for the lender to finance this release price purchase, the
Partnership paid down a portion of an affiliate's note payable in good faith. In
December 1994, the Partnership and the affiliated partnership, UCT Associates, A
California Limited Partnership ("UCT") agreed that the $1,000,000 paid by the
Partnership on behalf of UCT was an investment in UCT. Coupled with that, Robert
Batinovich contributed his limited partner interest in the profits and losses of
UCT. This gave the Partnership a 45% non-voting limited partner interest, a 99%
allocation of future income and losses, and an economic interest in any future
upside of this property, without exposure to any loss. This was made possible
after Glenborough waived a portion of its potential transaction fees on the
disposition of properties in 1994.
At December 31, 1994, the General Partner believes that there is no real equity
in UCT, therefore the $1,000,000 invested in UCT was recognized as a loss on
investment in real estate.
Previous reports have discussed the liquidity and capital resources problems
associated with vacancies by two large tenants, Solectron and SEEQ. However,
pursuant to the Amended Plan those properties were transferred to an affiliate
of Griffin, and the partnership's claims for delinquent rent have been
transferred to Brazos, so these issues are no longer pertinent to the
Partnership's liquidity and capital resources.
Page 15 of 54
<PAGE>
Near-term prospects for liquidity and capital resources are somewhat
problematic, since one of the Partnership's current properties, Rosemead is
substantially vacant and is currently held for sale. The other property, the
former Coherent facility in Palo Alto, which was totally vacant, was sold on
December 22, 1994. Until Rosemead is sold, management anticipates that, assuming
no new leasing at Rosemead, the Partnership's near-term cash flow will be
roughly break-even. To facilitate current financing, the Rosemead and Palo Alto
properties were transferred to a newly-formed subsidiary of GOCO, GPA West, L.P.
in early 1994, while the recently purchased Bond Street Building was purchased
by GPA Bond, L.P.
Management is seeking new tenants, particularly for the Rosemead property, and
pursuing renewals of existing leases as they expire. However, absent a dramatic
improvement in nationwide economic conditions and demand for commercial space,
management anticipates a continuation of rent concessions and lower effective
rental rates, as well as higher tenant delinquencies. As always, the Partnership
remains vulnerable to a variety of other factors beyond the Partnership's
control, that may adversely affect capital resources and liquidity, such as
excess supply in relation to demand, increases in unemployment, population
shifts, levels of corporate activity, zoning changes, changes in tenant's needs,
and bulk sale activities of the Resolution Trust Corporation as discussed above.
The Partnership suspended its distributions in 1990 in an attempt to increase
liquidity and capital resources for tenant and capital improvements, leasing
commissions, refinancing costs, and increasing debt service payments. As of
March 15, 1995, distributions remain suspended and at this time, management is
unable to predict when they may be resumed.
Results of Operations
Interest expense decreased for each of the last two years due to the bankruptcy
discussed above. In 1992, interest was accrued only through May 21, 1992 and
thereafter pursuant to SOP 90-7 interest expense is recognized only to the
extent monthly net cash payments were made to New West Federal/Brazos.
In accordance with Accounting Principles Board Opinion 30, the net costs
directly related to the reorganization were expensed as incurred and presented
as an extraordinary item in 1993 and 1992.
1994 versus 1993
Operating revenue and expenses decreased in all areas except professional fees
from 1993 compared to 1994 due to the transferring of all but six of the
remaining properties back to Brazos in the bankruptcy reorganization (see Note
10 of the Notes to the Consolidated Financial Statements). Professional fees
increased as a result of legal and tax consulting fees indirectly related to the
reorganization discussed above. Since these fees were not directly related to
the bankruptcy reorganization or early
Page 16 of 54
<PAGE>
extinguishment of debt, these items could not be recognized as extraordinary
items.
Prior to transferring the remaining properties back to Brazos, rental revenue
was lower in 1994 compared to 1993 due to the loss of a major revenue producing
tenant, Coherent (Palo Alto), in May 1993 and an overall decrease in total
average occupancy of all Partnership commercial properties from a high of
approximately 80% at March 31, 1993 to approximately 75% at December 31, 1993.
Interest and other revenue also decreased during the period in 1994 through the
date of transfer to Brazos compared to the same period in 1993 due to the
transfer of the Partnership's interest in interest bearing restricted cash
accounts and Griffin notes receivable in January 1994.
Through the date of transfer of properties in 1994, operating expenses, in
total, also decreased when comparing a comparable period in 1993 largely due to:
(i) the utilities expenses related to a single-tenant facility while it was
vacant in 1993; (ii) the determination in the first quarter of 1993 that a
portion of the outstanding receivable related to a particular tenant, was
uncollectible and charged to bad debt (other expense); and (iii) a portion of
the tenant improvements becoming fully depreciated in 1993.
1993 versus 1992
Rental revenue decreased in 1993 compared to 1992 primarily due to the loss of
three major revenue producing tenants since May 31, 1992, Solectron (May 1992),
SEEQ (September 1992) and Coherent Palo Alto (May 1993), from three
single-tenant facilities.
Upon filing for reorganization under Chapter 11 of the Federal Bankruptcy Code,
the Partnership adopted SOP 90-7, whereby interest on secured claims accrues
only to the extent that the value of underlying collateral exceeds the principal
amount of the secured claim. Therefore, interest revenue relating to the Griffin
Investment note receivable was accrued only through May 21, 1992. Subsequent to
May 21, 1992, interest revenue was recognized only to the extent it was received
in cash.
Operating expenses in 1993 decreased slightly compared to 1992 due to (i) the
1992 accrual of late charges on unpaid property tax bills (which were
subsequently paid in 1993); (ii) lower 1993 rental receipts discussed above, on
which management fees are calculated, compared to 1992 rental receipts; (iii)
the increased 1992 professional fees for legal costs connected with the civil
action against New West and GOCO's filing of a petition for reorganization under
Chapter 11 of the Federal Bankruptcy Code; and (iv) the comprehensive review of
the remaining useful lives and carrying values of individual fixed assets for
depreciation purposes.
Slightly offsetting these decreases in operating expenses were factors
increasing operating expenses in 1993 over 1992. These
Page 17 of 54
<PAGE>
factors include: (i) increased utilities expenses related to the vacancies of
the single-tenant facilities discussed above; and (ii) increased repairs and
maintenance associated with additional exterior landscape work on the vacated
single-tenant properties, roof and window repairs for minor leaks, and other
exterior wood working repairs.
Page 18 of 54
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
GLENBOROUGH PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Page
----
Report of Independent Public Accountants....................................20
Financial Statements:
Consolidated Balance Sheets - December 3l, l994
and l993 ........................................................21
Consolidated Statements of Operations
for the years ended December 3l, l994, l993
and l992.........................................................23
Consolidated Statements of Partners' Equity
(Deficit) for the years ended December 3l, l994,
l993 and l992....................................................25
Consolidated Statements of Cash Flows for the years
ended December 3l, l994, l993 and l992...........................26
Notes to the Consolidated Financial Statements........................28
Financial Statement Schedule:
Schedule III - Consolidated Real Estate
Investments and Related Accumulated
Depreciation and Amortization at
December 31, 1994.....................................................46
Other schedules are omitted either because of the absence of conditions under
which they are required or because the required information is given in the
financial statements or notes thereto.
Page 19 of 54
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
GLENBOROUGH PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP:
We have audited the accompanying consolidated balance sheets of GLENBOROUGH
PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP (formerly known as GLENBOROUGH
LIMITED, A CALIFORNIA LIMITED PARTNERSHIP), as of December 3l, l994 and l993,
and the related consolidated statements of operations, partners' equity
(deficit), and cash flows for each of the three years in the period ended
December 3l, l994. These consolidated financial statements and the schedule
referred to below are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
GLENBOROUGH PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP, as of December 3l, l994,
and 1993, and the results of its operations and its cash flows for each of the
three years in the period ended December 3l, l994, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index to consolidated financial statements and schedules is presented for the
purpose of complying with the Securities and Exchange Commission's rules and is
not part of the basic consolidated financial statements. The schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSON LLP
San Francisco, California,
February 10, 1995
<PAGE>
GLENBOROUGH PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets
(in thousands, except units outstanding)
December 31, 1994 and 1993
1994 1993
------- --------
Assets
Real estate investments, at cost:
Land $ 2,045 $ 28,620
Building and improvements 16,076 137,956
------- --------
18,121 166,576
Less:
Accumulated depreciation (2,901) (42,875)
------- --------
Net real estate investments 15,220 123,701
Real estate held for sale - net 4,558 -
Other Assets:
Cash and cash equivalents 2,604 1,506
Restricted cash - 8,247
Receivables, net of allowance for
doubtful receivables of $117 at
December 31, 1993 (including $70 from
a related party at December 31, 1993) 15 2,276
Deferred loan fees, net of accumulated
amortization of $44 and $8,856
at December 31, 1994 and 1993,
respectively 352 2,933
Deferred leasing commissions, net of
accumulated amortization of $161
and $2,278 at December 31, 1994 and
1993, respectively 10 721
Griffin notes receivable, net
(including premium of $4,092 at
December 31, 1993) - 44,830
Other notes receivable - 121
Prepaid incentive and transaction
fees (paid to related party) - 623
Prepaid expenses 69 -
Deposits 199 275
Other assets 158 49
------- -------
Total assets $23,185 $185,282
======= ========
(continued)
The accompanying notes are an integral part of these consolidated statements.
Page 21 of 54
<PAGE>
GLENBOROUGH PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets - continued
(in thousands, except units outstanding)
December 31, 1994 and 1993
1994 1993
------- --------
Liabilities and Partners' Equity (Deficit)
Prepetition liabilities:
Notes payable, including premium of
$38,641 at December 31, 1993 (including
$90 to a related party at
December 31, 1993) $ - $273,762
Accrued interest - 21,237
Accounts payable - 563
Deposits and other liabilities - 726
------- --------
Total prepetition liabilities - 296,288
------- --------
Postpetition liabilities:
Notes payable 17,160 381
Accounts payable 85 -
Accrued expenses 496 239
Advances from related parties 60 -
Lease obligation - 167
Deposits and other liabilities 95 475
------- --------
Total postpetition liabilities 17,896 1,262
------- --------
Partners' equity (deficit)
General partner 435 (2,234)
Limited partners, 2,961,853 and
3,414,839 units outstanding at
December 31, 1994 and 1993,
respectively 4,854 (110,034)
------- --------
Total partners' equity (deficit) 5,289 (112,268)
------- --------
Total liabilities and partners'
equity (deficit) $23,185 $185,282
======= ========
The accompanying notes are an integral part of these consolidated statements.
Page 22 of 54
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
(in thousands, except per unit amounts)
For the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Revenue:
Rental $ 5,821 $ 18,720 $ 20,824
Interest and other 277 3,341 4,139
------- ------- -------
Total revenues 6,098 22,061 24,963
------- ------- -------
Operating expenses:
Property taxes 677 2,201 2,293
Repairs and maintenance 486 1,873 1,661
Management fees and reimbursed expenses
(paid to related parties) 810 1,884 1,994
Insurance 112 221 226
Utilities 496 2,176 1,871
Salaries and wages (including $206, $751
and $762 paid to related parties in 1994,
1993 and 1992, respectively) 221 777 801
Professional fees 981 688 794
Depreciation and amortization 1,982 5,723 6,193
Interest expense and amortization of debt
premium/discount (contractual amount is
$21,683 and $21,695, including
premium amortization for 1993 and 1992) 3,178 12,219 14,752
Other (including $19, $156 and $219 paid
to related parties in 1994, 1993 and
1992 respectively for miscellaneous
reimbursement)
183 627 555
------- ------ ------
Total operating expenses 9,126 28,389 31,140
------- ------ ------
Operating loss (3,028) (6,328) (6,177)
Other expense:
Gain on property sales 1,631 - -
Loss on investment in real estate (1,000) - -
------- ------- -------
Loss before extraordinary items (2,397) (6,328) (6,177)
Extraordinary items:
Gain (loss) from bankruptcy reorganization
and early extinguishment of debt 119,954 (30) (40)
-------- ------- -------
Net income (loss) $ 117,557 $ (6,358) $ (6,217)
======== ======= =======
</TABLE>
(continued)
Page 23 of 54
<PAGE>
GLENBOROUGH PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations - continued
(in thousands, except per unit amounts)
For the years ended December 31, 1994, 1993 and 1992
Loss before extraordinary items per Limited
Partnership Unit ............................. $ (.74) $ (1.81) $ (1.77)
Extraordinary items per Limited Partnership
Unit ......................................... $ 37.26 (0.01) (0.01)
------ ------ ------
Net income (loss) per Limited Partnership
Unit ......................................... $ 36.52 $ (1.82) $ (1.78)
====== ====== ======
Distributions per Limited Partnership Unit ....... $ -- $ -- $ --
====== ====== ======
The accompanying notes are an integral part of these consolidated statements.
Page 24 of 54
<PAGE>
GLENBOROUGH PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Partners' Equity (Deficit)
(in thousands)
For the years ended December 31, 1994, 1993 and 1992
Total
Partners'
General Limited Capital
Partner Partners (Deficit)
------- -------- ---------
Consolidated balance, December 31, 1991 . $ (1,983) $ (97,710) $ (99,693)
Net loss .............................. (124) (6,093) (6,217)
--------- --------- ---------
Consolidated balance, December 31, 1992 . (2,107) (103,803) (105,910)
Net loss .............................. (127) (6,231) (6,358)
--------- --------- ---------
Consolidated balance, December 31, 1993 . (2,234) (110,034) (112,268)
Net income ............................ 2,669 114,888 117,557
--------- --------- ---------
Consolidated balance, December 31, 1994 . $ 435 $ 4,854 $ 5,289
========= ========= =========
The accompanying notes are an integral part of these consolidated statements.
Page 25 of 54
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows (in thousands)
For the years ended December 31, 1994, 1993 and 1992
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 117,557 $ (6,358) $ (6,217)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Debt premium amortization - - (2,405)
Notes receivable premium/discount
amortization (accretion) - (17) 128
Depreciation and amortization 1,982 5,723 6,193
Gain on property sales (1,631) - -
Loss on investment in real estate 1,000 - -
Gain from bankruptcy reorganization
and early extinguishment of debt (119,954) - -
Changes in assets and liabilities:
Decrease (increase) in receivables (85) (79) 140
Increase in deferred leasing
commissions and deferred loan fees (462) (212) (512)
Decrease (increase) in prepaid
incentive and transaction fees
(paid to related party) 348 662 625
Decrease (increase) in legal
retainers - 443 (443)
Decrease (increase) in other assets (158) 296 (7)
Decrease in deposits (191) - -
Decrease in prepaid expenses (69) - -
Decrease in advance from related
parties 60 - -
Increase in accrued interest 107 - 3,903
Increase (decrease) in accounts
payable and accrued expenses (277) (1,115) 1,269
Increase (decrease) in deposits
and other liabilities (277) 55 (226)
------ ------ ------
Net cash provided by (used for) operating
activities (2,050) (602) 2,448
------ ------ ------
Cash flows from investing activities:
Purchases of real estate (318) - -
Improvements to real estate (440) (633) (980)
Proceeds from sales of real estate 5,520 - -
Decrease (increase) in restricted cash (35) (244) 157
Investment in real estate (1,000) - -
Decrease (increase) in other notes
receivable - 701 (2)
Increase in Griffin notes receivable - - (105)
------ ------ ------
Net cash provided by (used for)
investing activities 3,727 (176) (930)
------ ------ ------
</TABLE>
(continued)
Page 26 of 54
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (in
thousands) - continued For the years
ended December 31, 1994, 1993 and 1992
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Cash flows from financing activities:
Borrowings on notes payable 912 202 98
Principal payments on notes payable
and lease obligations (1,491) (150) (304)
------ ------ ------
Net cash provided by (used for)
financing activities (579) 52 (206)
------ ------ ------
Net increase (decrease) in cash and
cash equivalents 1,098 (726) 1,312
Cash and cash equivalents (net of restricted cash):
Beginning of period 1,506 2,232 920
------ ------ ------
End of period $ 2,604 $ 1,506 $ 2,232
====== ====== ======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,070 $12,219 $13,256
======== ====== ======
Supplemental disclosure of non cash transactions:
Purchase of real estate:
Increase in notes payable for
purchase of real estate $ 2,835 $ - $ -
======== ====== ======
Bankruptcy reorganization and early extinguishment of debt:
Rollout and foreclosure of real
estate, net $ 99,867 $ - $ -
======== ====== ======
Extinguishment of debt $(280,482) $ - $ -
======== ====== ======
Other $ 60,661 $ - $ -
======== ====== ======
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
Page 27 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Note. 1. SUMMARY OF ORGANIZATION
Glenborough Partners, A California Limited Partnership ("Partners"), successor
to Glenborough Limited, A California Limited Partnership pursuant to section
15d-5 of the Securities Exchange Act of 1934 was originally formed in 1986
generally to acquire 66 real estate projects from their predecessor owners in
exchange for Partnership units ("the Exchange Transaction"). Debt secured by the
properties was restructured and consolidated into one loan at that time. The
properties were managed and other services were performed by affiliates of the
general partners.
To facilitate compliance with certain recording and filing requirements, a
second limited partnership, GOCO Realty Fund I, a California Limited Partnership
formerly known as Glenborough Operating Co. Ltd., A California Limited
Partnership ("GOCO"), was formed in April 1986 to hold and operate all real and
personal property then or thereafter owned by the Partnership (the "Partnership
Property"). Partners and GOCO operated as an economic unit and unless
specifically designated otherwise, were referred to collectively as the
"Partnership". The present general partners of both Partners and GOCO are
Glenborough Realty Corporation, a California corporation ("Realty"), and Robert
Batinovich (collectively "Glenborough" or "General Partner"). Glenborough Realty
Corporation is the managing general partner of the Partnership (the "Managing
General Partner"). Glenborough Partners is the sole limited partner of GOCO.
On May 21, 1992, GOCO Realty Fund I, the partnership holding and operating the
Partnership's real property (including its related debt), filed a petition in
the United States Bankruptcy Court for the Northern District of California for
reorganization under Chapter 11 of the Federal Bankruptcy Code. On January 13,
1994, a plan of reorganization was filed with the Bankruptcy court which became
effective January 24, 1994 (see Note 10).
To facilitate the Partnership's holding and transfer of real property as set
forth under the plan of reorganization, two partnerships were created in
February 1994: (i) GPA West, L.P. ("West"), and (ii) GPA Industrial L.P.
("Industrial"). West and Industrial are subsidiaries of GOCO Realty Fund I and
as such, the financial statements have been consolidated with Glenborough
Partners. The general partners of West and Industrial are Glenborough Realty
Corporation and Robert Batinovich while the sole limited partner of each of the
two partnerships is GOCO Realty Fund I.
A third subsidiary partnership, GPA Bond L.P., was created in 1994 to hold and
operate a property purchased on December 29, 1994.
Page 28 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Allocation of Net Income/Loss and Equity (Deficit). The limited partners and
assignees have a 99% share and the general partners have an aggregate 1% share
in the net income/loss and partners' equity (deficit) of Partners. Partners was
allocated 99% of the net income/loss and partners' equity (deficit) of GOCO and
its subsidiaries and the general partners were allocated an aggregate l% of the
net income/loss of GOCO. The 1% general partner interest in both Partners and
GOCO for net income/loss and partners' equity (deficit) was equal to a 1.99%
interest on a combined basis; while the 99% limited partner interest in each of
Partners and GOCO and its subsidiaries is equal to a 98.0l% interest on a
combined basis.
After the redemption of units as part of the reorganization plan discussed in
Note 10, the general partners hold a 2.27% and share of the partnership's net
income or loss and distributions. The limited partners currently hold a 97.73%
share of the partnership's net income or loss and distributions.
Note 2. SIGNIFICANT ACCOUNTING POLICIES
Consolidation. The accompanying consolidated financial statements include the
accounts of Partners and GOCO and its subsidiaries. All significant intercompany
transactions have been eliminated.
Real Estate Investments. Land, buildings and improvements are stated at the
lower of cost or net realizable value on a property by property basis.
The depreciation of building and improvements is calculated on a straight line
basis over their estimated useful lives of 35 years for residential properties
to 50 years for commercial properties and over an average lease term of five
years for tenant improvements (see Financial Statement Schedule III).
Cash and Cash Equivalents. The Partnership considers short-term investments,
including certificates of deposit, with a maturity of three months or less to be
cash equivalents.
Restricted Cash. Proceeds from prior period sales were placed into certificates
of deposit, which were pledged as cash collateral for the debt owed to Brazos
Asset Management, Inc. (the "Brazos Debt"), formerly known as New West Federal
Debt or the American Consolidated Debt (see Note 3 - Notes Payable).
All of these certificates of deposit were released to Brazos as part of the plan
of reorganization (see Note 10).
Loan Fees and Leasing Commissions. Loan fees are costs associated with obtaining
financing and include refinancing and certain
Page 29 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
transaction fees. Loan fees are capitalized and amortized over the original term
of the related loan. Leasing commissions are capitalized and amortized over the
term of the leases to which they relate.
Accrued Interest. Pursuant to Part B of the 1987 refinanced New West Federal
Debt, interest expense of $639,375 per month was accrued through May 21, 1992,
the date of the Chapter 11 filing. Subsequent to that date and through the
completion of the reorganization on January 24, 1994, the Partnership recognized
interest expense only to the extent paid in accordance with the requirements of
Statement of Position 90-7 - Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code ("SOP 90-7").
Interest Paid. As a result of the Chapter 11 filing, a cash collateral agreement
was implemented between the Partnership and Brazos Asset Management Inc.,
("Brazos", successor to New West Federal), whereby the Partnership was required
to pay monthly, to Brazos all but $50,000 of the funds remaining in the
operating cash accounts as of the last day of the previous month. Such payments
have been applied as interest expense. Total cash paid for interest, for all
notes, during 1994, 1993 and 1992 was $3,070,000, $12,219,000 and $13,256,000,
respectively.
Rental Income. Certain commercial lease agreements provide for significant
amounts of free rent to tenants. In such cases, revenue is recognized at a
constant rate over the term of the lease.
Net Income (Loss) Per Limited Partner Unit. For financial reporting purposes,
4,899,488 units were issued to limited partners upon the consummation of the
Exchange Transaction. After considering the MFCo. and Fraser Rollouts (see Note
4 - Property Sales), the units outstanding were adjusted to 3,442,ll0 for
December 3l, l990 and 1991. At the close of business on December 31, 1991, a
limited partner reassigned 27,271 units back to Glenborough Limited, resulting
in 3,414,839 units outstanding at December 31, 1992 and 1993. The net loss per
limited partner unit for December 31, 1993 and prior is derived by dividing
98.0l% of the net loss by the number of units outstanding to the limited
partners.
For financial reporting purposes, after the redemption of units as a result of
the plan of reorganization discussed in Note 10, 3,146,492 weighted average
units were outstanding to limited partners for the year ended December 31, 1994.
Net income (loss) per unit in 1994 is derived by dividing 97.73% of the net
income (loss) by the weighted average number of units outstanding to the limited
partners.
Page 30 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Note 3. NOTES PAYABLE
Historical Indebtedness
1987 Debt Refinancing. In l987, agreements were signed between American and the
Partnership which provided for, among other items, the consolidation of various
American notes into one amended consolidated note (the "Brazos Debt") and the
transfer of 541 homes back to American for debt relief of approximately $35
million.
The new note which became effective March 1, l987, was divided into two parts,
Part A and Part B. Part A provided for principal only payments at various
scheduled amounts through March l, l99l, and interest only payments thereafter
to maturity at June 30, l996. Interest was a stated dollar amount from February
28, l99l through March l, l993 regardless of the principal balance. From March
l, l993 through the maturity date of June 30, l996, the monthly interest rate
floated at the Federal Home Loan Board 11th District Cost of Funds plus 250
basis points. Part B was a $45 million note which bore simple non-compounding
interest at l7.05% per annum, payable monthly in arrears. Monthly interest was
forgiven through February l990 on this part.
With the Partnership filing for reorganization under Chapter 11 of the Federal
Bankruptcy Code on May 21, 1992 and pursuant to the SOP 90-7, interest ceased to
be accrued as of May 21, 1992.
The homes sold to American, for debt relief of approximately $35 million, had a
net book value of approximately $l6 million. Because the Partnership originally
purchased these homes from American, no gain was recognized on this transaction.
The difference between net book value and appraised value was transferred to the
carrying amount of the Brazos Debt. The revised net book value of the Brazos
Debt was compared to cash payments required under the amended note resulting in
a constant effective interest rate of 7.44%. The discount/premium on the debt is
amortized/accreted to yield this rate over the life of the note. This
amortization schedule assumed that the properties, except for one which was
contemplated to be sold at the date of refinancing, were to be held for the full
term of the note.
Chapter 11 - Bankruptcy Reorganization - In 1991 and 1992, the Resolution Trust
Corporation disapproved the terms of two separate proposed revisions of the
terms of the Brazos Debt that had been negotiated by management and New West
Federal. As a result, a forbearance agreement suspending the implementation of
required debt service increases expired under the then existing debt terms.
Without a modification or forbearance, the Partnership was unable to meet its
May 1, 1992 debt service payment to New West Federal.
Page 31 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
On May 21, 1992, New West filed a judicial foreclosure action in the Superior
Court of Orange County. Also on May 21, 1992, the Partnership (i) filed a civil
action against New West Federal in the Superior Court of San Mateo County,
seeking in excess of $30 million in damages for a variety of claims, including
misrepresentation and breach of contract, and (ii) filed a petition in the
United States Bankruptcy Court for the Northern District of California for
reorganization under Chapter 11 of the Federal Bankruptcy Code. Since the filing
of those actions, the Partnership endeavored to bring about settlement
discussions with Brazos.
On January 13, 1994, the United States Bankruptcy Court for the Northern
District of California confirmed a plan of reorganization which became effective
on January 24, 1994. (See Note 10 for discussion the reorganization plan).
Current Indebtedness
The two subsidiaries of GOCO Realty Fund I, GPA West, L.P. and GPA Industrial,
L.P. obtained the Rosemead Springs and J.I. Case/Navistar properties in February
1994 and May 1994, respectively, as described in the plan of reorganization
through the payment to Brazos of the negotiated release prices for each of the
properties. This required GPA West, L.P. and GPA Industrial, L.P. to secure
financing.
GPA West, L.P. incurred indebtedness of $2,500,000 to Mid-Peninsula Bank,
secured by Rosemead Springs. The interest rate on this promissory note payable
is two (2) percentage points per annum over the Mid-Peninsula Bank Base Rate.
Regular interest payments are due monthly until the May 1995 maturity, at which
time the entire principal balance and accrued interest are due.
GPA Industrial, L.P. incurred indebtedness of $12,000,000 to Heller Financial,
Inc. ("Heller") secured by the four J.I. Case/Navistar properties. The interest
rate on this promissory note payable is five (5) percentage points per annum
over the three month London Interbank Offered Rate ("Libor") and is reset the
first business day of each month. Monthly $25,000 principal plus interest
payments are due during the first two years of the loan. In the third fiscal
year of the loan monthly payments increase to $33,333 principal plus interest.
Finally, beginning with the fourth fiscal year of the loan until the May 2004
maturity, monthly payments will increase to $41,667 principal plus interest.
In August 1994, Glenborough Partners borrowed $1,412,000 from an unaffiliated
lender to pay off professional fees and the general partner transaction fees on
the reorganization discussed in Note
Page 32 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
10. This loan was repaid on December 23, 1994, with the proceeds from the sale
of the Palo Alto property (see Note 4).
On December 29, 1994, GPA Bond, L.P. purchased the Bond Street Building from
Heller. Heller financed $2,835,000 towards this transaction at the rate of three
hundred fifty (350) basis points plus the Base Rate (which is defined as the
three month Libor rate). Monthly interest only payments commenced February 1,
1995 and will continue until the maturity date of December 31, 1999. Principal
payments are required on a quarterly basis commencing April 15, 1995 at an
amount of excess cash flow, which is defined as net cash flow less: (i) current
payments due on the loan; and (ii) a ten percent (10%) per annum return on
equity to the borrower.
Subject to the effect of the reorganization plan, the Partnership had the
following notes payable including premium outstanding at December 31 (in
thousands):
1994 1993
--------- ---------
Brazos Debt:
Principal ............................. -- $ 235,032
Premium ............................... -- 38,641
--------- ---------
Total ................................. -- 273,673
Other notes payable:
GPA Industrial - Heller ............... $ 11,825 --
GPA West - Mid Peninsula .............. 2,500 --
GPA Bond - Heller ..................... 2,835 --
Miscellaneous ......................... -- 470
--------- ---------
Total ................................. 17,160 470
--------- ---------
TOTAL .......................................... $ 17,160 $ 274,143
========= =========
Principal repayments scheduled on all notes outstanding at December 31, 1994
assuming current interest rates are as follows (in thousands):
1995 $ 2,800
1996 358
1997 458
1998 500
1999 3,335
Thereafter 9,709
-------
TOTAL $ 17,160
=======
Page 33 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Note 4. PROPERTY SALES
MFCo. Rollout. Effective January 1, 1987, the Partnership transferred to MFCo.,
under an installment land contract, equitable title to nine of the 15 properties
originally contributed by MFCo. and its affiliates to the Partnership in the
Exchange Transaction. These properties had an original exchange value of
$73,852,000. In consideration for the properties and related net assets and
liabilities, David W. Mariani and MFCo. transferred back 1,110,863 units of
partnership interest in Limited and gave the Partnership a note in the original
principal amount of $53,172,000, which included undrawn reserves of $1,960,000.
This amount approximated the prorata share of refinanced Brazos Debt (see Note 3
- - Notes Payable) attributable to the MFCo. Rollout properties and had an
original maturity date of June 30, 1996.
The difference between the promissory note received from MFCo. and the book
value of the assets transferred was recorded on the Partnership's books as
deferred gain, an offset to the note receivable. An additional adjustment
affecting the promissory note was made subsequent to the Rollout, due to a
provision in the original master lease on one of the properties rolled-out. The
note receivable was discounted to yield the same effective interest rate as the
Brazos Debt, 7.44% (see Note 5). No accounting recognition had been given to the
surrender of Partnership Units. At December 31, 1993, the net Griffin note
receivable was $44,830,000.
In early 1994, pursuant to the plan of reorganization, the Partnership
transferred to Brazos its interest and rights to this Griffin note receivable.
The following are combined statements of property revenues and expenses for the
MFCo. Rollout properties for 1993 and l992, when the Griffin note was in effect
(in thousands):
1993 1992
------ -------
Rental Revenue ............................. $ 5,334 $ 5,212
Other Revenue .............................. 390 450
------- -------
Total Revenue ........................ $ 5,724 5,662
------- -------
Depreciation ............................... (1,060) (1,088)
Interest Expense ........................... (2,885) (4,652)
Property Taxes ............................. (748) (599)
Other Operating Costs ...................... (1,016) (1,203)
------- -------
Total Expense ........................ (5,709) (7,542)
------- -------
Net Income (Loss) .................... $ 15 $(1,880)
======= =======
Page 34 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Coherent Auburn & Coherent Palo Alto - On February 4, 1994, the Partnership sold
the Coherent Auburn facility to the tenant for $3,650,000. After paying
approximately $93,000 for other fees, $500,000 for Brazos' release of the
Rosemead Springs Business Park, and $750,000 for Brazos' release of Burlingame
Plaza, the Partnership applied most of the remaining proceeds towards Brazos'
lien release price for four properties known as the J.I. Case and Navistar
buildings. The gain on sale was approximately $1,503,000.
On December 22, 1994, the Partnership sold the property formerly known as
Coherent Palo Alto for $4,300,000. After paying approximately $87,000 for other
fees, the Partnership received gross proceeds of $4,213,000. The Partnership
then paid off a note payable for $1,358,000 on December 23, 1994. The remaining
balance was added to working capital reserves.
Note 5. NOTES RECEIVABLE
Notes receivable generally result from the disposition of rental properties. At
December 31, 1993, the Partnership had two notes which bore interest at 8.75%
and 11% per annum. Notes arising from sales are typically secured by deeds of
trust or letters of credit, while the note resulting from the MFCo. Rollout, net
of deferred gain, was secured by an Installment Sale Land Contract, Security
Agreement and Assignment of Rents. As discussed in Note 4, premium on the
Griffin Note Receivable was accreted and amortized based on the 7.44% internal
rate of return on the Brazos Debt (see Note 3).
Page 35 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
The following table lists the notes receivable outstanding as of December 31,
1993 (in thousands):
Building/Maker
Maturity Date Interest 1993
- -------------- -------- -------
MFCo. 5% - 10% Principal $ 53,057
Rolled-Out Premium 4,092
Properties/ Deferred Gain (12,319)
-------
Griffin
Investments/ Total Griffin
6-30-96 Notes Receivable $ 44,830
=======
Burlingame Prime plus Principal $ 121
Plaza/ 2% (plus 5%
Robert Fraser/ while in
6-30-96 default)
--------
Total Other Notes Receivable $ 121
=======
Prior to May 21, 1992, the Partnership recognized interest income on the Griffin
note receivable at an effective rate of 7.44% as discussed previously.
Subsequent to that date, the Partnership only recognized interest income to the
extent cash was received from Griffin and ceased to accrue interest receivable
in accordance to SOP 90-7.
Because the properties underlying these notes in part secure the Brazos Debt,
the notes were included as part of the plan of reorganization that was confirmed
by the Bankruptcy Court on January 13, 1994 (see Note 10). Under the plan of
reorganization, the Griffin note was transferred to Brazos and the Fraser note
was paid in the first quarter of 1994.
Note 6. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions are used to estimate the fair value of
each class of instruments for which it is practical to estimate that value:
a) Cash and cash equivalents - For those short term
instruments the carrying amount is a reasonable estimate of
fair value.
b) Restricted cash - For those short term instruments the
carrying amount is a reasonable estimate of fair value.
c) Other notes receivable - For these instruments, the
Page 36 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
carrying amount is a reasonable estimate of the fair value given
prevailing interest rates and terms of similar instruments.
d) Griffin notes receivable and Brazos notes payable - These notes
are interdependent and given the pending reorganization (Note
10), it is not practical or possible to estimate the fair value
of either instrument.
e) Heller and Mid Peninsula notes payable - The carrying amount is a
reasonable estimate of the fair value given prevailing interest
rates and terms of similar instruments.
Note 7. TENANT LEASES
Future minimum lease receivables under noncancellable operating leases on
currently owned properties as of December 3l, l994 are as follows (in
thousands):
1995 $ 2,960
1996 2,778
1997 2,575
1998 2,539
1999 2,444
Thereafter 9,277
-------
TOTAL $ 22,573
=======
Two tenants have options to purchase certain properties. One tenant, J.I. Case
did not exercise its option to purchase the Kansas City and Memphis properties
on March 1, 1993, but has an option to purchase the property every three years
thereafter, at a price equal to fair market value, but not less than $2,061,000
(Kansas City) and $1,664,000 (Memphis). The other tenant, Navistar did not
exercise its option to purchase the Baltimore and West Chicago properties on
March 1, 1993, but has an option to purchase the property every three years
thereafter, at a price equal to fair market value, but not less than $8,195,000
(Chicago) and $3,700,000 (Baltimore), and not more than $9,952,000 (Chicago) and
$4,200,000 (Baltimore). These figures are determined in accordance with a
formula specified in a 1990 modification of the lease. These figures may change
in future years based on the formula specified in the modification.
Note 8. RELATED PARTY TRANSACTIONS
Background
As discussed in Note 1 - Summary of Organization, the general partners of
Partners and GOCO and its subsidiaries are Realty and
Page 37 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Robert Batinovich. Realty is the managing general partner of the Partnership and
has the exclusive management and control of the business of the Partnership.
Indemnification of General Partners
In September 1992, Sleepy Hollow Associates, holder of the second deed of trust
on the Sleepy Hollow property (a property transferred to Brazos in 1994 pursuant
to the reorganization plan), made a demand upon Robert Batinovich, a co-general
partner of the Partnership, for payment under his guarantee of GOCO Realty Fund
I's promissory note to Sleepy Hollow Associates. Mr. Batinovich negotiated a
discount from $90,000 to $70,000 and purchased the note from Sleepy Hollow
Associates and paid Sleepy Hollow Associates the discounted amount.
Pursuant to the Indemnification Provision of the Limited Partnership Agreement,
the Partnership reimbursed Mr. Batinovich for the $70,000. However, on December
31, 1993, the Partnership had not relieved the original note of $90,000 because
it is a prepetition liability and as such, payment had not yet been approved by
the Bankruptcy Court. As a result, the $70,000 reimbursement was recorded as
receivable from Mr. Batinovich.
Fees to Affiliates
Prior to May 21, 1992, Realty and its affiliates received expense
reimbursements, fees, and other compensation for services provided to the
Partnership pursuant to the Limited Partnership Agreement as follows:
Transaction Fee - 2% of qualifying transaction price
Property Management Fees - 3 to 5% of gross property receipts
Incentive Fee - .5% of the fair value of assets to the extent earnings exceed
$1.50 per unit
General and Administrative Expenses - actual costs reimbursable
Page 38 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
After May 21, 1992, by order of New West Federal and the Bankruptcy Court,
Realty and its affiliates received expense reimbursements, fees, and other
compensation for services provided to the Partnership pursuant to the Limited
Partnership, Cash Collateral and Property Management Agreements (incorporated by
reference to Exhibit 10.39 to the Partnership's Annual Report on Form 10-K dated
December 31, 1992 - No. 33-3657). The items amended were as follows:
Property Management Fees - 2 to 5% of gross property receipts or a minimum of
$49,300 per month
Leasing Fees - 7% of total first year rent, declining to 2% of rent for the
11th year and beyond
After obtaining selected properties through the payment of Brazos' lien release
prices, new subsidiary partnership were created. Pursuant to the Limited
Partnership Agreements (incorporated by reference to Exhibits 10.40 through
10.43 to the Partnership's Annual Report on Form 10-K dated December 31, 1994 -
No. 33-3657), Realty and its affiliates are entitled to receive expense
reimbursements, fees, and other compensation for services provided to the
Partnership as follows:
Property management fees - 3 to 5% (10% for single-family residences) of gross
receipts collected
Incentive fee - .5% of the fair value of assets to the extent earnings exceed
$1.50 per unit
Transaction fee - 2% of qualifying transaction price
Refinancing fee - 1% of qualifying net loan refinancing proceeds
Fees and allocated expenses paid by the Partnership to affiliates for the years
ended December 31, 1994, 1993 and 1992 are as follows (in thousands):
1994 1993 1992
------ ------ -----
Property Management Fees ............. $ 239 $ 736 $ 831
Reimbursed General and
Administrative Expenses ............. 571 1,148 1,163
------- ------- -------
Total Management Fees and
Reimbursed General and
Administrative Expenses ............. $ 810 $ 1,884 $ 1,994
======= ======= =======
Leasing fees ......................... $ 50 $ 84 $ 267
======= ======= =======
In 1992, Glenborough was reimbursed $762,000 for salaries and benefits of
on-site management, maintenance and landscape employees and $219,000 for
miscellaneous reimbursements. During 1992, with Glenborough under no obligation
to immediately reimburse the
Page 39 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Partnership for the balance in prepaid incentive fees, the Partnership began
amortizing monthly overhead reimbursements from prepaid incentive and
transaction fees in lieu of actual payments.
In 1993, Glenborough was reimbursed $751,000 for salaries and benefits of
on-site management, maintenance and landscape employees and $156,000 for
miscellaneous reimbursements. During 1993, the Partnership continued to amortize
monthly overhead reimbursements from prepaid incentive fees. The Partnership
amortized 56% of the total monthly overhead reimbursements from prepaid
incentive and transaction fees in lieu of actual payments.
In 1994, Glenborough was reimbursed $206,000 for salaries and benefits of
on-site management, maintenance and landscaping employees and $19,000 for
miscellaneous reimbursements. During a portion of 1994, the Partnership
continued to amortize monthly overhead reimbursements from prepaid incentive
fees. The Partnership amortized 61% of the total overhead reimbursements from
prepaid incentive and transaction fees in lieu of actual payments.
Loss on investment in real estate
Through the May 1994 escrow related to the Partnership's obtaining free and
clear title from Brazos on the properties known as the J.I.Case and Navistar
buildings, the Partnership made a $1,000,000 principal paydown on a note payable
for an affiliated partnership. Financing for the J.I.Case and Navistar buildings
was extremely difficult to find in the current market, so as an inducement for
the lender to finance this release price purchase, the Partnership paid down a
portion of an affiliate's note payable in good faith. In December 1994, the
Partnership and the affiliated partnership, UCT Associates, A California Limited
Partnership ("UCT") agreed that the $1,000,000 paid by the Partnership on behalf
of UCT was an investment in UCT. Coupled with that, Robert Batinovich
contributed his limited partner interest in the profits and losses of UCT. This
gave the Partnership a 45% non-voting limited partner interest, a 99% allocation
of future income and losses, and an economic interest in any future upside of
this property, without exposure to any loss. This was made possible after
Glenborough waived a portion of its potential transaction fees on the
disposition of properties in 1994.
At December 31, 1994, the General Partner believes that there is no real equity
in UCT, therefore the $1,000,000 invested in UCT was recognized as a loss on
investment in real estate.
Page 40 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Note 9. OPTION PLAN
The Partnership's Option Plan provides for the grant of nonstatutory options to
purchase units to the General Partners and the officers, directors, employees
and certain consultants of the Managing General Partner, the property manager
and its affiliates. Individuals who render services to Realty, Glenborough or
its affiliates as an independent contractor may be considered an "employee" for
purposes of the Option Plan, provided services are rendered on a continuing
basis. In general, options exercisable on the date of termination of employment
may remain exercisable for up to one year following termination.
At December 31, 1993, options to purchase 14,890 units at an exercised price of
$20 were outstanding to former employees and 269,728 units at an exercise price
of $6.50 per unit were outstanding to 14 persons including 9 officers, directors
or affiliates of the managing general partner. At December 31, 1994, options to
purchase 14,890 units at an exercise price of $20 and 2,000 units at an exercise
price of $6.50 per unit were outstanding to former employees and 267,728 units
at an exercise price of $6.50 per unit were outstanding to 13 persons including
9 officers, directors or affiliates of the managing general partner. No options
had been exercised as of December 31, 1994.
Note 10. CHAPTER 11 - PLAN OF REORGANIZATION AND RELATED PRO FORMA
BALANCE SHEET (UNAUDITED)
On May 21, 1992, GOCO Realty Fund I, the partnership holding and operating the
Partnership's real property (including its related Brazos Debt), filed a
petition in the United States Bankruptcy Court for the Northern District of
California for reorganization under Chapter 11 of the Federal Bankruptcy Code.
On January 13, 1994, GOCO Realty Fund I entered a plan of reorganization in the
United States Bankruptcy Court (the "Court") for the Northern District of
California. The plan was confirmed by the Court and the plan became effective
January 24, 1994.
The following is a brief description of the principal points of the plan of
reorganization.
1. The claims of all creditors were satisfied in full.
2. Transfer to Brazos of the Partnership's interest in the
restricted cash and Griffin note receivable.
Page 41 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
3. Twelve properties have been transferred into two separate rollouts,
four to Griffin Investments (Phase II Rollout), and eight to a Griffin
affiliate (Phase III Rollout), in redemption of all of Griffin's (and
its affiliates') 448,894 units in Glenborough Partners. These
redemptions reduced Glenborough Partners' outstanding equity
securities from 3,410,747 limited partner units to 2,961,853 limited
partner units. Those entities were given options to pay off Brazos'
lien on those properties, at negotiated prices, or transfer them to
Brazos. The options on both the Phase II and the Phase III Properties
were not exercised, and the properties were transferred to Brazos.
4. GOCO's obligation to deliver the property known as Burlingame Plaza to
Robert Fraser was satisfied through the payment by GOCO Realty Fund I
of $750,000 toward the price charged by Brazos for release of
Burlingame Plaza, which was then delivered to Mr. Fraser free and
clear following his payment of $150,000 owed by him to GOCO. GOCO paid
this amount over to Brazos against the balance of the release price.
5. The claims of Brazos were satisfied through a multipart transaction
including the following:
a. Brazos unconditionally released its lien on two properties; (i)
a 50,000-foot industrial facility in Auburn, California, which
was leased to Coherent, Inc. -the release of this lien occurred
on February 4, 1994, as part of a sale of the property to the
tenant ; and (ii) a vacant 95,500 square foot industrial/office
facility in the Stanford Business Park in Palo Alto,
California.
b. GOCO paid Brazos the sum of $500,000, from the Coherent Auburn
sale, discussed below, in return for which Brazos released its
lien on the property known as Rosemead Springs Business Park in
El Monte, California - this transaction occurred on February 4,
1994.
c. GOCO had an option (exercisable at any time prior to April
30, 1994) to obtain a release of the Brazos lien as to any
of the remaining properties subject to Brazos' lien (the
"Option Properties") by paying a negotiated release price to
Brazos. The Partnership exercised its option on eight
properties as discussed in paragraph 4, 5.a and 5.b above
and 6. below. The remaining options were not exercised and
those properties were transferred to Brazos in satisfaction
of the remaining balance of Brazos claims in May 1994.
Page 42 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
6. GOCO closed the sale of the Coherent Auburn facility to the tenant for
$3,650,000 on February 4, 1994, and applied a portion of the net
proceeds from the sale toward the payment of the release price for the
Rosemead Springs property referred to in paragraph 5.b., above. Most
of the remaining proceeds were applied toward the partial paydown of
Brazos' discounted lien release price for four of the Option
Properties referred to in paragraph 5.c., above. The balance of the
funds required for the payment of those release prices were financed
through a $12 million loan obtained by GPA Industrial, L.P. from
Heller Financial, Inc. Such financing was applied to the release of
the liens on the two properties known as the J.I. Case buildings and
the two properties known as the Navistar buildings. The total release
price for these properties and the Rosemead property was $14,500,000.
7. Included in the above transactions, was $962,000 in net transaction
fees payable to a general partner which was paid in August 1994.
The impact of the reorganization is a $119,954,000 extraordinary gain from
bankruptcy reorganization and early extinguishment of debt. The consolidated
financial statements include adjustments that arose from the reorganization
plan.
The ultimate result is (i) GPA West obtaining Coherent Palo Alto free and clear,
which was subsequently sold on December 22, 1994 (see Note 4); (ii) GPA West
obtaining Rosemead Springs, financed through debt of $2,500,000; and (iii) GPA
Industrial obtaining the J.I. Case and Navistar buildings financed through debt
of $12,000,000.
Note 11. INCOME TAXES
Federal and state income tax laws provide that the income or loss of the
Partnership is reportable by the Partners in their individual tax returns.
Accordingly, no provisions for such taxes have been made in the accompanying
financial statements. The Partnership reports certain transactions differently
for tax and financial reporting purposes.
The Partnership's tax returns, its qualification as a partnership for Federal
income tax purposes, and the amount of taxable income or loss are subject to
examination by the Federal and State taxing authorities. If such examinations
result in changes to the Partnership's taxable income or loss, the tax liability
of the partners could change accordingly.
Page 43 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
For Federal income tax reporting, (a) revenues and expenses are recognized on an
accrual basis, i.e. lease income is recognized under the terms of the lease
contract, (b) fees paid for services related to seeking and evaluating potential
real estate investments are deducted if and when the plans of acquisition are
subsequently abandoned, (c) depreciation is provided for under accelerated and
modified accelerated cost recovery methods, (d) certain organizational costs
classified as syndication costs for tax purposes are not deductible, and (e) bad
debts are deducted and written off when deemed uncollectible.
The following is a reconciliation for the years ended December 31, 1994, 1993
and 1992, of the net income (loss) for financial reporting purposes to the
taxable income (loss) determined in accordance with accounting practices used in
preparation of Federal income tax returns.
1994 1993 1992
------ ------ -----
(in thousands)
Net income (loss) per
financial statements ................ $ 117,557 $ (6,358) $ (6,217)
Adjustments:
Depreciation ................ 1,132 (1,838) (1,326)
Interest and Original
Issue Discount ............ 70 529 935
Loan Fee Amortization ....... (2,626) (51) (51)
Prepaid Income .............. (339) 42 (236)
Free Rent Revenue ........... -- (30) 474
Gain on disposition of
real estate ................ (95,188) -- --
Loss on investment in
real estate ................ 1,000 -- --
Other ....................... (74) 166 13
---------- ---------- ----------
Partners' income (loss)
for Federal income tax
purposes ............................ $ 21,532 $ (7,540) $ (6,408)
========== ========== ==========
Page 44 of 54
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to the Consolidated Financial Statements
December 31, 1994, 1993 and 1992
The following is a reconciliation as of December 31, 1994 and 1993 of partners'
equity (deficit) for financial reporting purposes to partners' equity (deficit)
for Federal income tax purposes.
1994 1993
----- ------
(in thousands)
Partners' equity (deficit) per
financial statements ........................ $ 5,289 $(112,268)
Adjustments:
Real Estate Investments ............. (14,500) 85,586
Depreciation ........................ 5,454 (42,875)
Loan Fees Net of
Amortization ...................... 148 73
Unearned Revenue .................... -- 339
Free Rent ........................... -- (328)
Bad Debt ............................ -- 117
Unit Redemptions .................... (35,501) (274)
Other ............................... 262 212
--------- ---------
Partners' equity (deficit) for
Federal income tax purposes ................. $ (38,848) $ (69,418)
========= =========
12. SUBSEQUENT EVENT
In March 1995, GPA West purchased a $1,908,000 note receivable from California
Federal Bank, secured by a first deed of trust on a property owned by an
affiliate. This transaction was funded from the proceeds of the Palo Alto
property sale discussed in Note 4. The note currently bears interest at 7.958%
until an anticipated loan modification is ratified in the second quarter of
1995.
Page 45 of 54
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1994
(in thousands)
Column A Column B Column C Column D Column E
- ---------- ---------- ---------- ---------- ------------------------------
Net Costs
Capitalized
Initial (Reduced)
Cost to Subsequent to Gross Amount at Which
Partnership Acquisition Carried at Close of Period
---------------- ------------- ------------------------------
Buildings
and
Properties Encumbrances Land Buildings Improvements Land Improvements Totals
- ---------- ------------ ---- --------- ------------ ---- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Navistar &
J.I. Case/
Various Midwest/
East Cities $11,825 2,554 21,699 (9,285) 1,572 13,396 14,968
Rosemead Springs
Business Center,
El Monte, CA (1) 2,500 2,874 9,792 (12,666) - - -
Bond Street
Building,
Farmington
Hills, MI 2,835 473 2,680 - 473 2,680 3,153
------- ------- ------- -------- ------ ------- --------
$17,160 $ 5,901 $34,171 $(21,951) $2,045 $16,076 $18,121
======= ======= ======= ========= ====== ======= =======
</TABLE>
Column A Column F Column G Column H Column I
- ---------- ---------- ---------- ---------- ---------
Life on which
Depreciation
in the latest
Accumulated Date of Date Income Statement
Properties Depreciation Construction Acquired Is Computed
- ---------- ------------ ------------ --------- ----------------
Navistar &
J.I. Case/
Various Midwest/
East Cities 2,901 1950-1977 3/01/84 50 yrs
Rosemead Springs
Business Center,
El Monte, CA (1) - 1980 7/15/83 50 yrs
Bond Street
Building,
Farmington
Hills, MI - - 12/28/94 -
-------
$ 2,901
======
Note (1): Rosemead Springs has been reclassified as real estate held for sale in
1994.
See accompanying reconciliations.
Page 46 of 54
<PAGE>
RECONCILIATION OF REAL ESTATE COST
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
Note to Real Estate and Accumulated Depreciation Table.
(A) In addition to these encumbrances at December 31, 1993, the properties are
collateral for the Brazos Debt in the aggregate amount of $235,032,000, plus
accrued interest of $21,237,000.
1994 1993 1992
------ ------ -----
Balance, Beginning of Period ........ $ 166,576 $ 165,943 $ 164,963
Real estate addition ................ 3,153 -- --
Improvements ........................ 440 633 980
Disposition of real estate .......... (144,814) -- --
Real estate held for sale ........... (7,234) -- --
--------- --------- ---------
Balance, End of Period .............. $ 18,121 $ 166,576 $ 165,943
========= ========= =========
RECONCILIATION OF ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
1994 1993 1992
------ ------ -------
Balance, Beginning of Period ........ $ 42,875 $ 38,548 $ 33,727
Depreciation Expense ................ 1,467 4,327 4,821
Disposition of real estate .......... (38,765) -- --
Real estate held for sale ........... (2,676) -- --
-------- -------- --------
Balance, End of Period .............. $ 2,901 $ 42,875 $ 38,548
======== ======== ========
The aggregate cost basis of real estate owned at December 31, 1994, for Federal
income tax purposes was approximately $ 9,908,000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Page 47 of 54
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
GENERAL PARTNERS
The Partnership has no directors or executive officers. The general partners of
the Partnership are Glenborough Realty Corporation (the "Managing General
Partner") and Robert Batinovich. For informational purposes, the following are
the names and additional information relating to each of the controlling
persons, directors and executive officers of the Managing General Partner as of
March 1, 1995:
Name Age Position
- ---- --- --------
Robert Batinovich 58 President and Chairman of the Board
Andrew Batinovich 36 Senior Vice President, Chief
Financial Officer and Director
Sandra L. Boyle 46 Vice President
Barbara L. Evans 54 Vice President, Secretary and
Corporate Counsel
Eugene F. Daly 51 Director
Wallace A. Krone Jr. 63 Director
Laurence N. Walker 62 Director
J. Sydney Whalen 60 Director
The following is a brief description of the background and experience of Robert
Batinovich and each of the officers and directors of Glenborough Realty
Corporation.
Robert Batinovich has been the President and a Director of Glenborough
Corporation since its inception in l978 and of Glenborough Realty Corporation
since its inception in l985. He has been the Chief Financial Officer ("CFO") of
Glenborough Corporation since April l986 and the CFO of Glenborough Realty
Corporation from April l986 through April l988. He was a member of the
California Public Utilities Commission from l975 to January l979 and served as
its Chairman from January l977 to January l979. He has extensive real estate
investment experience. Mr. Batinovich's business background includes managing
and owning manufacturing, vending and service companies and a national bank.
Page 48 of 54
<PAGE>
Andrew Batinovich has been Senior Vice President and Chief Financial Officer of
Glenborough Realty Corporation since April l988. He was Vice President-Property
Management of Glenborough Realty Corporation from April l986 to April l988. He
also is Senior Vice President in charge of property management and partnership
accounting for Glenborough Corporation. Prior to joining Glenborough Corporation
in June l983, he was employed at Security Pacific National Bank in its
international and corporate banking groups specializing in real estate lending.
He is the son of Robert Batinovich.
Sandra L. Boyle has been Vice President of Glenborough Realty Corporation since
February 1991. She first joined Glenborough Corporation in 1984 and is
responsible for property management, including maintenance, capital and tenant
improvements, rent collection, budgeting and supervision of regional offices.
Prior to joining Glenborough Corporation, she was a residential real estate
marketing representative for Great Western Realtors.
Barbara L. Evans has been Secretary of Glenborough Realty Corporation since
April 1986 and Vice President since February 1991. She joined Glenborough
Corporation in l985 and serves as Counsel and Secretary. She was admitted as an
attorney in the State of California in l983. Prior to attending law school and
on a part-time basis during law school, Ms. Evans was a co-owner of TES
Associates, a property management and real estate investment advisor.
Eugene F. Daly was elected a Director of Glenborough Realty Corporation in
August 1989. He is President of Daly International Financial and Insurance
Services. Mr. Daly is a Registered Principal with the National Association of
Securities Dealers (NASD) and his firm Daly International Financial and
Insurance Services is a Registered Investment Advisor with the Securities and
Exchange Commission.
Wallace A. Krone, Jr. was elected a Director of Glenborough Realty Corporation
in August 1989. He has been associated with Glenborough for approximately 15
years as an investor in Glenborough sponsored partnerships. For the past
twenty-seven years, he has been self-employed owning various restaurants in the
San Francisco Bay Area. Currently Mr. Krone owns a number of Burger King
restaurants in the same area.
Laurence N. Walker was a Director of Glenborough Corporation from October l984
to November l985 and served as Treasurer from January l985 to November l985. He
has been a Director of Glenborough Realty Corporation since its inception in
l985. He is an attorney specializing in real estate law.
J. Sydney Whalen was elected a Director of Glenborough Realty Corporation in
April l988. He is a Canadian Chartered Accountant and since l983 has been
president of Whalen & Associates, a management consulting firm specializing in
executive management and chief financial officer services to companies
experiencing operating or financial difficulties. In 1993, Mr. Whalen was a co-
Page 49 of 54
<PAGE>
founder and became President of Round Hill Securities, Inc., a securities
broker/dealer. From l975 to l982, he was Vice President-Finance and
Administration of Raymond Kaiser Engineers, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
Compensation and Fees
In accordance with the Partnership Agreement for GOCO, the Managing General
Partner receives expense reimbursements and fees for services provided to the
Partnership. Information regarding these fees and reimbursements is incorporated
herein by reference to Note 8 of the Notes to Consolidated Financial Statements
under the heading "Fees to Affiliates" and Note 1 of the Notes to Consolidated
Financial Statements under the heading "Participation in Net Income and Net
Loss".
The Partnership has no employees and pays no salary or other cash compensation,
directly to any person other than the fees and expense reimbursements described
above. All officers of the Managing General Partner currently are officers of
Glenborough Corporation and receive a salary and other benefits from Glenborough
Corporation as compensation for Partnership activities as well as other
activities of Glenborough Corporation not related to the Partnership.
Option Plan
At December 31, 1993, options to purchase 14,890 units at an exercised price of
$20 were outstanding to former employees and 269,728 units at an exercise price
of $6.50 per unit were outstanding to 14 persons including 9 officers, directors
or affiliates of the managing general partner. At December 31, 1994, options to
purchase 14,890 units at an exercise price of $20 and 2,000 units at an exercise
price of $6.50 per unit were outstanding to former employees and 267,728 units
at an exercise price of $6.50 per unit were outstanding to 13 persons including
9 officers, directors or affiliates of the managing general partner. No options
had been exercised as of December 31, 1994.
Options Issued to Officers and Directors
Number of
Name Office Units
- ---- ------ ---------
Robert Batinovich Chairman of the Board/President 38,500
Andrew Batinovich Senior Vice President/
Chief Financial Officer/Director 38,500
Sandra L. Boyle Vice President 16,000
Barbara L. Evans Vice President/Secretary 16,000
Eugene F. Daly Director 17,000
Wallace A. Krone, Jr. Director 17,000
Laurence N. Walker Director 25,000
J. Sydney Whalen Director 17,000
--------
Total 185,000
========
Page 50 of 54
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information regarding the Units owned on
December 3l, l994 by (a) each Unitholder known to the Partnership to own
beneficially more than 5% of the outstanding Units; (b) each Unitholder under
common control of an officer, director, or 5% Unitholder; (c) each individual
general partner of the Partnership and each director of the managing general
partner; and (d) all executive officers and directors of the managing general
partners as a group.
Name of Beneficial Units Exercisable Percent
Owner (Notes 1 and 2) Owned Options Owned (3)
- --------------------- ----- ------- ---------
Robert Batinovich
(Note 4) ............................... 542,868 38,500 18.20%
Robert Batinovich,
General Partner ........................ 34,577 -0- 1.08%
Glenborough Corporation ................ 116,945 10,728 4.00%
Andrew Batinovich ...................... 24,248 38,500 1.96%
Eugene F. Daly ......................... 12,640 17,000 0.93%
577 Airport Boulevard, #200
Burlingame, CA 94010
Wallace A. Krone, Jr ................... 52,026 17,000 2.16%
393 Vintage Park Drive, #120
Foster City, CA 94404
Laurence N. Walker (Note 5) ............ 27,102 25,000 1.63%
2922 Forest Avenue
Berkeley, CA 94507
J. Sydney Whalen ....................... -0- 17,000 0.53%
3201 Danville Boulevard, #100
Alamo, CA 94507
All Executive Officers and ............. 696,289 185,000 27.60%
Directors as a Group
(8 persons)
(Notes 4 and 5)
Notes:
(1) Unless otherwise indicated, the addresses of the above beneficial owners are
the same as that of the registrant.
(2) The persons named on the table have sole voting and investment power with
respect to all interests beneficially owned by them, subject to community
property laws where applicable and the information contained in the footnotes to
the table. The table assumes the exercise of outstanding options held by eight
officers
Page 51 of 54
<PAGE>
and directors and one former director to acquire an aggregate of 193,272 Units,
which are presently exercisable.
(3) Percent owned is calculated by dividing the sum of the Unitholder's Units
and exercisable options by the sum of all outstanding Units and exercisable
options.
(4) Excludes Units held by Glenborough Corporation, of which Mr. Batinovich is
an officer and director, and which is owned in majority by Mr. Batinovich.
Excludes Mr. Batinovich's 1.15% General Partner interest in the Partnership.
Excludes 14,817 Units that Mr. Batinovich may vote pursuant to powers of
attorney or as Trustee from one Unitholder, as to which Mr. Batinovich disclaims
beneficial ownership. Excludes the 0.1% General Partner interest and 1,108
Limited Partnership Units owned by Glenborough Realty Corporation, of which Mr.
Batinovich is majority owner. Excludes 5,198 Units owned by the Robert and
Garnet Anne Batinovich l982 Irrevocable Inter Vivos Trust for the benefit of
Angela Batinovich, as to which Robert Batinovich disclaims beneficial ownership.
(5) Excludes 303,979 Units that Mr. Walker may vote pursuant to a power of
attorney or as Trustee, as to which Mr. Walker disclaims beneficial ownership.
Excludes 145,907 Units owned by BOS Associates, of which Mr. Walker is the
general partner.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Fees and Reimbursable Expenses - During l994 and in accordance with the prior
and current Limited Partnership Agreements (incorporated by reference to
Exhibits 10.40 thru 10.43 to the Partnership's annual report on Form 10-K dated
December 31, 1994, No. 33-3657), the Managing General Partner received
management fees and reimbursed expenses (see Item 8., Note 8 - Related Party
Transactions).
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) (l) Financial Statements and
(2) Financial Statement Schedules
See Item 8 of this Form 10-K for the Financial Statements of the
Partnership, Notes thereto, Report of Independent Certified Public
Accountants, and Supplemental Schedules. A Table of Contents to
Financial Statements and Supplemental Schedules is included in Item 8
and incorporated herein by reference.
Page 52 of 54
<PAGE>
(3) Exhibits
Page Number or
Exhibit Incorporation
Number Description By Reference to
- -------------------------------------------------------------------------------
10.39 Cash Collateral and Property Exhibit 10.39 to
Management Agreement dated the Annual Report
July 1, 1992 and amended on Form 10-K
October 23, 1992 by and among No. 33-3657 for the
New West Federal Savings and year ended
Loan Association, GOCO Realty December 31, 1992.
Fund I and Glenborough Corporation.
10.40 Limited Partnership Agreement
of Glenborough Partners, A
California Limited Partnership
10.41 Limited Partnership Agreement of
GPA West L.P.
10.42 Limited Partnership Agreement of
GPA Industrial L.P.
10.43 Limited Partnership Agreement of
GPA Bond L.P.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed in the period subsequent to
September 30, l994.
Page 53 of 54
<PAGE>
SIGNATURES
Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ Robert Batinovich By: Glenborough Realty Corporation,
------------------------- a California corporation,
Robert Batinovich the Managing General Partner
General Partner
Date: 3/30/95 By: /s/ Robert Batinovich
--------------- -------------------------------
Robert Batinovich
President and Chairman
of the Board
Date: 3/30/95
-------------------------
By: /s/ Andrew Batinovich
------------------------------
Andrew Batinovich
Senior Vice President,
Chief Financial Officer
and Director
Date: 3/30/95
-------------------------
By: /s/ Laurence N. Walker
------------------------------
Laurence N. Walker
Director
Date: 3/30/95
-------------------------
By: /s/ J. Sydney Whalen
-----------------------------
J. Sydney Whalen
Director
Date: 3/30/95
-------------------------
(A Majority of the Board of Directors of the General Partner)
Page 54 of 54
<TABLE>
GLENBOROUGH PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
Article 1 Definitions............................................................................1
1.1 Definitions...................................................................1
1.2 Accounting Terms and Determinations...........................................7
Article 2 The Limited Partnership................................................................7
2.1 Formation of the Partnership..................................................7
2.2 Partnership Name..............................................................8
2.3 Business and Purpose..........................................................8
2.4 Principal Office..............................................................8
2.5 Term..........................................................................8
2.6 Execution of Documents........................................................9
Article 3 The General Partners...................................................................9
3.1 General.......................................................................9
3.2 Management Power..............................................................9
3.3 Powers of the Managing General Partner.......................................10
3.4 Liability of General Partners................................................17
3.5 Similar Activities of General Partners.......................................17
3.6 Indemnification of General Partners..........................................18
3.7 Other Matters Concerning General
Partners.....................................................................20
3.8 Agreements With a General Partner or a
Related Person...............................................................21
3.9 Conveyances..................................................................21
Article 4 Compensation of General Partners......................................................21
4.1 Compensation of General Partners.............................................21
Article 5 The Limited Partners, Assignees and
Transferrees..........................................................................22
5.1 Limited Liability............................................................22
5.2 Restrictions on Limited Partners
and Assignees................................................................23
5.3 Outside Activities...........................................................23
5.4 No Withdrawal or Dissolution.................................................23
5.5 Assignees....................................................................23
5.6 Transferees..................................................................24
Article 6 Meetings and Voting; Amendments.......................................................24
6.1 Meetings.....................................................................24
6.2 Notice of a Meeting..........................................................24
6.3 Record Date..................................................................25
6.4 Adjournment..................................................................25
6.5 Waiver of Notice; Consent to Meeting.........................................25
6.6 Quorum.......................................................................26
i
<PAGE>
6.7 Conduct of Meeting...........................................................26
6.8 Action Without a Meeting.....................................................26
6.9 Voting Rights................................................................27
6.10 Exercise of Voting Rights....................................................28
6.11 Amendments by the Managing General
Partner......................................................................28
6.12 Voting Rights................................................................29
6.13 Prohibited Amendments........................................................29
Article 7 Original Limited Partner..............................................................29
7.1 Admission....................................................................29
7.2 Capital Contributions........................................................29
Article 8 Capital Contributions and Initial Issuance
of Units..............................................................................29
8.1 Cash Capital Contributions...................................................29
8.2 Contributrion by Partners....................................................30
8.3 Distribution of Original Units...............................................30
8.4 General Partner Interests....................................................31
8.5 Nonassessability of Partners.................................................32
8.6 Distribution of Capital......................................................31
8.7 No Interest on Capital Contribution..........................................32
8.8 Creditor's Interest in the Partnership.......................................32
8.9 Nature of Interests..........................................................32
8.10 One Percent Interest of General
Partners.....................................................................32
Article 9 Issuance of Additional Units..........................................................32
9.1 Sale of Additional Units.....................................................32
9.2 General Partner Interests....................................................32
9.3 Preemptive Rights............................................................33
Article 10 Allocation of Net Income, Net Loss and
Tax Credits...........................................................................33
10.1 General Allocation...........................................................33
10.2 Allocation on Transfer.......................................................34
Article 11 Cash Distributions....................................................................34
11.1 Time and Amount of Cash Distributions........................................34
11.2 Distributions of Partnership Property........................................36
Article 12 Accounting and Reports................................................................36
12.1 Fiscal Year..................................................................36
12.2 Reports......................................................................36
12.3 Tax Elections................................................................37
12.4 Books and Records............................................................37
12.5 Bank Accounts................................................................38
Article 13 Transfer of Units; Certificates.......................................................38
13.1 Transfer of General Partner Interests........................................38
13.2 Transfer of Limited Partners' Units..........................................38
13.3 New Certificates.............................................................39
ii
<PAGE>
13.4 Maintenance of Transfer Records..............................................39
13.5 Legends......................................................................39
Article 14 Admission of Substituted and Additional
Limited Partners......................................................................40
14.1 Admission of Substituted Limited
Partners.....................................................................40
14.2 Admission of Additional Limited
Partners.....................................................................40
Article 15 Removal, Resignation or Withdrawal of
General Partner.......................................................................40
15.1 Removal of General Partner...................................................40
15.2 Withdrawal...................................................................41
15.3 Dissolution or Bankruptcy of
General Partner..............................................................41
15.4 Liability and Rights.........................................................42
15.5 Successor and Predecessor
General Partners.............................................................43
Article 16 Dissolution, Winding Up and Liquidation...............................................43
16.1 Dissolution..................................................................43
16.2 Authority to Wind Up.........................................................44
16.3 Accounting...................................................................44
16.4 Winding Up and Liquidation...................................................44
16.5 Claim of Limited Partners and Assignees......................................45
16.6 No Restoration of Negative Capital
Accounts.....................................................................45
Article 17 Power of Attorney.....................................................................45
17.1 Power of Attorney............................................................45
17.2 Additional Documents.........................................................46
Article 18 Miscellaneous.........................................................................47
18.1 Notices......................................................................47
18.2 Choice of Law................................................................47
18.3 Article and Section Headings.................................................47
18.4 Sole Agreement...............................................................48
18.5 Execution in Counterparts....................................................48
18.6 Remedies Cumulative..........................................................48
18.7 Waiver.......................................................................48
18.8 Waiver of Action for Partition...............................................48
18.9 Assignability................................................................48
18.10 Gender and Number............................................................48
18.11 Severability.................................................................48
Signatures.......................................................................................................49
</TABLE>
iii
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
OF
GLENBOROUGH PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
This Limited Partnership Agreement (the "Agreement"), dated as of
December 30, 1993, is made and entered into by GLENBOROUGH REALTY CORPORATION, a
California corporation and ROBERT BATINOVICH, an individual, as General
Partners, and ROBERT BATINOVICH, an individual, as the Initial Limited Partner,
and all other parties who shall become partners of this limited partnership as
hereinafter provided.
In consideration of the mutual covenants and promises herein, the
parties hereby form a limited partnership under the California Revised Limited
Partnership Act upon the following terms and conditions:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. When used in this Agreement, the following terms shall
have the meanings set forth below, except as otherwise specifically modified:
"ACT" means the California Revised Limited Partnership Act, as
amended from time to time.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as an additional Limited Partner pursuant to Article 14
hereof.
"AFFILIATE" means any Person that directly or indirectly
controls, is controlled by, or is under common control with the Person
in question.
"ALLOCABLE SHARE" of a General Partner is his or its
percentage interest as set forth in Section 8.2(B) comprising an
aggregate of one percent (1%) and of the Limited Partners and
Assignees, at any particular time, an aggregate of 99%. The "Allocable
Share" of a Limited Partner or Assignee, at any particular time, means
the percentage which the number of Units held by such Limited Partner
or assigned to such Assignee is of the total number of Units
outstanding multiplied by 99%. If at any time, the aggregate of all
General Partner Interests represents more than 1% of all Units, the
Allocable Share of all General Partners shall be the percentage
interest represented by the ratio between all such Units which are
represented by General Partner Interests and all Units, and the
Allocable Share of all Limited Partners
<PAGE>
and Assignees shall be the percentage interest represented by the ratio
between all Units held by Limited Partners and Assignees and all Units.
"ASSIGNEE" means a Person to whom one or more Units have been
assigned by a Partner but who has not become a Substituted Limited
Partner.
"ASSOCIATE means any shareholder, director, officer, employee
or agent of any General Partner and any employee or agent of the
Partnership.
"BOOK DEPRECIATION" means the depreciation, cost recovery or
amortization of nondepletable assets that would be allowable to the
Partnership for federal income tax purposes if its tax basis in such
assets were equal to the Book Value of such assets.
"BOOK GAIN" OR "BOOK LOSS" means the gain or loss that would
be recognized by the Partnership for federal income tax purposes as a
result of sales or exchanges of its assets if its tax basis in such
assets were equal to the Book Value of such assets.
"BOOK VALUE" means (a) as to property contributed to the
Partnership, its agreed value; (b) as to property acquired in any other
manner, its value as reflected on the books of the Partnership as of
the date it is acquired by the Partnership; and (c) as to property
owned by the Partnership at the time of any repurchase or issuance of
Units for money or other property, its fair market value at that time,
all adjusted for Book Depreciation.
"CAPITAL ACCOUNT" means the account (maintained on a per- Unit
basis in the case of Unitholders) which shall be credited with the
Unitholder's or General Partner's distributive share of (a) cash
contributed to the Partnership; (b) the Book Value of contributed
property; (c) Net Income; (d) the amount of Partnership liabilities
assumed by such Unitholder or General Partner or that are secured by
any Partnership Property distributed to such Unitholder or General
Partner, and (e) increases in the basis of Partnership Property
attributable to investment credit recapture; and which shall be debited
with the Unitholder's or General Partner's distributive share of (v)
cash distributions (w) the Book Value of distributed property; (x) Net
Loss; (y) the amount of liabilities of a Unitholder or General Partner
assumed by the Partnership or that are secured by any Partnership
Property contributed by such Unitholder or General Partner assumed by
the Partnership or that are secured by any Partnership Property
contributed by such Unitholder or General Partner to the Partnership;
and (z) decreases in the basis of the Partnership Property for any
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credits allowed under the Code. A Limited Partner's Capital Account
shall be the aggregate Capital Account attributable to the Units held
by such Limited Partner. In the case of transfer by an existing Partner
of a Partnership interest, the transferee will succeed to the Capital
Account relating to the Partnership interest transferred. Upon the
repurchase of Units or upon the issuance of additional Units for money
or other property (other than a de minimis amount) the Capital Accounts
of each Unitholder outstanding prior to the repurchase or issuance and
the Capital Accounts of the General Partners shall be adjusted to
reflect a revaluation of the Partnership Property on the Partnership
books to its fair market value and the Capital Accounts of all Partners
shall be adjusted simultaneously to reflect such adjustment as if the
Partnership recognized Net Income or Net Loss equal to the amount of
such adjustment. It is intended by this provision to comply with
Treasury Regulations Section 1.704-1(b) and Code Section 704(c).
"CAPITAL CONTRIBUTION" means the individual total amount
contributed by each Partner to the capital of the Partnership as
provided in Article 8 or Article 9 hereof.
"CASH AVAILABLE FOR DISTRIBUTION" means cash held by the
Partnership in excess of (a) cash required for all expenses,
liabilities and obligations of the Partnership (whether for expense
items, capital expenditures, improvements, retirement of indebtedness
or otherwise); and (b) reserves as established in the sole discretion
of the Managing General Partner for Partnership capital expenditures,
improvements, retirement of indebtedness, operations, or contingencies,
known or unknown, liquidated or unliquidated, including, but not
limited to, liabilities which may be incurred in litigation and
liabilities undertaken pursuant to the indemnification provisions of
this Agreement.
"CERTIFICATE" means a certificate, evidencing ownership of one
or more Units, in the form approved by the Managing General Partner.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the certificate of
limited partnership filed pursuant to the Act or any successor statute,
as the same may be amended from time to time.
"CLOSING DATE" means that date selected by the General
Partners for the contribution of the Exchange Assets to the
Partnership.
"CODE" means the Internal Revenue Code of 1986 or any
successor statute, as amended from time to time.
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"EXCHANGE AGREEMENT" means the agreement between the Original
Limited Partner and the Partnership whereby the Exchange Assets are
transferred to the Partnership in exchange for a number of Units equal
to the number of units of partnership interest, both general and
limited, of the Original Limited Partner that are outstanding on the
Closing Date.
"EXCHANGE ASSETS" means the GOCO L.P. Units and all other
assets contributed to the Partnership pursuant to the Exchange
Agreement.
"EXCHANGE TRANSACTION" means the transaction whereby the
Partnership will exchange Units for Exchange Assets.
"EXCHANGE VALUE" means the value assigned to the Exchange
Assets for purposes of the Exchange Transaction.
"GENERAL PARTNERS" means the Persons named hereinabove as
general partners in their capacity as general partners of the
Partnership, and any successor or additional general partners. "General
Partner" means one of the General Partners.
"GENERAL PARTNER INTERESTS" means Units designated as such
pursuant to Sections 8.4 or 9.2
"GOCO" means GOCO Realty Fund I, a California limited
partnership.
"GOCO L.P. UNITS" means the entire limited partnership
interest in GOCO.
"INITIAL LIMITED PARTNER" means Robert Batinovich.
"LIMITED PARTNERS" means the Initial Limited Partner, the
Original Limited Partner and the Additional Limited Partner for so long
as they are limited partners hereunder. "Limited Partner" means one of
the Limited Partners. No Assignee who has not been admitted as a
Substituted Limited Partner shall be considered a Limited Partner for
the purposes of this Agreement.
"LIMITED PARTNERS' UNITS" means Units held or owned by any
Person or Persons as Limited Partner(s).
"MAJORITY INTEREST" means the Limited Partners of record
holding more than fifty percent (50%) of the Units held by all Limited
Partners of record.
"MANAGING GENERAL PARTNER" means the Person so designated
pursuant to Section 3.2.
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"MEMBER" means a Person owning an interest, whether as a
general partner, limited partner, sole proprietor or otherwise, in the
Original Limited Partner.
"NET INCOME" OR "NET LOSS" means the Partnership's taxable
income or loss (as an entity) under Code Section 703 computed with the
following adjustments:
(a) Tax-exempt income described in Code Section 705(a)(1)(B)
shall be included and any expenditures not deductible in computing
taxable income shall be deductible.
(b) The only deduction for depreciation, cost recovery or
amortization shall be Book Depreciation.
(c) Book Gain or Book Loss shall be used instead of taxable
gain or loss.
"NET OTHER ASSETS (LIABILITIES)" means the cash, accounts
receivable and certain other assets, less accounts payable and certain
liabilities of the Original Limited Partner which are included in the
Exchange Assets.
"OPERATING LIMITED PARTNERSHIP" means a limited partnership or
limited partnerships between the General Partners, as general partners,
and this Partnership, as the sole limited partner or between the
General Partners, as general partners, and any partnership, as the sole
limited partner, in which this Partnership is, directly or indirectly,
the sole limited partner, as it may be altered from time to time,
formed for the purpose of holding and operating all or part of the
Partnership Property or to simplify recording or filing requirements,
or to facilitate financing or for any other proper purpose. The initial
Operating Limited Partnership shall be GOCO, formerly known as
Glenborough Operating Co., Ltd., a California Limited Partnership,
formed pursuant to an Operating Limited Partnership Agreement, dated
February 25, 1986, between the General Partners, as general partners,
and the Original Limited Partner, as the sole limited partner.
"ORIGINAL LIMITED PARTNER" means Glenborough Limited, a
California limited partnership, who becomes a Limited Partner as
provided in Article 7 hereof.
"PARTNER" means a General Partner or a Limited Partner; and
"Partners" means the General Partners and all Limited Partners.
"PARTNERSHIP" means the limited partnership created by this
Agreement and any successor partnership thereto continuing the business
of the Partnership which is a
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reformation or reconstitution of the partnership governed by this
Agreement.
"PARTNERSHIP CAPITAL" means the total of all the Partners'
Capital Accounts at any given time.
"PARTNERSHIP PROPERTY" means the Exchange Assets and any and
all other property, real or personal, now or hereafter owned by the
Partnership or an Operating Limited Partnership or in or to which the
Partnership or an Operating Limited Partnership has any interest, right
or claim and shall include any interest in any Operating Limited
Partnership received by the Partnership in exchange for Partnership
Property.
"PERSON" means an individual, partnership (general or limited
and whether domestic or foreign), joint venture, estate, association,
corporation, trust company, trust or other entity.
"PRIMARY OPERATING LIMITED PARTNERSHIP" means an Operating
Limited Partnership in which the Partnership holds a direct interest as
the sole limited partner.
"PROJECTS" means the real estate projects owned by all
Operating Limited Partnerships.
"RECORD DATE" means the date established by the Partnership
for determining (a) the identity of Partners entitled to notice of or
to vote at any meeting of Partners or entitled to vote by ballot or
give consent to Partnership action in writing without a meeting, or
entitled to exercise rights in respect of any other lawful action of
Partners, or (b) the identity of Partners and Assignees entitled to
receive any report or distribution.
"RELATED PERSON" means the Original Limited Partner, a General
Partner; or any partner, officer, director of Affiliate of any of the
foregoing.
"REQUEST AND POWER" means a request for admission as a
Substituted or Additional Limited Partner, an agreement to be bound by
the terms of this Agreement, a power of attorney and the provision of
such other information as the Partnership shall request in such forms
as are approved by the Partnership.
"RETURN OF CAPITAL" means any distribution to the Partners to
the extent that such distribution reduces the Partnership Capital. A
distribution reduces the Partnership Capital to the extent that it
exceeds the following amount: the sum of the Net Income of the
Partnership since its formation, reduced by (but not below zero) the
sum of the Net
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Losses of the Partnership since its formation and the sum of all prior
distributions.
"SECONDARY OPERATING LIMITED PARTNERSHIP" means an Operating
Limited Partnership that is not a Primary Operating Limited
Partnership.
"SUBSTITUTED LIMITED PARTNER" means a Person admitted to the
Partnership as a limited partner pursuant to Article 8, 9 or 14 hereof.
"TRANSFER AGENT" means a Person appointed by the Partnership
to act as transfer agent for the Units.
"TAX CREDITS" means all credits against income, franchise or
similar taxes, including, without limitation, investment tax credits
and credits allowable to Partners or Assignees under federal, state or
other taxing statutes.
"UNIT" means a unit of interest in the Partnership acquired or
issued pursuant to 'Articles 8 or 9. "Units" means all of such units of
interest.
"UNITHOLDER" means any Person who, for tax purposes, is to be
treated as a Limited Partner whether such Person is a Limited Partner,
an Assignee or a Member of the Original Limited Partner to the extent
it has not distributed Units to its Members.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. All accounting terms used
herein shall be interpreted, and all accounting and tax determinations hereunder
shall be made, in accordance with the following:
(a) For financial reporting purposes, the Partnership shall
adhere to generally-accepted accounting principles;
(b) For purposes of determining Partner Capital Accounts, the
Partnership shall adhere to the provisions of Treasury Regulations
Section 1.704-1(b);
(c) For purposes of determining Partner and Assignee
distributable shares of taxable income and loss, the Partnership shall
adhere to the provisions of Code Sections 704(b) and (c) and the
regulations promulgated thereunder.
ARTICLE 2
THE LIMITED PARTNERSHIP
2.1 FORMATION OF THE PARTNERSHIP. The General Partners and the Initial
Limited Partner hereby agree to form, and by execution
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of this Agreement do hereby enter into, a limited partnership under the Act,
which Act shall, except as set forth in this Agreement, govern the rights and
liabilities of the parties hereto.
2.2 PARTNERSHIP NAME. The name of the Partnership is "Glenborough
Partners, a California Limited Partnership." The Partnership shall conduct
business under such name or such other name or names as the Managing General
Partner may from time to time deem necessary, appropriate or advisable. The
Managing General Partner in its sole discretion may change the name of the
Partnership at any time and from time to time. The General Partners and, if
necessary, the Limited Partners, shall promptly execute and the Managing General
Partner shall file and record with proper offices in each jurisdiction in which
the Partnership does or elects to do business, and publish such certificates or
other statements or instruments as are required by the Act, fictitious or
assumed name acts, or any other similar statute in effect in such jurisdiction,
in order to conduct validly the Partnership business therein as a limited
partnership.
2.3 BUSINESS AND PURPOSE. The business and purpose of the Partnership
shall be to engage in the Exchange Transaction and any lawful act or activity in
which a partnership may engage, including, without limitation, to engage
generally in any and all phases of the business of owning, holding, managing,
developing, controlling, acquiring, purchasing, disposing of or otherwise
dealing in or with any interests or rights in any real or personal property,
directly or through one or more Operating Limited Partnerships or other entities
or arrangements. Without limiting the generality of the foregoing, the
Partnership may perform such other acts incidental and supplementary to the
foregoing as the Managing General Partner determines to be necessary,
appropriate or advisable.
2.4 PRINCIPAL OFFICE. The office of the Partnership within California
for purposes of Section 15614(a) of the Act shall be at 400 South El Camino
Real, Eleventh Floor, San Mateo, California 94402. The Managing General Partner
may change such office and establish other places of business for the
Partnership (within or without the State of California) as it may, from time to
time, deem necessary or appropriate; provided, however, that the Managing
General Partner shall give the Partners and Assignees notice in writing of any
change of address of the office of the Partnership and, in connection therewith,
shall amend the Certificate of Limited Partnership in accordance with the Act.
The Managing General Partner may select one or more Persons in California to act
as agent for service of process on behalf of the Partnership, including, without
limitation, a General Partner or a Related Person.
2.5 TERM. The Partnership shall commence on the date the Certificate of
Limited Partnership is filed in the office of the
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Secretary of State of California in accordance with the provisions of the Act
and shall continue until January 31, 2037, unless extended by amendment of this
Agreement or unless the Partnership is dissolved prior to that date pursuant to
Article 16.
2.6 EXECUTION OF DOCUMENTS. The Managing General Partner (or, if
required, all the General Partners) shall execute, acknowledge, file, record or
deliver all Certificates of Limited Partnership, amended certificates,
instruments or other documents and counterparts thereof and make all filings and
recordings and perform all other acts as shall be necessary to comply with the
laws of the State of California for the formation of the Partnership, thereafter
for the continued good standing of the Partnership, and, when appropriate, for
the termination of the Partnership. The Managing General Partner (or, if
required, all the General Partners) shall also execute such certificates,
amended certificates and other documents conforming hereto and perform such
recording, publishing and other acts as may be appropriate to comply with the
requirements of law for the formation, reformation, qualification and/or
operation of a limited partnership in all jurisdictions where the Partnership
may wish to do business, if deemed necessary by the Managing General Partner.
Such certificates, instruments, documents and counterparts may be signed by the
Managing General Partner on behalf of any or all of the Limited Partners acting
pursuant to the powers of attorney from the Limited Partners.
ARTICLE 3
THE GENERAL PARTNERS
3.1 GENERAL. The General Partners shall devote such time and attention
to the business of the Partnership as may be reasonably necessary to carry out
their duties hereunder in the conduct of such business, but any General Partner
and its partners, shareholders, officers, directors, employees and agents shall
have the right to be otherwise employed by an entity or entities other than the
Partnership, including, without limitation, Affiliates of the Partnership, on a
part-time or full-time basis. Nothing contained herein shall prevent a General
Partner or any partner, shareholder, officer, director, employee or agent of a
General Partner from becoming an Assignee or a Substituted or Additional Limited
Partner, whereupon such Person shall be entitled to all rights, shall be subject
to all obligations and shall be deemed, as to such Units, an Assignee or a
Limited Partner, as applicable.
3.2 MANAGEMENT POWER. The Managing General Partner shall have full,
exclusive and complete discretion in the management and control of the business
of the Partnership for the purposes herein stated, and shall make all decisions
affecting the business of the Partnership, shall act as tax matters partner for
the Partnership, and may take such actions as it deems necessary or appropriate
to
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accomplish the purposes of the Partnership as set forth herein. The Managing
General Partner shall be Glenborough Realty Corporation and any successor to the
Managing General Partner which becomes the Managing General Partner of the
Partnership pursuant to Article 15. If there is no successor which becomes a
Managing General Partner pursuant to Article 15, then Robert Batinovich shall
become Managing General Partner until a meeting of the Partners can be convened
to elect a Person to serve as a General Partner and as Managing General Partner
hereunder. Except as may otherwise be set forth in this Agreement, no General
Partner, other than the Managing General Partner, shall have any authority,
right or power to bind the Partnership or to manage or control the business of
the Partnership in any manner whatsoever.
3.3 POWERS OF THE MANAGING GENERAL PARTNER. Subject to the provisions
of Article 6 vesting certain voting rights in the Limited Partners, in
connection with such management and control, the Managing General Partner shall
have the power and authority to do or cause to be done any and all acts, at the
expense of the Partnership, deemed by the Managing General Partner to be
necessary or appropriate to carry out the purposes of the Partnership. The power
and authority of the Managing General Partner shall be liberally construed to
encompass all acts and activities in which a partnership may engage. The power
and authority of the Managing General Partner shall include, without limitation,
the power and authority:
(A) To engage in the Exchange Transaction and to acquire, own,
lease, sublease, manage, hold, deal in, control or dispose of any
interests or rights in real or personal property, including, without
limitation, the powers to sell, exchange, mortgage, pledge, convey in
trust, enter into joint ventures or partnerships respecting or
otherwise hypothecate all or any portion of the Partnership Property,
and to contribute all or any of the Partnership Property to an
Operating Limited Partnership and to act as a limited partner thereof;
(B) To create, by grant or otherwise, easements and
servitudes;
(C) To alter, improve, repair, raze, replace and rebuild
Partnership Property;
(D) To let or lease Partnership Property for any period, and
for any purpose;
(E) To apply proceeds of any sale, exchange, mortgage, pledge
or other disposition of Partnership Property to payment of liabilities
of the Partnership and to pay, collect, compromise, arbitrate or
otherwise adjust any and all other claims or demands of or against the
Partnership, or to hold
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such proceeds against the payment of contingent liabilities, known or
unknown;
(F) To maintain or cause to be maintained records of all
rights and interests acquired for or disposed of by the Partnership,
all correspondence relating to the Partnership business and the
original records (or copies on such media as the Managing General
Partner deems appropriate) of all statements, bills and other
instruments furnished the Partnership in connection with its business;
(G) To maintain records and accounts of all operations and
expenditures, make all filings and reports required under applicable
rules and regulations of any governmental department, bureau or agency,
any securities exchange and any automated quotation system of a
registered securities association, and furnish the Partners and
Assignees with all necessary United States federal, state or local
income tax reporting information or such information with respect to
any other jurisdiction;
(H) To purchase and maintain, in its discretion and at the
expense of the Partnership, liability, indemnity and any other
insurance, including errors and omissions insurance, sufficient to
protect the Partnership, the General Partners and any other Person from
those liabilities and hazards which may be insured against in the
conduct or management of the Partnership's business;
(I) To make, execute, assign, acknowledge and file on behalf
of the Partnership, any and all documents or instruments of any kind
which the Managing General Partner may deem appropriate in carrying out
the purposes and business of the Partnership, including, without
limitation, powers of attorney, agreements of indemnification, sales
contracts, deeds, options, loan obligations, mortgages, deeds of trust,
notes, documents or instruments of any kind or character, and
amendments thereto. Any person, firm or corporation dealing with the
Managing General Partner shall not be required to determine or inquire
into the authority and power of the Managing General Partner to bind
the Partnership and to execute, acknowledge and deliver any and all
documents in connection therewith;
(J) To borrow money or to obtain credit in such amounts, on
such terms and conditions, and at such rates as the Managing General
Partner deems appropriate, from banks, other lending institutions and
any other Person, including the Partners and Assignees, for any
Partnership purpose, including, without limitation, any loan incurred
for the purpose of making one or more distributions to any or all
Partners and Assignees, including any distributions which are,
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in whole or in part, a Return of Capital; and in connection with such
loans to mortgage, pledge, assign or otherwise encumber or alienate any
or all Partnership Property, including any income therefrom, to secure
or provide repayment thereof. As between the Partnership and any
lender, it shall be conclusively presumed that the proceeds of such
loans are to be and will be used for the purposes authorized herein and
that the Managing General Partner has the full power and authority to
borrow such money and to obtain such credit;
(K) To assume obligations, enter into contracts, including
contracts of guaranty or suretyship, incur liabilities, lend money and
otherwise use the Partnership's credit and secure any of the
Partnership's obligations, contracts or liabilities by mortgage, pledge
or other encumbrance of all or any part of its property, franchises and
income;
(L) To invest Partnership funds in debt or equity securities
or other obligations of other issuers, including, but not limited to,
securities or other obligations of other partnerships; provided,
however, that the Managing General Partner shall not invest Partnership
funds in such a manner that the Partnership will be considered to be
holding itself out as being engaged primarily in the business of
investing, reinvesting or trading in securities or will otherwise be
deemed to be an investment company under the Investment Company Act of
1940, as amended;
(M) To make any election on behalf of the Partnership as is or
may be permitted under the Code or under the taxing statute or rule of
any state, local, foreign or other jurisdiction, and to supervise the
preparation and filing of all tax and information returns which the
Partnership may be required to file;
(N) To maintain the buildings, appurtenances and grounds of
the Partnership Property in accordance with acceptable standards,
including within such maintenance, without limitation thereof, interior
and exterior cleaning, painting and decorating, plumbing, carpentry and
such other normal maintenance and repair work as may be appropriate;
(O) To collect all rents and other charges from lessees of
Partnership Property and concessionaires, and otherwise due the
Partnership, with respect to the Partnership Property. The Partnership
authorizes the Managing General Partner to request, demand, collect,
receive and receipt for all such rents and other charges and to
institute legal proceedings in the name of the Partnership for the
collection thereof and for the dispossession of any Person from
Partnership Property and such expense may include the costs of counsel
for any such matter;
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(P) To cause to be disbursed (1) the aggregate amount required
to be paid pursuant to any indebtedness of the Partnership, including
therein amounts due under any mortgages or deeds of trust for interest,
amortization of principal and for allocation to reserve or escrow
funds; (2) the amount of rent payable by the terms of any lease under
which the Partnership holds the Partnership Property, or any portion
thereof, promptly when due; (3) the amount of all real estate taxes and
other impositions levied by appropriate authorities; and (4) amounts
otherwise due and payable as expenses of the Partnership authorized to
be incurred under the terms of this Agreement;
(Q) To employ and engage suitable agents, employees, advisers,
consultants and counsel (including any custodian, investment adviser,
accountant, attorney, corporate fiduciary, bank or other reputable
financial institution, or any other agents, employees or Persons which
may serve in such capacity for the Managing General Partner or any
Related Person) to carry out any activities which the Managing General
Partner is authorized or required to carry out or conduct under this
Agreement, including, without limitation, a Person which may be engaged
to undertake some or all of the general management, property
management, financial accounting and record keeping, construction
supervision and other duties of the Managing General Partner, to
indemnify such Persons against liabilities incurred by them in acting
in such capacities on behalf of the Partnership and to rely on the
advice given by such Persons, it being agreed and understood that the
Managing General Partner shall not be responsible for the acts and
omissions of any such Persons and shall assume no obligations in
connection therewith other than the obligation to use due care in the
selection thereof;
(R) To enter into an agreement or agreements with real estate
brokers or agents, investment banking firms, appraisers or others
providing for the engagement of such Persons on an exclusive or
nonexclusive basis to advise or represent the Partnership in the
valuation, sale, lease or other dealings in the Partnership Property,
it being understood that the Managing General Partner shall not be
responsible for the acts and omissions of any such Persons and shall
assume no obligations in connection therewith other than the obligation
to use due care in the selection thereof;
(S) To hold Partnership Property in the name of one or more
nominees, with or without disclosure of the fiduciary relationship;
(T) To keep proprietary or trade secret information
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confidential, and if deemed necessary by the Managing General Partner,
to keep such information confidential from the Limited Partners for a
reasonable period of time;
(U) To pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise upon such terms as it may
determine and upon such evidence as it may deem sufficient, any
obligation, suit, liability cause of action or claim, including taxes,
either in favor of or against the Partnership;
(V) To prosecute, protect and defend or cause to be protected
and defended all patents, patent rights, trade names, trademarks,
service marks and other marks, and all applications with respect
thereto which may be held by the Partnership, and to take all
reasonable and necessary actions to protect the secrecy of and the
proprietary rights with respect to any secret know-how, secret
processes or other proprietary information, and to prosecute and defend
all rights of the Partnership in connection therewith;
(W) To register, qualify or list, or cause to be registered,
qualified, listed or reported, this Agreement or Units hereunder
pursuant to the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, any other securities laws of the
United States, the securities laws of any state of the United States,
the laws of any other jurisdiction, or with any securities exchange or
pursuant to an automated quotation system of a registered securities
association as the Managing General Partner deems appropriate;
(X) To issue, purchase, repurchase, redeem, receive, take or
otherwise acquire, own, hold, sell, lend, exchange, trade in, grant
calls or options or warrants, grant appreciation rights, transfer or
otherwise dispose of, pledge, use and otherwise deal in and with Units
and shares, bonds, debentures and other securities, whether issued by
the Partnership or issued by any other Person, whether on an exchange,
over the counter, in private transactions or in other transactions, and
whether for the Partnership or for any plan maintained or sponsored by
the Partnership, including securities of the Partnership of a different
class or series than the Units, whether debt or equity, redeemable or
nonredeemable, convertible or nonconvertible, and including securities
with different rights, preferences, privileges, allocations and tax
consequences;
Notwithstanding the foregoing, to establish and maintain for
the General Partners and the directors, officers and employees of the
Managing General Partner, Glenborough Corporation and its Affiliates,
an option plan relating to Units on such terms and conditions as the
Managing General
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Partner shall in its reasonable discretion determine; provided,
however, that without the prior approval of a Majority Interest (i) the
total number of Units subject to option plus the total number of Units
purchased on exercise of option shall not exceed ten percent (10%) of
the total number of Units issued and outstanding at any given time;
(ii) the option price shall never be less than one hundred percent
(100%) of the fair market value of a Unit on the date of grant; and
(iii) no option shall be exercisable after ten years from the date of
grant;
(Y) To establish and maintain, including the right to
terminate, a distribution reinvestment plan whereby Partners may
automatically reinvest in the purchase of Units, Cash Available for
Distributions as the same may be distributed pursuant to Article 11
hereof, including offering and selling Units to Partners under such
plan at a price not less than ninety-five percent (95%) of the fair
market value of a Unit on the date of such reinvestment;
(Z) To qualify to do business in any other state, territory,
dependency or foreign country;
(AA) To make donations, regardless of specific benefit to the
Partnership, for the public welfare, to community or hospital funds, or
for charitable, educational, scientific, civic, political or similar
purposes;
(BB) To pay pensions, and to establish, participate in and
maintain as plan sponsor or otherwise, pension, profit sharing, bonus,
purchase, option, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions for any or all of the employees of
the Partnership, and any partner, shareholder, director, officer,
employee or agent of a General Partner or any Affiliate, including
plans, trusts and provisions which may provide for the ownership,
acquisition, holding, or disposition of Units or any other securities
of the Partnership; and to indemnify and purchase and maintain
insurance on behalf of, any fiduciary of such retirement, incentive and
benefit plans, trusts or other provisions, including, without
limitation, health insurance, medical and dental reimbursement, life
insurance, accident insurance, disability insurance and other plans,
trusts or provisions;
(CC) To put into effect and carry out any plan of
reorganization or arrangement and the orders of the court or judge
entered in a proceeding for reorganization or arrangement under any
applicable statute of the United States or of any state, local or other
jurisdiction, and to undertake any proceeding and perform any act
provided in the plan or directed by such orders, without further action
by any Partner
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or Assignee. Such power and authority may be exercised and such
proceedings and acts may be undertaken, as may be directed by such
orders, by the trustee or trustees of the Partnership appointed in the
reorganization or arrangement proceeding (or a majority thereof), or if
none is appointed and acting, by the Managing General Partner or a
master or other representative appointed by the court or judge, with
like effect as if exercised and taken by unanimous action of the
Partners and Assignees;
(DD) To distribute money or Partnership Property to Partners
and Assignees in accordance with this Agreement regardless of the
source of such money or Partnership Property, including, without
limitation, money borrowed by the Partnership or by the Managing
General Partner on behalf of the Partnership;
(EE) To possess and exercise any additional powers and rights
of general partners in a limited partnership, including, without
limitation, those granted under the Act and any other applicable laws,
to the extent not inconsistent with this Agreement;
(FF) To take any and all action, conduct all proceedings and
execute all rights and privileges, contracts and agreements of any kind
whatsoever, although not specifically mentioned in this Agreement, that
the Managing General Partner may deem necessary or appropriate to
conduct the business of the Partnership or to carry out the purposes of
the Partnership. The expression of any power or authority of the
Managing General Partner in this Agreement shall not limit or exclude
any other power or authority which is not specifically or expressly set
forth in this Agreement; and
(GG) To determine for purposes of Subsections (X) and (Y)
hereof the fair market value of a Unit; provided, however, that until
such time as there shall be a public market (as hereinafter defined)
for the Units, the Managing General Partner shall determine and fix
such value only after first retaining and considering the opinion of
one or more independent consultants experienced in valuing securities
such as the Units and shall consider all other factors reasonably
related to the valuation of the Units including, without limitation,
current book value, recent arm's length purchases and sales including
trades in the over-the-counter market and values of limited partnership
interests of other comparable real estate limited partnerships. Once a
public market has been established for the Units, fair market value
shall be determined as applicable based on either (i) the average of
the daily high and low sale prices of the Units on a national stock
exchange ("Exchange") for the period of five (5) trading days ending on
the valuation date; or (ii) the average of the
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mean between the closing representative bid and asked prices for the
Units on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") System for the period of five (5) trading days
ending on the valuation date. If there is no trading in the Units on
the Exchange or closing representative bid and asked prices for the
Units on the NASDAQ System for a substantial amount of time during any
trading day in the five-day period, the fair market value of a Unit
shall be determined by the Managing General Partner on the basis of
such market quotations as it shall deem appropriate. The existence of a
public market for the Units shall mean either that the Units shall have
been listed for trading on an Exchange, or that trading information for
the Units is reported on the NASDAQ System.
3.4 LIABILITY OF GENERAL PARTNERS. The General Partners shall be liable
to the Partnership and the Limited Partners and Assignees for gross negligence
or gross misconduct but neither the General Partners nor their Associates shall
be liable to either the Partnership or the Limited Partners or to Persons who
have acquired interests in the Units, whether as Assignees or otherwise, for
errors in judgment or for any acts or omissions that do not constitute willful
misconduct. If this Section 3.4 shall, for any reason and to any extent, be
invalid or unenforceable, it is intended that this Section 3.4 shall be
construed to exculpate the General Partners and their Associates to the fullest
extent permitted by law.
3.5 SIMILAR ACTIVITIES OF GENERAL PARTNERS. The General Partners and
their respective Associates may, directly or indirectly (including, without
limitation, through a Related Person or other entity in which the General
Partner or any such Related Person holds an ownership interest), engage in any
and all aspects of the business of owning, holding, developing, controlling,
acquiring, purchasing, managing, disposing of and otherwise dealing with real,
personal or mixed property; act as a partner (limited or general), shareholder,
director, officer, employee or agent of any entity (including GOCO and
Glenborough Corporation) engaging in such business or activities; or engage in
any other businesses and activities, whether the same be competitive with the
Partnership, an Operating Limited Partnership or otherwise, for their own
account and for the account of others, without having or incurring any
obligation to offer any interest in such properties, businesses or activities to
the Partnership or any Partner or Assignee and nothing herein contained shall be
deemed to prevent any General Partner or any such Related Person from conducting
such other business and activities. Neither the Partnership nor any Operating
Limited Partnership, nor any of the Partners or Assignees shall have any rights
by virtue of this Agreement in any independent business ventures of a General
Partner or any such Related Person. However, all records kept and maintained by
the Managing General Partner for the Partnership pursuant to this Agreement
shall be
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maintained separately from those for other operations of the General Partners,
including other partnerships for which a General Partner is a general partner.
3.6 INDEMNIFICATION OF GENERAL PARTNERS.
(A) The General Partners and each of their respective Associates
(individually an "Indemnitee") shall, to the fullest extent permitted by law, be
indemnified and held harmless by the Partnership from and against all losses,
claims, damages, liabilities (joint and several), expenses (including, without
limitation, attorneys' fees and expenses, and any expenses of establishing a
right to indemnification under this Section 3.6), judgments, fines, settlements
and other amounts (collectively "Liability") arising from or incurred in
connection with any claim, demand, action, suit or proceeding (including, but
not limited to, claims, demands, actions, suits and proceedings by, in the name
of or on behalf of, the Partnership), whether civil, criminal, administrative or
investigative and whether threatened, pending or completed (collectively
"Proceeding") in which the Indemnitee may be involved, or threatened to be
involved, as a party or otherwise by reason of: (i) its status at any time as a
General Partner or Associate of a General Partner; (ii) its management of the
Partnership; and/or (iii) any act performed or omitted to be performed by it at
any time in connection with the business, property or affairs of the Partnership
whether or not such Indemnitee continues to be a General Partner or an Associate
of a General Partner at the time such Liability is paid or incurred, if: (a)
such Liability was not the result of gross negligence or gross misconduct by the
Indemnitee, and the Indemnitee determined, in good faith, that the course of
conduct which caused the Liability was in the best interests of the Partnership;
or (b) a court of competent jurisdiction determines upon application that,
despite the fact that the requirements of clause (a) are not satisfied, in view
of all the circumstances, the Indemnitee is fairly and reasonably entitled to
indemnification for such Liabilities as such court may deem proper.
(B) The termination of a Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that the Indemnitee did not determine in good faith
that the course of conduct which caused the Liability was in the best interests
of the Partnership.
(C) Any Liability for which the Partnership and the Indemnitee are
jointly liable shall, if the Indemnitee is entitled to indemnification under
this Section 3.6, be satisfied first from the assets of the Partnership. The
indemnification provided by this Section 3.6 shall be recoverable out of the
assets of the Partnership, including any insurance proceeds, and shall not be
recoverable out of any other assets of the Limited Partners.
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(D) Expenses (including attorneys' fees and expenses) incurred in
defending any Proceeding shall be paid by the Partnership in advance of the
final disposition of such Proceeding upon receipt of an undertaking by or on
behalf of the Indemnitee to repay such amount if it shall ultimately be
determined by a court of competent jurisdiction that the Indemnitee is not
entitled to indemnification as authorized by this Section 3.6.
(E) The indemnification provided by this Section 3.6 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, vote of the Partners, as a matter of law or otherwise both as to
action in the Indemnitee's capacity as a General Partner or Associate of a
General Partner and to action in another capacity, shall continue as to an
Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(F) The Partnership shall, to the extent commercially reasonable,
purchase and maintain insurance on behalf of the Indemnitees and such other
Persons as the Managing General Partner shall determine against any Liability
which may be asserted against or expense which may be incurred by such persons
in connection with Partnership activities (including, without limitation, any
Proceeding) whether or not the Partnership would have the power to indemnify
such persons against such Liability under the provisions of this Agreement.
(G) For purposes of this Section 3.6, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by an Indemnitee of its duties to the Partnership
also imposes duties on, or otherwise involves services by, an Indemnitee to such
plan or participants or beneficiaries of such plan. Excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall be deemed a Liability and action taken or omitted by an Indemnitee with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by an Indemnitee to be in the interests of the
participants and beneficiaries of such plan shall be deemed to be for a purpose
which is in the best interests of the Partnership. Any payments to an Indemnitee
shall be solely from assets of the Partnership and shall not be paid from
employee benefit plan assets.
(H) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 3.6 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies.
(I) Notwithstanding the foregoing, an Indemnitee shall not be entitled
to indemnification hereunder for any Liability imposed in a Proceeding arising
from or out of a violation of state or federal
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securities laws associated with the offer and sale of Units. Indemnification
will be allowed for settlements and related expenses of Proceedings alleging
securities law violations, and for expenses incurred in successfully defending
such Proceedings, providing that a court either (i) approves the settlement and
finds that indemnification of the settlement and related costs should be made;
or (ii) approves indemnification of litigation costs if a successful defense is
made.
(J) If any provision of this Section 3.6, or the application thereof,
shall, for any reason and to any extent, be invalid or unenforceable, the
remainder of this Section 3.6 and the application thereof shall not be affected
thereby, it being the intent of this Section 3.6 to indemnify and hold harmless
the Indemnitees to the fullest extent permitted by applicable law.
3.7 OTHER MATTERS CONCERNING GENERAL PARTNERS.
(A) Each of the General Partners may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
(B) Each of the General Partners may consult with and employ counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants, advisers and Persons selected by it (who may serve as such for and
be employed by the Partnership or any Related Person), and any opinion of such
Person as to matters which the General Partner believes to be within that
Person's professional or expert competence shall be full and complete
authorization and protection with respect to any action taken, suffered, or
omitted by the General Partner hereunder in good faith and in accordance with
such opinion.
(C) Each of the General Partners may execute any of the powers
hereunder or perform any duties hereunder either directly or by or through
agents, including, without limitation, any Related Person, and a General Partner
shall not be responsible for any misconduct, negligence, or willful act on the
part of any agent appointed with due care by any General Partner.
(D) Any and all fees, commissions, compensation and other consideration
received by a General Partner or a partner, shareholder, director, officer,
agent or employee of a General Partner permitted hereunder shall be the
exclusive property of the recipient, in which the Partnership shall have no
right or claim, and the participation by any such Person in any agreement
permitted hereunder shall not constitute a breach by such Person of any duty
that it may owe the Partnership or the Limited Partners or Assignees under this
Agreement or by operation of law.
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3.8 AGREEMENTS WITH A GENERAL PARTNER OR A RELATED PERSON.
(A) In addition to agreements, arrangements and transactions provided
for in or contemplated by this Agreement, a General Partner and any Related
Person may, directly or indirectly, deal with the Partnership, including,
without limitation, making loans to (but not borrowing from) the Partnership, in
connection with carrying out the business of the Partnership or otherwise, as an
independent contractor or as an agent for others, and may receive from such
others or the Partnership, profits, compensation, commissions or other amounts
which the Managing General Partner in good faith believes to be reasonable
without having to account to the Partnership therefor, if the material facts as
to the agreement or transaction and as to the relationship or interest of the
General Partner or Related Person are disclosed or known to the Partners and
such agreement or transaction is specifically authorized, approved or ratified
by a Majority Interest. Compliance with the provisions of this Section 3.8 (A)
shall be a complete defense to any claim of invalidity or for damages or other
relief with respect to any such agreement or transaction.
(B) The satisfaction of the following condition shall be a complete
defense to any claim of invalidity or for damages or other relief with respect
to any agreement or transaction between a General Partner or a Related Person
and another Person based upon the assertion of a breach of duty owed to the
Partnership by a General Partner or a Related Person in entering into such
agreement or transaction: the material facts as to the agreement or transaction
and as to the relationship or interest of the General Partner or Related Person
are disclosed or known to the Partners and such agreement or transaction is
specifically authorized, approved or ratified by a Majority Interest.
3.9 CONVEYANCES. The Managing General Partner has the express authority
to convey title to any Partnership Property by a conveyance executed by the
Managing General Partner alone on behalf of the Partnership.
ARTICLE 4
COMPENSATION OF GENERAL PARTNERS
4.1 COMPENSATION OF GENERAL PARTNERS. Except for options which may be
granted to the General Partners pursuant to an option plan, no General Partner
shall receive from the Partnership any compensation for his or its services in
the capacity of General Partner; provided, however, that nothing contained
herein shall preclude a General Partner in his or its capacity as a general
partner of an Operating Limited Partnership from being compensated as such as
provided in its limited partnership agreement. The Partnership, however, shall
pay all expenses, disbursements and advances reasonably incurred by the General
Partners and their
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Affiliates in connection with the organization of the Partnership and the
conduct of Partnership business, including, without limitation, office expenses,
secretarial expenses and expenses for entertainment, travel and similar items,
including amounts paid to any Person retained to perform services for the
Partnership. The Partnership shall promptly reimburse the General Partners and
their Affiliates for any such items paid by the General Partners or their
Affiliates. The General Partners and their Affiliates shall also receive a
reasonable reimbursement for their general and administrative costs allocable to
the management and operation of the Partnership, as determined by the Managing
General Partner in its discretion; provided, however, that such costs shall be
reasonable in amount and necessary to the functions of the Partnership. Such
costs shall include salaries and compensation of legal and leasing personnel,
costs of software acquisition and costs incurred in connection with servicing
Partnership notes receivable, but shall exclude salaries and compensation of the
officers and directors of any General Partner.
ARTICLE 5
THE LIMITED PARTNERS, ASSIGNEES AND TRANSFERREES
5.1 LIMITED LIABILITY. No Limited Partner or Assignee (unless such
Limited Partner or Assignee is a General Partner or otherwise participates in
the control of the business of the Partnership) shall be personally liable for
any of the debts of the Partnership or for any Net Losses beyond the amount of
the Capital Contribution made or agreed to be made to the Partnership by the
Limited Partner or Assignee and any undistributed Net Income allocated to the
Limited Partner or Assignee. However, to the extent required by law, each
Limited Partner or Assignee receiving any actual or constructive distribution
may be liable to return such distribution if and to the extent that, immediately
after giving effect to the distribution, all liabilities of the Partnership,
other than liabilities to Partners or Assignees on account of their interest in
the Partnership and liabilities as to which recourse of creditors is limited to
specific property of the Partnership, exceed the fair value of the Partnership
Property; provided, however, that the fair value of any Partnership Property
that is subject to a liability as to which recourse of creditors is so limited
shall be included in the Partnership Property for purposes of this sentence only
to the extent that the fair value of such Partnership Property exceeds such
liability. Any Limited Partner returning all or any part of a distribution
actually received by an Assignee or successor of the Limited Partner shall be
subrogated to the Partnership's right to seek a return to the Partnership of the
distribution from the Assignee or such successor. In no event shall any Limited
Partner or Assignee be obligated under any circumstances to make any Capital
Contribution to the Partnership for any purpose whatsoever, other than Capital
Contributions described in Articles 8 and 9.
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5.2 RESTRICTIONS ON LIMITED PARTNERS AND ASSIGNEES.
(A) No Limited Partner or Assignee shall participate as such in the
management and control of the business of the Partnership, transact any business
for the Partnership, or attempt to do so, unless such Limited Partner or
Assignee is also the Managing General Partner or a Related Person or other
Person employed or engaged to transact any such business by or on behalf of the
Managing General Partner or the Partnership. The transaction of any such
business by a Limited Partner or Assignee employed or engaged to do so by or on
behalf of the Managing General Partner or the Partnership shall not be in his,
her or its capacity as Limited Partner or Assignee and shall not affect, impair
or eliminate the limitations on the liability of the Limited Partner or Assignee
under this Agreement.
(B) No Limited Partner or Assignee shall have the power to represent,
sign for or bind the Managing General Partner, any other General Partner or the
Partnership, unless such Limited Partner or Assignee is also the Managing
General Partner or a Related Person or other Person given such power by the
Managing General Partner.
5.3 OUTSIDE ACTIVITIES. A Limited Partner or Assignee shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities in direct competition with the Partnership. Neither the Partnership
nor any of the Partners or Assignees shall have any rights by virtue of this
Agreement in any independent business ventures of any other Limited Partner or
Assignee.
5.4 NO WITHDRAWAL OR DISSOLUTION. No Limited Partner shall at any time
withdraw from the Partnership, except as provided in this Agreement. No Limited
Partner shall have the right to have the Partnership dissolved or the right to a
Return of Capital from the Partnership, except as provided in this Agreement.
The legal incompetency, bankruptcy, insolvency, termination, dissolution,
withdrawal or death of a Limited Partner shall not cause a dissolution of the
Partnership.
5.5 ASSIGNEES. The creation of Assignees pursuant to Section 13.2 does
not dissolve the Partnership. An Assignee may become a Substituted Limited
Partner as provided in Section 14.1. Until an Assignee becomes a Substituted
Limited Partner, the Assignee has no right to notice of or to vote at any
meeting of Partners or upon any matters upon which Limited Partners may vote, to
require any information or account of Partnership transactions or to inspect
Partnership books, and is otherwise subject to the limitations under the Act on
the rights of an Assignee who has not become a Substituted Limited Partner. An
Assignee has the rights and obligations appurtenant to a Unit to share in the
Net Income and Net Losses of the Partnership and to receive distributions.
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5.6 TRANSFEREES. An assignment of Limited Partners' Units does not
dissolve the Partnership or entitle the transferee to become or to exercise any
rights of a Limited Partner. The transferee has the right to become a
Substituted Limited Partner pursuant to an assignment as provided in Section
14.1. A Limited Partner remains a Limited Partner upon transfer of all or part
of the Limited Partners' Units until the transferee becomes a Substituted
Limited Partner pursuant to Section 14.1. A transferee who does not become a
Substituted Limited Partner has no right to notice of or to vote at any meeting
of Partners or upon any matters upon which Limited Partners may vote, to require
any information or account of Partnership transactions or to inspect the
Partnership books, and is otherwise subject to the limitations under the Act on
the rights of a transferee or Assignee who has not become a Substituted Limited
Partner. Any distribution or payment to the Partner or Assignee of record or the
personal representative of such Partner or Assignee shall acquit the Partnership
of liability to the extent of such payment to any person who may have an
interest in such payment by reason of an assignment by the Partner or Assignee
or the successors or assignees of the Partner or Assignee, or by reason of the
death of such Partner or Assignee or otherwise.
ARTICLE 6
MEETINGS AND VOTING; AMENDMENTS
6.1 MEETINGS. Meetings of the Partners may be called by any of the
General Partners or by Limited Partners holding more than ten percent (10%) of
the Limited Partners' Units for any matters on which the Limited Partners are
entitled to vote pursuant to Sections 6.9 or 6.11. Any Limited Partners entitled
to call a meeting of the Partners who request that a meeting be called shall
deliver to the Managing General Partner a written request for such a meeting
indicating the specific matters to be considered at the meeting and the proposed
date of the meeting (which shall not be less than ten (10) nor more than sixty
(60) days after receipt by the Managing General Partner of such request), and
specifying the number of Units held by such Limited Partners. Upon receipt of
such a request, or upon the request of a General Partner, the Managing General
Partner forthwith shall cause notice to be given to the Limited Partners
entitled to vote at such meeting. If such notice is not given within twenty (20)
days after receipt of such request, the Partners entitled to call the meeting
may give the notice.
6.2 NOTICE OF A MEETING. Written notice of a meeting called pursuant to
Section 6.1 shall be given to each Limited Partner entitled to vote at the
meeting, not less than ten (10) nor more than sixty (60) days before the date of
the meeting. Such notice shall state the place, date and hour of the meeting and
the general nature of the business to be transacted, and no other business may
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be transacted. The notice shall be given either personally or by mail or other
means of written communication, addressed to the Limited Partners at their
respective addresses appearing on the books of the Partnership or, if no address
appears on the books of the Partnership, at the principal place of business of
the Partnership. The notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit or certificate of mailing of any notice in
accordance with the provisions of this Article 6, executed by the Managing
General Partner, Transfer Agent, registrar of Units or mailing organization
shall be prima facie evidence of the giving of notice. If any notice addressed
to any Limited Partner at the address of the Limited Partner appearing on the
books of the Partnership is returned to the Partnership by the United States
Postal Service marked to indicate that the United States Postal Service is
unable to deliver it, said notice and any subsequent notices shall be deemed to
have been duly given without further mailing if they are available for the
affected Limited Partner at the principal place of business of the Partnership
for a period of one year from the date of the giving of the notice to all other
Limited Partners.
6.3 RECORD DATE. For purposes of determining the Limited Partners
entitled to notice of and to vote at a meeting of the Limited Partners or to
give consents without a meeting as provided in Section 6.8, the Managing General
Partner may set a Record Date, or, if a meeting is called or consents are
requested without a meeting by the other General Partner(s) or by Limited
Partners holding more than ten percent (10%) of the Limited Partner Units, such
Partners may set a Record Date. The Record Date for any meeting shall not be
less than ten (10) or more than sixty (60) days before the date of such meeting.
If no Record Date is set as herein provided, the same shall be determined in
accordance with the Act.
6.4 ADJOURNMENT. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting, and a new Record Date need
not be fixed, if the time and place thereof are announced at the meeting at
which the adjournment is taken, unless such adjournment shall be for more than
forty-five (45) days or a new Record Date is fixed. At the adjourned meeting the
Partnership may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than forty-five (45) days or if
a new Record Date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given in accordance with this Article 6.
6.5 WAIVER OF NOTICE; CONSENT TO MEETING. The transactions of any
meeting of Limited Partners, however called and noticed, and wherever held, are
as valid as though had at a meeting duly held after regular call and notice, if
a quorum is present either in person or by proxy, and if, either before or after
the meeting,
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each of the Persons entitled to vote, not present in person or by proxy, signs a
written waiver of notice or a consent to the holding of the meeting or an
approval of the minutes thereof. All waivers, consents, and approvals shall be
filed with the Partnership records or made a part of the minutes of the meeting.
Attendance of a Person at a meeting shall constitute a waiver of notice of the
meeting, except when the Person objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened; provided, however, that attendance at a meeting is not a waiver of any
right to object to the consideration of matters required to be included in the
notice of the meeting but no so included, if the objection is expressly made at
the meeting.
6.6 QUORUM. A Majority Interest, represented in person or by proxy,
shall constitute a quorum at a meeting of Partners. The Limited Partners present
at a duly called or held meeting at which a quorum is present may continue to
transact business until adjournment notwithstanding the withdrawal of enough
Limited Partners to leave less than a quorum, if any action taken (other than
adjournment) is approved by the requisite percentage of interests of Limited
Partners specified in this Agreement. In the absence of a quorum, any meeting of
Partners may be adjourned from time to time by the vote of a majority of the
Limited Partners' Units represented either in person or by proxy, but no other
business may be transacted except as provided in Section 6.1
6.7 CONDUCT OF MEETING. Each Limited Partner entitled to vote at a
meeting or to consent to an action shall be entitled to one vote for each Unit
held by such Limited Partner, which vote may be cast in person or by written
proxy. The Managing General Partner shall have full power and authority
concerning the manner of conducting any meeting of Partners, including, without
limitation, the determination of Persons entitled to vote at the meeting, the
existence of a quorum, the satisfaction of the requirements of Section 6.10, the
conduct of voting, the validity and effect of any proxies, and the determination
of any controversies, votes, or challenges arising in connection with or during
the meeting. The Managing General Partner shall designate a Person to serve as
chairman of the meeting and shall further designate a Person to take the minutes
of the meeting, in either case including, without limitation, a director or
officer of the Managing General Partner. All minutes shall be kept with the
records of the Partnership maintained by the Managing General Partner.
6.8 ACTION WITHOUT A MEETING. Any action that may be taken at a meeting
of the Limited Partners may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by Limited Partners holding not less
than the minimum number of Units that would be necessary to authorize or take
such action at a meeting at which all the Limited Partners entitled to vote
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thereon were present and voted. Prompt notice of the taking of action without a
meeting shall be given to the Limited Partners who have not consented in
writing. If consent to the taking of any action by the Limited Partners without
a meeting is requested, the Limited Partners shall be given notice of the matter
to be voted upon in the same manner as described in Sections 6.1 and 6.2. In the
event any General Partner or Limited Partners holding at least ten percent (10%)
of the Limited Partners' Units request a meeting for the purpose of discussing
or voting on such matter, the notice of a meeting shall be given as described in
Sections 6.1 and 6.2 and no action shall be taken until the meeting is held.
Unless delayed in accordance with the provisions of the preceding sentence, any
action taken without a meeting will be effective fifteen (15) days after the
holders of the required minimum number of Units have signed the consent;
however, the action will be effective immediately if all General Partners and
Limited Partners holding at least ninety percent (90%) of the Limited Partner
Units have executed the consent.
6.9 VOTING RIGHTS. Subject to Sections 6.10 and 6.12, the Limited
Partners shall have the right to vote on only the matters specified below
(including, however, without limitation, those matters on which limited partners
are given the right to vote under the Act) and no other matters:
(A) The following actions may be taken by the Managing General Partner
only with the affirmative vote of a Majority Interest:
(1) The sale, exchange, lease or other transfer (other than
encumbrances) of all or substantially all of the assets of the
Partnership in a single transaction or in multiple interrelated
transactions, except in the liquidation and winding up of the business
of the Partnership upon its dissolution. For purposes of this
subsection, "substantially all of the assets of the Partnership" shall
mean ninety percent (90%) of the asset value of the Partnership
Property, as determined in accordance with generally-accepted
accounting principles, at the end of the most recently completed fiscal
quarter of the Partnership;
(2) The dissolution of the Partnership, other than pursuant to
Sections 16.1(A), (B), (C) and (E);
(3) An election to continue the business of the Partnership
other than after there is no remaining or surviving General Partner;
(4) An amendment to this Agreement, including, without
limitation, an amendment extending the term of this Agreement, except
for amendments described in Sections 6.11 and 6.13;
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(5) Any matter actually submitted to the Limited Partners
pursuant to Section 3.8; and
(6) Voting on or consenting as the Limited Partner to a sale,
exchange, lease or other transfer of all or substantially all of the
assets of an Operating Limited Partnership when such vote or consent is
required under the terms of the partnership agreement of such Operating
Limited Partnership.
(B) A General Partner may be removed only with the affirmative vote of
a Majority Interest.
(C) Except under circumstances described in clause (D), a new General
Partner may be admitted with the affirmative vote of a Majority Interest and
with the separate concurrence of the other General Partner(s).
(D) If there is no remaining or surviving General Partner, a new
General Partner may be admitted or an election to continue the business of the
Partnership may be made only upon the affirmative vote of all Limited Partners.
6.10 EXERCISE OF VOTING RIGHTS. The voting rights set forth in Section
6.9 (A) shall be exercisable by the Limited Partners unless the Partnership
shall have received the written opinion of independent counsel for a Majority
Interest to the effect that the exercise of such right or the action proposed to
be taken with respect to any particular matter: (A) shall cause the Limited
Partners to be deemed to be taking part in the management and control of the
business and affairs of the Partnership so as to subject the Limited Partners or
Assignees to unlimited liability therefor; (B) will jeopardize the status of the
Partnership as a partnership under applicable tax laws and regulations; or (C)
is otherwise impermissible under the state statutes then governing the rights,
duties and liabilities of the Partnership and the Partners and Assignees. Where
the Managing General Partner concludes that the exercise of a voting right set
forth in Section 6.9(A) could result, with respect to any particular action, in
any of the foregoing events, the Managing General Partner shall recommend to the
Limited Partners that independent counsel be appointed to consider the matter
prior to the exercise of such voting right.
6.11 AMENDMENTS BY THE MANAGING GENERAL PARTNER. Subject to Section
6.12, the Managing General Partner may, without prior notice to or consent of
any Partner or Assignee, amend any provision of this Agreement: (A) to cure any
ambiguity, omission, defect or inconsistency; (B) if in its opinion such
amendment does not have a materially adverse effect upon the Limited Partners
and Assignees or the Partnership, as the case may be; or (C) the amendment is
necessary, in the opinion of counsel to the Partnership, to prevent the
Partnership or the General Partners or
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the partners, directors or officers of a General Partner from being in any
manner subject to the provisions of the Investment Company Act of 1940, as
amended, the Investment Advisers Act of 1940, as amended, or "plan asset"
regulations adopted under the Employee Retirement Income Security Act of 1974,
as amended, whether or not substantially similar to plan asset regulations
currently applied or proposed by the Department of Labor; or (D) the amendment
is necessary, in the opinion of counsel to the Partnership, to prevent the
Partnership from being taxable as a corporation under the Code. A copy of such
amendment shall thereafter be furnished promptly to the Limited Partners and
Assignees. In the event an amendment shall have been approved pursuant to this
Section 6.11, the Managing General Partner shall execute such amendment,
certificate and other documents as may be reasonably required for the purpose of
effectuating the same; provided, however, that nothing in this Article 6 shall
affect the authority of the Managing General Partner to admit Additional Limited
Partners or Substituted Limited Partners.
6.12 VOTING BY GENERAL PARTNERS AND AFFILIATES. Notwithstanding the
foregoing, with respect to Sections 3.3(X), 4.1 and this Section 6.12, on
proposals to amend such Sections, all Limited Partners' Units held by the
General Partners and their respective Affiliates shall be voted for, against or
abstained in the same proportion as other Limited Partners' Units are voted for,
against or abstained on such matters.
6.13 PROHIBITED AMENDMENTS. Except with the unanimous consent of all
Partners, no amendment shall reduce the percentage of votes of the Limited
Partners as required herein for actions requiring such a vote, or change the
form of the Partnership to a general partnership.
ARTICLE 7
ORIGINAL LIMITED PARTNER
7.1 ADMISSION. Effective as of the Closing Date, and upon execution of
a Request and Power, Glenborough Limited, a California limited partnership,
shall become the Original Limited Partner.
7.2 CAPITAL CONTRIBUTIONS. The Original Limited Partner shall
contribute to the capital of the Partnership as provided in Article 8 hereof.
ARTICLE 8
CAPITAL CONTRIBUTIONS AND INITIAL ISSUANCE OF UNITS
8.1 CASH CAPITAL CONTRIBUTIONS. The initial capital of the Partnership
shall consist of One Thousand Dollars ($1,000), which the General Partners and
the Initial Limited Partner have
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heretofore contributed in cash to the capital of the Partnership as follows:
GENERAL PARTNERS
Glenborough Realty Corporation................................... $ 50
Robert Batinovich................................................ $450
INITIAL LIMITED PARTNER
Robert Batinovich................................................ $500
Upon completion of the Exchange Transaction, these cash contributions
shall be refunded to the General Partners and the Initial Limited Partner.
8.2 CONTRIBUTION BY PARTNERS. On the Closing Date, the Partners shall
contribute to the Partnership Property, including the Exchange Assets, as
follows:
(A) The Original Limited Partner shall, in accordance with the
Exchange Agreement, contribute the Exchange Assets.
(B) The General Partners shall each exchange sufficient Units
received by them under Section 8.3 hereof as Members of the Original
Limited Partner (or furnished to them by such Members) for General
Partner Interests such that such Units that are originally classified
as General Partner Interests shall constitute the following percentages
of the Partnership's Original Units (as defined in Section 8.3) as of
the Closing Date: Glenborough Realty Corporation, 0.10% and Robert
Batinovich 0.90%.
(C) For purposes of Capital Contributions on the Closing Date,
the value of the Exchange Assets (less the initial issue value of the
Units contributed by the General Partners under subsection (B) hereof),
shall be deemed to equal ninety-nine percent (99%) of the Partnership
net assets.
8.3 DISTRIBUTION OF ORIGINAL UNITS.
(A) Effective as of the Closing Date, the Partnership shall issue to
the Original Limited Partner that number of Units equal to the number of units
of limited partnership interest of the Original Limited Partner that are then
outstanding and held by the Members ("Original Units") which shall constitute
all the then outstanding Units of the Partnership. Thereafter, interests of
Limited Partners in the Partnership shall be represented by and expressed in
terms of Units.
(B) After the exchange by the General Partners provided for in Section
8.2 (B), the Original Units shall be held one percent
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(1%) by the General Partners (in the percentages shown in that Section) and
ninety-nine percent (99%) by the Original Limited Partner.
(C) Contemporaneously with the above, the Original Limited Partner
shall assign and transfer to its Members such Member's proportionate share of
the Original Limited Partner's Original Units. Such assignment and transfer
shall, however, be at all times subject to the terms and conditions of the
limited partnership agreement, as amended, of the Original Limited Partner and
the Exchange Agreement and all agreements contained therein. To effect such
assignment and delivery, the Original Limited Partner will deliver the
certificates representing the Original Units to the Transfer Agent together with
a list containing the name, address, and if available, the tax identification
number of each such Member, including a General Partner if applicable, and the
whole number of Original Units assigned and transferred to each such Member.
Immediately upon such transfer and delivery of the Certificates and lists, each
affected Member shall, except for Units which are distributed to General
Partners and become General Partner Interests, become a Substituted Limited
Partner with respect to such Member's Units in the place and stead of the
Original Limited Partner.
8.4 GENERAL PARTNER INTERESTS. The Original Units issued or transferred
to the Managing General Partner and Robert Batinovich as General Partners, that
were then contributed by them for their General Partner Interests shall be
designated as General Partner Interests. Any other Units held by the General
Partners shall be held by them as Limited Partner Units. If at any time the
number of Units classified as General Partner Interests shall represent more
than one percent (1%) of all Units the outstanding, the General Partners shall
be empowered to reclassify a portion of the Units classified as General Partner
Interests to Limited Partners' Units in order to reduce the number of Units
classified as General Partner Interests to one percent (1%) of all Units.
8.5 NONASSESSABILITY OF PARTNERS. Units shall not be assessable, and no
General Partner and no Limited Partner shall be required to make any additional
Capital Contribution. Capital Contributions made after the transfer of the
Exchange Assets pursuant to Article 8 shall be made as provided in Article 9.
8.6 DISTRIBUTION OF CAPITAL. A Partner or Assignee shall be entitled to
a distribution which constitutes a Return of Capital from time to time
throughout the duration of the Partnership in such amounts and at such times as
the Managing General Partner, in its sole discretion, deems appropriate. Such
distributions shall be made only if the conditions specified in Section 11.1
have been met or as provided in Section 8.1 with respect to the initial $1,000
cash contribution.
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8.7 NO INTEREST ON CAPITAL CONTRIBUTION. Partners and Assignees shall
not receive interest on or with respect to all or any part of their Capital
Contributions.
8.8 CREDITOR'S INTEREST IN THE PARTNERSHIP. No creditor who makes a
loan to the Partnership shall have or acquire at any time as a result of making
the loan, any direct or indirect interest in the profits, capital or property of
the Partnership other than as a creditor.
8.9 NATURE OF INTERESTS. All property owned by the Partnership, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and none of the Partners shall have any direct
ownership of such property.
8.10 ONE PERCENT INTEREST OF GENERAL PARTNERS. Notwith- standing
anything to the contrary that may be expressed or implied herein, the interests
of all of the General Partners, taken together, in each material item of
Partnership income, gain, loss, deduction or Tax Credits, as provided by Section
10.1, will be equal to at least one percent (1%) of each such item at all times
during the existence of the Partnership. In determining the General Partners'
interests in such items, Limited Partner Units owned by the General Partners
shall not be taken into account. The General Partners or their
successors-in-interest shall designate or acquire additional General Partner
Interests to satisfy this one percent (1%) General Partners' interest
requirement as provided in Section 9.1 and 15.1.
ARTICLE 9
ISSUANCE OF ADDITIONAL UNITS
9.1 SALE OF ADDITIONAL UNITS. For any purpose deemed by the Managing
General Partner to be in the best interests of the Partnership, the Managing
General Partner is authorized to cause to be issued additional Units from time
to time to any Person (which may include Partners and Assignees) and to admit
such Persons as Additional Limited Partners in the Partnership. The Managing
General Partner shall have sole and complete discretion in determining the
consideration and terms and conditions with respect to any future issuance of
Units. The Managing General Partner shall do all things necessary to comply with
the Act and is authorized and directed to do all things it deems necessary or
advisable in connection with any such future issuance.
9.2 GENERAL PARTNER INTERESTS. Notwithstanding the sale of additional
Units under Section 9.1, the General Partners shall at all times be deemed to
own as General Partner Interests (in the respective percentages set forth in
Section 8.2 (B)) at least a one percent (1%) interest in each item of
Partnership income, gain,
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loss, deduction or Tax Credits. No further contribution or consideration shall
be required of the General Partners to maintain their minimum one percent (1%)
General Partner Interest.
9.3 PREEMPTIVE RIGHTS. No Partner or Assignee shall have any
preemptive, preferential, or other rights with respect to the issuance of
additional Units.
ARTICLE 10
ALLOCATION OF NET INCOME, NET LOSS AND TAX CREDITS
10.1 GENERAL ALLOCATION.
(A) Net Income and Net Loss for each month shall be determined by the
Partnership and allocated among the Partners and Assignees in accordance with
their Allocable Shares.
(B) For federal, state or other tax purposes, all items of income,
gain, loss or deduction and all Tax Credits (including any such items arising
from a joint venture or a partnership in which the Partnership has an interest)
shall be determined using the accounting method designated by the Managing
General Partner and shall be allocated to the Partners and Assignees in
accordance with their Allocable Shares, subject to the provisions and
adjustments described in this subsection. In the case of the transfer of Units
by sale or exchange or upon death of a Partner during any year in which an
election under Section 754 of the Code is in effect, the income or loss
allocable to the holder of the Unit so transferred shall be adjusted in
accordance with Section 754, related sections of the Code and applicable
Treasury Regulations promulgated thereunder. If the Partnership is deemed to
have been terminated and reformulated pursuant to Section 708 of the Code,
depreciation, depletion, gain or loss shall be allocated among the Partners and
Assignees so as to take account of the variation between the basis of property
deemed contributed to the Partnership by each Partner or Assignee at the time of
its reformulation and the fair market value of such property at the time of such
contribution pursuant to Section 704(c) of the Code. Depreciation, depletion,
gain or loss (including the tax consequences of any basis reduction made by a
contributing Partner under Code Sections 108, 483 and 1274) with respect to
property contributed to the Partnership shall be allocated among the Partners
and Assignees to the extent required under Section 704(c) of the Code and
Treasury Regulations promulgated under Code Section 704(b) and (c) so as to take
into account, for tax purposes, the difference between the basis of such
property and its initial Book Value. The Managing General Partner is authorized
to adopt such methods of allocating such items, consistent with applicable law
and Regulations to make all Units as fungible as possible for tax purposes to
any purchaser thereof. At the request of the Managing General Partner, the
Partners and Assignees agree to furnish such information as may be reasonably
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necessary in the opinion of the Managing General Partner to effect the
aforementioned Section 754 and Section 704(c) adjustments. The Managing General
Partner will adopt the following conventions in effecting any Section 754 or
Section 704(c) adjustments for Partners or Assignees who do not supply
information. If a Partner or Assignee does not supply information as to the
purchase price, date and nature of transfer of a transferred Unit, the
conventions shall be:
(1) The transfer shall be deemed to have been a purchase which
occurred ten trading days before it is recorded on the books of the
Transfer Agent;
(2) The purchase price shall be deemed to be the lowest quoted
trading price of any Unit during the month in which the transfer occurs
or is deemed to have occurred.
The Managing General Partner may change any of the foregoing conventions at any
time if it deems it desirable to do so in its discretion.
10.2 ALLOCATION ON TRANSFER.
(A) The Partnership shall use the monthly convention specified in the
Conference Committee Report to Section 72 of the Tax Reform Act of 1984 in
determining allocations on transfer. Under this convention, Unit transfers after
the 15th day of a month shall be treated as occurring immediately after the
close of business of the last day of the month, and Unit transfers during the
first fifteen (15) days of a month shall be treated as occurring immediately
before the opening of business of the first day of the month.
(B) If the Allocable Share of a General Partner changes during a month
for any reason, other than upon a transfer under Section 10.2(A) its Allocable
Share for the month shall be determined in the manner for transfer of Units
specified in Section 10.2(A).
ARTICLE 11
CASH DISTRIBUTIONS
11.1 TIME AND AMOUNT OF CASH DISTRIBUTIONS.
(A) As of the close of each fiscal quarter and each fiscal year, and at
any other time the Managing General Partner deems appropriate, the Cash
Available for Distribution shall be calculated and, if the Managing General
Partner deems appropriate in its sole discretion, all or any portion thereof
shall be distributed to the Partners and Assignees of record on the Record Date
set for the distribution, and each Partner and Assignee shall
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receive his Allocable Share thereof.
(B) As provided herein, the General Partners will also be the General
Partners of each of the Operating Limited Partnerships. During any period of
time that the Partnership may hold an indirect interest in any Secondary
Operating Limited Partnership, the General Partners, in their capacity as
General Partners of the Partnership and as general partners of any Primary
Operating Limited Partnership shall be entitled to receive distributions only
from the Partnership and the Primary Operating Limited Partnerships and to the
extent that the General Partners, in their capacity as general partners of any
Secondary Operating Limited Partnership, receive any distributions from any such
Secondary Operating Limited Partnership, the amounts so received shall be
credited first against any amounts to which they may otherwise be entitled as a
general partner of any Primary Operating Limited Partnership (with the amount so
credited being added to the amount distributed to the limited partner(s) of such
Primary Operating Limited Partnership) and then to the amounts distributed to
the General Partners of the Partnership (with the amount so credited being added
to the amount distributed to the Limited Partners of the Partnership).
(C) Notwithstanding the provisions of Section 11.1(A), any distribution
shall be made only if:
(1) All liabilities of the Partnership, except liabilities to
the General Partners and to Limited Partners and Assignees on account
of the Capital Contribution and liabilities as to which recourse of
creditors is limited to specified property, have been paid or after
such distribution, there will remain Partnership Property with a fair
value sufficient to pay such liabilities, provided that the fair value
of any Partnership Property that is subject to a liability as to which
recourse of creditors is limited shall be included in Partnership
Property for purposes of this subsection only to the extent that the
fair value of such Partnership Property exceeds such liability;
(2) The Managing General Partner determines in good faith that
such distributions may be made without materially affecting the ability
of the Partnership to pay obligations (including contingent
liabilities) of the Partnership as they fall due; and
(3) Such distribution may be made without violating any
provision of the Act.
(D) Nothing in this Agreement or this Section shall serve as a
limitation on the Managing General Partner's right to retain or use the
Partnership's assets or its revenues as, in the opinion of the Managing General
Partner, may be required to satisfy the anticipated present and future cash
needs of the Partnership,
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whether for operations, liabilities, expansion, improvements, acquisition or
otherwise.
11.2 DISTRIBUTIONS OF PARTNERSHIP PROPERTY. In its sole discretion, the
Managing General Partner may distribute to Partners and Assignees, Partnership
Property other than Cash Available for Distribution. In its sole discretion, the
Managing General Partner may distribute to Partners and Assignees additional
Units or securities of the Partnership which have been authorized and issued
pursuant to the terms of this Agreement.
ARTICLE 12
ACCOUNTING AND REPORTS
12.1 FISCAL YEAR. The fiscal year of the Partnership shall end on
December 31 of each year, unless the Managing General Partner determines that it
is in the best interest of the Partnership and its Partners to utilize a
different fiscal year and the permission of the Internal Revenue Service has
been obtained.
12.2 REPORTS.
(A) As soon as practicable, but in no event later than ninety (90)
days, after the close of the calendar year, the Managing General Partner shall
prepare or cause to be prepared and furnish to each Person who was a Partner or
Assignee of record during the Partnership's fiscal year, the information
reasonably necessary for the preparation of such Person's United States federal
income tax return and any state or local income or other tax returns required of
such Person as a result of the operations of the Partnership. The Partners and
Assignees agree to furnish the Managing General Partner with such information as
may be necessary or helpful in preparing the tax returns or other filings of the
Partnership.
(B) As soon as practicable, but in no event later than one hundred
twenty (120) days after the close of each fiscal year, the Managing General
Partner shall mail or deliver to each Partner and each Assignee of record an
annual report containing financial statements of the Partnership for the fiscal
year, including a balance sheet and statements of operations, changes in
Partners' equity and changes in financial position at the end of or for the most
recent fiscal year. Such statements are to be prepared in accordance with
generally-accepted accounting principles and shall include the opinion of a firm
of independent public accountants selected by the Managing General Partner, and
are to be accompanied by a supplementary summary (except as disclosed in the
financial statements), by classification of the total fees and compensation,
including any overhead reimbursement and indemnification, paid by the
Partnership, directly or indirectly, to the General Partners.
(C) If and to the extent required by the Act or applicable
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state or federal securities laws, as soon as practicable, but in no event later
than sixty (60) days after the close of each fiscal quarter, except the last
fiscal quarter of each fiscal year, the Managing General Partner shall mail or
otherwise furnish to each Partner and Assignee of record a quarterly report for
the fiscal quarter containing such financial and other information (which may be
condensed, including statements of operations for such fiscal quarter and since
the end of the last fiscal year, a balance sheet at the end of such period and a
certificate of the Managing General Partner to the effect that such financial
statements were prepared without audit from the books and records of the
Partnership) as the Managing General Partner deems appropriate.
12.3 TAX ELECTIONS. The Managing General Partner shall, in its sole
discretion, and as it deems in the best interests of the Partnership or the
Partners and Assignees, determine whether to make any available election and how
to make any necessary allocation for federal, state, local or other income tax
purposes.
12.4 BOOKS AND RECORDS. The Managing General Partner shall maintain all
records necessary for documenting and reporting the business and affairs of the
Partnership. The Managing General Partner shall maintain at the office of the
Partnership specified in Section 2.4: (A) a current list of the full name and
last-known business or residence address of each Partner and Assignee set forth
in alphabetical order together with the contribution and the share in profits
and losses of each Partner and Assignee; (B) a copy of the Certificate of
Limited Partnership and all certificates of amendment thereto, together with
executed copies of any powers of attorney pursuant to which any certificate has
been executed; (C) copies of the Partnership's federal, state and local income
tax or information returns and reports, if any, for the six most recent taxable
years or for such shorter time as the Partnership has been in existence; (D) the
original Agreement and all amendments thereto; (E) copies of the financial
statements of the Partnership for the six most recent fiscal years or for such
shorter time as the Partnership has been in existence; and (F) the Partnership's
books and records for at least the current and past three fiscal years or for
such shorter time as the Partnership has been in existence. Any records
maintained by the Partnership in the regular course of its business, including
the record of the holders of Units, books of account, and records of Partnership
proceedings may be kept on, or be in the form of punch cards, magnetic media,
photographs, micrographics, or any other information storage device, provided
that the records so kept can be converted into clearly legible written form
within a reasonable period of time. Except for information kept confidential by
the Managing General Partner pursuant to the power described in Section 3.3(T),
all books, financial records, reports and accounts shall be open to inspection
by any Partner or duly authorized representative of the Partner on reasonable
notice during normal business hours, for any purpose reasonably related to the
Partner's interest as a Partner,
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and the Partner or the representatives at the expense of the Partner shall have
the further right to make copies or excerpts therefrom; provided, however, that
a copy of the information described in clauses (A),(B),(C) and (D) of the second
sentence of this Section 12.4 shall be promptly delivered by the Managing
General Partner, at the expense of the Partnership, to any Partner requesting
such information. The Partner and the Partner's representatives shall not
divulge to any Person any confidential or proprietary data, information or
property or any trade secrets of the Partnership.
12.5 BANK ACCOUNTS. The Partnership shall establish and maintain
accounts in financial institutions (including, without limitation, national or
state banks, trust companies, or savings and loan institutions) in such amounts
as the Managing General Partner may deem necessary from time to time.
Partnership funds shall not be commingled with the funds of, or used as a
compensating balance on behalf of, any General Partner or any other Person.
Checks shall be drawn on and withdrawals of funds shall be made from any such
accounts for Partnership purposes and shall be signed by the Person or Persons
designated by the Managing General Partner. Temporary surplus funds of the
Partnership may be invested in commercial paper, time deposits, short-term
government obligations or other investments as shall be determined by the
Managing General Partner.
ARTICLE 13
TRANSFER OF UNITS; CERTIFICATES
13.1 TRANSFER OF GENERAL PARTNER INTERESTS.
(A) The term "transfer" when used in this Article with respect to a
Unit includes a sale, assignment, gift, exchange, or any other disposition.
(B) General Partner Interests are nontransferable except as provided in
Article 8 and Section 15.1. All Limited Partners hereby consent to any transfer
pursuant thereto.
13.2 TRANSFER OF LIMITED PARTNERS' UNITS.
(A) Except as provided in Section 8.3 (c), Units held by Limited
Partners may be transferred on the books of the Partnership only by assignment
of the Units, satisfactory in form and substance to the Partnership
("Assignment"), by the transferee's completing and delivering to the Partnership
(or its Transfer Agent) a Request and Power and by delivery of the Certificate
representing the Units and no transfer of Units will be recorded or otherwise
recognized by the Partnership and no Certificate will be issued to the proposed
transferee unless the transferee has signed and delivered a Request and Power to
the Partnership.
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(B) Each distribution of Cash Available for Distribution or other
Partnership Property or securities of the Partnership in respect of Units shall
be paid by the Partnership directly or through any Person or agent, only to the
Partners and Assignees of record as of the Record Date set for the distribution.
Such payment shall constitute full payment and satisfaction of the Partnership's
liability in respect of such payment, regardless of any claim of any Person who
may have an interest in such payment by reason of an assignment or otherwise.
(C) A transferee who has completed and delivered a Request and Power
shall be deemed: (1) to have agreed to comply with and be bound by this
Agreement and to execute any document that the Managing General Partner may
reasonably require to be executed in connection with the Assignment and
admission as a Substituted Limited Partner pursuant to Article 14; and (2) to
have appointed the Managing General Partner attorney-in-fact on the terms and
conditions set forth in Article 17.
(D) Upon receipt of delivery to it of an Assignment and Request and
Power with respect to a transfer of a Unit or Units in accordance with this
Section 13.2, the Managing General Partner shall take all appropriate steps
pursuant to Section 14.1 to reflect the termination of the transferor's interest
in the Partnership as a Limited Partner and the admission of the transferee as a
Substituted Limited Partner with respect to the Units.
13.3 NEW CERTIFICATES. The Partnership may issue or cause to be issued
a new Certificate if the Certificate is alleged to have been lost, stolen or
destroyed. The Partnership may require the owner or holder of the lost, stolen
or destroyed Certificate, or the owner's or holder's legal representative, to
give the Partnership a bond or other adequate security sufficient to indemnify
it and its successors against any claim that may be made against it or its
successors, including any expense or liability on account of the alleged loss,
theft or destruction or the issuance of a new Certificate.
13.4 MAINTENANCE OF TRANSFER RECORDS. The Partnership or its Transfer
Agent will maintain records reflecting the name of each Assignee and Limited
Partner and any subsequent transfers of Units and admission of Substituted and
Additional Limited Partners pursuant to Articles 7, 8, 9 and 14 hereof.
13.5 LEGENDS. The Partnership may cause to be imposed, imprinted or
stamped on any Certificate one or more legends or restrictions on transfer which
the Managing General Partner, in its sole discretion, believes may be necessary
or advisable to comply with federal or state securities laws or other applicable
laws, rules, regulations or agreements restricting the transferability of the
Certificates.
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ARTICLE 14
ADMISSION OF SUBSTITUTED AND ADDITIONAL LIMITED PARTNERS
14.1 ADMISSION OF SUBSTITUTED LIMITED PARTNERS. A Limited Partner shall
have the power to give the transferee of such Person's Units the right to become
a Substituted Limited Partner in the manner permitted in this Agreement. An
Assignee of a Unit may apply to become a Substituted Limited Partner with
respect to such Unit in the manner set forth in Section 13.2. All other
transferees shall apply to become Substituted Limited Partners with respect to
Units transferred to such Person by executing and delivering a Request and Power
at the time of such transfer as provided in Section 13.2. Upon receipt by the
Partnership of a completed and executed Request and Power, and such other
documents as may be required pursuant to Section 8.3, the name of the transferee
shall be added to the list of Limited Partners maintained by the Partnership,
whereupon such transferee shall become a Substituted Limited Partner.
14.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS. A Person other than a
General Partner (acting in its capacity as a General Partner), the Original
Limited Partner or a Substituted Limited Partner who makes a contribution to the
capital of the Partnership may, with the approval of the Managing General
Partner, be admitted to the Partnership as an Additional Limited Partner upon
furnishing to the Managing General Partner: (A) an acceptance in form
satisfactory to the Managing General Partner of all the terms and conditions of
this Agreement, including, without limitation, the power of attorney granted in
Article 17; and (B) such other documents or instruments as may be required in
order to effect admission as a Limited Partner. Upon receipt of such documents,
the Partnership shall add the name of such Person to the list of Partners
maintained by the Partnership, whereupon such Person shall become an additional
Limited Partner.
ARTICLE 15
REMOVAL, RESIGNATION OR WITHDRAWAL OF GENERAL PARTNER
15.1 REMOVAL OF GENERAL PARTNER. A General Partner may be removed from
office as provided in Section 6.9. Such removal shall take effect sixty (60)
days from the date of the vote of the Partners. At such time, the assets, books
and records of the Partnership shall be surrendered to the remaining or
successor General Partner(s), provided that the remaining or successor General
Partner(s) shall: (A) hold or have acquired sufficient General Partner Interests
(which may be obtained from the removed General Partner) so that the General
Partner(s) who will continue to serve as General Partner(s) hold and have
designated, in the aggregate, at least a one percent (1%) interest in the
Partnership as General Partner(s); and (B) have complied with the provisions of
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Section 15.4. If such removal dissolves the Partnership, then the Partnership
shall be reconstituted and its business shall be continued with any remaining
and successor General Partner(s) as the General Partner(s) thereof, and they
shall have the exclusive right to possess Partnership Property to continue the
business of the Partnership. Removal of a General Partner shall not preclude the
rights of the removed General Partner to compensation pursuant to Article 4
accrued as of the date the removal takes effect.
15.2 WITHDRAWAL. A General Partner may withdraw, resign or retire on
ninety (90) days' advance written notice to the Partners. A General Partner
shall cease to be a General Partner on the effective date of its or his
withdrawal, resignation or retirement.
15.3 DISSOLUTION OR BANKRUPTCY OF GENERAL PARTNER. A General Partner
shall cease to be a General Partner upon the happening of any of the following
events:
(A) The dissolution of the General Partner or, if the General Partner
is an individual, the death of the General Partner or the entry by a court of
competent jurisdiction of an order adjudicating the General Partner incompetent
to manage his person or estate;
(B) The General Partner: (1) makes a general assignment for the benefit
of creditors; (2) commences a voluntary case under the federal bankruptcy law;
(3) files a petition or answer seeking for the General Partner any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law, or regulation; (4) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in any proceeding of the nature
described in clause (3); or (5) seeks, consents to or acquiesces in the
appointment of a trustee, receiver, or liquidator of the General Partner or of
all or any substantial part of the General Partner's properties;
(C) An order for relief against the General Partner is entered under
Chapter 7 or 11 of the federal bankruptcy law;
(D) Sixty (60) days after the commencement of any proceeding against
the General Partner seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law,
or regulation, if the proceeding has not been dismissed;
(E) Sixty (60) days after the appointment without the General Partner's
consent or acquiescence of a trustee, receiver, or liquidator of the General
Partner or of all or any substantial part of the General Partner's properties,
if the appointment is not vacated or stayed, or sixty (60) days after the
expiration of any such stay, if the appointment is not vacated; or
41
<PAGE>
(F) Upon the General Partner ceasing to be a general partner of an
Operating Limited Partnership for any reason other than the dissolution of that
partnership provided that there is no longer an Affiliate of a General Partner
serving as a general partner of such Operating Limited Partnership.
15.4 LIABILITY AND RIGHTS. A General Partner shall be discharged from,
and the Partnership or any Person or Persons continuing the business of the
Partnership in the event it has been dissolved, shall assume and pay, as they
mature, all Partnership obligations and liabilities that exist on the date of
such General Partner's removal from the Partnership or on the date on which it
or he ceases to be a General Partner under Sections 15.2 or 15.3, and shall hold
such General Partner harmless from any action or claim arising or alleged to
arise from obligations and liabilities accruing after such date; provided,
however, that nothing in this Section 15.4 shall relieve or discharge, nor shall
the Partnership indemnify or hold harmless, such General Partner from any
individual obligation or liability of such General Partner (as distinguished
from a Partnership obligation or liability) to the Partnership or third parties.
On the date of removal of a General Partner or the date on which it ceases to be
a General Partner under Sections 15.2 or 15.3, or as soon thereafter as
possible, the Partnership or any Person or Persons continuing the business of
the Partnership shall file an amendment to the Certificate of Limited
Partnership reflecting the removal of the General Partner or the fact that the
General Partner has ceased to be a General Partner. The Partnership or any such
Person or Persons continuing the business of the Partnership shall promptly
notify all creditors of the Partnership as of such date: (A) of the removal of
such General Partner and the resulting dissolution of the Partnership (if the
Partnership has dissolved) or of the General Partner ceasing to be a General
Partner pursuant to Sections 15.2 or 15.3, as the case may be; (B) that such
General Partner shall not be personally liable for the Partnership's obligations
and liabilities after such date; and (C) if applicable, of the assumption of all
the Partnership's obligations and liabilities by the Partnership or such Person
or Persons continuing the business of the Partnership. The Partnership or such
Person or Persons continuing the business of the Partnership (if the Partnership
has dissolved) shall use its or their best efforts to procure and execute an
agreement from creditors of the Partnership discharging such General Partner
from liability to such creditors as of the date the General Partner is removed
or ceases to be a General Partner. Such General Partner shall have the same
rights to inspect and make copies or excerpts of the books and records of the
Partnership as is provided to Partners pursuant to Section 12.4 until all
amounts due such General Partner as of the date the General Partner is removed
or ceases to be a General Partner pursuant to Section 3.6 and Article 4 have
been paid. The General Partner shall be a creditor of the Partnership as to all
such amounts owed to it or him by the Partnership. Any Units held by a General
Partner after it or he
42
<PAGE>
has been removed, or it or he ceases to be a General Partner, shall be held as
Limited Partners' Units and such General Partner shall be entitled to all the
rights and shall be subject to all the obligations of a Limited Partner.
15.5 SUCCESSOR AND PREDECESSOR GENERAL PARTNERS. Unless a General
Partner has been dissolved because of bankruptcy, insolvency, liquidation or
ceases to be a General Partner because of death, disability, incapacity or
incompetency or unless a General Partner has been removed as General Partner,
upon dissolution of a General Partner, any Person continuing the business of the
General Partner so affected shall immediately become a General Partner of the
Partnership (and shall become Managing General Partner if the General Partner so
affected was the Managing General Partner) without any action or vote of any
Person. If any dissolution of a General Partner causes a dissolution of the
Partnership, then the Partnership shall be reformed and reconstituted and its
business continued as provided in this Section and Article 16. If it is
necessary or advisable to reform and reconstitute the Partnership and to
continue its business, the remaining and successor General Partners shall elect
to reform and reconstitute the Partnership and to continue its business. When
any Person ceases to be a General Partner under this Agreement or a partner,
shareholder, director, officer, employee or agent of a General Partner, that
Person shall continue to have the benefit of any provisions of this Agreement
providing for indemnity, exculpation or insurance which protected such Person as
a General Partner or a partner, shareholder, director, officer, employee or
agent of a General Partner, or which limited or defined the liability of such
Person.
ARTICLE 16
DISSOLUTION, WINDING UP AND LIQUIDATION
16.1 DISSOLUTION. The Partnership shall be dissolved at the expiration
of the term of the Partnership set forth in Section 2.5; provided, however, that
the Partnership shall be dissolved prior thereto without breach of this
Agreement upon occurrence of one of the following:
(A) The removal, resignation, retirement, withdrawal, bankruptcy,
insolvency, dissolution, liquidation, death, disability, incapacity or
incompetency of a General Partner; provided, however, that unless applicable law
shall under the circumstances require a dissolution notwithstanding an agreement
to the contrary, the Partnership shall not be dissolved but shall be continued
or, if dissolved, the business of the Partnership shall be continued by any
remaining or successor General Partner(s) upon the vote of a Majority Interest.
If no General Partner(s) remain or succeed or if the remaining or successor
General Partner(s) do not have the power under California law to elect to
continue or not
43
<PAGE>
to continue the business of the Partnership or they elect not to continue the
business, then, upon the affirmative vote of all Limited Partners and the
admission of one or more new General Partner(s), the Partnership shall not be
dissolved, but shall be continued or, if dissolved, the business of the
Partnership shall be continued;
(B) The Partnership becomes insolvent or bankrupt;
(C) The sale or other disposition of substantially all assets
of the Partnership and the cessation of active business;
(D) The passage of ninety (90) days after the affirmative vote pursuant
to Section 6.9 of a Majority Interest to dissolve the Partnership; or
(E) The occurrence of any event which makes it unlawful for the
business of the Partnership to be continued.
Admission of a General Partner shall not cause the dissolution of the
Partnership.
16.2 AUTHORITY TO WIND UP. If dissolution occurs for any reason other
than the removal, resignation, retirement, withdrawal, bankruptcy, insolvency,
dissolution, liquidation, death, disability, incapacity or incompetency of the
Managing General Partner, the Managing General Partner shall have the authority
to wind up the business and affairs of the Partnership. If dissolution occurs by
reason of the removal, resignation, retirement, withdrawal, bankruptcy,
insolvency, dissolution, liquidation, death, disability, incapacity or
incompetency of the Managing General Partner, and if the business of the
Partnership is not continued pursuant to Articles 15 or 16, the remaining
General Partner(s) shall have the authority to wind up the business and affairs
of the Partnership or, if no General Partner remains or survives, any Person
designated by a decree of court or designated by vote of a Majority Interest
shall wind up the affairs of the Partnership.
16.3 ACCOUNTING. Upon dissolution (if the business of the Partnership
is not continued), and again upon the termination of the Partnership after the
winding up of the affairs of the Partnership is complete, an accounting of the
Partnership shall be made and its financial statements shall be examined by the
independent public accountants of the Partnership, and a report thereon shall be
furnished to the General Partner(s) or legal representatives thereof and to all
Limited Partners and Assignees.
16.4 WINDING UP AND LIQUIDATION. Upon dissolution of the Partnership,
if the Partnership or the business of the Partnership is not otherwise continued
hereunder, it shall be wound up and liquidated. The Book Value of any assets not
sold shall be
44
<PAGE>
adjusted to their fair market value and any Net Income or Net Loss shall be
allocated to the Capital Accounts as if the Partnership recognized Net Income or
Net Loss equal to such adjustment. After such allocations, the assets of the
Partnerships shall be paid or distributed in the following order of priority:
(A) To creditors, in the order of priority as provided by law, except
to secured creditors the obligations to whom will be assumed or otherwise
transferred on liquidation of the Partnership assets;
(B) Those amounts deemed necessary by the Persons winding up the
affairs of the Partnership for any contingent liabilities or obligations of the
Partnership shall be set aside as a reserve for contingent liabilities to be
distributed at such time and in such manner hereunder as the Persons winding up
the affairs of the Partnership shall determine in their sole discretion;
(C) To the General Partner(s) with respect to payments due to them
pursuant to Section 3.6 and Article 4;
(D) To each General Partner, Limited Partner and Assignee the amount of
their respective Capital Accounts.
16.5 CLAIM OF LIMITED PARTNERS AND ASSIGNEES. No Limited Partner or
Assignee shall have the right or power to demand or receive property other than
cash, whether as a Return of Capital, a distribution, a payment on liquidation
or otherwise. The Limited Partners and Assignees shall look solely to the assets
of the Partnership for the payment of income allocated to the Limited Partners
or Assignees and the return of the Capital Contributions of the Limited
Partners, and if the assets of the Partnership remaining after payment or
discharge of the debts and liabilities of the Partnership are insufficient to
pay all or part of such income or Capital Contributions, no Limited Partner or
Assignee shall have any recourse against any General Partner, the Partnership or
any other Limited Partner or Assignee.
16.6 NO RESTORATION OF NEGATIVE CAPITAL ACCOUNTS. Neither the
Partnership nor any General or Limited Partner shall have the right to require
any Partner to restore a deficit balance in such Partner's Capital Account.
ARTICLE 17
POWER OF ATTORNEY
17.1 POWER OF ATTORNEY. The Original Limited Partner and any General
Partner which is not the Managing General Partner by executing or becoming bound
by this Agreement, each person who shall become a Substituted Limited Partner
pursuant to the provisions of Section 8.3 (c) and each Person who executes a
45
<PAGE>
Request and Power shall, by such signature or execution and/or the operation of
such provisions, irrevocably constitute and appoint the Managing General Partner
of the Partnership, and its successors as Managing General Partner, the true and
lawful attorneys and agents for such Person and in such Person's name, place,
and stead for such Person's use and benefit to sign, certify and acknowledge,
swear to, and, to the extent necessary, to file and record: (1) this Agreement,
the Certificate of Limited Partnership and all amendments thereto; (2) any other
instrument which may be required to be filed by the Partnership under the laws
of any state or by any governmental agency which the Managing General Partner
deems advisable to file, including, but not limited to, certificates of
fictitious name statements, certificates or applications with respect to leases
from the federal government or a state government, and amendments to or
cancellation of this Agreement or the Certificate of Limited Partnership; (3)
all certificates and other instruments (including, at the option of the Managing
General Partner, this Agreement) and all amendments thereof which the Managing
General Partner deems appropriate or necessary to qualify, or continue the
qualification of, the Partnership as a limited partnership (or a partnership in
which the Limited Partner has limited liability) in all jurisdictions in which
the Partnership may conduct business or own any property; and (4) instruments
relating to the admission of Additional or Substituted Limited Partners. Each
such Person by such signature and/or the operation of such provisions shall also
authorize the Managing General Partner to take any further action which it shall
consider necessary or appropriate in connection with any of the foregoing,
thereby giving the Managing General Partner full power and authority to do and
perform each and every act and thing whatsoever requisite, necessary or
appropriate to be done in connection with the foregoing as fully as such Person
might or could do if personally present, and thereby ratifying and confirming
all that said Managing General Partner shall lawfully do or cause to be done by
virtue thereof. The foregoing grant of authority (A) shall be a Power of
Attorney coupled with an interest, is irrevocable, and shall survive the signing
Person's death or incapacity, if such signing Person is an individual, or
termination of existence, if such signing Person is a corporation, partnership
or other entity; and (B) shall survive the delivery of an assignment by the
signing Person of the whole or a portion of his interest in the Partnership.
Such power of attorney shall not supersede any other part of this Agreement nor
shall it be used to deprive such Person of any of such Person's rights under
this Agreement or to deprive the Limited Partner of his rights as the Limited
Partner. It is intended only to provide a simplified system for execution of
documents and the conduct of the business of the Partnership.
17.2 ADDITIONAL DOCUMENTS. Each Person who has given the Managing
General Partner a power of attorney pursuant to this Article 17 hereby agrees to
execute and deliver to the Managing General Partner within five (5) days after
receipt of the Managing
46
<PAGE>
General Partner's written request therefor, such other and further statements of
interest and holdings, designations, powers of attorney and other instruments
that the Managing General Partner deems necessary to comply with any laws, rules
or regulations relating to the business or proposed business of the Partnership.
ARTICLE 18
MISCELLANEOUS
18.1 NOTICES. All notices or other communications required or permitted
to be given pursuant to this Agreement shall, in the case of notices or
communications required or permitted to be given to the Limited Partner or his
Assignee, be in writing, and shall be considered as properly given or made if
personally delivered or if mailed by United States first class mail, postage
prepaid, or if sent by prepaid telegram, and addressed to the Limited Partner's
or Assignee's address for notices as it appears on the records of the
Partnership, and, in the case of notices or communications required or permitted
to be given to the General Partners or the Partnership, shall be in writing and
shall be considered as properly given or made if personally delivered, or if
sent by prepaid telegram, or if mailed by United States certified or registered
mail, postage prepaid, and addressed to the Managing General Partner at the
principal place of business of the Partnership as specified in Section 2.4. Any
Limited Partner or Assignee may change the address for notices, by giving notice
of such change to the Partnership, and the Managing General Partner may change
the address for notices to the General Partners or the Partnership by giving
notice of such change to the Limited Partner and his Assignee. Commencing on the
tenth (10th) day after giving of such notice, such newly-designated address
shall be such Partner's or Assignee's or the Partnership's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement. Any notice or other communication shall be deemed to
have been given as of the date on which it is personally delivered or, if mailed
or telegraphed to a General Partner which is not received by the General Partner
within ten (10) days after the date of its mailing or transmission shall be
deemed to have been given as of the date actually received by the General
Partner.
18.2 CHOICE OF LAW. This Agreement and all rights and liabilities of
the parties hereto with reference to the Partnership shall be subject to and
governed by the internal laws (and not the law pertaining to choice or conflict
of laws) of the State of California.
18.3 ARTICLE AND SECTION HEADINGS. The headings in this Agreement are
inserted for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
47
<PAGE>
18.4 SOLE AGREEMENT. This Agreement and the exhibits hereto constitute
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings pertaining
thereto.
18.5 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts with the same effect as if all parties had all signed the
same document. All counterparts shall be construed together and shall constitute
one agreement. Each party shall become bound by the Agreement immediately upon
affixing his or her signature hereto, independently of the signature of any
other party.
18.6 REMEDIES CUMULATIVE. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which any
Person may be lawfully entitled.
18.7 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement,
or condition.
18.8 WAIVER OF ACTION FOR PARTITION. Each of the parties hereto
irrevocably waives during the term of the Partnership any right that he may have
to maintain any action for partition with respect to the Partnership Property.
18.9 ASSIGNABILITY. Subject to the restrictions on transferability
contained herein, each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the successors and assigns of the respective parties hereto.
18.10 GENDER AND NUMBER. Whenever the context requires, the gender of
all words used hereby shall include the masculine, feminine and neuter, the
singular of all words shall include the singular and plural, and the plural of
all words shall include the singular and plural. Unless the context requires
otherwise, any reference to a General Partner shall include all General Partners
and any reference to the General Partners shall mean any General Partner.
18.11 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby, but
rather shall be enforced to the maximum extent permissible under applicable law.
IN WITNESS WHEREOF, the undersigned have executed this
48
<PAGE>
Agreement as of the day and year first above written.
GENERAL PARTNERS:
GLENBOROUGH REALTY CORPORATION
By /s/ Robert Batinovich
----------------------------
Title
-------------------------
/s/ Robert Batinovich
-----------------------------
Robert Batinovich
INITIAL LIMITED PARTNER:
/s/ Robert Batinovich
-----------------------------
Robert Batinovich
49
<TABLE>
GPA WEST, L.P.
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
Article 1 Definitions............................................................................1
1.1 Definitions...................................................................1
1.2 Accounting Terms and Determinations...........................................7
Article 2 The Limited Partnership................................................................8
2.1 Formation of the Partnership..................................................8
2.2 Partnership Name..............................................................8
2.3 Business and Purpose..........................................................8
2.4 Principal Office..............................................................8
2.5 Term..........................................................................9
2.6 Execution of Documents........................................................9
Article 3 The General Partners...................................................................9
3.1 General.......................................................................9
3.2 Management Power..............................................................9
3.3 Powers of the Managing General Partner.......................................10
3.4 Liability of General Partners................................................16
3.5 Similar Activities of General Partners.......................................16
3.6 Indemnification of General Partners..........................................17
3.7 Other Matters Concerning General
Partners.....................................................................19
3.8 Agreements With a General Partner or a
Related Person...............................................................20
3.9 Conveyances..................................................................20
Article 4 Compensation of General Partners......................................................20
4.1 Compensation of Managing
General Partner..............................................................20
4.2 Property Management Fee......................................................21
4.3 Incentive Fee................................................................21
4.4 Transaction Fee..............................................................23
4.5 Refinancing Fee..............................................................24
4.6 No Repayment.................................................................24
4.7 Accrual Upon Change in Managing
General Partner..............................................................25
4.8 Joint Ventures...............................................................25
4.9 Change in Compensation.......................................................25
4.10 Fringe Benefits..............................................................25
4.11 Expenses of General Partner..................................................25
4.12 Commissions on Certain Sales.................................................26
Article 5 The Limited Partners, Assignees and
Transferrees..........................................................................26
5.1 Limited Liability............................................................26
<PAGE>
5.2 Restrictions on Limited Partners
and Assignees................................................................27
5.3 Outside Activities...........................................................27
5.4 No Withdrawal or Dissolution.................................................27
5.5 Assignees....................................................................28
5.6 Transferees..................................................................28
Article 6 Approval by Limited Partner; Amendments...............................................28
6.1 Approval by Limited Partner..................................................28
6.2 Rights Conditional ..........................................................29
6.3 Amendments by the Managing
General Partner..............................................................30
6.4 Prohibited Amendments........................................................30
Article 7 Capital Contributions and Initial
Issuance of Interests.................................................................30
7.1 Cash Capital Contributions...................................................30
7.2 Contribution by Partners.....................................................31
7.3 Distribution of Interests....................................................31
7.4 General Partner Interests....................................................32
7.5 Distribution of Capital......................................................32
7.6 No Interest on Capital Contribution..........................................32
7.7 Creditor's Interest in the Partnership.......................................32
7.8 Nature of Interests..........................................................32
7.9 One Percent Interest of General
Partners and Additional Capital
Contributions................................................................32
Article 8 Allocation of Net Income, Net Loss and
Tax Credits...........................................................................33
8.1 General Allocation...........................................................33
8.2 Allocation on Transfer.......................................................33
Article 9 Cash Distributions....................................................................34
9.1 Time and Amount of Cash Distributions........................................34
9.2 Distributions of Partnership Property........................................34
Article 10 Accounting and Reports................................................................35
10.1 Fiscal Year..................................................................35
10.2 Reports......................................................................35
10.3 Tax Elections................................................................36
10.4 Books and Records............................................................36
10.5 Bank Accounts................................................................37
Article 11 Transfer of Interests.................................................................37
11.1 Transfer of Interests........................................................37
Article 12 Admission of Substituted and Additional
Limited Partners......................................................................37
12.1 Admission of Substituted Limited
Partners.....................................................................37
<PAGE>
12.2 Admission of Additional Limited
Partners.....................................................................38
Article 13 Removal, Resignation or Withdrawal of
Limited Partners......................................................................38
13.1 Removal of General Partner...................................................38
13.2 Withdrawal...................................................................38
13.3 Dissolution or Bankruptcy of
General Partner..............................................................39
13.4 Liability and Rights.........................................................39
13.5 Successor and Predecessor
General Partners.............................................................40
Article 14 Dissolution, Winding Up and Liquidation...............................................41
14.1 Dissolution..................................................................41
14.2 Authority to Wind Up.........................................................42
14.3 Accounting...................................................................42
14.4 Winding Up and Liquidation...................................................42
14.5 Claim of Limited Partners and Assignees......................................43
14.6 No Restoration of Negative Capital
Accounts.....................................................................43
Article 15 Miscellaneous.........................................................................43
15.1 Notices......................................................................43
15.2 Choice of Law................................................................44
15.3 Article and Section Headings.................................................44
15.4 Sole Agreement...............................................................44
15.5 Execution in Counterparts....................................................44
15.6 Remedies Cumulative..........................................................44
15.7 Waiver.......................................................................44
15.8 Waiver of Action for Partition...............................................44
15.9 Assignability................................................................44
15.10 Gender and Number............................................................45
15.11 Severability.................................................................45
15.12 Additional Documents.........................................................45
Signatures..................................................................................................45 & 46
</TABLE>
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
OF
GPA WEST, L.P.
This Limited Partnership Agreement (the "Agreement"), dated as of
____________, 1994, is made and entered into by GLENBOROUGH REALTY CORPORATION,
a California corporation and ROBERT BATINOVICH, an individual, as General
Partners, and GOCO REALTY FUND I, a California limited partnership, as the
Limited Partner, and all other parties who shall become partners of this limited
partnership as hereinafter provided.
In consideration of the mutual covenants and promises herein, the
parties hereby form a limited partnership under the California Revised Limited
Partnership Act upon the following terms and conditions:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. When used in this Agreement, the following terms shall
have the meanings set forth below, except as otherwise specifically modified:
"ACT" means the California Revised Limited Partnership Act, as
amended from time to time.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as an additional Limited Partner pursuant to Article 12
hereof.
"AFFILIATE" means any Person that directly or indirectly
controls, is controlled by, or is under common control with the Person
in question.
"ALLOCABLE SHARE" of a General Partner is his or its
percentage interest as set forth in Section 8.2(B) comprising an
aggregate of one percent (1%) and of the Limited Partners or Assignees,
at any particular time, an aggregate of 99%. The "Allocable Share" of a
Limited Partner or Assignee, at any particular time, means the
percentage which the number of Interests held by such Limited Partner
or assigned to such Assignee is of the total number of Interests
outstanding multiplied by 99%. If at any time, the aggregate of all
General Partner Interests represents more than 1% of all Interests, the
Allocable Share of all General Partners shall be the percentage
interest represented by the ratio between all such Interests which are
represented by General Partner Interests and all Interests, and the
Allocable Share of all
<PAGE>
Limited Partners and Assignees shall be the percentage interest
represented by the ratio between all Interests held by Limited Partners
and Assignees and all Interests.
"ASSIGNEE" means a Person to whom one or more Interests have
been assigned by a Partner but who has not become a Substituted Limited
Partner.
"ASSOCIATE means any shareholder, director, officer, employee
or agent of any General Partner and any employee or agent of the
Partnership.
"BOOK DEPRECIATION" means the depreciation, cost recovery or
amortization of nondepletable assets that would be allowable to the
Partnership for federal income tax purposes if its tax basis in such
assets were equal to the Book Value of such assets.
"BOOK GAIN" OR "BOOK LOSS" means the gain or loss that would
be recognized by the Partnership for federal income tax purposes as a
result of sales or exchanges of its assets if its tax basis in such
assets were equal to the Book Value of such assets.
"BOOK VALUE" means (a) as to property contributed to the
Partnership, its agreed value; (b) as to property acquired in any other
manner, its value as reflected on the books of the Partnership as of
the date it is acquired by the Partnership; and (c) as to property
owned by the Partnership at the time of any repurchase or issuance of
Interests for money or other property, its fair market value at that
time, all adjusted for Book Depreciation.
"CAPITAL ACCOUNT" means the account (maintained on a per-
Interest basis in the case of Interestholders) which shall be credited
with the Interestholder's or General Partner's distributive share of
(a) cash contributed to the Partnership; (b) the Book Value of
contributed property; (c) Net Income; (d) the amount of Partnership
liabilities assumed by such Interestholder or General Partner or that
are secured by any Partnership Property distributed to such
Interestholder or General Partner, and (e) increases in the basis of
Partnership Property attributable to investment credit recapture; and
which shall be debited with the Interestholder's or General Partner's
distributive share of (v) cash distributions (w) the Book Value of
distributed property; (x) Net Loss; (y) the amount of liabilities of a
Interestholder or General Partner assumed by the Partnership or that
are secured by any Partnership Property contributed by such
Interestholder or General Partner assumed by the Partnership or that
are secured by any Partnership Property contributed by such
Interestholder or General Partner to the Partnership; and (z) decreases
in
2
<PAGE>
the basis of the Partnership Property for any credits allowed under the
Code. A Limited Partner's Capital Account shall be the aggregate
Capital Account attributable to the Interests held by such Limited
Partner. In the case of transfer by an existing Partner of a
Partnership interest, the transferee will succeed to the Capital
Account relating to the Partnership interest transferred. Upon the
repurchase of Interests or upon the issuance of additional Interests
for money or other property (other than a de minimis amount) the
Capital Accounts of each Interestholder outstanding prior to the
repurchase or issuance and the Capital Accounts of the General Partners
shall be adjusted to reflect a revaluation of the Partnership Property
on the Partnership books to its fair market value and the Capital
Accounts of all Partners shall be adjusted simultaneously to reflect
such adjustment as if the Partnership recognized Net Income or Net Loss
equal to the amount of such adjustment. It is intended by this
provision to comply with Treasury Regulations Section 1.704-1(b) and
Code Section 704(c).
"CAPITAL CONTRIBUTION" means the individual total amount
contributed by each Partner to the capital of the Partnership as
provided in Article 7 hereof.
"CASH AVAILABLE FOR DISTRIBUTION" means cash held by the
Partnership in excess of (a) cash required for all expenses,
liabilities and obligations of the Partnership (whether for expense
items, capital expenditures, improvements, retirement of indebtedness
or otherwise); and (b) reserves as established in the sole discretion
of the Managing General Partner for Partnership capital expenditures,
improvements, retirement of indebtedness, operations, or contingencies,
known or unknown, liquidated or unliquidated, including, but not
limited to, liabilities which may be incurred in litigation and
liabilities undertaken pursuant to the indemnification provisions of
this Agreement.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the certificate of
limited partnership filed pursuant to the Act or any successor statute,
as the same may be amended from time to time.
"CLOSING DATE" means that date selected by the General
Partners for the contribution of the Exchange Assets to the
Partnership.
"CODE" means the Internal Revenue Code of 1986 or any
successor statute, as amended from time to time.
"EXCHANGE AGREEMENT" means the agreement between the Limited
Partner and the Partnership whereby the Exchange Assets are transferred
to the Partnership in exchange for 990 Interests.
3
<PAGE>
"EXCHANGE ASSETS" means the specific Projects contributed to
the Partnership pursuant to the Exchange Agreement.
"EXCHANGE TRANSACTION" means the transaction whereby the
Partnership will exchange Interests for Exchange Assets.
"EXCHANGE VALUE" means the value assigned to the Exchange
Assets for purposes of the Exchange Transaction.
"GENERAL PARTNERS" means the Persons named hereinabove as
general partners in their capacity as general partners of the
Partnership, and any successor or additional general partners. "General
Partner" means one of the General Partners.
"GENERAL PARTNER INTERESTS" means Interests designated as such
pursuant to Sections 7.4 or 7.9.
"GOCO" means GOCO Realty Fund I, a California limited
partnership.
"INTEREST" means a unit of interest in the Partnership
acquired or issued pursuant to Article 7.
"INTERESTS" means all of such units of interest.
"INTERESTHOLDER" means any Person who, for tax purposes, is to
be treated as a Limited Partner whether such Person is a Limited
Partner or an Assignee.
"LIMITED PARTNER" means GOCO, and any successor limited
partner who has become a Substituted Limited Partner and any Additional
Limited Partner.
"LIMITED PARTNERS" means all limited partners if, at any time,
there is more than one limited partner.
"LIMITED PARTNER INTERESTS" means Interests held or owned by
any Person or Persons as Limited Partner(s).
"MAJORITY INTEREST" means the Limited Partners of record
holding more than fifty percent (50%) of the Interests held by all
Limited Partners of record.
"MANAGING GENERAL PARTNER" means the Person so designated
pursuant to Section 3.2.
"NET INCOME" OR "NET LOSS" means the Partnership's taxable
income or loss (as an entity) under Code Section 703 computed with the
following adjustments:
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(a) Tax-exempt income described in Code Section 705(a)(1)(B)
shall be included and any expenditures not deductible in computing
taxable income shall be deductible.
(b) The only deduction for depreciation, cost recovery or
amortization shall be Book Depreciation.
(c) Book Gain or Book Loss shall be used instead of taxable
gain or loss.
"NET OPERATING CASH FLOW" means net income or loss as
determined under generally accepted accounting principles with the
following adjustments:
(a) There shall be added depreciation expense and amortization
expense related to capitalized loan fees, leasing commissions and debt
discount;
(b) There shall be deducted any gain from the sale or other
disposition of non-inventory real estate which was acquired as a part
of the Exchange Transaction and there shall be added any loss from the
sale or other disposition of any non-inventory real estate that was
acquired in the Exchange Transaction;
(c) There shall be deducted any income or gain from
investments in joint ventures or partnerships which are accounted for
on the equity method and there shall be added any losses from such
partnerships or joint ventures;
(d) There shall be added any cash received from distributions
from a partnership or joint venture to the extent that the aggregate
distributions for such partnership or joint venture exceeds the cost of
the investment in such partnership or joint venture;
(e) There shall be added cash received from the sale of an
interest in a partnership or joint venture to the extent that such cash
when added to any cash distributions received from such partnership or
joint venture exceeds the cost of the investment in such partnership or
joint venture;
(f) Adjustment shall be made to account for any gain arising
from the sale of non-inventory real property which was not acquired as
a part of the Exchange Transaction utilizing the installment method.
"PARTNER" means a General Partner or a Limited Partner; and
"Partners" means the General Partners and all Limited Partners.
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"PARTNERSHIP" means the limited partnership created by this
Agreement and any successor partnership thereto continuing the business
of the Partnership which is a reformation or reconstitution of the
partnership governed by this Agreement.
"PARTNERSHIP CAPITAL" means the total of all the Partners'
Capital Accounts at any given time.
"PARTNERSHIP PROPERTY" means the Exchange Assets and any and
all other property, real or personal, now or hereafter owned by the
Partnership or an Operating Limited Partnership or in or to which the
Partnership or an Operating Limited Partnership has any interest, right
or claim and shall include any interest in any Operating Limited
Partnership received by the Partnership in exchange for Partnership
Property.
"PERSON" means an individual, partnership (general or limited
and whether domestic or foreign), joint venture, estate, association,
corporation, trust company, trust or other entity.
"PRIMARY OPERATING LIMITED PARTNERSHIP" means an Operating
Limited Partnership in which the Partnership holds a direct interest as
the sole limited partner.
"PROJECTS" means the real estate projects owned by the
Partnership and all Operating Limited Partnerships.
"RECORD DATE" means the date established by the Partnership
for determining (a) the identity of Partners entitled to notice of or
to vote at any meeting of Partners or entitled to vote by ballot or
give consent to Partnership action in writing without a meeting, or
entitled to exercise rights in respect of any other lawful action of
Partners, or (b) the identity of Partners and Assignees entitled to
receive any report or distribution.
"RELATED PERSON" means Glenborough Corporation, the Limited
Partner, a General Partner; or any partner, officer, director of
Affiliate of any of the foregoing.
"REQUEST AND POWER" means a request for admission as a
Substituted or Additional Limited Partner, an agreement to be bound by
the terms of this Agreement, a power of attorney and the provision of
such other information as the Partnership shall request in such forms
as are approved by the Partnership.
"RETURN OF CAPITAL" means any distribution to the Partners to
the extent that such distribution reduces the Partnership Capital. A
distribution reduces the Partnership
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Capital to the extent that it exceeds the following amount: the sum of
the Net Income of the Partnership since its formation, reduced by (but
not below zero) the sum of the Net Losses of the Partnership since its
formation and the sum of all prior distributions.
"SECONDARY OPERATING LIMITED PARTNERSHIP" means an Operating
Limited Partnership that is not a Primary Operating Limited
Partnership.
"SUBSTITUTED LIMITED PARTNER" means a Person admitted to the
Partnership as a limited partner pursuant to Article 12 hereof.
"TAX CREDITS" means all credits against income, franchise or
similar taxes, including, without limitation, investment tax credits
and credits allowable to Partners or Assignees under federal, state or
other taxing statutes.
"UNITS" means Units of interest in Glenborough Partners, a
California limited partnership, as defined in the Limited Partnership
Agreement of Glenborough Partners, a California limited partnership,
dated as of December 30, 1993, for so long a period of time as
Glenborough Partners, a California limited partnership, is the holder
of a majority of the limited partnership interests in the Limited
Partner. Except as otherwise defined herein, the capitalized terms used
herein shall have the meaning given thereto in such Limited Partnership
Agreement.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. All accounting terms used
herein shall be interpreted, and all accounting and tax determinations hereunder
shall be made, in accordance with the following:
(a) For financial reporting purposes, the Partnership shall
adhere to generally-accepted accounting principles;
(b) For purposes of determining Partner Capital Accounts, the
Partnership shall adhere to the provisions of Treasury Regulations
Section 1.704-1(b);
(c) For purposes of determining Partner and Assignee
distributable shares of taxable income and loss, the Partnership shall
adhere to the provisions of Code Sections 704(b) and (c) and the
regulations promulgated thereunder.
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ARTICLE 2
THE LIMITED PARTNERSHIP
2.1 FORMATION OF THE PARTNERSHIP. The General Partners and the Limited
Partner hereby agree to form, and by execution of this Agreement do hereby enter
into, a limited partnership under the Act, which Act shall, except as set forth
in this Agreement, govern the rights and liabilities of the parties hereto.
2.2 PARTNERSHIP NAME. The name of the Partnership is "GPA West, L.P."
The Partnership shall conduct business under such name or such other name or
names as the Managing General Partner may from time to time deem necessary,
appropriate or advisable. The Managing General Partner in its sole discretion
may change the name of the Partnership at any time and from time to time. The
General Partners and, if necessary, the Limited Partner, shall promptly execute
and the Managing General Partner shall file and record with proper offices in
each jurisdiction in which the Partnership does or elects to do business, and
publish such certificates or other statements or instruments as are required by
the Act, fictitious or assumed name acts, or any other similar statute in effect
in such jurisdiction, in order to conduct validly the Partnership business
therein as a limited partnership.
2.3 BUSINESS AND PURPOSE. The business and purpose of the Partnership
shall be to engage in the Exchange Transaction and any lawful act or activity in
which a partnership may engage, including, without limitation, to engage
generally in any and all phases of the business of owning, holding, managing,
developing, controlling, acquiring, purchasing, disposing of or otherwise
dealing in or with any interests or rights in any real or personal property,
directly or through one or more Operating Limited Partnerships or other entities
or arrangements. Without limiting the generality of the foregoing, the
Partnership may perform such other acts incidental and supplementary to the
foregoing as the Managing General Partner determines to be necessary,
appropriate or advisable.
2.4 PRINCIPAL OFFICE. The office of the Partnership within California
for purposes of Section 15614(a) of the Act shall be at 400 South El Camino
Real, Eleventh Floor, San Mateo, California 94402. The Managing General Partner
may change such office and establish other places of business for the
Partnership (within or without the State of California) as it may, from time to
time, deem necessary or appropriate; provided, however, that the Managing
General Partner shall give the Partners and Assignees notice in writing of any
change of address of the office of the Partnership and, in connection therewith,
shall amend the Certificate of Limited Partnership in accordance with the Act.
The Managing General Partner may select one or more Persons in California to act
as agent for service of process on behalf of the Partnership,
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including, without limitation, a General Partner or a Related Person.
2.5 TERM. The Partnership shall commence on the date the Certificate of
Limited Partnership is filed in the office of the Secretary of State of
California in accordance with the provisions of the Act and shall continue until
January 31, 2037, unless extended by amendment of this Agreement or unless the
Partnership is dissolved prior to that date pursuant to Article 14.
2.6 EXECUTION OF DOCUMENTS. The Managing General Partner (or, if
required, all the General Partners) shall execute, acknowledge, file, record or
deliver all Certificates of Limited Partnership, amended certificates,
instruments or other documents and counterparts thereof and make all filings and
recordings and perform all other acts as shall be necessary to comply with the
laws of the State of California for the formation of the Partnership, thereafter
for the continued good standing of the Partnership, and, when appropriate, for
the termination of the Partnership. The Managing General Partner (or, if
required, all the General Partners) shall also execute such certificates,
amended certificates and other documents conforming hereto and perform such
recording, publishing and other acts as may be appropriate to comply with the
requirements of law for the formation, reformation, qualification and/or
operation of a limited partnership in all jurisdictions where the Partnership
may wish to do business, if deemed necessary by the Managing General Partner.
Such certificates, instruments, documents and counterparts may be signed by the
Managing General Partner on behalf of any or all of the Limited Partners acting
pursuant to the powers of attorney from the Limited Partners.
ARTICLE 3
THE GENERAL PARTNERS
3.1 GENERAL. The General Partners shall devote such time and attention
to the business of the Partnership as may be reasonably necessary to carry out
their duties hereunder in the conduct of such business, but any General Partner
and its partners, shareholders, officers, directors, employees and agents shall
have the right to be otherwise employed by an entity or entities other than the
Partnership, including, without limitation, Affiliates of the Partnership, on a
part-time or full-time basis. Nothing contained herein shall prevent a General
Partner or any partner, shareholder, officer, director, employee or agent of a
General Partner from becoming an Assignee or a Substituted or Additional Limited
Partner, whereupon such Person shall be entitled to all rights, shall be subject
to all obligations and shall be deemed, as to such Units, an Assignee or a
Limited Partner, as applicable.
3.2 MANAGEMENT POWER. The Managing General Partner shall
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have full, exclusive and complete discretion in the management and control of
the business of the Partnership for the purposes herein stated, and shall make
all decisions affecting the business of the Partnership, shall act as tax
matters partner for the Partnership, and may take such actions as it deems
necessary or appropriate to accomplish the purposes of the Partnership as set
forth herein. The Managing General Partner shall be Glenborough Realty
Corporation and any successor to the Managing General Partner which becomes the
Managing General Partner of the Partnership pursuant to Article 13. If there is
no successor which becomes a Managing General Partner pursuant to Article 13,
then Robert Batinovich shall become Managing General Partner until a meeting of
the Partners can be convened to elect a Person to serve as a General Partner and
as Managing General Partner hereunder. Except as may otherwise be set forth in
this Agreement, no General Partner, other than the Managing General Partner,
shall have any authority, right or power to bind the Partnership or to manage or
control the business of the Partnership in any manner whatsoever.
3.3 POWERS OF THE MANAGING GENERAL PARTNER. Subject to the provisions
of Article 6 vesting certain approval rights in the Limited Partners, in
connection with such management and control, the Managing General Partner shall
have the power and authority to do or cause to be done any and all acts, at the
expense of the Partnership, deemed by the Managing General Partner to be
necessary or appropriate to carry out the purposes of the Partnership. The power
and authority of the Managing General Partner shall be liberally construed to
encompass all acts and activities in which a partnership may engage. The power
and authority of the Managing General Partner shall include, without limitation,
the power and authority:
(A) To engage in the Exchange Transaction and to acquire, own,
lease, sublease, manage, hold, deal in, control or dispose of any
interests or rights in real or personal property, including, without
limitation, the powers to sell, exchange, mortgage, pledge, convey in
trust, enter into joint ventures or partnerships respecting or
otherwise hypothecate all or any portion of the Partnership Property;
(B) To create, by grant or otherwise, easements and
servitudes;
(C) To alter, improve, repair, raze, replace and rebuild
Partnership Property;
(D) To let or lease Partnership Property for any period, and
for any purpose;
(E) To apply proceeds of any sale, exchange, mortgage, pledge
or other disposition of Partnership Property to payment of liabilities
of the Partnership and to pay, collect,
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compromise, arbitrate or otherwise adjust any and all other claims or
demands of or against the Partnership, or to hold such proceeds against
the payment of contingent liabilities, known or unknown;
(F) To maintain or cause to be maintained records of all
rights and interests acquired for or disposed of by the Partnership,
all correspondence relating to the Partnership business and the
original records (or copies on such media as the Managing General
Partner deems appropriate) of all statements, bills and other
instruments furnished the Partnership in connection with its business;
(G) To maintain records and accounts of all operations and
expenditures, make all filings and reports required under applicable
rules and regulations of any governmental department, bureau or agency,
any securities exchange and any automated quotation system of a
registered securities association, and furnish the Partners and
Assignees with all necessary United States federal, state or local
income tax reporting information or such information with respect to
any other jurisdiction;
(H) To purchase and maintain, in its discretion and at the
expense of the Partnership, liability, indemnity and any other
insurance, including errors and omissions insurance, sufficient to
protect the Partnership, the General Partners and any other Person from
those liabilities and hazards which may be insured against in the
conduct or management of the Partnership's business;
(I) To make, execute, assign, acknowledge and file on behalf
of the Partnership, any and all documents or instruments of any kind
which the Managing General Partner may deem appropriate in carrying out
the purposes and business of the Partnership, including, without
limitation, powers of attorney, agreements of indemnification, sales
contracts, deeds, options, loan obligations, mortgages, deeds of trust,
notes, documents or instruments of any kind or character, and
amendments thereto. Any person, firm or corporation dealing with the
Managing General Partner shall not be required to determine or inquire
into the authority and power of the Managing General Partner to bind
the Partnership and to execute, acknowledge and deliver any and all
documents in connection therewith;
(J) To borrow money or to obtain credit in such amounts, on
such terms and conditions, and at such rates as the Managing General
Partner deems appropriate, from banks, other lending institutions and
any other Person, including the Partners and Assignees, for any
Partnership purpose, including, without limitation, any loan incurred
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for the purpose of making one or more distributions to any or all
Partners and Assignees, including any distributions which are, in whole
or in part, a Return of Capital; and in connection with such loans to
mortgage, pledge, assign or otherwise encumber or alienate any or all
Partnership Property, including any income therefrom, to secure or
provide repayment thereof. As between the Partnership and any lender,
it shall be conclusively presumed that the proceeds of such loans are
to be and will be used for the purposes authorized herein and that the
Managing General Partner has the full power and authority to borrow
such money and to obtain such credit;
(K) To assume obligations, enter into contracts, including
contracts of guaranty or suretyship, incur liabilities, lend money and
otherwise use the Partnership's credit and secure any of the
Partnership's obligations, contracts or liabilities by mortgage, pledge
or other encumbrance of all or any part of its property, franchises and
income;
(L) To invest Partnership funds in debt or equity securities
or other obligations of other issuers, including, but not limited to,
securities or other obligations of other partnerships; provided,
however, that the Managing General Partner shall not invest Partnership
funds in such a manner that the Partnership will be considered to be
holding itself out as being engaged primarily in the business of
investing, reinvesting or trading in securities or will otherwise be
deemed to be an investment company under the Investment Company Act of
1940, as amended;
(M) To make any election on behalf of the Partnership as is or
may be permitted under the Code or under the taxing statute or rule of
any state, local, foreign or other jurisdiction, and to supervise the
preparation and filing of all tax and information returns which the
Partnership may be required to file;
(N) To maintain the buildings, appurtenances and grounds of
the Partnership Property in accordance with acceptable standards,
including within such maintenance, without limitation thereof, interior
and exterior cleaning, painting and decorating, plumbing, carpentry and
such other normal maintenance and repair work as may be appropriate;
(O) To collect all rents and other charges from lessees of
Partnership Property and concessionaires, and otherwise due the
Partnership, with respect to the Partnership Property. The Partnership
authorizes the Managing General Partner to request, demand, collect,
receive and receipt for all such rents and other charges and to
institute legal proceedings in the name of the Partnership for the
collection thereof and for
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the dispossession of any Person from Partnership Property and such
expense may include the costs of counsel for any such matter;
(P) To cause to be disbursed (1) the aggregate amount required
to be paid pursuant to any indebtedness of the Partnership, including
therein amounts due under any mortgages or deeds of trust for interest,
amortization of principal and for allocation to reserve or escrow
funds; (2) the amount of rent payable by the terms of any lease under
which the Partnership holds the Partnership Property, or any portion
thereof, promptly when due; (3) the amount of all real estate taxes and
other impositions levied by appropriate authorities; and (4) amounts
otherwise due and payable as expenses of the Partnership authorized to
be incurred under the terms of this Agreement;
(Q) To employ and engage suitable agents, employees, advisers,
consultants and counsel (including any custodian, investment adviser,
accountant, attorney, corporate fiduciary, bank or other reputable
financial institution, or any other agents, employees or Persons which
may serve in such capacity for the Managing General Partner or any
Related Person) to carry out any activities which the Managing General
Partner is authorized or required to carry out or conduct under this
Agreement, including, without limitation, a Person which may be engaged
to undertake some or all of the general management, property
management, financial accounting and record keeping, construction
supervision and other duties of the Managing General Partner, to
indemnify such Persons against liabilities incurred by them in acting
in such capacities on behalf of the Partnership and to rely on the
advice given by such Persons, it being agreed and understood that the
Managing General Partner shall not be responsible for the acts and
omissions of any such Persons and shall assume no obligations in
connection therewith other than the obligation to use due care in the
selection thereof;
(R) To enter into an agreement or agreements with real estate
brokers or agents, investment banking firms, appraisers or others
providing for the engagement of such Persons on an exclusive or
nonexclusive basis to advise or represent the Partnership in the
valuation, sale, lease or other dealings in the Partnership Property,
it being understood that the Managing General Partner shall not be
responsible for the acts and omissions of any such Persons and shall
assume no obligations in connection therewith other than the obligation
to use due care in the selection thereof;
(S) To hold Partnership Property in the name of one or more
nominees, with or without disclosure of the fiduciary relationship;
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(T) To keep proprietary or trade secret information
confidential, and if deemed necessary by the Managing General Partner,
to keep such information confidential from the Limited Partners for a
reasonable period of time;
(U) To pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise upon such terms as it may
determine and upon such evidence as it may deem sufficient, any
obligation, suit, liability cause of action or claim, including taxes,
either in favor of or against the Partnership;
(V) To prosecute, protect and defend or cause to be protected
and defended all patents, patent rights, trade names, trademarks,
service marks and other marks, and all applications with respect
thereto which may be held by the Partnership, and to take all
reasonable and necessary actions to protect the secrecy of and the
proprietary rights with respect to any secret know-how, secret
processes or other proprietary information, and to prosecute and defend
all rights of the Partnership in connection therewith;
(W) To register, qualify or list, or cause to be registered,
qualified, listed or reported, this Agreement or Units hereunder
pursuant to the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, any other securities laws of the
United States, the securities laws of any state of the United States,
the laws of any other jurisdiction, or with any securities exchange or
pursuant to an automated quotation system of a registered securities
association as the Managing General Partner deems appropriate;
(X) To issue, purchase, repurchase, redeem, receive, take or
otherwise acquire, own, hold, sell, lend, exchange, trade in, grant
calls or options or warrants, grant appreciation rights, transfer or
otherwise dispose of, pledge, use and otherwise deal in and with
shares, bonds, debentures and other securities, whether issued by the
Partnership or issued by any other Person, whether on an exchange, over
the counter, in private transactions or in other transactions, and
whether for the Partnership or for any plan maintained or sponsored by
the Partnership, including securities of the Partnership of a different
class or series than the Interests, whether debt or equity, redeemable
or nonredeemable, convertible or nonconvertible, and including
securities with different rights, preferences, privileges, allocations
and tax consequences;
(Y) To qualify to do business in any other state, territory,
dependency or foreign country;
(Z) To make donations, regardless of specific benefit to
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the Partnership, for the public welfare, to community or hospital
funds, or for charitable, educational, scientific, civic, political or
similar purposes;
(AA) To pay pensions, and to establish, participate in and
maintain as plan sponsor or otherwise, pension, profit sharing, bonus,
purchase, option, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions for any or all of the employees of
the Partnership, and any partner, shareholder, director, officer,
employee or agent of a General Partner or any Affiliate, including
plans, trusts and provisions which may provide for the ownership,
acquisition, holding, or disposition of Units or any other securities
of the Partnership; and to indemnify and purchase and maintain
insurance on behalf of, any fiduciary of such retirement, incentive and
benefit plans, trusts or other provisions, including, without
limitation, health insurance, medical and dental reimbursement, life
insurance, accident insurance, disability insurance and other plans,
trusts or provisions;
(BB) To put into effect and carry out any plan of
reorganization or arrangement and the orders of the court or judge
entered in a proceeding for reorganization or arrangement under any
applicable statute of the United States or of any state, local or other
jurisdiction, and to undertake any proceeding and perform any act
provided in the plan or directed by such orders, without further action
by any Partner or Assignee. Such power and authority may be exercised
and such proceedings and acts may be undertaken, as may be directed by
such orders, by the trustee or trustees of the Partnership appointed in
the reorganization or arrangement proceeding (or a majority thereof),
or if none is appointed and acting, by the Managing General Partner or
a master or other representative appointed by the court or judge, with
like effect as if exercised and taken by unanimous action of the
Partners and Assignees;
(CC) To distribute money or Partnership Property to Partners
and Assignees in accordance with this Agreement regardless of the
source of such money or Partnership Property, including, without
limitation, money borrowed by the Partnership or by the Managing
General Partner on behalf of the Partnership;
(DD) To possess and exercise any additional powers and rights
of general partners in a limited partnership, including, without
limitation, those granted under the Act and any other applicable laws,
to the extent not inconsistent with this Agreement;
(EE) To take any and all action, conduct all proceedings
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and execute all rights and privileges, contracts and agreements of any
kind whatsoever, although not specifically mentioned in this Agreement,
that the Managing General Partner may deem necessary or appropriate to
conduct the business of the Partnership or to carry out the purposes of
the Partnership. The expression of any power or authority of the
Managing General Partner in this Agreement shall not limit or exclude
any other power or authority which is not specifically or expressly set
forth in this Agreement; and
3.4 LIABILITY OF GENERAL PARTNERS. The General Partners shall be liable
to the Partnership and the Limited Partners and Assignees for gross negligence
or gross misconduct but neither the General Partners nor their Associates shall
be liable to either the Partnership or the Limited Partner or to Persons who
have acquired interests in the Interests, whether as Assignees or otherwise, for
errors in judgment or for any acts or omissions that do not constitute willful
misconduct. If this Section 3.4 shall, for any reason and to any extent, be
invalid or unenforceable, it is intended that this Section 3.4 shall be
construed to exculpate the General Partners and their Associates to the fullest
extent permitted by law.
3.5 SIMILAR ACTIVITIES OF GENERAL PARTNERS. The General Partners and
their respective Associates may, directly or indirectly (including, without
limitation, through a Related Person or other entity in which the General
Partner or any such Related Person holds an ownership interest), engage in any
and all aspects of the business of owning, holding, developing, controlling,
acquiring, purchasing, managing, disposing of and otherwise dealing with real,
personal or mixed property; act as a partner (limited or general), shareholder,
director, officer, employee or agent of any entity (including GOCO, Glenborough
Partners and Glenborough Corporation) engaging in such business or activities;
or engage in any other businesses and activities, whether the same be
competitive with the Partnership, any Operating Limited Partnership (as defined
in the Limited Partnership Agreement of Glenborough Partners), Glenborough
Partners, the Limited Partner or otherwise, for their own account and for the
account of others, without having or incurring any obligation to offer any
interest in such properties, businesses or activities to the Partnership or any
Partner or Assignee and nothing herein contained shall be deemed to prevent any
General Partner or any such Related Person from conducting such other business
and activities. Neither the Partnership, nor any of the Partners or Assignees
shall have any rights by virtue of this Agreement in any independent business
ventures of a General Partner or any such Related Person. However, all records
kept and maintained by the Managing General Partner for the Partnership pursuant
to this Agreement shall be maintained separately from those for other operations
of the General Partners, including other partnerships for which a General
Partner is a general partner.
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3.6 INDEMNIFICATION OF GENERAL PARTNERS.
(A) The General Partners and each of their respective Associates
(individually an "Indemnitee") shall, to the fullest extent permitted by law, be
indemnified and held harmless by the Partnership from and against all losses,
claims, damages, liabilities (joint and several), expenses (including, without
limitation, attorneys' fees and expenses, and any expenses of establishing a
right to indemnification under this Section 3.6), judgments, fines, settlements
and other amounts (collectively "Liability") arising from or incurred in
connection with any claim, demand, action, suit or proceeding (including, but
not limited to, claims, demands, actions, suits and proceedings by, in the name
of or on behalf of, the Partnership), whether civil, criminal, administrative or
investigative and whether threatened, pending or completed (collectively
"Proceeding") in which the Indemnitee may be involved, or threatened to be
involved, as a party or otherwise by reason of: (i) its status at any time as a
General Partner or Associate of a General Partner; (ii) its management of the
Partnership; and/or (iii) any act performed or omitted to be performed by it at
any time in connection with the business, property or affairs of the Partnership
whether or not such Indemnitee continues to be a General Partner or an Associate
of a General Partner at the time such Liability is paid or incurred, if: (a)
such Liability was not the result of gross negligence or gross misconduct by the
Indemnitee, and the Indemnitee determined, in good faith, that the course of
conduct which caused the Liability was in the best interests of the Partnership;
or (b) a court of competent jurisdiction determines upon application that,
despite the fact that the requirements of clause (a) are not satisfied, in view
of all the circumstances, the Indemnitee is fairly and reasonably entitled to
indemnification for such Liabilities as such court may deem proper.
(B) The termination of a Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that the Indemnitee did not determine in good faith
that the course of conduct which caused the Liability was in the best interests
of the Partnership.
(C) Any Liability for which the Partnership and the Indemnitee are
jointly liable shall, if the Indemnitee is entitled to indemnification under
this Section 3.6, be satisfied first from the assets of the Partnership. The
indemnification provided by this Section 3.6 shall be recoverable out of the
assets of the Partnership, including any insurance proceeds, and shall not be
recoverable out of any other assets of the Limited Partners.
(D) Expenses (including attorneys' fees and expenses) incurred in
defending any Proceeding shall be paid by the Partnership in advance of the
final disposition of such Proceeding
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upon receipt of an undertaking by or on behalf of the Indemnitee to repay such
amount if it shall ultimately be determined by a court of competent jurisdiction
that the Indemnitee is not entitled to indemnification as authorized by this
Section 3.6.
(E) The indemnification provided by this Section 3.6 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, vote of the Partners, as a matter of law or otherwise both as to
action in the Indemnitee's capacity as a General Partner or Associate of a
General Partner and to action in another capacity, shall continue as to an
Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(F) The Partnership shall, to the extent commercially reasonable,
purchase and maintain insurance on behalf of the Indemnitees and such other
Persons as the Managing General Partner shall determine against any Liability
which may be asserted against or expense which may be incurred by such persons
in connection with Partnership activities (including, without limitation, any
Proceeding) whether or not the Partnership would have the power to indemnify
such persons against such Liability under the provisions of this Agreement.
(G) For purposes of this Section 3.6, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by an Indemnitee of its duties to the Partnership
also imposes duties on, or otherwise involves services by, an Indemnitee to such
plan or participants or beneficiaries of such plan. Excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall be deemed a Liability and action taken or omitted by an Indemnitee with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by an Indemnitee to be in the interests of the
participants and beneficiaries of such plan shall be deemed to be for a purpose
which is in the best interests of the Partnership. Any payments to an Indemnitee
shall be solely from assets of the Partnership and shall not be paid from
employee benefit plan assets.
(H) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 3.6 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies.
(I) Notwithstanding the foregoing, an Indemnitee shall not be entitled
to indemnification hereunder for any Liability imposed in a Proceeding arising
from or out of a violation of state or federal securities laws associated with
the offer and sale of Units. Indemnification will be allowed for settlements and
related expenses of Proceedings alleging securities law violations, and
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for expenses incurred in successfully defending such Proceedings, providing that
a court either (i) approves the settlement and finds that indemnification of the
settlement and related costs should be made; or (ii) approves indemnification of
litigation costs if a successful defense is made.
(J) If any provision of this Section 3.6, or the application thereof,
shall, for any reason and to any extent, be invalid or unenforceable, the
remainder of this Section 3.6 and the application thereof shall not be affected
thereby, it being the intent of this Section 3.6 to indemnify and hold harmless
the Indemnitees to the fullest extent permitted by applicable law.
3.7 OTHER MATTERS CONCERNING GENERAL PARTNERS.
(A) Each of the General Partners may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
(B) Each of the General Partners may consult with and employ counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants, advisers and Persons selected by it (who may serve as such for and
be employed by the Partnership or any Related Person), and any opinion of such
Person as to matters which the General Partner believes to be within that
Person's professional or expert competence shall be full and complete
authorization and protection with respect to any action taken, suffered, or
omitted by the General Partner hereunder in good faith and in accordance with
such opinion.
(C) Each of the General Partners may execute any of the powers
hereunder or perform any duties hereunder either directly or by or through
agents, including, without limitation, any Related Person, and a General Partner
shall not be responsible for any misconduct, negligence, or willful act on the
part of any agent appointed with due care by any General Partner.
(D) Any and all fees, commissions, compensation and other consideration
received by a General Partner or a partner, shareholder, director, officer,
agent or employee of a General Partner permitted hereunder shall be the
exclusive property of the recipient, in which the Partnership shall have no
right or claim, and the participation by any such Person in any agreement
permitted hereunder shall not constitute a breach by such Person of any duty
that it may owe the Partnership or the Limited Partners or Assignees under this
Agreement or by operation of law.
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3.8 AGREEMENTS WITH A GENERAL PARTNER OR A RELATED PERSON.
(A) In addition to agreements, arrangements and transactions provided
for in or contemplated by this Agreement, a General Partner and any Related
Person may, directly or indirectly, deal with the Partnership, including,
without limitation, making loans to (but not borrowing from) the Partnership, in
connection with carrying out the business of the Partnership or otherwise, as an
independent contractor or as an agent for others, and may receive from such
others or the Partnership, profits, compensation, commissions or other amounts
which the Managing General Partner in good faith believes to be reasonable
without having to account to the Partnership therefor, if the material facts as
to the agreement or transaction and as to the relationship or interest of the
General Partner or Related Person are disclosed or known to the partner of
Glenborough Partners and such agreement or transaction is specifically
authorized, approved or ratified by a majority of the Units held by the limited
partners of Glenborough Partners. Compliance with the provisions of this Section
3.8 (A) shall be a complete defense to any claim of invalidity or for damages or
other relief with respect to any such agreement or transaction.
(B) The satisfaction of the following condition shall be a complete
defense to any claim of invalidity or for damages or other relief with respect
to any agreement or transaction between a General Partner or a Related Person
and another Person based upon the assertion of a breach of duty owed to the
Partnership by a General Partner or a Related Person in entering into such
agreement or transaction: the material facts as to the agreement or transaction
and as to the relationship or interest of the General Partner or Related Person
are disclosed or known to the partner of Glenborough Partners and such agreement
or transaction is specifically authorized, approved or ratified by a majority of
the Units held by the limited partners of Glenborough Partners.
3.9 CONVEYANCES. The Managing General Partner has the express authority
to convey title to any Partnership Property by a conveyance executed by the
Managing General Partner alone on behalf of the Partnership.
ARTICLE 4
COMPENSATION OF GENERAL PARTNERS
4.1 COMPENSATION OF MANAGING GENERAL PARTNER. In consideration of the
services rendered by the Managing General Partner in managing the business and
affairs of the Partnership, the Partnership shall pay the Managing General
Partner fees consisting of the amounts described in Sections 4.2 through 4.7,
inclusive. The Managing General Partner may divide, allocate or pay the
compensation it receives under this Agreement among its Associates and other
Persons, or may assign to or subcontract with
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other Persons (including Glenborough Corporation) any of its management duties
hereunder together with some or all of such compensation, as it determines in
its sole discretion. All compensation paid the Managing General Partner shall be
paid in United States dollars.
4.2 PROPERTY MANAGEMENT FEE. The Managing General Partner shall be
entitled to a fee (the "Property Management Fee") determined as follows:
(A) With regard to any Partnership Property leased to multiple tenants,
including apartments and condominiums (except as provided in subsection (C)
hereof), a sum equal to five percent (5%) of the monthly Gross Receipts
collected by the Partnership. For purposes of this Section 4.2, "Gross Receipts"
shall mean all rentals and other charges due the Partnership from tenants of
Partnership Property, including, without limitation, expense pass-through items
such as real property taxes and insurance, and rentals or fees paid for parking.
(B) With regard to any non-residential Partnership Property leased to a
single tenant, a sum equal to three percent (3%) of the monthly Gross Receipts
collected by the Partnership.
(C) With regard to any Partnership Property consisting of single-family
residences or scattered condominiums, a sum equal to ten percent (10%) of the
monthly Gross Receipts collected by the Partnership.
(D) The Property Management Fee shall be computed as of the end of each
calendar month with respect to the gross receipts of such month and shall be
paid to the Managing General Partner as soon as practicable thereafter.
4.3 INCENTIVE FEE. The Managing General Partner shall be entitled to a
fee (the "Incentive Fee") determined as follows:
(A) An amount equal to one-half of one percent (.5%) of the sum of the
monthly weighted average of the fair market value ("Fair Market Value") of the
real property (as real property is determined under California law) of the
Partnership and the Book Value of all other Partnership Property as determined
in accordance with this Section.
(B) The Fair Market Value of the Partnership's real property shall be
determined in accordance with the following and the provisions of Section 4.3
(D).
(1) For the year 1994, with respect to that real property
acquired in the Exchange Transaction, it shall be the value thereof
established in the Exchange Agreement which, in turn, shall be the
value thereof as
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last determined by the Limited Partner pursuant to the provisions of
Section 4.3 of the Amended and Restated Limited Partnership Agreement
of the Limited Partner dated as of May 1, 1986, as amended ("Original
Value").
(2) For the year 1995, with respect to that real property
acquired in the Exchange Transaction, it shall be the Original Value
thereof, as increased by the CPI Adjustment, as defined herein
("Adjusted Original Value").
(3) For 1996 and each even-numbered year thereafter, it shall
be the appraised value of such real property, as of the end of each
such year, as determined by independent appraisals ("Biennial Appraised
Value").
(4) For 1997 and each odd-numbered year thereafter, it shall
be the most recent Biennial Appraised Value as adjusted by the CPI
Adjustment ("Adjusted Biennial Appraised Value").
(5) Where in any year, the Partnership should acquire
additional real property, the aggregate prices paid therefor by the
Partnership shall, subject to the provisions of subsection (E) hereof,
be added to the Original Value, Adjusted Original Value, Biennial
Appraised Value or Adjusted Biennial Appraised Value for such year, as
appropriate, the sum of the two being hereafter referred to as the
"Base Value".
(C) The CPI Adjustment shall be the adjustment described in Section
4.3(D) and shall be determined by utilizing the Consumer Price Index for All
Urban Consumers of All Items for the United States (base year 1982 - 1984 =
100), published by the United States Department of Labor, Bureau of Labor
Statistics ("CPI Index"). For those years in which the CPI Adjustment is to be
made, the beginning index ("Beginning Index") shall be the CPI Index for the
month of December of the prior year and the extension index ("Extension Index")
shall be the CPI Index for the month of December of that year.
(D) If the Extension Index has increased over the Beginning Index, the
Fair Market Value shall be determined by multiplying the Base Value of the real
estate for such year by a fraction, the numerator of which is the Extension
Index, and the denominator of which is the Beginning Index. In no case shall the
Fair Market Value of real property for an odd-numbered year be less than the
Base Value thereof for that year. If the CPI Index is changed so that the base
year differs from that used for the Beginning Index, the CPI Index shall be
converted in accordance with the conversion factor published by the United
States Department of Labor, Bureau of Labor Statistics. If the CPI Index is
discontinued or revised,
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such other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would be obtained if
the CPI Index had not been discontinued or revised.
(E) The Fair Market Value of the Partnership real property and the Book
Value of all other Partnership Property shall be determined on a monthly
weighted average basis to reflect the period of ownership of such Partnership
Property for such year 22 The monthly weighted average for the first and last
year of the Partnership shall be based on a denominator equal to the number of
months of existence of the Partnership in such year.
(F) The Incentive Fee shall be paid to the Managing General Partner on
a monthly basis by taking one-twelfth (1/12th) of the Incentive Fee based on the
most recent Fair Market Value determination hereunder; except that at the end of
each year, the Incentive Fee for that year shall be recomputed as herein
provided, and the Managing General Partner shall thereupon be entitled to the
balance of the Incentive Fee. Any overpayment of the Incentive Fee shall be
deducted from the next monthly payments of the Incentive Fee to fall due for the
following year.
(G) The Incentive Fee shall be paid to the Managing General Partner
only to the extent that the combined Net Operating Cash Flow of the Partnership,
the Limited Partner, and all other partnerships included within the definition
of an Operating Limited Partnership as that term is defined in Section 1.1 of
the Limited Partnership Agreement of Glenborough Partners during such year
exceeds an amount equal to one dollar and fifty cents ($1.50) multiplied by the
monthly weighted average number of the outstanding limited partnership Units. To
the extent the Incentive Fee cannot be paid for any year it shall lapse.
4.4 TRANSACTION FEE.
(A) The Managing General Partner shall be entitled to a fee upon the
sale, exchange or purchase of any property of the Partnership equal to two
percent (2%) of the sale proceeds or the purchase price (the "Transaction Fee");
provided, however, that no Transaction Fee shall be payable on such transactions
with Affiliates or for sales in which the Managing General Partner participates
in real estate commissions as set forth in Section 4.12 hereof. The sale
proceeds or the purchase price of the property shall be the total of all
consideration received or paid, as the case may be, including, but not limited
to, all cash, the principal amount of any note or promise to pay, and the fair
market value of any other property paid or transferred in connection with the
sale or purchase. For purposes of this Section 4.4, an exchange shall be deemed
one transaction. The principal amount of a note or promise to pay bearing no
interest or interest at other than market rates shall be adjusted as provided in
Section 4.4(B)
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in computing the sale proceeds or the purchase price to reflect market interest
rates. In addition, the entry into a lease of real property or improvements to
real property (other than a lease of office space required for administration of
the Partnership) by the Partnership, as lessee, shall be deemed a purchase and
the present value of the lease payments over the term of the lease, excluding
any option periods and any increases in payments which cannot be calculated at
the time of the entry into the lease, discounted at the interest rate on
five-year Treasury Notes, or comparable indices if five-year Treasury Notes are
no longer customarily quoted ("Adjustment Index"), prevailing on the date of
entry into the lease, shall be deemed the purchase price on which the
Transaction Fee shall be computed. The exercise by the Partnership or any other
Person of any option to purchase and the consummation of such purchase, whether
or not related to any lease, shall be deemed a separate transaction for purposes
of the application and computation of the Transaction Fee under this Section 4.4
(B) ADJUSTMENT METHOD. Except as may be otherwise specified, the
principal amount of any note or promise to pay required to be adjusted under
Section 4.4(A) shall be adjusted in accordance with the same principles used by
the Partnership for financial reporting purposes and shall be based on the
Adjustment Index, defined in Section 4.4(A) above.
(C) PAYMENT. The Transaction Fee shall be paid as soon as practicable
after consummation of the transaction with respect to which the fee is accrued.
4.5 REFINANCING FEE. The Managing General Partner shall be entitled to
a fee ("Refinancing Fee") equal to one percent (1%) of the net loan refinancing
proceeds received from third Persons on the refinancing of any Partnership
Property, but only if the refinancing results in:
(A) A new loan with a materially lower interest rate or better payment
terms; or
(B) Proceeds which are available for other Partnership purposes; or
(C) Funds for the repayment of an existing loan that is due or will
become due in the near future.
The amount of net loan refinancing proceeds shall equal the principal
amount of the loan less points, loan processing fees and other loan costs. The
Refinancing Fee shall be paid to the Managing General Partner as soon as
practicable after the loan refinancing proceeds have been made available to the
Partnership.
4.6 NO REPAYMENT. The Managing General Partner shall not be required to
return to the Partnership all or any part of any fee
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properly computed and paid to it, notwithstanding any subsequent event.
4.7 ACCRUAL UPON CHANGE IN MANAGING GENERAL PARTNER. If the Managing
General Partner ceases to serve in that capacity as of any day (the "Termination
Date") for any reason, the Property Management Fee and the Incentive Fee shall
be accrued on a prorata daily basis to and including the Termination Date. The
Property Management Fee and the Incentive Fee payable to any new Managing
General Partner shall accrue from and after the Termination Date. The Property
Management Fee and the Incentive Fee shall be paid to the Managing General
Partner at such time as it would otherwise be payable for the period in which
the Termination Date occurs.
4.8 JOINT VENTURES. References herein to any property acquired, owned
or disposed of by the Partnership shall include the Partnership's interest from
time to time in any underlying property held by any joint venture, partnership
or other entity or form of ownership in which the Partnership has an interest
("Partnership's Share in Underlying Property"). Without limiting the generality
of the foregoing, the Property Management Fee, Incentive Fee, Transaction Fee,
and any other fee which may become payable to the Managing General Partner shall
apply to and be based upon not only any wholly-owned property, but also the
Partnership's Share in Underlying Property. There shall, however, be no
duplication of fees as a consequence of this provision.
4.9 CHANGE IN COMPENSATION. With the approval of holders of the Units
held by limited partners of Glenborough Partners in accordance with Section 3.8,
the Managing General Partner may propose and effect any additional or substitute
compensation plans or arrangements for compensation to be paid to it as Managing
General Partner; provided, however, that in voting on such matters (as well as
the amendment of this Section), the General Partners and Glenborough Partners
and their respective Affiliates shall vote their interests for, against, or
abstain in the same proportion as all other limited partners of Glenborough
Partners vote for, against, or abstain on such matters and provided further,
that there shall be no retroactive changes in the compensation paid to the
Managing General Partner.
4.10 FRINGE BENEFITS. At the expense of the Partnership, any officer or
employee of the Managing General Partner who performs services for the Managing
General Partner in connection with the conduct of Partnership business shall be
entitled to participate in any health insurance, medical and dental
reimbursement, life insurance, accident insurance, disability insurance or any
other plans, trusts or provisions, or any other employee benefit plans or
arrangements established by the Partnership, as if such officer or employee were
an officer or employee of the Partnership.
4.11 EXPENSES OF GENERAL PARTNER. The Partnership shall pay
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all expenses, disbursements and advances reasonably incurred by the General
Partners and their Affiliates in connection with the organization of the
Partnership and the conduct of Partnership business, including, without
limitation, office expenses, secretarial expenses, software acquisition, data
processing services and expenses for entertainment, travel and similar items,
including amounts paid to any Person employed or retained to perform services
for the Partnership. The Partnership shall promptly reimburse the General
Partners and their Affiliates for any such items paid by the General Partners or
their Affiliates. The General Partners and their Affiliates shall also receive a
reasonable reimbursement for their general and administrative costs allocable to
the management and operation of the Partnership, as determined by the Managing
General Partner in its discretion; provided, however, that such costs shall be
reasonable in amount and necessary to the functions of the Partnership. Such
costs shall include salaries and compensation of legal and leasing personnel,
and costs incurred in connection with servicing Partnership notes receivable,
but shall exclude salaries and compensation of the officers and directors of any
General Partner.
4.12 COMMISSIONS ON CERTAIN SALES. The Managing General Partner or an
Affiliate thereof, shall be entitled to receive a commission upon the sale of
single-family residences (but not including condominiums or residential units
sold in bulk), where substantial services have been rendered in connection with
such sale. Such commission shall be an amount equal to a maximum of four percent
(4%) of the sale proceeds where no third Person is employed in connection with
the sale of the Partnership Property and a minimum of two percent (2%) of the
sale proceeds where a third Person or Persons are employed in connection with
the sale of Partnership Property; provided, however, that in no event shall the
total commission paid to all Persons in connection with the sale of such
Partnership Property be less than four percent (4%) or more than seven percent
(7%) of the sale proceeds (as that term is defined in Section 4.4(A)).
ARTICLE 5
THE LIMITED PARTNERS, ASSIGNEES AND TRANSFERREES
5.1 LIMITED LIABILITY. No Limited Partner or Assignee (unless such
Limited Partner or Assignee is a General Partner or otherwise participates in
the control of the business of the Partnership) shall be personally liable for
any of the debts of the Partnership or for any Net Losses beyond the amount of
the Capital Contribution made or agreed to be made to the Partnership by the
Limited Partner or Assignee and any undistributed Net Income allocated to the
Limited Partner or Assignee. However, to the extent required by law, each
Limited Partner or Assignee receiving any actual or constructive distribution
may be liable to return such distribution if and to the extent that, immediately
after
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giving effect to the distribution, all liabilities of the Partnership, other
than liabilities to Partners or Assignees on account of their interest in the
Partnership and liabilities as to which recourse of creditors is limited to
specific property of the Partnership, exceed the fair value of the Partnership
Property; provided, however, that the fair value of any Partnership Property
that is subject to a liability as to which recourse of creditors is so limited
shall be included in the Partnership Property for purposes of this sentence only
to the extent that the fair value of such Partnership Property exceeds such
liability. Any Limited Partner returning all or any part of a distribution
actually received by an Assignee or successor of the Limited Partner shall be
subrogated to the Partnership's right to seek a return to the Partnership of the
distribution from the Assignee or such successor. In no event shall any Limited
Partner or Assignee be obligated under any circumstances to make any Capital
Contribution to the Partnership for any purpose whatsoever, other than Capital
Contributions described in Article 7.
5.2 RESTRICTIONS ON LIMITED PARTNERS AND ASSIGNEES.
(A) No Limited Partner or Assignee shall participate as such in the
management and control of the business of the Partnership, transact any business
for the Partnership, or attempt to do so, unless such Limited Partner or
Assignee is also the Managing General Partner or a Related Person or other
Person employed or engaged to transact any such business by or on behalf of the
Managing General Partner or the Partnership. The transaction of any such
business by a Limited Partner or Assignee employed or engaged to do so by or on
behalf of the Managing General Partner or the Partnership shall not be in his,
her or its capacity as Limited Partner or Assignee and shall not affect, impair
or eliminate the limitations on the liability of the Limited Partner or Assignee
under this Agreement.
(B) No Limited Partner or Assignee shall have the power to represent,
sign for or bind the Managing General Partner, any other General Partner or the
Partnership, unless such Limited Partner or Assignee is also the Managing
General Partner or a Related Person or other Person given such power by the
Managing General Partner.
5.3 OUTSIDE ACTIVITIES. A Limited Partner or Assignee shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities in direct competition with the Partnership. Neither the Partnership
nor any of the Partners or Assignees shall have any rights by virtue of this
Agreement in any independent business ventures of any other Limited Partner or
Assignee.
5.4 NO WITHDRAWAL OR DISSOLUTION. No Limited Partner shall at any time
withdraw from the Partnership, except as provided in
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this Agreement. No Limited Partner shall have the right to have the Partnership
dissolved or the right to a Return of Capital from the Partnership, except as
provided in this Agreement. The legal incompetency, bankruptcy, insolvency,
termination, dissolution, withdrawal or death of a Limited Partner shall not
cause a dissolution of the Partnership.
5.5 ASSIGNEES. The creation of Assignees pursuant to Section 11.2 does
not dissolve the Partnership. An Assignee may become a Substituted Limited
Partner as provided in Section 12.1. Until an Assignee becomes a Substituted
Limited Partner, the Assignee has no right to notice of or to vote at any
meeting of Partners or upon any matters upon which Limited Partners may vote, to
require any information or account of Partnership transactions or to inspect
Partnership books, and is otherwise subject to the limitations under the Act on
the rights of an Assignee who has not become a Substituted Limited Partner. An
Assignee has the rights and obligations appurtenant to a Unit to share in the
Net Income and Net Losses of the Partnership and to receive distributions.
5.6 TRANSFEREES. An assignment of a Limited Partner's Interests does
not dissolve the Partnership or entitle the transferee to become or to exercise
any rights of a Limited Partner. The transferee has the right to become a
Substituted Limited Partner pursuant to an assignment as provided in Section
12.1. A Limited Partner remains a Limited Partner upon transfer of all or part
of the Limited Partner's Interests until the transferee becomes a Substituted
Limited Partner pursuant to Section 12.1. A transferee who does not become a
Substituted Limited Partner has no right to notice of or to vote at any meeting
of Partners or upon any matters upon which a Limited Partner may vote, to
require any information or account of Partnership transactions or to inspect the
Partnership books, and is otherwise subject to the limitations under the Act on
the rights of a transferee or Assignee who has not become a Substituted Limited
Partner. Any distribution or payment to the Partner or Assignee of record or the
personal representative of such Partner or Assignee shall acquit the Partnership
of liability to the extent of such payment to any person who may have an
interest in such payment by reason of an assignment by the Partner or Assignee
or the successors or assignees of the Partner or Assignee, or by reason of the
death of such Partner or Assignee or otherwise.
ARTICLE 6
APPROVAL BY LIMITED PARTNERS; AMENDMENTS
6.1 APPROVAL BY LIMITED PARTNER. Subject to Sections 6.2 and 6.3, the
approval of a Majority Interest shall be required only for the matters specified
below (including, however, without limitation, those matters on which limited
partners are given the right to vote under the Act) and no other matters:
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(A) The following actions may be taken by the Managing General Partner
only with the affirmative vote of a Majority Interest:
(1) the sale, exchange, lease or other transfer (other than
encumbrances) of all or substantially all of the assets of the
Partnership in a single transaction or in multiple interrelated
transactions, except in the liquidation and winding up of the business
of the Partnership upon its dissolution. For purposes of this
subsection, "substantially all of the assets of the Partnership" shall
mean ninety percent (90%) of the asset value of the Partnership
Property, as determined in accordance with generally-accepted
accounting principles, at the end of the most recently completed fiscal
quarter of the Partnership;
(2) the dissolution of the Partnership, other than pursuant to
Sections 14.1(A), (B), (C) and (E);
(3) an election to continue the business of the Partnership
other than after there is no remaining or surviving General Partner;
(4) an amendment to this Agreement, including, without
limitation, an amendment extending the term of this Agreement, except
for amendments described in Sections 6.3 and 6.4;
(5) Any matter requiring approval of the holders of Units of
Glenborough Partners pursuant to Section 3.8.
(B) A General Partner may be removed only with the approval of a
Majority Interest.
(C) Except under circumstances described in clause (D), a new General
Partner may be admitted with only the approval of a Majority Interest and with
the separate concurrence of the other General Partner(s).
(D) If there is no remaining or surviving General Partner, a new
General Partner(s) may be admitted or an election to continue the business of
the Partnership may be made only upon the approval of all the Limited Partners.
6.2 RIGHTS CONDITIONAL. The rights set forth in Section 6.1 (A) shall
not be exercised unless the Partnership shall have received the written opinion
of counsel for the Partnership to the effect that the exercise of such right or
the action proposed to be taken with respect to any particular matter: (A) shall
not cause the Limited Partner to be deemed to be taking part in the management
and control of the business and affairs of the Partnership so as to subject the
Limited Partner or Assignees to unlimited liability therefor; (B) will not
jeopardize the status of
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the Partnership as a partnership under applicable tax laws and regulations; or
(C) is otherwise permissible under the state statutes then governing the rights,
duties and liabilities of the Partnership and the Partners and Assignees. If
counsel for the Partnership has indicated that it is unable or unwilling to
deliver such an opinion, the Managing General Partner may take any action
described in Section 6.1 (A) without the need for approval of the Limited
Partner, provided that such action is not otherwise prohibited by this Agreement
or by law.
6.3 AMENDMENTS BY THE MANAGING GENERAL PARTNER. Subject to Section 6.4,
the Managing General Partner may, without prior notice to or consent of any
Partner or Assignee, amend any provision of this Agreement: (A) to cure any
ambiguity, omission, defect or inconsistency; (B) if in its opinion such
amendment does not have a materially adverse effect upon the Limited Partners
and Assignees or the Partnership, as the case may be; or (C) the amendment is
necessary, in the opinion of counsel to the Partnership, to prevent the
Partnership or the General Partners or the partners, directors or officers of a
General Partner from being in any manner subject to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, whether or not substantially similar to
plan asset regulations currently applied or proposed by the Department of Labor;
or (D) the amendment is necessary, in the opinion of counsel to the Partnership,
to prevent the Partnership from being taxable as a corporation under the Code. A
copy of such amendment shall thereafter be furnished promptly to the Limited
Partner and Assignees. In the event an amendment shall have been approved
pursuant to this Section 6.3, the Managing General Partner and, if necessary,
the Limited Partner, shall execute such amendment, certificate and other
documents as may be reasonably required for the purpose of effectuating the
same.
6.4 PROHIBITED AMENDMENTS. Except with the unanimous consent of all
Partners, no amendments shall modify the provisions regarding amendment of this
Agreement or the liabilities of the Partners or change the form of Partnership
to a general partnership.
ARTICLE 7
CAPITAL CONTRIBUTIONS AND INITIAL ISSUANCE OF INTERESTS
7.1 CASH CAPITAL CONTRIBUTIONS. The initial capital of the Partnership
shall consist of One Thousand Dollars ($1,000), which the Partners have
heretofore contributed in cash to the capital of the Partnership as follows:
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GENERAL PARTNERS
Glenborough Realty Corporation.................................... $ 1
Robert Batinovich................................................. $ 9
LIMITED PARTNER
Robert Batinovich................................................ $990
Upon completion of the Exchange Transaction, these cash contributions
shall be refunded to the General Partners and the Limited Partner.
7.2 CONTRIBUTION BY PARTNERS. On the Closing Date, the Partners shall
contribute to the Partnership Property, including the Exchange Assets, as
follows:
(A) The Limited Partner shall, in accordance with the Exchange
Agreement, contribute the Exchange Assets at the Exchange Values.
(B) The General Partners shall not be required to contribute
to the Partnership; provided, however, that in consideration of
services rendered, the General Partners shall, in the respective shares
shown in Section 7.1, receive and hold a one percent (1%) interest in
the Net Income and Net Loss of the Partnership, including a one percent
(1%) interest in cash items of Partnership income, gain, loss,
deduction or Tax Credits.
(C) For purposes of this Section 7.2, the value of the
Exchange Assets shall be deemed to equal one hundred percent (100%) of
the Partnership's net assets as of the Closing Date.
7.3 DISTRIBUTION OF INTERESTS.
(A) Effective as of the Closing Date and in consideration of the
transfer provided in Section 7.2 (A), the Partnership shall issue to the Limited
Partner 990 Interests. Thereafter, interests of the Limited Partner in the
Partnership shall be represented and expressed in terms of Interests.
(B) In consideration for services and to represent the General
Partners' interest in the Partnership provided for in Section 7.2 (B), the
Partnership shall issue 10 Interests to the General Partners in the proportions
provided for in Section 7.1.
(C) After the issuance of Interests provided for in 7.3 (A) and (B)
above, Interests shall be held one percent by the General Partners and
ninety-nine percent (99%) by the Limited Partner.
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7.4 GENERAL PARTNER INTERESTS. The Interests issued to the Managing
General Partner and Robert Batinovich as General Partners, shall be designated
as General Partner Interests.
7.5 DISTRIBUTION OF CAPITAL. A Partner or Assignee shall be entitled to
a distribution which constitutes a Return of Capital from time to time
throughout the duration of the Partnership in such amounts and at such times as
the Managing General Partner, in its sole discretion, deems appropriate. Such
distributions shall be made only if the conditions specified in Section 9.1 have
been met or as provided in Section 7.1 with respect to the initial $1,000 cash
contribution.
7.6 NO INTEREST ON CAPITAL CONTRIBUTION. Partners and Assignees shall
not receive interest on or with respect to all or any part of their Capital
Contributions.
7.7 CREDITOR'S INTEREST IN THE PARTNERSHIP. No creditor who makes a
loan to the Partnership shall have or acquire at any time as a result of making
the loan, any direct or indirect interest in the profits, capital or property of
the Partnership other than as a creditor.
7.8 NATURE OF INTERESTS. All property owned by the Partnership, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and none of the Partners shall have any direct
ownership of such property.
7.9 ONE PERCENT INTEREST OF GENERAL PARTNERS AND ADDITIONAL CAPITAL
CONTRIBUTIONS. Notwithstanding anything to the contrary that may be expressed or
implied herein, the interests of all of the General Partners, taken together, in
each material item of Partnership income, gain, loss, deduction or Tax Credits,
as provided by Section 8.1, will be equal to at least one percent (1%) of each
such item at all times during the existence of the Partnership. In determining
the General Partners' interests in such items, interests held by the General
Partners as general partners of the Limited Partner or of any Operating Limited
Partnership, as defined in the Limited Partnership Agreement of Glenborough
Partners and Units owned by the General Partners shall not be taken into
account. Additional Capital Contributions shall be made to the Partnership only
with the approval of all Partners. If additional Capital Contributions are made,
such Capital Contributions shall be made by each Partner in accordance with its
Allocable Share; provided, however, that the General Partners shall, at all
times, be deemed to own as General Partners (in the respective percentages set
forth in Section 7.1, one percent (1%) of the outstanding interests in the
Partnership and no further contribution or consideration shall be required of
the General Partners for their General Partner interests. Additional Interests
shall be issued to evidence such additional capital contributions
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and to maintain the General Partners' interest as aforesaid. If property other
than cash is contributed, the Managing General Partner shall determine the value
of such property.
ARTICLE 8
ALLOCATION OF NET INCOME, NET LOSS AND TAX CREDITS
8.1 GENERAL ALLOCATION.
(A) Net Income and Net Loss for each month shall be determined by the
Partnership and allocated among the Partners and Assignees in accordance with
their Allocable Shares.
(B) For federal, state or other tax purposes, all items of income,
gain, loss or deduction and all Tax Credits (including any such items arising
from a joint venture or a partnership in which the Partnership has an interest)
shall be determined using the accounting method designated by the Managing
General Partner and shall be allocated to the Partners and Assignees in
accordance with their Allocable Shares, subject to the provisions and
adjustments described in this subsection. If the Partnership is deemed to have
been terminated and reformulated pursuant to Section 708 of the Code,
depreciation, depletion, gain or loss shall be allocated among the Partners and
Assignees so as to take account of the variation between the basis of property
deemed contributed to the Partnership by each Partner or Assignee at the time of
its reformulation and the fair market value of such property at the time of such
contribution pursuant to Section 704(c) of the Code. Depreciation, depletion,
gain or loss (including the tax consequences of any basis reduction made by a
contributing Partner under Code Sections 108, 483 and 1274) with respect to
property contributed to the Partnership shall be allocated among the Partners
and Assignees to the extent required under Section 704(c) of the Code and
Treasury Regulations promulgated under Code Section 704(b) and (c) so as to take
into account, for tax purposes, the difference between the basis of such
property and its initial Book Value. The Managing General Partner is authorized
to adopt such methods of allocating such items, consistent with applicable law
and Regulations.
8.2 ALLOCATION ON TRANSFER.
The Partnership shall use the monthly convention specified in the
Conference Committee Report to Section 72 of the Tax Reform Act of 1984 in
determining allocations on transfer. Under this convention, Interest transfers
after the 15th day of a month shall be treated as occurring immediately after
the close of business of the last day of the month, and Interest transfers
during the first fifteen (15) days of a month shall be treated as occurring
immediately before the opening of business of the first day of the month.
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ARTICLE 9
CASH DISTRIBUTIONS
9.1 TIME AND AMOUNT OF CASH DISTRIBUTIONS.
(A) As of the close of each fiscal quarter and each fiscal year, and at
any other time the Managing General Partner deems appropriate, the Cash
Available for Distribution shall be calculated and, if the Managing General
Partner deems appropriate in its sole discretion, all or any portion thereof
shall be distributed to the Partners and Assignees of record on the Record Date
set for the distribution, and each Partner and Assignee shall receive his
Allocable Share thereof.
(B) Notwithstanding the provisions of Section 9.1(A), any distribution
shall be made only if:
(1) All liabilities of the Partnership, except liabilities to
the General Partners and to the Limited Partner and Assignees on
account of the Capital Contribution and liabilities as to which
recourse of creditors is limited to specified property, have been paid
or after such distribution, there will remain Partnership Property with
a fair value sufficient to pay such liabilities, provided that the fair
value of any Partnership Property that is subject to a liability as to
which recourse of creditors is limited shall be included in Partnership
Property for purposes of this subsection only to the extent that the
fair value of such Partnership Property exceeds such liability;
(2) The Managing General Partner determines in good faith that
such distributions may be made without materially affecting the ability
of the Partnership to pay obligations (including contingent
liabilities) of the Partnership as they fall due; and
(3) Such distribution may be made without violating any
provision of the Act.
(C) Nothing in this Agreement or this Section shall serve as a
limitation on the Managing General Partner's right to retain or use the
Partnership's assets or its revenues as, in the opinion of the Managing General
Partner, may be required to satisfy the anticipated present and future cash
needs of the Partnership, whether for operations, liabilities, expansion,
improvements, acquisition or otherwise.
9.2 DISTRIBUTIONS OF PARTNERSHIP PROPERTY. In its sole discretion, the
Managing General Partner may distribute to Partners and Assignees, Partnership
Property other than Cash Available for Distribution. In its sole discretion, the
Managing General Partner
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may distribute to Partners and Assignees additional Interests or securities of
the Partnership which have been authorized and issued pursuant to the terms of
this Agreement.
ARTICLE 10
ACCOUNTING AND REPORTS
10.1 FISCAL YEAR. The fiscal year of the Partnership shall end on
December 31 of each year, unless the Managing General Partner determines that it
is in the best interest of the Partnership and its Partners to utilize a
different fiscal year and the permission of the Internal Revenue Service has
been obtained.
10.2 REPORTS.
(A) As soon as practicable, but in no event later than ninety (90)
days, after the close of the calendar year, the Managing General Partner shall
prepare or cause to be prepared and furnish to each Person who was a Partner or
Assignee of record during the Partnership's fiscal year, the information
reasonably necessary for the preparation of such Person's United States federal
income tax return and any state or local income or other tax returns required of
such Person as a result of the operations of the Partnership. The Partners and
Assignees agree to furnish the Managing General Partner with such information as
may be necessary or helpful in preparing the tax returns or other filings of the
Partnership.
(B) As soon as practicable, but in no event later than one hundred
twenty (120) days after the close of each fiscal year, the Managing General
Partner shall mail or deliver to each Partner and each Assignee of record an
annual report containing financial statements of the Partnership (which may be
consolidated with the financial statements of the Limited Partner) for the
fiscal year, including a balance sheet and statements of operations, changes in
Partners' equity and changes in financial position at the end of or for the most
recent fiscal year. Such statements are to be prepared in accordance with
generally-accepted accounting principles and shall include the opinion of a firm
of independent public accountants selected by the Managing General Partner, and
are to be accompanied by a supplementary summary (except as disclosed in the
financial statements), by classification of the total fees and compensation,
including any overhead reimbursement and indemnification, paid by the
Partnership, directly or indirectly, to the General Partners.
(C) If and to the extent required by the Act or applicable state or
federal securities laws, as soon as practicable, but in no event later than
sixty (60) days after the close of each fiscal quarter, except the last fiscal
quarter of each fiscal year, the Managing General Partner shall mail or
otherwise furnish to each Partner and Assignee of record a quarterly report for
the fiscal
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quarter containing such financial and other information (which may be condensed,
including statements of operations for such fiscal quarter and since the end of
the last fiscal year, a balance sheet at the end of such period and a
certificate of the Managing General Partner to the effect that such financial
statements were prepared without audit from the books and records of the
Partnership) as the Managing General Partner deems appropriate.
10.3 TAX ELECTIONS. The Managing General Partner shall, in its sole
discretion, and as it deems in the best interests of the Partnership or the
Partners and Assignees, determine whether to make any available election and how
to make any necessary allocation for federal, state, local or other income tax
purposes.
10.4 BOOKS AND RECORDS. The Managing General Partner shall maintain all
records necessary for documenting and reporting the business and affairs of the
Partnership. The Managing General Partner shall maintain at the office of the
Partnership specified in Section 2.4: (A) a current list of the full name and
last-known business or residence address of each Partner and Assignee set forth
in alphabetical order together with the contribution and the share in profits
and losses of each Partner and Assignee; (B) a copy of the Certificate of
Limited Partnership and all certificates of amendment thereto, together with
executed copies of any powers of attorney pursuant to which any certificate has
been executed; (C) copies of the Partnership's federal, state and local income
tax or information returns and reports, if any, for the six most recent taxable
years or for such shorter time as the Partnership has been in existence; (D) the
original Agreement and all amendments thereto; (E) copies of the financial
statements of the Partnership for the six most recent fiscal years or for such
shorter time as the Partnership has been in existence; and (F) the Partnership's
books and records for at least the current and past three fiscal years or for
such shorter time as the Partnership has been in existence. Any records
maintained by the Partnership in the regular course of its business, including
the record of the holders of Interests, books of account, and records of
Partnership proceedings may be kept on, or be in the form of punch cards,
magnetic media, photographs, micrographics, or any other information storage
device, provided that the records so kept can be converted into clearly legible
written form within a reasonable period of time. Except for information kept
confidential by the Managing General Partner pursuant to the power described in
Section 3.3(T), all books, financial records, reports and accounts shall be open
to inspection by any Partner or duly authorized representative of the Partner on
reasonable notice during normal business hours, for any purpose reasonably
related to the Partner's interest as a Partner, and the Partner or the
representatives at the expense of the Partner shall have the further right to
make copies or excerpts therefrom; provided, however, that a copy of the
information described in clauses (A),(B),(C) and (D) of the second sentence of
this Section 10.4 shall be promptly delivered by the Managing
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General Partner, at the expense of the Partnership, to any Partner requesting
such information. The Partner and the Partner's representatives shall not
divulge to any Person any confidential or proprietary data, information or
property or any trade secrets of the Partnership.
10.5 BANK ACCOUNTS. The Partnership shall establish and maintain
accounts in financial institutions (including, without limitation, national or
state banks, trust companies, or savings and loan institutions) in such amounts
as the Managing General Partner may deem necessary from time to time.
Partnership funds shall not be commingled with the funds of, or used as a
compensating balance on behalf of, any General Partner or any other Person.
Checks shall be drawn on and withdrawals of funds shall be made from any such
accounts for Partnership purposes and shall be signed by the Person or Persons
designated by the Managing General Partner. Temporary surplus funds of the
Partnership may be invested in commercial paper, time deposits, short-term
government obligations or other investments as shall be determined by the
Managing General Partner.
ARTICLE 11
TRANSFER OF INTERESTS
11.1 TRANSFER OF INTERESTS.
(A) The term "transfer" when used in this Article with respect to a
Unit includes a sale, assignment, gift, exchange, or any other disposition.
(B) General Partner Interests are nontransferable without the consent
of all Partners except as provided in Article 7 and Section 13.1. The Limited
Partner hereby consents to any transfer pursuant thereto.
(C) Interests held by Limited Partners are nontransferable without the
consent of all Partners.
ARTICLE 12
ADMISSION OF SUBSTITUTED AND ADDITIONAL LIMITED PARTNERS
12.1 ADMISSION OF SUBSTITUTED LIMITED PARTNERS. A Limited Partner shall
have the power to give the transferee of such Person's Interests the right to
become a Substituted Limited Partner in the manner permitted in this Agreement.
An Assignee or transferee of an Interest may apply to become a Substituted
Limited Partner with respect to such Interest by executing and delivering a
Request and Power in form approved by the Managing General Partner. Upon receipt
by the Partnership of a completed and executed Request and Power, the name of
the transferee shall be
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added to the list of Limited Partners maintained by the Partnership, whereupon
such transferee shall become a Substituted Limited Partner.
12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS. A Person other than a
General Partner (acting in its capacity as a General Partner), the Limited
Partner or a substituted Limited Partner who makes a contribution to the capital
of the Partnership in a manner permitted by the terms of this Agreement may,
with the approval of
the Managing General Partner, be admitted to the Partnership as an Additional
Limited Partner upon furnishing to the Managing General Partner: (A) a Request
and Power; and (B) such other documents or instruments as may be required in
order to effect admission as a Limited Partner. Upon receipt of such documents,
the Partnership shall add the name of such Person to the list of Partners
maintained by the Partnership, whereupon such Person shall become an additional
Limited Partner.
ARTICLE 13
REMOVAL, RESIGNATION OR WITHDRAWAL OF GENERAL PARTNER
13.1 REMOVAL OF GENERAL PARTNER. A General Partner may be removed from
office as provided in Section 6.1 and shall be removed if such General Partner
is removed as general partner of the Limited Partner or Glenborough Partners.
Such removal shall take effect sixty (60) days from the date of the action by
the Limited Partner. At such time, the assets, books and records of the
Partnership shall be surrendered to the remaining or successor General
Partner(s), provided that the remaining or successor General Partner(s) shall:
(A) hold or have acquired sufficient General Partner Interests (which shall be
obtained from the removed General Partner) so that the General Partner(s) who
will continue to serve as General Partner(s) hold and have designated, in the
aggregate, at least a one percent (1%) interest in the Partnership as General
Partner(s); and (B) have complied with the provisions of Section 13.4. If such
removal dissolves the Partnership, then the Partnership shall be reconstituted
and its business shall be continued with any remaining and successor General
Partner(s) as the General Partner(s) thereof, and they shall have the exclusive
right to possess Partnership Property to continue the business of the
Partnership. Removal of a General Partner shall not prejudice the rights of the
removed General Partner to compensation pursuant to Article 4 accrued as of the
date the removal takes effect. The value of a removed General Partner's Interest
shall be agreed to by all Partners.
13.2 WITHDRAWAL. A General Partner may withdraw, resign or retire on
ninety (90) days' advance written notice to the Partners. A General Partner
shall cease to be a General Partner on the effective date of its or his
withdrawal, resignation or retirement.
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13.3 DISSOLUTION OR BANKRUPTCY OF GENERAL PARTNER. A General Partner
shall cease to be a General Partner upon the happening of any of the following
events:
(A) The dissolution of the General Partner or, if the General Partner
is an individual, the death of the General Partner or the entry by a court of
competent jurisdiction of an order adjudicating the General Partner incompetent
to manage his person or estate;
(B) The General Partner: (1) makes a general assignment for the benefit
of creditors; (2) commences a voluntary case under the federal bankruptcy law;
(3) files a petition or answer seeking for the General Partner any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law, or regulation; (4) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in any proceeding of the nature
described in clause (3); or (5) seeks, consents to or acquiesces in the
appointment of a trustee, receiver, or liquidator of the General Partner or of
all or any substantial part of the General Partner's properties;
(C) An order for relief against the General Partner is entered under
Chapter 7 or 11 of the federal bankruptcy law;
(D) Sixty (60) days after the commencement of any proceeding against
the General Partner seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law,
or regulation, if the proceeding has not been dismissed;
(E) Sixty (60) days after the appointment without the General Partner's
consent or acquiescence of a trustee, receiver, or liquidator of the General
Partner or of all or any substantial part of the General Partner's properties,
if the appointment is not vacated or stayed, or sixty (60) days after the
expiration of any such stay, if the appointment is not vacated; or
(F) Upon the General Partner ceasing to be a general partner of either
the Limited Partner or Glenborough Partners for any reason other than the
dissolution of that partnership provided that there is no longer an Affiliate of
a General Partner serving as a general partner of such partnership.
13.4 LIABILITY AND RIGHTS. A General Partner shall be discharged from,
and the Partnership or any Person or Persons continuing the business of the
Partnership in the event it has been dissolved, shall assume and pay, as they
mature, all Partnership obligations and liabilities that exist on the date of
such General Partner's removal from the Partnership or on the date on which it
or he ceases to be a General Partner under Sections 13.2 or 13.3, and shall hold
such General Partner harmless from any action or
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claim arising or alleged to arise from obligations and liabilities accruing
after such date; provided, however, that nothing in this Section 13.4 shall
relieve or discharge, nor shall the Partnership indemnify or hold harmless, such
General Partner from any individual obligation or liability of such General
Partner (as distinguished from a Partnership obligation or liability) to the
Partnership or third parties. On the date of removal of a General Partner or the
date on which it ceases to be a General Partner under Sections 13.2 or 13.3, or
as soon thereafter as possible, the Partnership or any Person or Persons
continuing the business of the Partnership shall file an amendment to the
Certificate of Limited Partnership reflecting the removal of the General Partner
or the fact that the General Partner has ceased to be a General Partner. The
Partnership or any such Person or Persons continuing the business of the
Partnership shall promptly notify all creditors of the Partnership as of such
date: (A) of the removal of such General Partner and the resulting dissolution
of the Partnership (if the Partnership has dissolved) or of the General Partner
ceasing to be a General Partner pursuant to Sections 13.2 or 13.3, as the case
may be; (B) that such General Partner shall not be personally liable for the
Partnership's obligations and liabilities after such date; and (C) if
applicable, of the assumption of all the Partnership's obligations and
liabilities by the Partnership or such Person or Persons continuing the business
of the Partnership. The Partnership or such Person or Persons continuing the
business of the Partnership (if the Partnership has dissolved) shall use its or
their best efforts to procure and execute an agreement from creditors of the
Partnership discharging such General Partner from liability to such creditors as
of the date the General Partner is removed or ceases to be a General Partner.
Such General Partner shall have the same rights to inspect and make copies or
excerpts of the books and records of the Partnership as is provided to Partners
pursuant to Section 10.4 until all amounts due such General Partner as of the
date the General Partner is removed or ceases to be a General Partner pursuant
to Section 3.6 and Article 4 have been paid. The General Partner shall be a
creditor of the Partnership as to all such amounts owed to it or him by the
Partnership. Any General Partner Interests held by a General Partner after it or
he has been removed, or it or he ceases to be a General Partner, shall be
transferred to such Person or Persons who remain as or succeed such General
Partner as General Partner(s).
13.5 SUCCESSOR AND PREDECESSOR GENERAL PARTNERS. Unless a General
Partner has been dissolved because of bankruptcy, insolvency, liquidation or
ceases to be a General Partner because of death, disability, incapacity or
incompetency or unless a General Partner has been removed as General Partner,
upon dissolution of a General Partner, any Person continuing the business of the
General Partner so affected shall immediately become a General Partner of the
Partnership (and shall become Managing General Partner if the General Partner so
affected was the
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Managing General Partner) without any action or vote of any Person. If any
dissolution of a General Partner causes a dissolution of the Partnership, then
the Partnership shall be reformed and reconstituted and its business continued
as provided in this Section and Article 14. If it is necessary or advisable to
reform and reconstitute the Partnership and to continue its business, the
remaining and successor General Partners shall elect to reform and reconstitute
the Partnership and to continue its business. When any Person ceases to be a
General Partner under this Agreement or a partner, shareholder, director,
officer, employee or agent of a General Partner, that Person shall continue to
have the benefit of any provisions of this Agreement providing for indemnity,
exculpation or insurance which protected such Person as a General Partner or a
partner, shareholder, director, officer, employee or agent of a General Partner,
or which limited or defined the liability of such Person.
ARTICLE 14
DISSOLUTION, WINDING UP AND LIQUIDATION
14.1 DISSOLUTION. The Partnership shall be dissolved at the expiration
of the term of the Partnership set forth in Section 2.5; provided, however, that
the Partnership shall be dissolved prior thereto without breach of this
Agreement upon occurrence of one of the following:
(A) The removal, resignation, retirement, withdrawal, bankruptcy,
insolvency, dissolution, liquidation, death, disability, incapacity or
incompetency of a General Partner; provided, however, that unless applicable law
shall under the circumstances require a dissolution notwithstanding an agreement
to the contrary, the Partnership shall not be dissolved but shall be continued
or, if dissolved, the business of the Partnership shall be continued by any
remaining or successor General Partner(s) upon obtaining the approval of a
Majority Interest. If no General Partner(s) remain or succeed or if the
remaining or successor General Partner(s) do not have the power under California
law to elect to continue or not to continue the business of the Partnership or
they elect not to continue the business, then, upon approval of all the Limited
Partners and the admission of one or more new General Partner(s), the
Partnership shall not be dissolved, but shall be continued or, if dissolved, the
business of the Partnership shall be continued;
(B) The Partnership becomes insolvent or bankrupt;
(C) The sale or other disposition of substantially all assets of the
Partnership and the cessation of active business;
(D) The passage of ninety (90) days after approval by a Majority
Interest to dissolve the Partnership; or
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(E) The occurrence of any event which makes it unlawful for the
business of the Partnership to be continued.
Admission of a General Partner shall not cause the dissolution of the
Partnership.
14.2 AUTHORITY TO WIND UP. If dissolution occurs for any reason other
than the removal, resignation, retirement, withdrawal, bankruptcy, insolvency,
dissolution, liquidation, death, disability, incapacity or incompetency of the
Managing General Partner, the Managing General Partner shall have the authority
to wind up the business and affairs of the Partnership. If dissolution occurs by
reason of the removal, resignation, retirement, withdrawal, bankruptcy,
insolvency, dissolution, liquidation, death, disability, incapacity or
incompetency of the Managing General Partner, and if the business of the
Partnership is not continued pursuant to Articles 13 or 14, the remaining
General Partner(s) shall have the authority to wind up the business and affairs
of the Partnership or, if no General Partner remains or survives, any Person
designated by a decree of court or designated by approval of a Majority Interest
shall wind up the affairs of the Partnership.
14.3 ACCOUNTING. Upon dissolution (if the business of the Partnership
is not continued), and again upon the termination of the Partnership after the
winding up of the affairs of the Partnership is complete, an accounting of the
Partnership shall be made and its financial statements shall be examined by the
independent public accountants of the Partnership, and a report thereon shall be
furnished to the General Partner(s) or legal representatives thereof and to all
Limited Partners and Assignees.
14.4 WINDING UP AND LIQUIDATION. Upon dissolution of the Partnership,
if the Partnership or the business of the Partnership is not otherwise continued
hereunder, it shall be wound up and liquidated. The Book Value of any assets not
sold shall be adjusted to their fair market value and any Net Income or Net Loss
shall be allocated to the Capital Accounts as if the Partnership recognized Net
Income or Net Loss equal to such adjustment. After such allocations, the assets
of the Partnerships shall be paid or distributed in the following order of
priority:
(A) To creditors, in the order of priority as provided by law, except
to secured creditors the obligations to whom will be assumed or otherwise
transferred on liquidation of the Partnership assets;
(B) Those amounts deemed necessary by the Persons winding up the
affairs of the Partnership for any contingent liabilities or obligations of the
Partnership shall be set aside as a reserve for contingent liabilities to be
distributed at such time and in such manner hereunder as the Persons winding up
the affairs of the
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Partnership shall determine in their sole discretion;
(C) To the General Partner(s) with respect to payments due to them
pursuant to Section 3.6 and Article 4;
(D) To each General Partner, Limited Partner and Assignee the amount of
their respective Capital Accounts.
14.5 CLAIM OF LIMITED PARTNERS AND ASSIGNEES. No Limited Partner or
Assignee shall have the right or power to demand or receive property other than
cash, whether as a Return of Capital, a distribution, a payment on liquidation
or otherwise. The Limited Partners and Assignees shall look solely to the assets
of the Partnership for the payment of income allocated to the Limited Partners
or Assignees and the return of the Capital Contributions of the Limited
Partners, and if the assets of the Partnership remaining after payment or
discharge of the debts and liabilities of the Partnership are insufficient to
pay all or part of such income or Capital Contributions, no Limited Partner or
Assignee shall have any recourse against any General Partner, the Partnership or
any other Limited Partner or Assignee.
14.6 NO RESTORATION OF NEGATIVE CAPITAL ACCOUNTS. Neither the
Partnership nor any General or Limited Partner shall have the right to require
any Partner to restore a deficit balance in such Partner's Capital Account.
ARTICLE 15
MISCELLANEOUS
15.1 NOTICES. All notices or other communications required or permitted
to be given pursuant to this Agreement shall, in the case of notices or
communications required or permitted to be given to the Limited Partner or his
Assignee, be in writing, and shall be considered as properly given or made if
personally delivered or if mailed by United States first class mail, postage
prepaid, or if sent by prepaid telegram, and addressed to the Limited Partner's
or Assignee's address for notices as it appears on the records of the
Partnership, and, in the case of notices or communications required or permitted
to be given to the General Partners or the Partnership, shall be in writing and
shall be considered as properly given or made if personally delivered, or if
sent by prepaid telegram, or if mailed by United States certified or registered
mail, postage prepaid, and addressed to the Managing General Partner at the
principal place of business of the Partnership as specified in Section 2.4. Any
Limited Partner or Assignee may change the address for notices, by giving notice
of such change to the Partnership, and the Managing General Partner may change
the address for notices to the General Partners or the Partnership by giving
notice of such change to the Limited Partner and his Assignee. Commencing on the
tenth (10th) day after giving
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of such notice, such newly-designated address shall be such Partner's or
Assignee's or the Partnership's address for the purpose of all notices or other
communications required or permitted to be given pursuant to this Agreement. Any
notice or other communication shall be deemed to have been given as of the date
on which it is personally delivered or, if mailed or telegraphed to a General
Partner which is not received by the General Partner within ten (10) days after
the date of its mailing or transmission shall be deemed to have been given as of
the date actually received by the General Partner.
15.2 CHOICE OF LAW. This Agreement and all rights and liabilities of
the parties hereto with reference to the Partnership shall be subject to and
governed by the internal laws (and not the law pertaining to choice or conflict
of laws) of the State of California.
15.3 ARTICLE AND SECTION HEADINGS. The headings in this Agreement are
inserted for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
15.4 SOLE AGREEMENT. This Agreement and the exhibits hereto constitute
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings pertaining
thereto.
15.5 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts with the same effect as if all parties had all signed the
same document. All counterparts shall be construed together and shall constitute
one agreement. Each party shall become bound by the Agreement immediately upon
affixing his or her signature hereto, independently of the signature of any
other party.
15.6 REMEDIES CUMULATIVE. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which any
Person may be lawfully entitled.
15.7 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement,
or condition.
15.8 WAIVER OF ACTION FOR PARTITION. Each of the parties hereto
irrevocably waives during the term of the Partnership any right that he may have
to maintain any action for partition with respect to the Partnership Property.
15.9 ASSIGNABILITY. Subject to the restrictions on transferability
contained herein, each and all of the covenants,
44
<PAGE>
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the successors and assigns of the respective parties
hereto.
15.10 GENDER AND NUMBER. Whenever the context requires, the gender of
all words used hereby shall include the masculine, feminine and neuter, the
singular of all words shall include the singular and plural, and the plural of
all words shall include the singular and plural. Unless the context requires
otherwise, any reference to a General Partner shall include all General Partners
and any reference to the General Partners shall mean any General Partner.
15.11 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby, but
rather shall be enforced to the maximum extent permissible under applicable law.
15.12 ADDITIONAL DOCUMENTS. Each of the parties hereto agree to execute
and deliver such other and further documents, including without limitation,
designations, powers of attorney and other instruments, as the Managing General
Partner may reasonably request.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
GENERAL PARTNERS:
GLENBOROUGH REALTY CORPORATION,
a California corporation
By /s/ Robert Batinovich
-----------------------------
Title
--------------------------
/s/ Robert Batinovich
-------------------------------
Robert Batinovich
45
<PAGE>
LIMITED PARTNER:
GOCO REALTY FUND I, a Califor-
nia limited partnership
By Glenborough Realty Corpor-
ation, a California Corpora-
tion, Its Managing Partner
By /s/ Robert Batinovich
-----------------------------
Robert Batinovich
President
46
<TABLE>
GPA INDUSTRIAL L.P.
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
Article 1 Definitions............................................................................1
1.1 Definitions...................................................................1
1.2 Accounting Terms and Determinations...........................................7
Article 2 The Limited Partnership................................................................8
2.1 Formation of the Partnership..................................................8
2.2 Partnership Name..............................................................8
2.3 Business and Purpose..........................................................8
2.4 Principal Office..............................................................8
2.5 Term..........................................................................9
2.6 Execution of Documents........................................................9
Article 3 The General Partners...................................................................9
3.1 General.......................................................................9
3.2 Management Power..............................................................9
3.3 Powers of the Managing General Partner.......................................10
3.4 Liability of General Partners................................................16
3.5 Similar Activities of General Partners.......................................16
3.6 Indemnification of General Partners..........................................17
3.7 Other Matters Concerning General
Partners.....................................................................19
3.8 Agreements With a General Partner or a
Related Person...............................................................20
3.9 Conveyances..................................................................20
Article 4 Compensation of General Partners......................................................20
4.1 Compensation of Managing
General Partner..............................................................20
4.2 Property Management Fee......................................................21
4.3 Incentive Fee................................................................21
4.4 Transaction Fee..............................................................23
4.5 Refinancing Fee..............................................................24
4.6 No Repayment.................................................................24
4.7 Accrual Upon Change in Managing
General Partner..............................................................25
4.8 Joint Ventures...............................................................25
4.9 Change in Compensation.......................................................25
4.10 Fringe Benefits..............................................................25
4.11 Expenses of General Partner..................................................25
4.12 Commissions on Certain Sales.................................................26
Article 5 The Limited Partners, Assignees and
Transferrees..........................................................................26
5.1 Limited Liability............................................................26
<PAGE>
5.2 Restrictions on Limited Partners
and Assignees................................................................27
5.3 Outside Activities...........................................................27
5.4 No Withdrawal or Dissolution.................................................27
5.5 Assignees....................................................................28
5.6 Transferees..................................................................28
Article 6 Approval by Limited Partner; Amendments...............................................28
6.1 Approval by Limited Partner..................................................28
6.2 Rights Conditional ..........................................................29
6.3 Amendments by the Managing
General Partner..............................................................30
6.4 Prohibited Amendments........................................................30
Article 7 Capital Contributions and Initial
Issuance of Interests.................................................................30
7.1 Cash Capital Contributions...................................................30
7.2 Contribution by Partners.....................................................31
7.3 Distribution of Interests....................................................31
7.4 General Partner Interests....................................................32
7.5 Distribution of Capital......................................................32
7.6 No Interest on Capital Contribution..........................................32
7.7 Creditor's Interest in the Partnership.......................................32
7.8 Nature of Interests..........................................................32
7.9 One Percent Interest of General
Partners and Additional Capital
Contributions................................................................32
Article 8 Allocation of Net Income, Net Loss and
Tax Credits...........................................................................33
8.1 General Allocation...........................................................33
8.2 Allocation on Transfer.......................................................33
Article 9 Cash Distributions....................................................................34
9.1 Time and Amount of Cash Distributions........................................34
9.2 Distributions of Partnership Property........................................34
Article 10 Accounting and Reports................................................................35
10.1 Fiscal Year..................................................................35
10.2 Reports......................................................................35
10.3 Tax Elections................................................................36
10.4 Books and Records............................................................36
10.5 Bank Accounts................................................................37
Article 11 Transfer of Interests.................................................................37
11.1 Transfer of Interests........................................................37
Article 12 Admission of Substituted and Additional
Limited Partners......................................................................37
12.1 Admission of Substituted Limited
Partners.....................................................................37
<PAGE>
12.2 Admission of Additional Limited
Partners.....................................................................38
Article 13 Removal, Resignation or Withdrawal of
Limited Partners......................................................................38
13.1 Removal of General Partner...................................................38
13.2 Withdrawal...................................................................38
13.3 Dissolution or Bankruptcy of
General Partner..............................................................39
13.4 Liability and Rights.........................................................39
13.5 Successor and Predecessor
General Partners.............................................................40
Article 14 Dissolution, Winding Up and Liquidation...............................................41
14.1 Dissolution..................................................................41
14.2 Authority to Wind Up.........................................................42
14.3 Accounting...................................................................42
14.4 Winding Up and Liquidation...................................................42
14.5 Claim of Limited Partners and Assignees......................................43
14.6 No Restoration of Negative Capital
Accounts.....................................................................43
Article 15 Miscellaneous.........................................................................43
15.1 Notices......................................................................43
15.2 Choice of Law................................................................44
15.3 Article and Section Headings.................................................44
15.4 Sole Agreement...............................................................44
15.5 Execution in Counterparts....................................................44
15.6 Remedies Cumulative..........................................................44
15.7 Waiver.......................................................................44
15.8 Waiver of Action for Partition...............................................44
15.9 Assignability................................................................44
15.10 Gender and Number............................................................45
15.11 Severability.................................................................45
15.12 Additional Documents.........................................................45
Signatures..................................................................................................45 & 46
</TABLE>
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
OF
GPA INDUSTRIAL, L.P.
This Limited Partnership Agreement (the "Agreement"), dated as of
, 1994, is made and entered into by GLENBOROUGH REALTY CORPORATION,
a California corporation and ROBERT BATINOVICH, an individual, as General
Partners, and GOCO REALTY FUND I, a California limited partnership, as the
Limited Partner, and all other parties who shall become partners of this limited
partnership as hereinafter provided.
In consideration of the mutual covenants and promises herein, the
parties hereby form a limited partnership under the California Revised Limited
Partnership Act upon the following terms and conditions:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. When used in this Agreement, the following terms shall
have the meanings set forth below, except as otherwise specifically modified:
"ACT" means the California Revised Limited Partnership Act, as
amended from time to time.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as an additional Limited Partner pursuant to Article 12
hereof.
"AFFILIATE" means any Person that directly or indirectly
controls, is controlled by, or is under common control with the Person
in question.
"ALLOCABLE SHARE" of a General Partner is his or its
percentage interest as set forth in Section 8.2(B) comprising an
aggregate of one percent (1%) and of the Limited Partners or Assignees,
at any particular time, an aggregate of 99%. The "Allocable Share" of a
Limited Partner or Assignee, at any particular time, means the
percentage which the number of Interests held by such Limited Partner
or assigned to such Assignee is of the total number of Interests
outstanding multiplied by 99%. If at any time, the aggregate of all
General Partner Interests represents more than 1% of all Interests, the
Allocable Share of all General Partners shall be the percentage
interest represented by the ratio between all such Interests which are
represented by General Partner Interests and all Interests, and the
Allocable Share of all
<PAGE>
Limited Partners and Assignees shall be the percentage interest
represented by the ratio between all Interests held by Limited Partners
and Assignees and all Interests.
"ASSIGNEE" means a Person to whom one or more Interests have
been assigned by a Partner but who has not become a Substituted Limited
Partner.
"ASSOCIATE means any shareholder, director, officer, employee
or agent of any General Partner and any employee or agent of the
Partnership.
"BOOK DEPRECIATION" means the depreciation, cost recovery or
amortization of nondepletable assets that would be allowable to the
Partnership for federal income tax purposes if its tax basis in such
assets were equal to the Book Value of such assets.
"BOOK GAIN" OR "BOOK LOSS" means the gain or loss that would
be recognized by the Partnership for federal income tax purposes as a
result of sales or exchanges of its assets if its tax basis in such
assets were equal to the Book Value of such assets.
"BOOK VALUE" means (a) as to property contributed to the
Partnership, its agreed value; (b) as to property acquired in any other
manner, its value as reflected on the books of the Partnership as of
the date it is acquired by the Partnership; and (c) as to property
owned by the Partnership at the time of any repurchase or issuance of
Interests for money or other property, its fair market value at that
time, all adjusted for Book Depreciation.
"CAPITAL ACCOUNT" means the account (maintained on a per-
Interest basis in the case of Interestholders) which shall be credited
with the Interestholder's or General Partner's distributive share of
(a) cash contributed to the Partnership; (b) the Book Value of
contributed property; (c) Net Income; (d) the amount of Partnership
liabilities assumed by such Interestholder or General Partner or that
are secured by any Partnership Property distributed to such
Interestholder or General Partner, and (e) increases in the basis of
Partnership Property attributable to investment credit recapture; and
which shall be debited with the Interestholder's or General Partner's
distributive share of (v) cash distributions (w) the Book Value of
distributed property; (x) Net Loss; (y) the amount of liabilities of a
Interestholder or General Partner assumed by the Partnership or that
are secured by any Partnership Property contributed by such
Interestholder or General Partner assumed by the Partnership or that
are secured by any Partnership Property contributed by such
Interestholder or General Partner to the Partnership; and (z) decreases
in
2
<PAGE>
the basis of the Partnership Property for any credits allowed under the
Code. A Limited Partner's Capital Account shall be the aggregate
Capital Account attributable to the Interests held by such Limited
Partner. In the case of transfer by an existing Partner of a
Partnership interest, the transferee will succeed to the Capital
Account relating to the Partnership interest transferred. Upon the
repurchase of Interests or upon the issuance of additional Interests
for money or other property (other than a de minimis amount) the
Capital Accounts of each Interestholder outstanding prior to the
repurchase or issuance and the Capital Accounts of the General Partners
shall be adjusted to reflect a revaluation of the Partnership Property
on the Partnership books to its fair market value and the Capital
Accounts of all Partners shall be adjusted simultaneously to reflect
such adjustment as if the Partnership recognized Net Income or Net Loss
equal to the amount of such adjustment. It is intended by this
provision to comply with Treasury Regulations Section 1.704-1(b) and
Code Section 704(c).
"CAPITAL CONTRIBUTION" means the individual total amount
contributed by each Partner to the capital of the Partnership as
provided in Article 7 hereof.
"CASH AVAILABLE FOR DISTRIBUTION" means cash held by the
Partnership in excess of (a) cash required for all expenses,
liabilities and obligations of the Partnership (whether for expense
items, capital expenditures, improvements, retirement of indebtedness
or otherwise); and (b) reserves as established in the sole discretion
of the Managing General Partner for Partnership capital expenditures,
improvements, retirement of indebtedness, operations, or contingencies,
known or unknown, liquidated or unliquidated, including, but not
limited to, liabilities which may be incurred in litigation and
liabilities undertaken pursuant to the indemnification provisions of
this Agreement.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the certificate of
limited partnership filed pursuant to the Act or any successor statute,
as the same may be amended from time to time.
"CLOSING DATE" means that date selected by the General
Partners for the contribution of the Exchange Assets to the
Partnership.
"CODE" means the Internal Revenue Code of 1986 or any
successor statute, as amended from time to time.
"EXCHANGE AGREEMENT" means the agreement between the Limited
Partner and the Partnership whereby the Exchange Assets are transferred
to the Partnership in exchange for 990 Interests.
3
<PAGE>
"EXCHANGE ASSETS" means the specific Projects contributed to
the Partnership pursuant to the Exchange Agreement.
"EXCHANGE TRANSACTION" means the transaction whereby the
Partnership will exchange Interests for Exchange Assets.
"EXCHANGE VALUE" means the value assigned to the Exchange
Assets for purposes of the Exchange Transaction.
"GENERAL PARTNERS" means the Persons named hereinabove as
general partners in their capacity as general partners of the
Partnership, and any successor or additional general partners. "General
Partner" means one of the General Partners.
"GENERAL PARTNER INTERESTS" means Interests designated as such
pursuant to Sections 7.4 or 7.9.
"GOCO" means GOCO Realty Fund I, a California limited
partnership.
"INTEREST" means a unit of interest in the Partnership
acquired or issued pursuant to Article 7.
"INTERESTS" means all of such units of interest.
"INTERESTHOLDER" means any Person who, for tax purposes, is to
be treated as a Limited Partner whether such Person is a Limited
Partner or an Assignee.
"LIMITED PARTNER" means GOCO, and any successor limited
partner who has become a Substituted Limited Partner and any Additional
Limited Partner.
"LIMITED PARTNERS" means all limited partners if, at any time,
there is more than one limited partner.
"LIMITED PARTNER INTERESTS" means Interests held or owned by
any Person or Persons as Limited Partner(s).
"MAJORITY INTEREST" means the Limited Partners of record
holding more than fifty percent (50%) of the Interests held by all
Limited Partners of record.
"MANAGING GENERAL PARTNER" means the Person so designated
pursuant to Section 3.2.
"NET INCOME" OR "NET LOSS" means the Partnership's taxable
income or loss (as an entity) under Code Section 703 computed with the
following adjustments:
4
<PAGE>
(a) Tax-exempt income described in Code Section 705(a)(1)(B)
shall be included and any expenditures not deductible in computing
taxable income shall be deductible.
(b) The only deduction for depreciation, cost recovery or
amortization shall be Book Depreciation.
(c) Book Gain or Book Loss shall be used instead of taxable
gain or loss.
"NET OPERATING CASH FLOW" means net income or loss as
determined under generally accepted accounting principles with the
following adjustments:
(a) There shall be added depreciation expense and amortization
expense related to capitalized loan fees, leasing commissions and debt
discount;
(b) There shall be deducted any gain from the sale or other
disposition of non-inventory real estate which was acquired as a part
of the Exchange Transaction and there shall be added any loss from the
sale or other disposition of any non-inventory real estate that was
acquired in the Exchange Transaction;
(c) There shall be deducted any income or gain from
investments in joint ventures or partnerships which are accounted for
on the equity method and there shall be added any losses from such
partnerships or joint ventures;
(d) There shall be added any cash received from distributions
from a partnership or joint venture to the extent that the aggregate
distributions for such partnership or joint venture exceeds the cost of
the investment in such partnership or joint venture;
(e) There shall be added cash received from the sale of an
interest in a partnership or joint venture to the extent that such cash
when added to any cash distributions received from such partnership or
joint venture exceeds the cost of the investment in such partnership or
joint venture;
(f) Adjustment shall be made to account for any gain arising
from the sale of non-inventory real property which was not acquired as
a part of the Exchange Transaction utilizing the installment method.
"PARTNER" means a General Partner or a Limited Partner; and
"Partners" means the General Partners and all Limited Partners.
5
<PAGE>
"PARTNERSHIP" means the limited partnership created by this
Agreement and any successor partnership thereto continuing the business
of the Partnership which is a reformation or reconstitution of the
partnership governed by this Agreement.
"PARTNERSHIP CAPITAL" means the total of all the Partners'
Capital Accounts at any given time.
"PARTNERSHIP PROPERTY" means the Exchange Assets and any and
all other property, real or personal, now or hereafter owned by the
Partnership or an Operating Limited Partnership or in or to which the
Partnership or an Operating Limited Partnership has any interest, right
or claim and shall include any interest in any Operating Limited
Partnership received by the Partnership in exchange for Partnership
Property.
"PERSON" means an individual, partnership (general or limited
and whether domestic or foreign), joint venture, estate, association,
corporation, trust company, trust or other entity.
"PRIMARY OPERATING LIMITED PARTNERSHIP" means an Operating
Limited Partnership in which the Partnership holds a direct interest as
the sole limited partner.
"PROJECTS" means the real estate projects owned by the
Partnership and all Operating Limited Partnerships.
"RECORD DATE" means the date established by the Partnership
for determining (a) the identity of Partners entitled to notice of or
to vote at any meeting of Partners or entitled to vote by ballot or
give consent to Partnership action in writing without a meeting, or
entitled to exercise rights in respect of any other lawful action of
Partners, or (b) the identity of Partners and Assignees entitled to
receive any report or distribution.
"RELATED PERSON" means Glenborough Corporation, the Limited
Partner, a General Partner; or any partner, officer, director of
Affiliate of any of the foregoing.
"REQUEST AND POWER" means a request for admission as a
Substituted or Additional Limited Partner, an agreement to be bound by
the terms of this Agreement, a power of attorney and the provision of
such other information as the Partnership shall request in such forms
as are approved by the Partnership.
"RETURN OF CAPITAL" means any distribution to the Partners to
the extent that such distribution reduces the Partnership
6
<PAGE>
Capital. A distribution reduces the Partnership Capital to the extent
that it exceeds the following amount: the sum of the Net Income of the
Partnership since its formation, reduced by (but not below zero) the
sum of the Net Losses of the Partnership since its formation and the
sum of all prior distributions.
"SECONDARY OPERATING LIMITED PARTNERSHIP" means an Operating
Limited Partnership that is not a Primary Operating Limited
Partnership.
"SUBSTITUTED LIMITED PARTNER" means a Person admitted to the
Partnership as a limited partner pursuant to Article 12 hereof.
"TAX CREDITS" means all credits against income, franchise or
similar taxes, including, without limitation, investment tax credits
and credits allowable to Partners or Assignees under federal, state or
other taxing statutes.
"UNITS" means Units of interest in Glenborough Partners, a
California limited partnership, as defined in the Limited Partnership
Agreement of Glenborough Partners, a California limited partnership,
dated as of December 30, 1993, for so long a period of time as
Glenborough Partners, a California limited partnership, is the holder
of a majority of the limited partnership interests in the Limited
Partner. Except as otherwise defined herein, the capitalized terms used
herein shall have the meaning given thereto in such Limited Partnership
Agreement.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. All accounting terms used
herein shall be interpreted, and all accounting and tax determinations hereunder
shall be made, in accordance with the following:
(a) For financial reporting purposes, the Partnership shall
adhere to generally-accepted accounting principles;
(b) For purposes of determining Partner Capital Accounts, the
Partnership shall adhere to the provisions of Treasury Regulations
Section 1.704-1(b);
(c) For purposes of determining Partner and Assignee
distributable shares of taxable income and loss, the Partnership shall
adhere to the provisions of Code Sections 704(b) and (c) and the
regulations promulgated thereunder.
7
<PAGE>
ARTICLE 2
THE LIMITED PARTNERSHIP
2.1 FORMATION OF THE PARTNERSHIP. The General Partners and the Limited
Partner hereby agree to form, and by execution of this Agreement do hereby enter
into, a limited partnership under the Act, which Act shall, except as set forth
in this Agreement, govern the rights and liabilities of the parties hereto.
2.2 PARTNERSHIP NAME. The name of the Partnership is "GPA Industrial,
L.P." The Partnership shall conduct business under such name or such other name
or names as the Managing General Partner may from time to time deem necessary,
appropriate or advisable. The Managing General Partner in its sole discretion
may change the name of the Partnership at any time and from time to time. The
General Partners and, if necessary, the Limited Partner, shall promptly execute
and the Managing General Partner shall file and record with proper offices in
each jurisdiction in which the Partnership does or elects to do business, and
publish such certificates or other statements or instruments as are required by
the Act, fictitious or assumed name acts, or any other similar statute in effect
in such jurisdiction, in order to conduct validly the Partnership business
therein as a limited partnership.
2.3 BUSINESS AND PURPOSE. The business and purpose of the Partnership
shall be to engage in the Exchange Transaction and any lawful act or activity in
which a partnership may engage, including, without limitation, to engage
generally in any and all phases of the business of owning, holding, managing,
developing, controlling, acquiring, purchasing, disposing of or otherwise
dealing in or with any interests or rights in any real or personal property,
directly or through one or more Operating Limited Partnerships or other entities
or arrangements. Without limiting the generality of the foregoing, the
Partnership may perform such other acts incidental and supplementary to the
foregoing as the Managing General Partner determines to be necessary,
appropriate or advisable.
2.4 PRINCIPAL OFFICE. The office of the Partnership within California
for purposes of Section 15614(a) of the Act shall be at 400 South El Camino
Real, Eleventh Floor, San Mateo, California 94402. The Managing General Partner
may change such office and establish other places of business for the
Partnership (within or without the State of California) as it may, from time to
time, deem necessary or appropriate; provided, however, that the Managing
General Partner shall give the Partners and Assignees notice in writing of any
change of address of the office of the Partnership and, in connection therewith,
shall amend the Certificate of Limited Partnership in accordance with the Act.
The Managing General Partner may select one or more Persons in California to act
as agent for service of process on behalf of the Partnership,
8
<PAGE>
including, without limitation, a General Partner or a Related Person.
2.5 TERM. The Partnership shall commence on the date the Certificate of
Limited Partnership is filed in the office of the Secretary of State of
California in accordance with the provisions of the Act and shall continue until
January 31, 2037, unless extended by amendment of this Agreement or unless the
Partnership is dissolved prior to that date pursuant to Article 14.
2.6 EXECUTION OF DOCUMENTS. The Managing General Partner (or, if
required, all the General Partners) shall execute, acknowledge, file, record or
deliver all Certificates of Limited Partnership, amended certificates,
instruments or other documents and counterparts thereof and make all filings and
recordings and perform all other acts as shall be necessary to comply with the
laws of the State of California for the formation of the Partnership, thereafter
for the continued good standing of the Partnership, and, when appropriate, for
the termination of the Partnership. The Managing General Partner (or, if
required, all the General Partners) shall also execute such certificates,
amended certificates and other documents conforming hereto and perform such
recording, publishing and other acts as may be appropriate to comply with the
requirements of law for the formation, reformation, qualification and/or
operation of a limited partnership in all jurisdictions where the Partnership
may wish to do business, if deemed necessary by the Managing General Partner.
Such certificates, instruments, documents and counterparts may be signed by the
Managing General Partner on behalf of any or all of the Limited Partners acting
pursuant to the powers of attorney from the Limited Partners.
ARTICLE 3
THE GENERAL PARTNERS
3.1 GENERAL. The General Partners shall devote such time and attention
to the business of the Partnership as may be reasonably necessary to carry out
their duties hereunder in the conduct of such business, but any General Partner
and its partners, shareholders, officers, directors, employees and agents shall
have the right to be otherwise employed by an entity or entities other than the
Partnership, including, without limitation, Affiliates of the Partnership, on a
part-time or full-time basis. Nothing contained herein shall prevent a General
Partner or any partner, shareholder, officer, director, employee or agent of a
General Partner from becoming an Assignee or a Substituted or Additional Limited
Partner, whereupon such Person shall be entitled to all rights, shall be subject
to all obligations and shall be deemed, as to such Units, an Assignee or a
Limited Partner, as applicable.
3.2 MANAGEMENT POWER. The Managing General Partner shall
9
<PAGE>
have full, exclusive and complete discretion in the management and control of
the business of the Partnership for the purposes herein stated, and shall make
all decisions affecting the business of the Partnership, shall act as tax
matters partner for the Partnership, and may take such actions as it deems
necessary or appropriate to accomplish the purposes of the Partnership as set
forth herein. The Managing General Partner shall be Robert Batinovich and any
successor to the Managing General Partner which becomes the Managing General
Partner of the Partnership pursuant to Article 13. If there is no successor
which becomes a Managing General Partner pursuant to Article 13, then
Glenborough Realty Corporation shall become Managing General Partner until a
meeting of the Partners can be convened to elect a Person to serve as a General
Partner and as Managing General Partner hereunder. Except as may otherwise be
set forth in this Agreement, no General Partner, other than the Managing General
Partner, shall have any authority, right or power to bind the Partnership or to
manage or control the business of the Partnership in any manner whatsoever.
3.3 POWERS OF THE MANAGING GENERAL PARTNER. Subject to the provisions
of Article 6 vesting certain approval rights in the Limited Partners, in
connection with such management and control, the Managing General Partner shall
have the power and authority to do or cause to be done any and all acts, at the
expense of the Partnership, deemed by the Managing General Partner to be
necessary or appropriate to carry out the purposes of the Partnership. The power
and authority of the Managing General Partner shall be liberally construed to
encompass all acts and activities in which a partnership may engage. The power
and authority of the Managing General Partner shall include, without limitation,
the power and authority:
(A) To engage in the Exchange Transaction and to acquire, own,
lease, sublease, manage, hold, deal in, control or dispose of any
interests or rights in real or personal property, including, without
limitation, the powers to sell, exchange, mortgage, pledge, convey in
trust, enter into joint ventures or partnerships respecting or
otherwise hypothecate all or any portion of the Partnership Property;
(B) To create, by grant or otherwise, easements and
servitudes;
(C) To alter, improve, repair, raze, replace and rebuild
Partnership Property;
(D) To let or lease Partnership Property for any period, and
for any purpose;
(E) To apply proceeds of any sale, exchange, mortgage, pledge
or other disposition of Partnership Property to payment of liabilities
of the Partnership and to pay, collect,
10
<PAGE>
compromise, arbitrate or otherwise adjust any and all other claims or
demands of or against the Partnership, or to hold such proceeds against
the payment of contingent liabilities, known or unknown;
(F) To maintain or cause to be maintained records of all
rights and interests acquired for or disposed of by the Partnership,
all correspondence relating to the Partnership business and the
original records (or copies on such media as the Managing General
Partner deems appropriate) of all statements, bills and other
instruments furnished the Partnership in connection with its business;
(G) To maintain records and accounts of all operations and
expenditures, make all filings and reports required under applicable
rules and regulations of any governmental department, bureau or agency,
any securities exchange and any automated quotation system of a
registered securities association, and furnish the Partners and
Assignees with all necessary United States federal, state or local
income tax reporting information or such information with respect to
any other jurisdiction;
(H) To purchase and maintain, in its discretion and at the
expense of the Partnership, liability, indemnity and any other
insurance, including errors and omissions insurance, sufficient to
protect the Partnership, the General Partners and any other Person from
those liabilities and hazards which may be insured against in the
conduct or management of the Partnership's business;
(I) To make, execute, assign, acknowledge and file on behalf
of the Partnership, any and all documents or instruments of any kind
which the Managing General Partner may deem appropriate in carrying out
the purposes and business of the Partnership, including, without
limitation, powers of attorney, agreements of indemnification, sales
contracts, deeds, options, loan obligations, mortgages, deeds of trust,
notes, documents or instruments of any kind or character, and
amendments thereto. Any person, firm or corporation dealing with the
Managing General Partner shall not be required to determine or inquire
into the authority and power of the Managing General Partner to bind
the Partnership and to execute, acknowledge and deliver any and all
documents in connection therewith;
(J) To borrow money or to obtain credit in such amounts, on
such terms and conditions, and at such rates as the Managing General
Partner deems appropriate, from banks, other lending institutions and
any other Person, including the Partners and Assignees, for any
Partnership purpose, including, without limitation, any loan incurred
for the
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purpose of making one or more distributions to any or all Partners and
Assignees, including any distributions which are, in whole or in part,
a Return of Capital; and in connection with such loans to mortgage,
pledge, assign or otherwise encumber or alienate any or all Partnership
Property, including any income therefrom, to secure or provide
repayment thereof. As between the Partnership and any lender, it shall
be conclusively presumed that the proceeds of such loans are to be and
will be used for the purposes authorized herein and that the Managing
General Partner has the full power and authority to borrow such money
and to obtain such credit;
(K) To assume obligations, enter into contracts, including
contracts of guaranty or suretyship, incur liabilities, lend money and
otherwise use the Partnership's credit and secure any of the
Partnership's obligations, contracts or liabilities by mortgage, pledge
or other encumbrance of all or any part of its property, franchises and
income;
(L) To invest Partnership funds in debt or equity securities
or other obligations of other issuers, including, but not limited to,
securities or other obligations of other partnerships; provided,
however, that the Managing General Partner shall not invest Partnership
funds in such a manner that the Partnership will be considered to be
holding itself out as being engaged primarily in the business of
investing, reinvesting or trading in securities or will otherwise be
deemed to be an investment company under the Investment Company Act of
1940, as amended;
(M) To make any election on behalf of the Partnership as is or
may be permitted under the Code or under the taxing statute or rule of
any state, local, foreign or other jurisdiction, and to supervise the
preparation and filing of all tax and information returns which the
Partnership may be required to file;
(N) To maintain the buildings, appurtenances and grounds of
the Partnership Property in accordance with acceptable standards,
including within such maintenance, without limitation thereof, interior
and exterior cleaning, painting and decorating, plumbing, carpentry and
such other normal maintenance and repair work as may be appropriate;
(O) To collect all rents and other charges from lessees of
Partnership Property and concessionaires, and otherwise due the
Partnership, with respect to the Partnership Property. The Partnership
authorizes the Managing General Partner to request, demand, collect,
receive and receipt for all such rents and other charges and to
institute legal proceedings in the name of the Partnership for the
collection thereof and for
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the dispossession of any Person from Partnership Property and such
expense may include the costs of counsel for any such matter;
(P) To cause to be disbursed (1) the aggregate amount required
to be paid pursuant to any indebtedness of the Partnership, including
therein amounts due under any mortgages or deeds of trust for interest,
amortization of principal and for allocation to reserve or escrow
funds; (2) the amount of rent payable by the terms of any lease under
which the Partnership holds the Partnership Property, or any portion
thereof, promptly when due; (3) the amount of all real estate taxes and
other impositions levied by appropriate authorities; and (4) amounts
otherwise due and payable as expenses of the Partnership authorized to
be incurred under the terms of this Agreement;
(Q) To employ and engage suitable agents, employees, advisers,
consultants and counsel (including any custodian, investment adviser,
accountant, attorney, corporate fiduciary, bank or other reputable
financial institution, or any other agents, employees or Persons which
may serve in such capacity for the Managing General Partner or any
Related Person) to carry out any activities which the Managing General
Partner is authorized or required to carry out or conduct under this
Agreement, including, without limitation, a Person which may be engaged
to undertake some or all of the general management, property
management, financial accounting and record keeping, construction
supervision and other duties of the Managing General Partner, to
indemnify such Persons against liabilities incurred by them in acting
in such capacities on behalf of the Partnership and to rely on the
advice given by such Persons, it being agreed and understood that the
Managing General Partner shall not be responsible for the acts and
omissions of any such Persons and shall assume no obligations in
connection therewith other than the obligation to use due care in the
selection thereof;
(R) To enter into an agreement or agreements with real estate
brokers or agents, investment banking firms, appraisers or others
providing for the engagement of such Persons on an exclusive or
nonexclusive basis to advise or represent the Partnership in the
valuation, sale, lease or other dealings in the Partnership Property,
it being understood that the Managing General Partner shall not be
responsible for the acts and omissions of any such Persons and shall
assume no obligations in connection therewith other than the obligation
to use due care in the selection thereof;
(S) To hold Partnership Property in the name of one or more
nominees, with or without disclosure of the fiduciary relationship;
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(T) To keep proprietary or trade secret information
confidential, and if deemed necessary by the Managing General Partner,
to keep such information confidential from the Limited Partners for a
reasonable period of time;
(U) To pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise upon such terms as it may
determine and upon such evidence as it may deem sufficient, any
obligation, suit, liability cause of action or claim, including taxes,
either in favor of or against the Partnership;
(V) To prosecute, protect and defend or cause to be protected
and defended all patents, patent rights, trade names, trademarks,
service marks and other marks, and all applications with respect
thereto which may be held by the Partnership, and to take all
reasonable and necessary actions to protect the secrecy of and the
proprietary rights with respect to any secret know-how, secret
processes or other proprietary information, and to prosecute and defend
all rights of the Partnership in connection therewith;
(W) To register, qualify or list, or cause to be registered,
qualified, listed or reported, this Agreement or Units hereunder
pursuant to the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, any other securities laws of the
United States, the securities laws of any state of the United States,
the laws of any other jurisdiction, or with any securities exchange or
pursuant to an automated quotation system of a registered securities
association as the Managing General Partner deems appropriate;
(X) To issue, purchase, repurchase, redeem, receive, take or
otherwise acquire, own, hold, sell, lend, exchange, trade in, grant
calls or options or warrants, grant appreciation rights, transfer or
otherwise dispose of, pledge, use and otherwise deal in and with
shares, bonds, debentures and other securities, whether issued by the
Partnership or issued by any other Person, whether on an exchange, over
the counter, in private transactions or in other transactions, and
whether for the Partnership or for any plan maintained or sponsored by
the Partnership, including securities of the Partnership of a different
class or series than the Interests, whether debt or equity, redeemable
or nonredeemable, convertible or nonconvertible, and including
securities with different rights, preferences, privileges, allocations
and tax consequences;
(Y) To qualify to do business in any other state, territory,
dependency or foreign country;
(Z) To make donations, regardless of specific benefit to
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the Partnership, for the public welfare, to community or hospital
funds, or for charitable, educational, scientific, civic, political or
similar purposes;
(AA) To pay pensions, and to establish, participate in and
maintain as plan sponsor or otherwise, pension, profit sharing, bonus,
purchase, option, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions for any or all of the employees of
the Partnership, and any partner, shareholder, director, officer,
employee or agent of a General Partner or any Affiliate, including
plans, trusts and provisions which may provide for the ownership,
acquisition, holding, or disposition of Units or any other securities
of the Partnership; and to indemnify and purchase and maintain
insurance on behalf of, any fiduciary of such retirement, incentive and
benefit plans, trusts or other provisions, including, without
limitation, health insurance, medical and dental reimbursement, life
insurance, accident insurance, disability insurance and other plans,
trusts or provisions;
(BB) To put into effect and carry out any plan of
reorganization or arrangement and the orders of the court or judge
entered in a proceeding for reorganization or arrangement under any
applicable statute of the United States or of any state, local or other
jurisdiction, and to undertake any proceeding and perform any act
provided in the plan or directed by such orders, without further action
by any Partner or Assignee. Such power and authority may be exercised
and such proceedings and acts may be undertaken, as may be directed by
such orders, by the trustee or trustees of the Partnership appointed in
the reorganization or arrangement proceeding (or a majority thereof),
or if none is appointed and acting, by the Managing General Partner or
a master or other representative appointed by the court or judge, with
like effect as if exercised and taken by unanimous action of the
Partners and Assignees;
(CC) To distribute money or Partnership Property to Partners
and Assignees in accordance with this Agreement regardless of the
source of such money or Partnership Property, including, without
limitation, money borrowed by the Partnership or by the Managing
General Partner on behalf of the Partnership;
(DD) To possess and exercise any additional powers and rights
of general partners in a limited partnership, including, without
limitation, those granted under the Act and any other applicable laws,
to the extent not inconsistent with this Agreement;
(EE) To take any and all action, conduct all proceedings
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and execute all rights and privileges, contracts and agreements of any
kind whatsoever, although not specifically mentioned in this Agreement,
that the Managing General Partner may deem necessary or appropriate to
conduct the business of the Partnership or to carry out the purposes of
the Partnership. The expression of any power or authority of the
Managing General Partner in this Agreement shall not limit or exclude
any other power or authority which is not specifically or expressly set
forth in this Agreement; and
3.4 LIABILITY OF GENERAL PARTNERS. The General Partners shall be liable
to the Partnership and the Limited Partners and Assignees for gross negligence
or gross misconduct but neither the General Partners nor their Associates shall
be liable to either the Partnership or the Limited Partner or to Persons who
have acquired interests in the Interests, whether as Assignees or otherwise, for
errors in judgment or for any acts or omissions that do not constitute willful
misconduct. If this Section 3.4 shall, for any reason and to any extent, be
invalid or unenforceable, it is intended that this Section 3.4 shall be
construed to exculpate the General Partners and their Associates to the fullest
extent permitted by law.
3.5 SIMILAR ACTIVITIES OF GENERAL PARTNERS. The General Partners and
their respective Associates may, directly or indirectly (including, without
limitation, through a Related Person or other entity in which the General
Partner or any such Related Person holds an ownership interest), engage in any
and all aspects of the business of owning, holding, developing, controlling,
acquiring, purchasing, managing, disposing of and otherwise dealing with real,
personal or mixed property; act as a partner (limited or general), shareholder,
director, officer, employee or agent of any entity (including GOCO, Glenborough
Partners and Glenborough Corporation) engaging in such business or activities;
or engage in any other businesses and activities, whether the same be
competitive with the Partnership, any Operating Limited Partnership (as defined
in the Limited Partnership Agreement of Glenborough Partners), Glenborough
Partners, the Limited Partner or otherwise, for their own account and for the
account of others, without having or incurring any obligation to offer any
interest in such properties, businesses or activities to the Partnership or any
Partner or Assignee and nothing herein contained shall be deemed to prevent any
General Partner or any such Related Person from conducting such other business
and activities. Neither the Partnership, nor any of the Partners or Assignees
shall have any rights by virtue of this Agreement in any independent business
ventures of a General Partner or any such Related Person. However, all records
kept and maintained by the Managing General Partner for the Partnership pursuant
to this Agreement shall be maintained separately from those for other operations
of the General Partners, including other partnerships for which a General
Partner is a general partner.
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3.6 INDEMNIFICATION OF GENERAL PARTNERS.
(A) The General Partners and each of their respective Associates
(individually an "Indemnitee") shall, to the fullest extent permitted by law, be
indemnified and held harmless by the Partnership from and against all losses,
claims, damages, liabilities (joint and several), expenses (including, without
limitation, attorneys' fees and expenses, and any expenses of establishing a
right to indemnification under this Section 3.6), judgments, fines, settlements
and other amounts (collectively "Liability") arising from or incurred in
connection with any claim, demand, action, suit or proceeding (including, but
not limited to, claims, demands, actions, suits and proceedings by, in the name
of or on behalf of, the Partnership), whether civil, criminal, administrative or
investigative and whether threatened, pending or completed (collectively
"Proceeding") in which the Indemnitee may be involved, or threatened to be
involved, as a party or otherwise by reason of: (i) its status at any time as a
General Partner or Associate of a General Partner; (ii) its management of the
Partnership; and/or (iii) any act performed or omitted to be performed by it at
any time in connection with the business, property or affairs of the Partnership
whether or not such Indemnitee continues to be a General Partner or an Associate
of a General Partner at the time such Liability is paid or incurred, if: (a)
such Liability was not the result of gross negligence or gross misconduct by the
Indemnitee, and the Indemnitee determined, in good faith, that the course of
conduct which caused the Liability was in the best interests of the Partnership;
or (b) a court of competent jurisdiction determines upon application that,
despite the fact that the requirements of clause (a) are not satisfied, in view
of all the circumstances, the Indemnitee is fairly and reasonably entitled to
indemnification for such Liabilities as such court may deem proper.
(B) The termination of a Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that the Indemnitee did not determine in good faith
that the course of conduct which caused the Liability was in the best interests
of the Partnership.
(C) Any Liability for which the Partnership and the Indemnitee are
jointly liable shall, if the Indemnitee is entitled to indemnification under
this Section 3.6, be satisfied first from the assets of the Partnership. The
indemnification provided by this Section 3.6 shall be recoverable out of the
assets of the Partnership, including any insurance proceeds, and shall not be
recoverable out of any other assets of the Limited Partners.
(D) Expenses (including attorneys' fees and expenses) incurred in
defending any Proceeding shall be paid by the Partnership in advance of the
final disposition of such Proceeding
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upon receipt of an undertaking by or on behalf of the Indemnitee to repay such
amount if it shall ultimately be determined by a court of competent jurisdiction
that the Indemnitee is not entitled to indemnification as authorized by this
Section 3.6.
(E) The indemnification provided by this Section 3.6 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, vote of the Partners, as a matter of law or otherwise both as to
action in the Indemnitee's capacity as a General Partner or Associate of a
General Partner and to action in another capacity, shall continue as to an
Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(F) The Partnership shall, to the extent commercially reasonable,
purchase and maintain insurance on behalf of the Indemnitees and such other
Persons as the Managing General Partner shall determine against any Liability
which may be asserted against or expense which may be incurred by such persons
in connection with Partnership activities (including, without limitation, any
Proceeding) whether or not the Partnership would have the power to indemnify
such persons against such Liability under the provisions of this Agreement.
(G) For purposes of this Section 3.6, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by an Indemnitee of its duties to the Partnership
also imposes duties on, or otherwise involves services by, an Indemnitee to such
plan or participants or beneficiaries of such plan. Excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall be deemed a Liability and action taken or omitted by an Indemnitee with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by an Indemnitee to be in the interests of the
participants and beneficiaries of such plan shall be deemed to be for a purpose
which is in the best interests of the Partnership. Any payments to an Indemnitee
shall be solely from assets of the Partnership and shall not be paid from
employee benefit plan assets.
(H) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 3.6 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies.
(I) Notwithstanding the foregoing, an Indemnitee shall not be entitled
to indemnification hereunder for any Liability imposed in a Proceeding arising
from or out of a violation of state or federal securities laws associated with
the offer and sale of Units. Indemnification will be allowed for settlements and
related expenses of Proceedings alleging securities law violations, and for
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expenses incurred in successfully defending such Proceedings, providing that a
court either (i) approves the settlement and finds that indemnification of the
settlement and related costs should be made; or (ii) approves indemnification of
litigation costs if a successful defense is made.
(J) If any provision of this Section 3.6, or the application thereof,
shall, for any reason and to any extent, be invalid or unenforceable, the
remainder of this Section 3.6 and the application thereof shall not be affected
thereby, it being the intent of this Section 3.6 to indemnify and hold harmless
the Indemnitees to the fullest extent permitted by applicable law.
3.7 OTHER MATTERS CONCERNING GENERAL PARTNERS.
(A) Each of the General Partners may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
(B) Each of the General Partners may consult with and employ counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants, advisers and Persons selected by it (who may serve as such for and
be employed by the Partnership or any Related Person), and any opinion of such
Person as to matters which the General Partner believes to be within that
Person's professional or expert competence shall be full and complete
authorization and protection with respect to any action taken, suffered, or
omitted by the General Partner hereunder in good faith and in accordance with
such opinion.
(C) Each of the General Partners may execute any of the powers
hereunder or perform any duties hereunder either directly or by or through
agents, including, without limitation, any Related Person, and a General Partner
shall not be responsible for any misconduct, negligence, or willful act on the
part of any agent appointed with due care by any General Partner.
(D) Any and all fees, commissions, compensation and other consideration
received by a General Partner or a partner, shareholder, director, officer,
agent or employee of a General Partner permitted hereunder shall be the
exclusive property of the recipient, in which the Partnership shall have no
right or claim, and the participation by any such Person in any agreement
permitted hereunder shall not constitute a breach by such Person of any duty
that it may owe the Partnership or the Limited Partners or Assignees under this
Agreement or by operation of law.
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3.8 AGREEMENTS WITH A GENERAL PARTNER OR A RELATED PERSON.
(A) In addition to agreements, arrangements and transactions provided
for in or contemplated by this Agreement, a General Partner and any Related
Person may, directly or indirectly, deal with the Partnership, including,
without limitation, making loans to (but not borrowing from) the Partnership, in
connection with carrying out the business of the Partnership or otherwise, as an
independent contractor or as an agent for others, and may receive from such
others or the Partnership, profits, compensation, commissions or other amounts
which the Managing General Partner in good faith believes to be reasonable
without having to account to the Partnership therefor, if the material facts as
to the agreement or transaction and as to the relationship or interest of the
General Partner or Related Person are disclosed or known to the partner of
Glenborough Partners and such agreement or transaction is specifically
authorized, approved or ratified by a majority of the Units held by the limited
partners of Glenborough Partners. Compliance with the provisions of this Section
3.8 (A) shall be a complete defense to any claim of invalidity or for damages or
other relief with respect to any such agreement or transaction.
(B) The satisfaction of the following condition shall be a complete
defense to any claim of invalidity or for damages or other relief with respect
to any agreement or transaction between a General Partner or a Related Person
and another Person based upon the assertion of a breach of duty owed to the
Partnership by a General Partner or a Related Person in entering into such
agreement or transaction: the material facts as to the agreement or transaction
and as to the relationship or interest of the General Partner or Related Person
are disclosed or known to the partner of Glenborough Partners and such agreement
or transaction is specifically authorized, approved or ratified by a majority of
the Units held by the limited partners of Glenborough Partners.
3.9 CONVEYANCES. The Managing General Partner has the express authority
to convey title to any Partnership Property by a conveyance executed by the
Managing General Partner alone on behalf of the Partnership.
ARTICLE 4
COMPENSATION OF GENERAL PARTNERS
4.1 COMPENSATION OF MANAGING GENERAL PARTNER. In consideration of the
services rendered by the Managing General Partner in managing the business and
affairs of the Partnership, the Partnership shall pay the Managing General
Partner fees consisting of the amounts described in Sections 4.2 through 4.7,
inclusive. The Managing General Partner may divide, allocate or pay the
compensation it receives under this Agreement among its Associates and other
Persons, or may assign to or subcontract with
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other Persons (including Glenborough Corporation) any of its management duties
hereunder together with some or all of such compensation, as it determines in
its sole discretion. All compensation paid the Managing General Partner shall be
paid in United States dollars.
4.2 PROPERTY MANAGEMENT FEE. The Managing General Partner shall be
entitled to a fee (the "Property Management Fee") determined as follows:
(A) With regard to any Partnership Property leased to multiple tenants,
including apartments and condominiums (except as provided in subsection (C)
hereof), a sum equal to five percent (5%) of the monthly Gross Receipts
collected by the Partnership. For purposes of this Section 4.2, "Gross Receipts"
shall mean all rentals and other charges due the Partnership from tenants of
Partnership Property, including, without limitation, expense pass-through items
such as real property taxes and insurance, and rentals or fees paid for parking.
(B) With regard to any non-residential Partnership Property leased to a
single tenant, a sum equal to three percent (3%) of the monthly Gross Receipts
collected by the Partnership.
(C) With regard to any Partnership Property consisting of single-family
residences or scattered condominiums, a sum equal to ten percent (10%) of the
monthly Gross Receipts collected by the Partnership.
(D) The Property Management Fee shall be computed as of the end of each
calendar month with respect to the gross receipts of such month and shall be
paid to the Managing General Partner as soon as practicable thereafter.
4.3 INCENTIVE FEE. The Managing General Partner shall be entitled to a
fee (the "Incentive Fee") determined as follows:
(A) An amount equal to one-half of one percent (.5%) of the sum of the
monthly weighted average of the fair market value ("Fair Market Value") of the
real property (as real property is determined under California law) of the
Partnership and the Book Value of all other Partnership Property as determined
in accordance with this Section.
(B) The Fair Market Value of the Partnership's real property shall be
determined in accordance with the following and the provisions of Section 4.3
(D).
(1) For the year 1994, with respect to that real property
acquired in the Exchange Transaction, it shall be the value thereof
established in the Exchange Agreement which, in turn, shall be the
value thereof as
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last determined by the Limited Partner pursuant to the provisions of
Section 4.3 of the Amended and Restated Limited Partnership Agreement
of the Limited Partner dated as of May 1, 1986, as amended ("Original
Value").
(2) For the year 1995, with respect to that real property
acquired in the Exchange Transaction, it shall be the Original Value
thereof, as increased by the CPI Adjustment, as defined herein
("Adjusted Original Value").
(3) For 1996 and each even-numbered year thereafter, it shall
be the appraised value of such real property, as of the end of each
such year, as determined by independent appraisals ("Biennial Appraised
Value").
(4) For 1997 and each odd-numbered year thereafter, it shall
be the most recent Biennial Appraised Value as adjusted by the CPI
Adjustment ("Adjusted Biennial Appraised Value").
(5) Where in any year, the Partnership should acquire
additional real property, the aggregate prices paid therefor by the
Partnership shall, subject to the provisions of subsection (E) hereof,
be added to the Original Value, Adjusted Original Value, Biennial
Appraised Value or Adjusted Biennial Appraised Value for such year, as
appropriate, the sum of the two being hereafter referred to as the
"Base Value".
(C) The CPI Adjustment shall be the adjustment described in Section
4.3(D) and shall be determined by utilizing the Consumer Price Index for All
Urban Consumers of All Items for the United States (base year 1982 - 1984 =
100), published by the United States Department of Labor, Bureau of Labor
Statistics ("CPI Index"). For those years in which the CPI Adjustment is to be
made, the beginning index ("Beginning Index") shall be the CPI Index for the
month of December of the prior year and the extension index ("Extension Index")
shall be the CPI Index for the month of December of that year.
(D) If the Extension Index has increased over the Beginning Index, the
Fair Market Value shall be determined by multiplying the Base Value of the real
estate for such year by a fraction, the numerator of which is the Extension
Index, and the denominator of which is the Beginning Index. In no case shall the
Fair Market Value of real property for an odd-numbered year be less than the
Base Value thereof for that year. If the CPI Index is changed so that the base
year differs from that used for the Beginning Index, the CPI Index shall be
converted in accordance with the conversion factor published by the United
States Department of Labor, Bureau of Labor Statistics. If the CPI Index is
discontinued or revised,
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such other government index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would be obtained if
the CPI Index had not been discontinued or revised.
(E) The Fair Market Value of the Partnership real property and the Book
Value of all other Partnership Property shall be determined on a monthly
weighted average basis to reflect the period of ownership of such Partnership
Property for such year. The monthly weighted average for the first and last year
of the Partnership shall be based on a denominator equal to the number of months
of existence of the Partnership in such year.
(F) The Incentive Fee shall be paid to the Managing General Partner on
a monthly basis by taking one-twelfth (1/12th) of the Incentive Fee based on the
most recent Fair Market Value determination hereunder; except that at the end of
each year, the Incentive Fee for that year shall be recomputed as herein
provided, and the Managing General Partner shall thereupon be entitled to the
balance of the Incentive Fee. Any overpayment of the Incentive Fee shall be
deducted from the next monthly payments of the Incentive Fee to fall due for the
following year.
(G) The Incentive Fee shall be paid to the Managing General Partner
only to the extent that the combined Net Operating Cash Flow of the Partnership,
the Limited Partner, and all other partnerships included within the definition
of an Operating Limited Partnership as that term is defined in Section 1.1 of
the Limited Partnership Agreement of Glenborough Partners during such year
exceeds an amount equal to one dollar and fifty cents ($1.50) multiplied by the
monthly weighted average number of the outstanding limited partnership Units. To
the extent the Incentive Fee cannot be paid for any year it shall lapse.
4.4 TRANSACTION FEE.
(A) The Managing General Partner shall be entitled to a fee upon the
sale, exchange or purchase of any property of the Partnership equal to two
percent (2%) of the sale proceeds or the purchase price (the "Transaction Fee");
provided, however, that no Transaction Fee shall be payable on such transactions
with Affiliates or for sales in which the Managing General Partner participates
in real estate commissions as set forth in Section 4.12 hereof. The sale
proceeds or the purchase price of the property shall be the total of all
consideration received or paid, as the case may be, including, but not limited
to, all cash, the principal amount of any note or promise to pay, and the fair
market value of any other property paid or transferred in connection with the
sale or purchase. For purposes of this Section 4.4, an exchange shall be deemed
one transaction. The principal amount of a note or promise to pay bearing no
interest or interest at other than market rates shall be adjusted as provided in
Section 4.4(B)
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in computing the sale proceeds or the purchase price to reflect market interest
rates. In addition, the entry into a lease of real property or improvements to
real property (other than a lease of office space required for administration of
the Partnership) by the Partnership, as lessee, shall be deemed a purchase and
the present value of the lease payments over the term of the lease, excluding
any option periods and any increases in payments which cannot be calculated at
the time of the entry into the lease, discounted at the interest rate on
five-year Treasury Notes, or comparable indices if five-year Treasury Notes are
no longer customarily quoted ("Adjustment Index"), prevailing on the date of
entry into the lease, shall be deemed the purchase price on which the
Transaction Fee shall be computed. The exercise by the Partnership or any other
Person of any option to purchase and the consummation of such purchase, whether
or not related to any lease, shall be deemed a separate transaction for purposes
of the application and computation of the Transaction Fee under this Section 4.4
(B) ADJUSTMENT METHOD. Except as may be otherwise specified, the
principal amount of any note or promise to pay required to be adjusted under
Section 4.4(A) shall be adjusted in accordance with the same principles used by
the Partnership for financial reporting purposes and shall be based on the
Adjustment Index, defined in Section 4.4(A) above.
(C) PAYMENT. The Transaction Fee shall be paid as soon as practicable
after consummation of the transaction with respect to which the fee is accrued.
4.5 REFINANCING FEE. The Managing General Partner shall be entitled to
a fee ("Refinancing Fee") equal to one percent (1%) of the net loan refinancing
proceeds received from third Persons on the refinancing of any Partnership
Property, but only if the refinancing results in:
(A) A new loan with a materially lower interest rate or better payment
terms; or
(B) Proceeds which are available for other Partnership purposes; or
(C) Funds for the repayment of an existing loan that is due or will
become due in the near future.
The amount of net loan refinancing proceeds shall equal the principal
amount of the loan less points, loan processing fees and other loan costs. The
Refinancing Fee shall be paid to the Managing General Partner as soon as
practicable after the loan refinancing proceeds have been made available to the
Partnership.
4.6 NO REPAYMENT. The Managing General Partner shall not be required to
return to the Partnership all or any part of any fee
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properly computed and paid to it, notwithstanding any subsequent event.
4.7 ACCRUAL UPON CHANGE IN MANAGING GENERAL PARTNER. If the Managing
General Partner ceases to serve in that capacity as of any day (the "Termination
Date") for any reason, the Property Management Fee and the Incentive Fee shall
be accrued on a prorata daily basis to and including the Termination Date. The
Property Management Fee and the Incentive Fee payable to any new Managing
General Partner shall accrue from and after the Termination Date. The Property
Management Fee and the Incentive Fee shall be paid to the Managing General
Partner at such time as it would otherwise be payable for the period in which
the Termination Date occurs.
4.8 JOINT VENTURES. References herein to any property acquired, owned
or disposed of by the Partnership shall include the Partnership's interest from
time to time in any underlying property held by any joint venture, partnership
or other entity or form of ownership in which the Partnership has an interest
("Partnership's Share in Underlying Property"). Without limiting the generality
of the foregoing, the Property Management Fee, Incentive Fee, Transaction Fee,
and any other fee which may become payable to the Managing General Partner shall
apply to and be based upon not only any wholly-owned property, but also the
Partnership's Share in Underlying Property. There shall, however, be no
duplication of fees as a consequence of this provision.
4.9 CHANGE IN COMPENSATION. With the approval of holders of the Units
held by limited partners of Glenborough Partners in accordance with Section 3.8,
the Managing General Partner may propose and effect any additional or substitute
compensation plans or arrangements for compensation to be paid to it as Managing
General Partner; provided, however, that in voting on such matters (as well as
the amendment of this Section), the General Partners and Glenborough Partners
and their respective Affiliates shall vote their interests for, against, or
abstain in the same proportion as all other limited partners of Glenborough
Partners vote for, against, or abstain on such matters and provided further,
that there shall be no retroactive changes in the compensation paid to the
Managing General Partner.
4.10 FRINGE BENEFITS. At the expense of the Partnership, any officer or
employee of the Managing General Partner who performs services for the Managing
General Partner in connection with the conduct of Partnership business shall be
entitled to participate in any health insurance, medical and dental
reimbursement, life insurance, accident insurance, disability insurance or any
other plans, trusts or provisions, or any other employee benefit plans or
arrangements established by the Partnership, as if such officer or employee were
an officer or employee of the Partnership.
4.11 EXPENSES OF GENERAL PARTNER. The Partnership shall pay
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all expenses, disbursements and advances reasonably incurred by the General
Partners and their Affiliates in connection with the organization of the
Partnership and the conduct of Partnership business, including, without
limitation, office expenses, secretarial expenses, software acquisition, data
processing services and expenses for entertainment, travel and similar items,
including amounts paid to any Person employed or retained to perform services
for the Partnership. The Partnership shall promptly reimburse the General
Partners and their Affiliates for any such items paid by the General Partners or
their Affiliates. The General Partners and their Affiliates shall also receive a
reasonable reimbursement for their general and administrative costs allocable to
the management and operation of the Partnership, as determined by the Managing
General Partner in its discretion; provided, however, that such costs shall be
reasonable in amount and necessary to the functions of the Partnership. Such
costs shall include salaries and compensation of legal and leasing personnel,
and costs incurred in connection with servicing Partnership notes receivable,
but shall exclude salaries and compensation of the officers and directors of any
General Partner.
4.12 COMMISSIONS ON CERTAIN SALES. The Managing General Partner or an
Affiliate thereof, shall be entitled to receive a commission upon the sale of
single-family residences (but not including condominiums or residential units
sold in bulk), where substantial services have been rendered in connection with
such sale. Such commission shall be an amount equal to a maximum of four percent
(4%) of the sale proceeds where no third Person is employed in connection with
the sale of the Partnership Property and a minimum of two percent (2%) of the
sale proceeds where a third Person or Persons are employed in connection with
the sale of Partnership Property; provided, however, that in no event shall the
total commission paid to all Persons in connection with the sale of such
Partnership Property be less than four percent (4%) or more than seven percent
(7%) of the sale proceeds (as that term is defined in Section 4.4(A)).
ARTICLE 5
THE LIMITED PARTNERS, ASSIGNEES AND TRANSFERREES
5.1 LIMITED LIABILITY. No Limited Partner or Assignee (unless such
Limited Partner or Assignee is a General Partner or otherwise participates in
the control of the business of the Partnership) shall be personally liable for
any of the debts of the Partnership or for any Net Losses beyond the amount of
the Capital Contribution made or agreed to be made to the Partnership by the
Limited Partner or Assignee and any undistributed Net Income allocated to the
Limited Partner or Assignee. However, to the extent required by law, each
Limited Partner or Assignee receiving any actual or constructive distribution
may be liable to return such distribution if and to the extent that, immediately
after
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giving effect to the distribution, all liabilities of the Partnership, other
than liabilities to Partners or Assignees on account of their interest in the
Partnership and liabilities as to which recourse of creditors is limited to
specific property of the Partnership, exceed the fair value of the Partnership
Property; provided, however, that the fair value of any Partnership Property
that is subject to a liability as to which recourse of creditors is so limited
shall be included in the Partnership Property for purposes of this sentence only
to the extent that the fair value of such Partnership Property exceeds such
liability. Any Limited Partner returning all or any part of a distribution
actually received by an Assignee or successor of the Limited Partner shall be
subrogated to the Partnership's right to seek a return to the Partnership of the
distribution from the Assignee or such successor. In no event shall any Limited
Partner or Assignee be obligated under any circumstances to make any Capital
Contribution to the Partnership for any purpose whatsoever, other than Capital
Contributions described in Article 7.
5.2 RESTRICTIONS ON LIMITED PARTNERS AND ASSIGNEES.
(A) No Limited Partner or Assignee shall participate as such in the
management and control of the business of the Partnership, transact any business
for the Partnership, or attempt to do so, unless such Limited Partner or
Assignee is also the Managing General Partner or a Related Person or other
Person employed or engaged to transact any such business by or on behalf of the
Managing General Partner or the Partnership. The transaction of any such
business by a Limited Partner or Assignee employed or engaged to do so by or on
behalf of the Managing General Partner or the Partnership shall not be in his,
her or its capacity as Limited Partner or Assignee and shall not affect, impair
or eliminate the limitations on the liability of the Limited Partner or Assignee
under this Agreement.
(B) No Limited Partner or Assignee shall have the power to represent,
sign for or bind the Managing General Partner, any other General Partner or the
Partnership, unless such Limited Partner or Assignee is also the Managing
General Partner or a Related Person or other Person given such power by the
Managing General Partner.
5.3 OUTSIDE ACTIVITIES. A Limited Partner or Assignee shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities in direct competition with the Partnership. Neither the Partnership
nor any of the Partners or Assignees shall have any rights by virtue of this
Agreement in any independent business ventures of any other Limited Partner or
Assignee.
5.4 NO WITHDRAWAL OR DISSOLUTION. No Limited Partner shall at any time
withdraw from the Partnership, except as provided in
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this Agreement. No Limited Partner shall have the right to have the Partnership
dissolved or the right to a Return of Capital from the Partnership, except as
provided in this Agreement. The legal incompetency, bankruptcy, insolvency,
termination, dissolution, withdrawal or death of a Limited Partner shall not
cause a dissolution of the Partnership.
5.5 ASSIGNEES. The creation of Assignees pursuant to Section
11.2 does not dissolve the Partnership. An Assignee may become a Substituted
Limited Partner as provided in Section 12.1. Until an Assignee becomes a
Substituted Limited Partner, the Assignee has no right to notice of or to vote
at any meeting of Partners or upon any matters upon which Limited Partners may
vote, to require any information or account of Partnership transactions or to
inspect Partnership books, and is otherwise subject to the limitations under the
Act on the rights of an Assignee who has not become a Substituted Limited
Partner. An Assignee has the rights and obligations appurtenant to a Unit to
share in the Net Income and Net Losses of the Partnership and to receive
distributions.
5.6 TRANSFEREES. An assignment of a Limited Partner's Interests does
not dissolve the Partnership or entitle the transferee to become or to exercise
any rights of a Limited Partner. The transferee has the right to become a
Substituted Limited Partner pursuant to an assignment as provided in Section
12.1. A Limited Partner remains a Limited Partner upon transfer of all or part
of the Limited Partner's Interests until the transferee becomes a Substituted
Limited Partner pursuant to Section 12.1. A transferee who does not become a
Substituted Limited Partner has no right to notice of or to vote at any meeting
of Partners or upon any matters upon which a Limited Partner may vote, to
require any information or account of Partnership transactions or to inspect the
Partnership books, and is otherwise subject to the limitations under the Act on
the rights of a transferee or Assignee who has not become a Substituted Limited
Partner. Any distribution or payment to the Partner or Assignee of record or the
personal representative of such Partner or Assignee shall acquit the Partnership
of liability to the extent of such payment to any person who may have an
interest in such payment by reason of an assignment by the Partner or Assignee
or the successors or assignees of the Partner or Assignee, or by reason of the
death of such Partner or Assignee or otherwise.
ARTICLE 6
APPROVAL BY LIMITED PARTNERS; AMENDMENTS
6.1 APPROVAL BY LIMITED PARTNER. Subject to Sections 6.2 and 6.3, the
approval of a Majority Interest shall be required only for the matters specified
below (including, however, without limitation, those matters on which limited
partners are given the right to vote under the Act) and no other matters:
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(A) The following actions may be taken by the Managing General Partner
only with the affirmative vote of a Majority Interest:
(1) the sale, exchange, lease or other transfer (other than
encumbrances) of all or substantially all of the assets of the
Partnership in a single transaction or in multiple interrelated
transactions, except in the liquidation and winding up of the business
of the Partnership upon its dissolution. For purposes of this
subsection, "substantially all of the assets of the Partnership" shall
mean ninety percent (90%) of the asset value of the Partnership
Property, as determined in accordance with generally-accepted
accounting principles, at the end of the most recently completed fiscal
quarter of the Partnership;
(2) the dissolution of the Partnership, other than pursuant to
Sections 14.1(A), (B), (C) and (E);
(3) an election to continue the business of the Partnership
other than after there is no remaining or surviving General Partner;
(4) an amendment to this Agreement, including, without
limitation, an amendment extending the term of this Agreement, except
for amendments described in Sections 6.3 and 6.4;
(5) Any matter requiring approval of the holders of Units of
Glenborough Partners pursuant to Section 3.8.
(B) A General Partner may be removed only with the approval of a
Majority Interest.
(C) Except under circumstances described in clause (D), a new General
Partner may be admitted with only the approval of a Majority Interest and with
the separate concurrence of the other General Partner(s).
(D) If there is no remaining or surviving General Partner, a new
General Partner(s) may be admitted or an election to continue the business of
the Partnership may be made only upon the approval of all the Limited Partners.
6.2 RIGHTS CONDITIONAL. The rights set forth in Section 6.1 (A) shall
not be exercised unless the Partnership shall have received the written opinion
of counsel for the Partnership to the effect that the exercise of such right or
the action proposed to be taken with respect to any particular matter: (A) shall
not cause the Limited Partner to be deemed to be taking part in the management
and control of the business and affairs of the Partnership so as to subject the
Limited Partner or Assignees to unlimited liability therefor; (B) will not
jeopardize the status of
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the Partnership as a partnership under applicable tax laws and regulations; or
(C) is otherwise permissible under the state statutes then governing the rights,
duties and liabilities of the Partnership and the Partners and Assignees. If
counsel for the Partnership has indicated that it is unable or unwilling to
deliver such an opinion, the Managing General Partner may take any action
described in Section 6.1 (A) without the need for approval of the Limited
Partner, provided that such action is not otherwise prohibited by this Agreement
or by law.
6.3 AMENDMENTS BY THE MANAGING GENERAL PARTNER. Subject to Section 6.4,
the Managing General Partner may, without prior notice to or consent of any
Partner or Assignee, amend any provision of this Agreement: (A) to cure any
ambiguity, omission, defect or inconsistency; (B) if in its opinion such
amendment does not have a materially adverse effect upon the Limited Partners
and Assignees or the Partnership, as the case may be; or (C) the amendment is
necessary, in the opinion of counsel to the Partnership, to prevent the
Partnership or the General Partners or the partners, directors or officers of a
General Partner from being in any manner subject to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, whether or not substantially similar to
plan asset regulations currently applied or proposed by the Department of Labor;
or (D) the amendment is necessary, in the opinion of counsel to the Partnership,
to prevent the Partnership from being taxable as a corporation under the Code. A
copy of such amendment shall thereafter be furnished promptly to the Limited
Partner and Assignees. In the event an amendment shall have been approved
pursuant to this Section 6.3, the Managing General Partner and, if necessary,
the Limited Partner, shall execute such amendment, certificate and other
documents as may be reasonably required for the purpose of effectuating the
same.
6.4 PROHIBITED AMENDMENTS. Except with the unanimous consent of all
Partners, no amendments shall modify the provisions regarding amendment of this
Agreement or the liabilities of the Partners or change the form of Partnership
to a general partnership.
ARTICLE 7
CAPITAL CONTRIBUTIONS AND INITIAL ISSUANCE OF INTERESTS
7.1 CASH CAPITAL CONTRIBUTIONS. The initial capital of the Partnership
shall consist of One Thousand Dollars ($1,000), which the Partners have
heretofore contributed in cash to the capital of the Partnership as follows:
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GENERAL PARTNERS
Glenborough Realty Corporation...... ............................. $ 1
Robert Batinovich................................................. $ 9
LIMITED PARTNER
Robert Batinovich................................................ $990
Upon completion of the Exchange Transaction, these cash contributions
shall be refunded to the General Partners and the Limited Partner.
7.2 CONTRIBUTION BY PARTNERS. On the Closing Date, the Partners shall
contribute to the Partnership Property, including the Exchange Assets, as
follows:
(A) The Limited Partner shall, in accordance with the Exchange
Agreement, contribute the Exchange Assets at the Exchange Values.
(B) The General Partners shall not be required to contribute
to the Partnership; provided, however, that in consideration of
services rendered, the General Partners shall, in the respective shares
shown in Section 7.1, receive and hold a one percent (1%) interest in
the Net Income and Net Loss of the Partnership, including a one percent
(1%) interest in cash items of Partnership income, gain, loss,
deduction or Tax Credits.
(C) For purposes of this Section 7.2, the value of the
Exchange Assets shall be deemed to equal one hundred percent (100%) of
the Partnership's net assets as of the Closing Date.
7.3 DISTRIBUTION OF INTERESTS.
(A) Effective as of the Closing Date and in consideration of the
transfer provided in Section 7.2 (A), the Partnership shall issue to the Limited
Partner 990 Interests. Thereafter, interests of the Limited Partner in the
Partnership shall be represented and expressed in terms of Interests.
(B) In consideration for services and to represent the General
Partners' interest in the Partnership provided for in Section 7.2 (B), the
Partnership shall issue 10 Interests to the General Partners in the proportions
provided for in Section 7.1.
(C) After the issuance of Interests provided for in 7.3 (A) and (B)
above, Interests shall be held one percent by the General Partners and
ninety-nine percent (99%) by the Limited Partner.
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7.4 GENERAL PARTNER INTERESTS. The Interests issued to the Managing
General Partner and Robert Batinovich as General Partners, shall be designated
as General Partner Interests.
7.5 DISTRIBUTION OF CAPITAL. A Partner or Assignee shall be entitled to
a distribution which constitutes a Return of Capital from time to time
throughout the duration of the Partnership in such amounts and at such times as
the Managing General Partner, in its sole discretion, deems appropriate. Such
distributions shall be made only if the conditions specified in Section 9.1 have
been met or as provided in Section 7.1 with respect to the initial $1,000 cash
contribution.
7.6 NO INTEREST ON CAPITAL CONTRIBUTION. Partners and Assignees shall
not receive interest on or with respect to all or any part of their Capital
Contributions.
7.7 CREDITOR'S INTEREST IN THE PARTNERSHIP. No creditor who makes a
loan to the Partnership shall have or acquire at any time as a result of making
the loan, any direct or indirect interest in the profits, capital or property of
the Partnership other than as a creditor.
7.8 NATURE OF INTERESTS. All property owned by the Partnership, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and none of the Partners shall have any direct
ownership of such property.
7.9 ONE PERCENT INTEREST OF GENERAL PARTNERS AND ADDITIONAL CAPITAL
CONTRIBUTIONS. Notwithstanding anything to the contrary that may be expressed or
implied herein, the interests of all of the General Partners, taken together, in
each material item of Partnership income, gain, loss, deduction or Tax Credits,
as provided by Section 8.1, will be equal to at least one percent (1%) of each
such item at all times during the existence of the Partnership. In determining
the General Partners' interests in such items, interests held by the General
Partners as general partners of the Limited Partner or of any Operating Limited
Partnership, as defined in the Limited Partnership Agreement of Glenborough
Partners and Units owned by the General Partners shall not be taken into
account. Additional Capital Contributions shall be made to the Partnership only
with the approval of all Partners. If additional Capital Contributions are made,
such Capital Contributions shall be made by each Partner in accordance with its
Allocable Share; provided, however, that the General Partners shall, at all
times, be deemed to own as General Partners (in the respective percentages set
forth in Section 7.1, one percent (1%) of the outstanding interests in the
Partnership and no further contribution or consideration shall be required of
the General Partners for their General Partner interests. Additional Interests
shall be issued to evidence such additional capital contributions
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and to maintain the General Partners' interest as aforesaid. If property other
than cash is contributed, the Managing General Partner shall determine the value
of such property.
ARTICLE 8
ALLOCATION OF NET INCOME, NET LOSS AND TAX CREDITS
8.1 GENERAL ALLOCATION.
(A) Net Income and Net Loss for each month shall be determined by the
Partnership and allocated among the Partners and Assignees in accordance with
their Allocable Shares.
(B) For federal, state or other tax purposes, all items of income,
gain, loss or deduction and all Tax Credits (including any such items arising
from a joint venture or a partnership in which the Partnership has an interest)
shall be determined using the accounting method designated by the Managing
General Partner and shall be allocated to the Partners and Assignees in
accordance with their Allocable Shares, subject to the provisions and
adjustments described in this subsection. If the Partnership is deemed to have
been terminated and reformulated pursuant to Section 708 of the Code,
depreciation, depletion, gain or loss shall be allocated among the Partners and
Assignees so as to take account of the variation between the basis of property
deemed contributed to the Partnership by each Partner or Assignee at the time of
its reformulation and the fair market value of such property at the time of such
contribution pursuant to Section 704(c) of the Code. Depreciation, depletion,
gain or loss (including the tax consequences of any basis reduction made by a
contributing Partner under Code Sections 108, 483 and 1274) with respect to
property contributed to the Partnership shall be allocated among the Partners
and Assignees to the extent required under Section 704(c) of the Code and
Treasury Regulations promulgated under Code Section 704(b) and (c) so as to take
into account, for tax purposes, the difference between the basis of such
property and its initial Book Value. The Managing General Partner is authorized
to adopt such methods of allocating such items, consistent with applicable law
and Regulations.
8.2 ALLOCATION ON TRANSFER.
The Partnership shall use the monthly convention specified in the
Conference Committee Report to Section 72 of the Tax Reform Act of 1984 in
determining allocations on transfer. Under this convention, Interest transfers
after the 15th day of a month shall be treated as occurring immediately after
the close of business of the last day of the month, and Interest transfers
during the first fifteen (15) days of a month shall be treated as occurring
immediately before the opening of business of the first day of the month.
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ARTICLE 9
CASH DISTRIBUTIONS
9.1 TIME AND AMOUNT OF CASH DISTRIBUTIONS.
(A) As of the close of each fiscal quarter and each fiscal year, and at
any other time the Managing General Partner deems appropriate, the Cash
Available for Distribution shall be calculated and, if the Managing General
Partner deems appropriate in its sole discretion, all or any portion thereof
shall be distributed to the Partners and Assignees of record on the Record Date
set for the distribution, and each Partner and Assignee shall receive his
Allocable Share thereof.
(B) Notwithstanding the provisions of Section 9.1(A), any distribution
shall be made only if:
(1) All liabilities of the Partnership, except liabilities to
the General Partners and to the Limited Partner and Assignees on
account of the Capital Contribution and liabilities as to which
recourse of creditors is limited to specified property, have been paid
or after such distribution, there will remain Partnership Property with
a fair value sufficient to pay such liabilities, provided that the fair
value of any Partnership Property that is subject to a liability as to
which recourse of creditors is limited shall be included in Partnership
Property for purposes of this subsection only to the extent that the
fair value of such Partnership Property exceeds such liability;
(2) The Managing General Partner determines in good faith that
such distributions may be made without materially affecting the ability
of the Partnership to pay obligations (including contingent
liabilities) of the Partnership as they fall due; and
(3) Such distribution may be made without violating any
provision of the Act.
(C) Nothing in this Agreement or this Section shall serve as a
limitation on the Managing General Partner's right to retain or use the
Partnership's assets or its revenues as, in the opinion of the Managing General
Partner, may be required to satisfy the anticipated present and future cash
needs of the Partnership, whether for operations, liabilities, expansion,
improvements, acquisition or otherwise.
9.2 DISTRIBUTIONS OF PARTNERSHIP PROPERTY. In its sole discretion, the
Managing General Partner may distribute to Partners and Assignees, Partnership
Property other than Cash Available for Distribution. In its sole discretion, the
Managing General Partner
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may distribute to Partners and Assignees additional Interests or securities of
the Partnership which have been authorized and issued pursuant to the terms of
this Agreement.
ARTICLE 10
ACCOUNTING AND REPORTS
10.1 FISCAL YEAR. The fiscal year of the Partnership shall end on
December 31 of each year, unless the Managing General Partner determines that it
is in the best interest of the Partnership and its Partners to utilize a
different fiscal year and the permission of the Internal Revenue Service has
been obtained.
10.2 REPORTS.
(A) As soon as practicable, but in no event later than ninety (90)
days, after the close of the calendar year, the Managing General Partner shall
prepare or cause to be prepared and furnish to each Person who was a Partner or
Assignee of record during the Partnership's fiscal year, the information
reasonably necessary for the preparation of such Person's United States federal
income tax return and any state or local income or other tax returns required of
such Person as a result of the operations of the Partnership. The Partners and
Assignees agree to furnish the Managing General Partner with such information as
may be necessary or helpful in preparing the tax returns or other filings of the
Partnership.
(B) As soon as practicable, but in no event later than one hundred
twenty (120) days after the close of each fiscal year, the Managing General
Partner shall mail or deliver to each Partner and each Assignee of record an
annual report containing financial statements of the Partnership (which may be
consolidated with the financial statements of the Limited Partner) for the
fiscal year, including a balance sheet and statements of operations, changes in
Partners' equity and changes in financial position at the end of or for the most
recent fiscal year. Such statements are to be prepared in accordance with
generally-accepted accounting principles and shall include the opinion of a firm
of independent public accountants selected by the Managing General Partner, and
are to be accompanied by a supplementary summary (except as disclosed in the
financial statements), by classification of the total fees and compensation,
including any overhead reimbursement and indemnification, paid by the
Partnership, directly or indirectly, to the General Partners.
(C) If and to the extent required by the Act or applicable state or
federal securities laws, as soon as practicable, but in no event later than
sixty (60) days after the close of each fiscal quarter, except the last fiscal
quarter of each fiscal year, the Managing General Partner shall mail or
otherwise furnish to each Partner and Assignee of record a quarterly report for
the fiscal
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quarter containing such financial and other information (which may be condensed,
including statements of operations for such fiscal quarter and since the end of
the last fiscal year, a balance sheet at the end of such period and a
certificate of the Managing General Partner to the effect that such financial
statements were prepared without audit from the books and records of the
Partnership) as the Managing General Partner deems appropriate.
10.3 TAX ELECTIONS. The Managing General Partner shall, in its sole
discretion, and as it deems in the best interests of the Partnership or the
Partners and Assignees, determine whether to make any available election and how
to make any necessary allocation for federal, state, local or other income tax
purposes.
10.4 BOOKS AND RECORDS. The Managing General Partner shall maintain all
records necessary for documenting and reporting the business and affairs of the
Partnership. The Managing General Partner shall maintain at the office of the
Partnership specified in Section 2.4: (A) a current list of the full name and
last-known business or residence address of each Partner and Assignee set forth
in alphabetical order together with the contribution and the share in profits
and losses of each Partner and Assignee; (B) a copy of the Certificate of
Limited Partnership and all certificates of amendment thereto, together with
executed copies of any powers of attorney pursuant to which any certificate has
been executed; (C) copies of the Partnership's federal, state and local income
tax or information returns and reports, if any, for the six most recent taxable
years or for such shorter time as the Partnership has been in existence; (D) the
original Agreement and all amendments thereto; (E) copies of the financial
statements of the Partnership for the six most recent fiscal years or for such
shorter time as the Partnership has been in existence; and (F) the Partnership's
books and records for at least the current and past three fiscal years or for
such shorter time as the Partnership has been in existence. Any records
maintained by the Partnership in the regular course of its business, including
the record of the holders of Interests, books of account, and records of
Partnership proceedings may be kept on, or be in the form of punch cards,
magnetic media, photographs, micrographics, or any other information storage
device, provided that the records so kept can be converted into clearly legible
written form within a reasonable period of time. Except for information kept
confidential by the Managing General Partner pursuant to the power described in
Section 3.3(T), all books, financial records, reports and accounts shall be open
to inspection by any Partner or duly authorized representative of the Partner on
reasonable notice during normal business hours, for any purpose reasonably
related to the Partner's interest as a Partner, and the Partner or the
representatives at the expense of the Partner shall have the further right to
make copies or excerpts therefrom; provided, however, that a copy of the
information described in clauses (A),(B),(C) and (D) of the second sentence of
this Section 10.4 shall be promptly delivered by the Managing
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General Partner, at the expense of the Partnership, to any Partner requesting
such information. The Partner and the Partner's representatives shall not
divulge to any Person any confidential or proprietary data, information or
property or any trade secrets of the Partnership.
10.5 BANK ACCOUNTS. The Partnership shall establish and maintain
accounts in financial institutions (including, without limitation, national or
state banks, trust companies, or savings and loan institutions) in such amounts
as the Managing General Partner may deem necessary from time to time.
Partnership funds shall not be commingled with the funds of, or used as a
compensating balance on behalf of, any General Partner or any other Person.
Checks shall be drawn on and withdrawals of funds shall be made from any such
accounts for Partnership purposes and shall be signed by the Person or Persons
designated by the Managing General Partner. Temporary surplus funds of the
Partnership may be invested in commercial paper, time deposits, short-term
government obligations or other investments as shall be determined by the
Managing General Partner.
ARTICLE 11
TRANSFER OF INTERESTS
11.1 TRANSFER OF INTERESTS.
(A) The term "transfer" when used in this Article with respect to a
Unit includes a sale, assignment, gift, exchange, or any other disposition.
(B) General Partner Interests are nontransferable without the consent
of all Partners except as provided in Article 7 and Section 13.1. The Limited
Partner hereby consents to any transfer pursuant thereto.
(C) Interests held by Limited Partners are nontransferable without the
consent of all Partners.
ARTICLE 12
ADMISSION OF SUBSTITUTED AND ADDITIONAL LIMITED PARTNERS
12.1 ADMISSION OF SUBSTITUTED LIMITED PARTNERS. A Limited Partner shall
have the power to give the transferee of such Person's Interests the right to
become a Substituted Limited Partner in the manner permitted in this Agreement.
An Assignee or transferee of an Interest may apply to become a Substituted
Limited Partner with respect to such Interest by executing and delivering a
Request and Power in form approved by the Managing General Partner. Upon receipt
by the Partnership of a completed and executed Request and Power, the name of
the transferee shall be
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added to the list of Limited Partners maintained by the Partnership, whereupon
such transferee shall become a Substituted Limited Partner.
12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS. A Person other than a
General Partner (acting in its capacity as a General Partner), the Limited
Partner or a substituted Limited Partner who makes a contribution to the capital
of the Partnership in a manner permitted by the terms of this Agreement may,
with the approval of the Managing General Partner, be admitted to the
Partnership as an Additional Limited Partner upon furnishing to the Managing
General Partner: (A) a Request and Power; and (B) such other documents or
instruments as may be required in order to effect admission as a Limited
Partner. Upon receipt of such documents, the Partnership shall add the name of
such Person to the list of Partners maintained by the Partnership, whereupon
such Person shall become an additional Limited Partner.
ARTICLE 13
REMOVAL, RESIGNATION OR WITHDRAWAL OF GENERAL PARTNER
13.1 REMOVAL OF GENERAL PARTNER. A General Partner may be removed from
office as provided in Section 6.1 and shall be removed if such General Partner
is removed as general partner of the Limited Partner or Glenborough Partners.
Such removal shall take effect sixty (60) days from the date of the action by
the Limited Partner. At such time, the assets, books and records of the
Partnership shall be surrendered to the remaining or successor General
Partner(s), provided that the remaining or successor General Partner(s) shall:
(A) hold or have acquired sufficient General Partner Interests (which shall be
obtained from the removed General Partner) so that the General Partner(s) who
will continue to serve as General Partner(s) hold and have designated, in the
aggregate, at least a one percent (1%) interest in the Partnership as General
Partner(s); and (B) have complied with the provisions of Section 13.4. If such
removal dissolves the Partnership, then the Partnership shall be reconstituted
and its business shall be continued with any remaining and successor General
Partner(s) as the General Partner(s) thereof, and they shall have the exclusive
right to possess Partnership Property to continue the business of the
Partnership. Removal of a General Partner shall not prejudice the rights of the
removed General Partner to compensation pursuant to Article 4 accrued as of the
date the removal takes effect. The value of a removed General Partner's Interest
shall be agreed to by all Partners.
13.2 WITHDRAWAL. A General Partner may withdraw, resign or retire on
ninety (90) days' advance written notice to the Partners. A General Partner
shall cease to be a General Partner on the effective date of its or his
withdrawal, resignation or retirement.
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13.3 DISSOLUTION OR BANKRUPTCY OF GENERAL PARTNER. A General Partner
shall cease to be a General Partner upon the happening of any of the following
events:
(A) The dissolution of the General Partner or, if the General Partner
is an individual, the death of the General Partner or the entry by a court of
competent jurisdiction of an order adjudicating the General Partner incompetent
to manage his person or estate;
(B) The General Partner: (1) makes a general assignment for the benefit
of creditors; (2) commences a voluntary case under the federal bankruptcy law;
(3) files a petition or answer seeking for the General Partner any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law, or regulation; (4) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in any proceeding of the nature
described in clause (3); or (5) seeks, consents to or acquiesces in the
appointment of a trustee, receiver, or liquidator of the General Partner or of
all or any substantial part of the General Partner's properties;
(C) An order for relief against the General Partner is entered under
Chapter 7 or 11 of the federal bankruptcy law;
(D) Sixty (60) days after the commencement of any proceeding against
the General Partner seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law,
or regulation, if the proceeding has not been dismissed;
(E) Sixty (60) days after the appointment without the General Partner's
consent or acquiescence of a trustee, receiver, or liquidator of the General
Partner or of all or any substantial part of the General Partner's properties,
if the appointment is not vacated or stayed, or sixty (60) days after the
expiration of any such stay, if the appointment is not vacated; or
(F) Upon the General Partner ceasing to be a general partner of either
the Limited Partner or Glenborough Partners for any reason other than the
dissolution of that partnership provided that there is no longer an Affiliate of
a General Partner serving as a general partner of such partnership.
13.4 LIABILITY AND RIGHTS. A General Partner shall be discharged from,
and the Partnership or any Person or Persons continuing the business of the
Partnership in the event it has been dissolved, shall assume and pay, as they
mature, all Partnership obligations and liabilities that exist on the date of
such General Partner's removal from the Partnership or on the date on which it
or he ceases to be a General Partner under Sections 13.2 or 13.3, and shall hold
such General Partner harmless from any action or
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claim arising or alleged to arise from obligations and liabilities accruing
after such date; provided, however, that nothing in this Section 13.4 shall
relieve or discharge, nor shall the Partnership indemnify or hold harmless, such
General Partner from any individual obligation or liability of such General
Partner (as distinguished from a Partnership obligation or liability) to the
Partnership or third parties. On the date of removal of a General Partner or the
date on which it ceases to be a General Partner under Sections 13.2 or 13.3, or
as soon thereafter as possible, the Partnership or any Person or Persons
continuing the business of the Partnership shall file an amendment to the
Certificate of Limited Partnership reflecting the removal of the General Partner
or the fact that the General Partner has ceased to be a General Partner. The
Partnership or any such Person or Persons continuing the business of the
Partnership shall promptly notify all creditors of the Partnership as of such
date: (A) of the removal of such General Partner and the resulting dissolution
of the Partnership (if the Partnership has dissolved) or of the General Partner
ceasing to be a General Partner pursuant to Sections 13.2 or 13.3, as the case
may be; (B) that such General Partner shall not be personally liable for the
Partnership's obligations and liabilities after such date; and (C) if
applicable, of the assumption of all the Partnership's obligations and
liabilities by the Partnership or such Person or Persons continuing the business
of the Partnership. The Partnership or such Person or Persons continuing the
business of the Partnership (if the Partnership has dissolved) shall use its or
their best efforts to procure and execute an agreement from creditors of the
Partnership discharging such General Partner from liability to such creditors as
of the date the General Partner is removed or ceases to be a General Partner.
Such General Partner shall have the same rights to inspect and make copies or
excerpts of the books and records of the Partnership as is provided to Partners
pursuant to Section 10.4 until all amounts due such General Partner as of the
date the General Partner is removed or ceases to be a General Partner pursuant
to Section 3.6 and Article 4 have been paid. The General Partner shall be a
creditor of the Partnership as to all such amounts owed to it or him by the
Partnership. Any General Partner Interests held by a General Partner after it or
he has been removed, or it or he ceases to be a General Partner, shall be
transferred to such Person or Persons who remain as or succeed such General
Partner as General Partner(s).
13.5 SUCCESSOR AND PREDECESSOR GENERAL PARTNERS. Unless a General
Partner has been dissolved because of bankruptcy, insolvency, liquidation or
ceases to be a General Partner because of death, disability, incapacity or
incompetency or unless a General Partner has been removed as General Partner,
upon dissolution of a General Partner, any Person continuing the business of the
General Partner so affected shall immediately become a General Partner of the
Partnership (and shall become Managing General Partner if the General Partner so
affected was the
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Managing General Partner) without any action or vote of any Person. If any
dissolution of a General Partner causes a dissolution of the Partnership, then
the Partnership shall be reformed and reconstituted and its business continued
as provided in this Section and Article 14. If it is necessary or advisable to
reform and reconstitute the Partnership and to continue its business, the
remaining and successor General Partners shall elect to reform and reconstitute
the Partnership and to continue its business. When any Person ceases to be a
General Partner under this Agreement or a partner, shareholder, director,
officer, employee or agent of a General Partner, that Person shall continue to
have the benefit of any provisions of this Agreement providing for indemnity,
exculpation or insurance which protected such Person as a General Partner or a
partner, shareholder, director, officer, employee or agent of a General Partner,
or which limited or defined the liability of such Person.
ARTICLE 14
DISSOLUTION, WINDING UP AND LIQUIDATION
14.1 DISSOLUTION. The Partnership shall be dissolved at the expiration
of the term of the Partnership set forth in Section 2.5; provided, however, that
the Partnership shall be dissolved prior thereto without breach of this
Agreement upon occurrence of one of the following:
(A) The removal, resignation, retirement, withdrawal, bankruptcy,
insolvency, dissolution, liquidation, death, disability, incapacity or
incompetency of a General Partner; provided, however, that unless applicable law
shall under the circumstances require a dissolution notwithstanding an agreement
to the contrary, the Partnership shall not be dissolved but shall be continued
or, if dissolved, the business of the Partnership shall be continued by any
remaining or successor General Partner(s) upon obtaining the approval of a
Majority Interest. If no General Partner(s) remain or succeed or if the
remaining or successor General Partner(s) do not have the power under California
law to elect to continue or not to continue the business of the Partnership or
they elect not to continue the business, then, upon approval of all the Limited
Partners and the admission of one or more new General Partner(s), the
Partnership shall not be dissolved, but shall be continued or, if dissolved, the
business of the Partnership shall be continued;
(B) The Partnership becomes insolvent or bankrupt;
(C) The sale or other disposition of substantially all assets of the
Partnership and the cessation of active business;
(D) The passage of ninety (90) days after approval by a Majority
Interest to dissolve the Partnership; or
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(E) The occurrence of any event which makes it unlawful for the
business of the Partnership to be continued.
Admission of a General Partner shall not cause the dissolution of the
Partnership.
14.2 AUTHORITY TO WIND UP. If dissolution occurs for any reason other
than the removal, resignation, retirement, withdrawal, bankruptcy, insolvency,
dissolution, liquidation, death, disability, incapacity or incompetency of the
Managing General Partner, the Managing General Partner shall have the authority
to wind up the business and affairs of the Partnership. If dissolution occurs by
reason of the removal, resignation, retirement, withdrawal, bankruptcy,
insolvency, dissolution, liquidation, death, disability, incapacity or
incompetency of the Managing General Partner, and if the business of the
Partnership is not continued pursuant to Articles 13 or 14, the remaining
General Partner(s) shall have the authority to wind up the business and affairs
of the Partnership or, if no General Partner remains or survives, any Person
designated by a decree of court or designated by approval of a Majority Interest
shall wind up the affairs of the Partnership.
14.3 ACCOUNTING. Upon dissolution (if the business of the Partnership
is not continued), and again upon the termination of the Partnership after the
winding up of the affairs of the Partnership is complete, an accounting of the
Partnership shall be made and its financial statements shall be examined by the
independent public accountants of the Partnership, and a report thereon shall be
furnished to the General Partner(s) or legal representatives thereof and to all
Limited Partners and Assignees.
14.4 WINDING UP AND LIQUIDATION. Upon dissolution of the Partnership,
if the Partnership or the business of the Partnership is not otherwise continued
hereunder, it shall be wound up and liquidated. The Book Value of any assets not
sold shall be adjusted to their fair market value and any Net Income or Net Loss
shall be allocated to the Capital Accounts as if the Partnership recognized Net
Income or Net Loss equal to such adjustment. After such allocations, the assets
of the Partnerships shall be paid or distributed in the following order of
priority:
(A) To creditors, in the order of priority as provided by law, except
to secured creditors the obligations to whom will be assumed or otherwise
transferred on liquidation of the Partnership assets;
(B) Those amounts deemed necessary by the Persons winding up the
affairs of the Partnership for any contingent liabilities or obligations of the
Partnership shall be set aside as a reserve for contingent liabilities to be
distributed at such time and in such manner hereunder as the Persons winding up
the affairs of the
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Partnership shall determine in their sole discretion;
(C) To the General Partner(s) with respect to payments due to them
pursuant to Section 3.6 and Article 4;
(D) To each General Partner, Limited Partner and Assignee the amount of
their respective Capital Accounts.
14.5 CLAIM OF LIMITED PARTNERS AND ASSIGNEES. No Limited Partner or
Assignee shall have the right or power to demand or receive property other than
cash, whether as a Return of Capital, a distribution, a payment on liquidation
or otherwise. The Limited Partners and Assignees shall look solely to the assets
of the Partnership for the payment of income allocated to the Limited Partners
or Assignees and the return of the Capital Contributions of the Limited
Partners, and if the assets of the Partnership remaining after payment or
discharge of the debts and liabilities of the Partnership are insufficient to
pay all or part of such income or Capital Contributions, no Limited Partner or
Assignee shall have any recourse against any General Partner, the Partnership or
any other Limited Partner or Assignee.
14.6 NO RESTORATION OF NEGATIVE CAPITAL ACCOUNTS. Neither the
Partnership nor any General or Limited Partner shall have the right to require
any Partner to restore a deficit balance in such Partner's Capital Account.
ARTICLE 15
MISCELLANEOUS
15.1 NOTICES. All notices or other communications required or permitted
to be given pursuant to this Agreement shall, in the case of notices or
communications required or permitted to be given to the Limited Partner or his
Assignee, be in writing, and shall be considered as properly given or made if
personally delivered or if mailed by United States first class mail, postage
prepaid, or if sent by prepaid telegram, and addressed to the Limited Partner's
or Assignee's address for notices as it appears on the records of the
Partnership, and, in the case of notices or communications required or permitted
to be given to the General Partners or the Partnership, shall be in writing and
shall be considered as properly given or made if personally delivered, or if
sent by prepaid telegram, or if mailed by United States certified or registered
mail, postage prepaid, and addressed to the Managing General Partner at the
principal place of business of the Partnership as specified in Section 2.4. Any
Limited Partner or Assignee may change the address for notices, by giving notice
of such change to the Partnership, and the Managing General Partner may change
the address for notices to the General Partners or the Partnership by giving
notice of such change to the Limited Partner and his Assignee. Commencing on the
tenth (10th) day after giving
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of such notice, such newly-designated address shall be such Partner's or
Assignee's or the Partnership's address for the purpose of all notices or other
communications required or permitted to be given pursuant to this Agreement. Any
notice or other communication shall be deemed to have been given as of the date
on which it is personally delivered or, if mailed or telegraphed to a General
Partner which is not received by the General Partner within ten (10) days after
the date of its mailing or transmission shall be deemed to have been given as of
the date actually received by the General Partner.
15.2 CHOICE OF LAW. This Agreement and all rights and liabilities of
the parties hereto with reference to the Partnership shall be subject to and
governed by the internal laws (and not the law pertaining to choice or conflict
of laws) of the State of California.
15.3 ARTICLE AND SECTION HEADINGS. The headings in this Agreement are
inserted for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
15.4 SOLE AGREEMENT. This Agreement and the exhibits hereto constitute
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings pertaining
thereto.
15.5 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts with the same effect as if all parties had all signed the
same document. All counterparts shall be construed together and shall constitute
one agreement. Each party shall become bound by the Agreement immediately upon
affixing his or her signature hereto, independently of the signature of any
other party.
15.6 REMEDIES CUMULATIVE. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which any
Person may be lawfully entitled.
15.7 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement,
or condition.
15.8 WAIVER OF ACTION FOR PARTITION. Each of the parties hereto
irrevocably waives during the term of the Partnership any right that he may have
to maintain any action for partition with respect to the Partnership Property.
15.9 ASSIGNABILITY. Subject to the restrictions on transferability
contained herein, each and all of the covenants,
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terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the successors and assigns of the respective parties hereto.
15.10 GENDER AND NUMBER. Whenever the context requires, the gender of
all words used hereby shall include the masculine, feminine and neuter, the
singular of all words shall include the singular and plural, and the plural of
all words shall include the singular and plural. Unless the context requires
otherwise, any reference to a General Partner shall include all General Partners
and any reference to the General Partners shall mean any General Partner.
15.11 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby, but
rather shall be enforced to the maximum extent permissible under applicable law.
15.12 ADDITIONAL DOCUMENTS. Each of the parties hereto agree to execute
and deliver such other and further documents, including without limitation,
designations, powers of attorney and other instruments, as the Managing General
Partner may reasonably request.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
GENERAL PARTNERS:
GLENBOROUGH REALTY CORPORATION,
a California corporation
By /s/ Robert Batinovich
-----------------------------
Title
--------------------------
/s/ Robert Batinovich
-------------------------------
Robert Batinovich
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LIMITED PARTNER:
GOCO REALTY FUND I, a Califor-
nia limited partnership
By Glenborough Realty Corpor-
ation, a California Corpora-
tion, Its Managing Partner
By /s/ Robert Batinovich
-----------------------------
Robert Batinovich
President
46
LIMITED PARTNERSHIP AGREEMENT
OF
GPA BOND, L.P.
This Limited Partnership Agreement (the "Agreement"), dated as of
December 22, 1994, is made and entered into by GLENBOROUGH REALTY CORPORATION, a
California corporation, as General Partner, and GOCO REALTY FUND I, a California
limited partnership, as the Limited Partner, and all other parties who shall
become partners of this limited partnership as hereinafter provided.
In consideration of the mutual covenants and promises herein, the
parties hereby form a limited partnership under the California Revised Limited
Partnership Act upon the following
terms and conditions:
ARTICLE I
Definitions
1.1 DEFINITIONS. When used in this Agreement, the following terms shall
have the meanings set forth below, except as otherwise specifically modified:
"ACT" means the California Revised Limited Partnership Act, as amended
from time to time.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the Partnership
as an additional Limited Partner pursuant to Article 12 hereof.
"AFFILIATE" means any Person that directly or indirectly controls, is
controlled by, or is under common control with the Person in question.
"ALLOCABLE SHARE" of a General Partner is his or its percentage
interest as set forth in Section 8.2(B) comprising an aggregate of one percent
(1%) and of the Limited Partners or Assignees, at any particular time, an
aggregate of 99%. The "Allocable Share" of a Limited Partner or Assignee, at any
particular time, means the percentage which the number of Interests held by such
Limited Partner or assigned to such Assignee is of the total number of Interests
outstanding multiplied by 99%. If at any time, the aggregate of all General
Partner Interests represents more than 1% of all Interests, the Allocable Share
of all General Partners shall be the percentage interest represented by the
ratio between all such Interests which are represented by General Partner
Interests and all Interests and the Allocable Share of all Limited Partners and
<PAGE>
Assignees shall be the percentage interest represented by the ratio between all
Interests held by Limited Partners and Assignees and all Interests.
"ASSIGNEE" means a Person to whom one or more Interests have been
assigned by a Partner but who has not become a Substituted Limited Partner.
"ASSOCIATE" means any shareholder, director, officer, employee or agent
of any General Partner and any employee or agent of the Partnership.
"BOOK DEPRECIATION" means the depreciation, cost recovery or
amortization of nondepletable assets that would be allowable to the Partnership
for federal income tax purposes if its tax basis in such assets were equal to
the Book Value of such assets.
"BOOK GAIN" or "BOOK LOSS" means the gain or loss that would be
recognized by the Partnership for federal income tax purposes as a result of
sales or exchanges of its assets if its tax basis in such assets were equal to
the Book Value of such assets.
"BOOK VALUE" means (a) as to property contributed to the Partnership,
its agreed value; (b) as to property acquired in any other manner, its value as
reflected on the books of the Partnership as of the date it is acquired by the
Partnership; and (c) as to property owned by the Partnership at the time of any
repurchase or issuance of Interests for money or other property, its fair market
value at that time, all adjusted for Book Depreciation.
"CAPITAL ACCOUNT" means the account (maintained on a per Interest basis
in the case of Interestholders) which shall be credited with the
Interestholder's or General Partner's distributive share of (a) cash contributed
to the Partnership; (b) the Book Value of contributed property; (c) Net Income;
(d) the amount of Partnership liabilities assumed by such Interestholder or
General Partner or that are secured by any Partnership Property distributed to
such Interestholder or General Partner, and (e) increases in the basis of
Partnership Property attributable to investment credit recapture; and which
shall be debited with the Interestholder's or General Partner's distributive
share of (v) cash distributions (w) the Book Value of distributed property; (x)
Net Loss; (y) the amount of liabilities of a Interestholder or General Partner
assumed by the Partnership or that are secured by any Partnership Property
contributed by such Interestholder or General Partner assumed by the Partnership
or that are secured by any Partnership Property contributed by such
Interestholder or General Partner to the Partnership; and (z) decreases in the
basis of the Partnership Property for any credits allowed under the Code. A
Limited Partner's Capital Account shall be the aggregate Capital Account
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attributable to the Interests held by such Limited Partner. In the case of
transfer by an existing Partner of a Partnership interest, the transferee will
succeed to the Capital Account relating to the Partnership interest transferred.
Upon the repurchase of Interests or upon the issuance of additional Interests
for money or other property (other than a de minimis amount) the Capital
Accounts of each Interestholder outstanding prior to the repurchase or issuance
and the Capital Accounts of the General Partners shall be adjusted to reflect a
revaluation of the Partnership Property on the Partnership books to its fair
market value and the Capital Accounts of all Partners shall be adjusted
simultaneously to reflect such adjustment as if the Partnership recognized Net
Income or Net Loss equal to the amount of such adjustment. It is intended by
this provision to comply with Treasury Regulations Section 1.704-l(b) and Code
Section 704(c).
"CAPITAL CONTRIBUTION" means the individual total amount contributed by
each Partner to the capital of the Partnership as provided in Article 7 hereof.
"CASH AVAILABLE FOR DISTRIBUTION" means cash held by the Partnership in
excess of (a) cash required for all expenses, liabilities and obligations of the
Partnership (whether for expense items, capital expenditures, improvements,
retirement of indebtedness or otherwise); and (b) reserves as established in the
sole discretion of the Managing General Partner for Partnership capital
expenditures, improvements, retirement of indebtedness, operations, or
contingencies, known or unknown, liquidated or unliquidated, including, but not
limited to, liabilities which may be incurred in litigation and liabilities
undertaken pursuant to the indemnification provisions of this Agreement.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the certificate of limited
partnership filed pursuant to the Act or any successor statute, as the same may
be amended from time to time.
"CLOSING DATE" means that date selected by the General Partners for the
contribution by Partners to the Partnership.
"CODE" means the Internal Revenue Code of 1986 or any successor
statute, as amended from time to time.
"GENERAL PARTNER" means the Person named hereinabove as general partner
in its capacity as general partner of the Partnership, and any successor or
additional general partners.
"GENERAL PARTNER INTERESTS" means Interests designated as such pursuant
to Sections 7.4 or 7.9.
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"GOCO" means GOCO Realty Fund I, a California limited partnership.
"INTEREST" means a unit of interest in the Partnership acquired or
issued pursuant to Article 7.
"INTERESTS" means all of such units of interest.
"INTERESTHOLDER" means any Person who, for tax purposes, is to be
treated as a Limited Partner whether such Person is a Limited Partner or an
Assignee.
"LIMITED PARTNER" means GOCO, and any successor limited partner who has
become a Substituted Limited Partner and any Additional Limited Partner.
"LIMITED PARTNERS" means all limited partners if, at any time, there is
more than one limited partner.
"LIMITED PARTNER INTERESTS" means Interests held or owned by any Person
or Persons as Limited Partner(s).
"MAJORITY INTEREST" means the Limited Partners of record holding more
than fifty percent (50%) of the Interests held by all Limited Partners of
record.
"MANAGING GENERAL PARTNER" means the Person so designated
pursuant to Section 3.2.
"NET INCOME" or "NET LOSS" means the Partnership's taxable income or
loss (as an entity) under Code Section 703 computed with the following
adjustments:
(a) Tax-exempt income described in Code Section
705(a)(1)(B) shall be included and any expenditures not deductible in
computing taxable income shall be deductible.
(b) The only deduction for depreciation, cost recovery
or amortization shall be Book Depreciation.
(c) Book Gain or Book Loss shall be used instead of
taxable gain or loss.
"NET OPERATING CASH FLOW" means net income or loss as determined under
generally accepted accounting principles with the following adjustments:
(a) There shall be added depreciation expense and
amortization expense related to capitalized loan fees, leasing
commissions and debt discount;
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(b) There shall be deducted any income or gain from
investments in joint ventures or partnerships which are accounted for
on the equity method and there shall be added any losses from such
partnerships or joint ventures;
(c) There shall be added any cash received from
distributions from a partnership or joint venture to the extent that
the aggregate distributions for such partnership or joint venture
exceeds the cost of the investment in such partnership or joint
venture;
(d) There shall be added cash received from the sale of
an interest in a partnership or joint venture to the extent that such
cash when added to any cash distributions received from such
partnership or joint venture exceeds the cost of the investment in such
partnership or joint venture.
"PARTNER" means a General Partner or a Limited Partner; and "Partners"
means the General Partners and all Limited Partners.
"PARTNERSHIP" means the limited partnership created by this Agreement
and any successor partnership thereto continuing the business of the Partnership
which is a reformation or reconstitution of the partnership governed by this
Agreement.
"PARTNERSHIP CAPITAL" means the total of all the Partners'
Capital Accounts at any given time.
"PARTNERSHIP PROPERTY" means any and all property, real or personal,
now or hereafter owned by the Partnership or an Operating Limited Partnership or
in or to which the Partnership or an Operating Limited Partnership has any
interest, right or claim and shall include any interest in any Operating Limited
Partnership received by the Partnership in exchange for Partnership Property.
"PERSON" means an individual, partnership (general or limited and
whether domestic or foreign), joint venture, estate, association, corporation,
trust company, trust or other entity.
"PRIMARY OPERATING LIMITED PARTNERSHIP" means an Operating Limited
Partnership in which the Partnership holds a direct interest as the sole limited
partner.
"PROJECTS" means the real estate projects owned by the Partnership and
all Operating Limited Partnerships.
"RECORD DATE" means the date established by the Partnership for
determining (a) the identity of Partners entitled to notice of or to vote at any
meeting of Partners or entitled to vote by ballot or give consent to Partnership
action in writing without a meeting, or entitled to exercise rights in respect
of any other
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lawful action of Partners, or (b) the identity of Partners and Assignees
entitled to receive any report or distribution.
"RELATED PERSON" means Glenborough Corporation, the Limited Partner, a
General Partner; or any partner, officer, director of Affiliate of any of the
foregoing.
"REQUEST AND POWER" means a request for admission as a Substituted or
Additional Limited Partner, an agreement to be bound by the terms of this
Agreement, a power of attorney and the provision of such other information as
the Partnership shall request in such forms as are approved by the Partnership.
"RETURN OF CAPITAL" means any distribution to the Partners to the
extent that such distribution reduces the Partnership Capital. A distribution
reduces the Partnership Capital to the extent that it exceeds the following
amount: the sum of the Net Income of the Partnership since its formation,
reduced by (but not below zero) the sum of the Net Losses of the Partnership
since its formation and the sum of all prior distributions.
"SECONDARY OPERATING LIMITED PARTNERSHIP" means an Operating
Limited Partnership that is not a Primary Operating Limited
Partnership.
"SUBSTITUTED LIMITED PARTNER" means a Person admitted to the
Partnership as a limited partner pursuant to Article 12 hereof.
"TAX CREDITS" means all credits against income, franchise or similar
taxes, including, without limitation, investment tax credits and credits
allowable to Partners or Assignees under federal, state or other taxing
statutes.
"UNITS" means Units of interest in Glenborough Partners, a California
limited partnership, as defined in the Limited Partnership Agreement of
Glenborough Partners, a California limited partnership, dated as of December 30,
1993, for so long a period of time as Glenborough Partners, a California limited
partnership, is the holder of a majority of the limited partnership interests in
the Limited Partner. Except as otherwise defined herein, the capitalized terms
used herein shall have the meaning given thereto in such Limited Partnership
Agreement.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. All accounting terms used
herein shall be interpreted, and all accounting and tax determinations hereunder
shall be made, in accordance with the following:
(a) For financial reporting purposes, the Partnership
shall adhere to generally-accepted accounting principles;
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(b) For purposes of determining Partner Capital
Accounts, the Partnership shall adhere to the provisions of Treasury
Regulations Section 1.704-l(b);
(c) For purposes of determining Partner and Assignee
distributable shares of taxable income and loss, the Partnership shall
adhere to the provisions of Code Sections 704(b) and (c) and the
regulations promulgated thereunder.
ARTICLE 2
The Limited Partnership
2.1 FORMATION OF THE PARTNERSHIP. The General Partner and the Limited
Partner hereby agree to form, and by execution of this Agreement do hereby enter
into, a limited partnership under the Act, which Act shall, except as set forth
in this Agreement, govern the rights and liabilities of the parties hereto.
2.2 PARTNERSHIP NAME. The name of the Partnership is "GPA Bond, L.P."
The Partnership shall conduct business under such name or such other name or
names as the Managing General Partner may from time to time deem necessary,
appropriate or advisable. The Managing General Partner in its sole discretion
may change the name of the Partnership at any time and from time to time. The
General Partners and, if necessary, the Limited Partner, shall promptly execute
and the Managing General Partner shall file and record with proper offices in
each jurisdiction in which the Partnership does or elects to do business, and
publish such certificates or other statements or instruments as are required by
the Act, fictitious or assumed name acts, or any other similar statute in effect
in such jurisdiction, in order to conduct validly the Partnership business
therein as a limited partnership.
2.3 BUSINESS AND PURPOSE. The business and purpose of the Partnership
shall be to engage in any lawful act or activity in which a partnership may
engage, including, without limitation, to engage generally in any and all phases
of the business of owning, holding, managing, developing, controlling,
acquiring, purchasing, disposing of or otherwise dealing in or with any
interests or rights in any real or personal property, directly or through one or
more Operating Limited Partnerships or other entities or arrangements. Without
limiting the generality of the foregoing, the Partnership may perform such other
acts incidental and supplementary to the foregoing as the Managing General
Partner determines to be necessary, appropriate or advisable.
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2.4 PRINCIPAL OFFICE. The office of the Partnership within California
for purposes of Section 15614(a) of the Act shall be at 400 South El Camino
Real, Eleventh Floor, San Mateo, California 94402. The Managing General Partner
may change such office and establish other places of business for the
Partnership (within or without the State of California) as it may, from time to
time, deem necessary or appropriate; provided, however, that the Managing
General Partner shall give the Partners and Assignees notice in writing of any
change of address of the office of the Partnership and, in connection therewith,
shall amend the Certificate of Limited Partnership in accordance with the Act.
The Managing General Partner may select one or more Persons in California to act
as agent for service of process on behalf of the Partnership, including, without
limitation, a General Partner or a Related Person.
2.5 TERM. The Partnership shall commence on the date the Certificate of
Limited Partnership is filed in the office of the Secretary of State of
California in accordance with the provisions of the Act and shall continue until
January 31, 2037, unless extended by amendment of this Agreement or unless the
Partnership is dissolved prior to that date pursuant to Article 14.
2.6 EXECUTION OF DOCUMENTS. The Managing General Partner (or, if
required, all the General Partners) shall execute, acknowledge, file, record or
deliver all Certificates of Limited Partnership, amended certificates,
instruments or other documents and counterparts thereof and make all filings and
recordings and perform all other acts as shall be necessary to comply with the
laws of the State of California for the formation of the Partnership, thereafter
for the continued good standing of the Partnership, and, when appropriate, for
the termination of the Partnership. The Managing General Partner (or, if
required, all the General Partners) shall also execute such certificates,
amended certificates and other documents conforming hereto and perform such
recording, publishing and other acts as may be appropriate to comply with the
requirements of law for the formation, reformation, qualification and/or
operation of a limited partnership in all jurisdictions where the Partnership
may wish to do business, if deemed necessary by the Managing General Partner.
Such certificates, instruments, documents and counterparts may be signed by the
Managing General Partner on behalf of any or all of the Limited Partners acting
pursuant to the powers of attorney from the Limited Partners.
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ARTICLE 3
The General Partner
3.1 GENERAL. The General Partner shall devote such time and attention
to the business of the Partnership as may be reasonably necessary to carry out
their duties hereunder in the conduct of such business, but any General Partner
and its partners, shareholders, officers, directors, employees and agents shall
have the right to be otherwise employed by an entity or entities other than the
Partnership, including, without limitation, Affiliates of the Partnership, on a
part-time or full-time basis. Nothing contained herein shall prevent a General
Partner or any partner, shareholder, officer, director, employee or agent of a
General Partner from becoming an Assignee or a Substituted or Additional Limited
Partner, whereupon such Person shall be entitled to all rights, shall be subject
to all obligations and shall be deemed, as to such Units, an Assignee or a
Limited Partner, as applicable.
3.2 MANAGEMENT POWER. The Managing General Partner shall have full,
exclusive and complete discretion in the management and control of the business
of the Partnership for the purposes herein stated, and shall make all decisions
affecting the business of the Partnership, shall act as tax matters partner for
the Partnership and may take such actions as it deems necessary or appropriate
to accomplish the purposes of the Partnership as set forth herein. As long a
Glenborough Realty Corporation is the General Partner or one of the General
Partners, the Managing General Partner shall be Glenborough Realty Corporation
and any successor to the Managing General Partner which becomes the Managing
General Partner of the Partnership pursuant to Article 13. Except as may
otherwise be set forth in this Agreement, no General Partner other than the
Managing General Partner, shall have any authority, right or power to bind the
Partnership or to manage or control the business of the Partnership in any
manner whatsoever.
3.3 POWERS OF THE MANAGING GENERAL PARTNER. Subject to the provisions
of Article 6 vesting certain approval rights in the Limited Partners, in
connection with such management and control, the Managing General Partner shall
have the power and authority to do or cause to be done any and all acts, at the
expense of the Partnership, deemed by the Managing General Partner to be
necessary or appropriate to carry out the purposes of the Partnership. The power
and authority of the Managing General Partner shall be liberally construed to
encompass all acts and activities in which a partnership may engage. The power
and authority of the Managing General Partner shall include, without limitation,
the power and authority:
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(A) To acquire, own, lease, sublease, manage, hold,
deal in, control or dispose of any interests or rights in real or
personal property, including, without limitation, the powers to sell,
exchange, mortgage, pledge, convey in trust, enter into joint ventures
or partnerships respecting or otherwise hypothecate all or any portion
of the Partnership Property;
(B) To create, by grant or otherwise, easements and
servitudes;
(C) To alter, improve, repair, raze, replace and
rebuild Partnership Property;
(D) To let or lease Partnership Property for any
period, and for any purpose;
(E) To apply proceeds of any sale, exchange, mortgage,
pledge or other disposition of Partnership Property to payment of
liabilities of the Partnership and to pay, collect, compromise,
arbitrate or otherwise adjust any and all other claims or demands of or
against the Partnership, or to hold such proceeds against the payment
of contingent liabilities, known or unknown;
(F) To maintain or cause to be maintained records of
all rights and interests acquired for or disposed of by the
Partnership, all correspondence relating to the Partnership business
and the original records (or copies on such media as the Managing
General Partner deems appropriate) of all statements, bills and other
instruments furnished the Partnership in connection with its business;
(G) To maintain records and accounts of all operations
and expenditures, make all filings and reports required under
applicable rules and regulations of any governmental department, bureau
or agency, any securities exchange and any automated quotation system
of a registered securities association, and furnish the Partners and
Assignees with all necessary United States federal, state or local
income tax reporting information or such information with respect to
any other jurisdiction;
(H) To purchase and maintain, in its discretion and at
the expense of the Partnership, liability, indemnity and any other
insurance, including errors and omissions insurance, sufficient to
protect the Partnership, the General Partners and any other Person from
those liabilities and hazards which may be insured against in the
conduct or management of the Partnership's business;
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(I) To make, execute, assign, acknowledge and file on
behalf of the Partnership, any and all documents or instruments of any
kind which the Managing General Partner may deem appropriate in
carrying out the purposes and business of the Partnership, including,
without limitation, powers of attorney, agreements of indemnification,
sales contracts, deeds, options, loan obligations, mortgages, deeds of
trust, notes, documents or instruments of any kind or character, and
amendments thereto. Any person, firm or corporation dealing with the
Managing General Partner shall not be required to determine or inquire
into the authority and power of the Managing General Partner to bind
the Partnership and to execute, acknowledge and deliver any and all
documents in connection therewith;
(J) To borrow money or to obtain credit in such
amounts, on such terms and conditions, and at such rates as the
Managing General Partner deems appropriate, from banks, other lending
institutions and any other Person, including the Partners and
Assignees, for any Partnership purpose, including, without limitation,
any loan incurred for the purpose of making one or more distributions
to any or all Partners and Assignees, including any distributions which
are, in whole or in part, a Return of Capital; and in connection with
such loans to mortgage, pledge, assign or otherwise encumber or
alienate any or all Partnership Property, including any income
therefrom, to secure or provide repayment thereof. As between the
Partnership and any lender, it shall be conclusively presumed that the
proceeds of such loans are to be and will be used for the purposes
authorized herein and that the Managing General Partner has the full
power and authority to borrow such money and to obtain such credit;
(K) To assume obligations, enter into contracts,
including contracts of guaranty or suretyship, incur liabilities, lend
money and otherwise use the Partnership's credit and secure any of the
Partnership's obligations, contracts or liabilities by mortgage, pledge
or other encumbrance of all or any part of its property, franchises and
income;
(L) To invest Partnership funds in debt or equity
securities or other obligations of other issuers, including, but not
limited to, securities or other obligations of other partnerships;
provided, however, that the Managing General Partner shall not invest
Partnership funds in such a manner that the Partnership will be
considered to be holding itself out as being engaged primarily in the
business of investing, reinvesting or trading in securities or will
otherwise be deemed to be an investment company under the Investment
Company Act of 1940, as amended;
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(M) To make any election on behalf of the Partnership
as is or may be permitted under the Code or under the taxing statute or
rule of any state, local, foreign or other jurisdiction, and to
supervise the preparation and filing of all tax and information returns
which the Partnership may be required to file;
(N) To maintain the buildings, appurtenances and
grounds of the Partnership Property in accordance with acceptable
standards, including within such maintenance, without limitation
thereof, interior and exterior cleaning, painting and decorating,
plumbing, carpentry and such other normal maintenance and repair work
as may be appropriate;
(O) To collect all rents and other charges from lessees
of Partnership Property and concessionaires, and otherwise due the
Partnership, with respect to the Partnership Property. The Partnership
authorizes the Managing General Partner to request, demand, collect,
receive and receipt for all such rents and other charges and to
institute legal proceedings in the name of the Partnership for the
collection thereof and for the dispossession of any Person from
Partnership Property and such expense may include the costs of counsel
for any such matter;
(P) To cause to be disbursed (1) the aggregate amount
required to be paid pursuant to any indebtedness of the Partnership,
including therein amounts due under any mortgages or deeds of trust for
interest, amortization of principal and for allocation to reserve or
escrow funds; (2) the amount of rent payable by the terms of any lease
under which the Partnership holds the Partnership Property, or any
portion thereof, promptly when due; (3) the amount of all real estate
taxes and other impositions levied by appropriate authorities; and (4)
amounts otherwise due and payable as expenses of the Partnership
authorized to be incurred under the terms of this Agreement;
(Q) To employ and engage suitable agents, employees,
advisers, consultants and counsel (including any custodian, investment
adviser, accountant, attorney, corporate fiduciary, bank or other
reputable financial institution, or any other agents, employees or
Persons which may serve in such capacity for the Managing General
Partner or any Related Person) to carry out any activities which the
Managing General Partner is authorized or required to carry out or
conduct under this Agreement, including, without limitation, a Person
which may be engaged to undertake some or all of the general
management, property management, financial accounting and record
keeping, construction supervision and other duties of the Managing
General
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Partner, to indemnify such Persons against liabilities incurred by them
in acting in such capacities on behalf of the Partnership and to rely
on the advice given by such Persons, it being agreed and understood
that the Managing General Partner shall not be responsible for the acts
and omissions of any such Persons and shall assume no obligations in
connection therewith other than the obligation to use due care in the
selection thereof;
(R) To enter into an agreement or agreements with real
estate brokers or agents, investment banking firms, appraisers or
others providing for the engagement of such Persons on an exclusive or
nonexclusive basis to advise or represent the Partnership in the
valuation, sale, lease or other dealings in the Partnership Property,
it being understood that the Managing General Partner shall not be
responsible for the acts and omissions of any such Persons and shall
assume no obligations in connection therewith other than the obligation
to use due care in the selection thereof;
(S) To hold Partnership Property in the name of one or
more nominees, with or without disclosure of the fiduciary
relationship;
(T) To keep proprietary or trade secret information
confidential, and if deemed necessary by the Managing General Partner,
to keep such information confidential from the Limited Partners for a
reasonable period of time;
(U) To pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise upon such terms as it may
determine and upon such evidence as it may deem sufficient, any
obligation, suit, liability cause of action or claim, including taxes,
either in favor of or against the Partnership;
(V) To prosecute, protect and defend or cause to be
protected and defended all patents, patent rights, trade names,
trademarks, service marks and other marks, and all applications with
respect thereto which may be held by the Partnership, and to take all
reasonable and necessary actions to protect the secrecy of and the
proprietary rights with respect to any secret know-how, secret
processes or other proprietary information, and to prosecute and defend
all rights of the Partnership in connection therewith;
(W) To register, qualify or list, or cause to be
registered, qualified, listed or reported, this Agreement or Units
hereunder pursuant to the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended,
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any other securities laws of the United States, the securities laws of
any state of the United States, the laws of any other jurisdiction, or
with any securities exchange or pursuant to an automated quotation
system of a registered securities association as the Managing General
Partner deems appropriate;
(X) To issue, purchase, repurchase, redeem, receive,
take or otherwise acquire, own, hold, sell, lend, exchange, trade in,
grant calls or options or warrants, grant appreciation rights, transfer
or otherwise dispose of, pledge, use and otherwise deal in and with
shares, bonds, debentures and other securities, whether issued by the
Partnership or issued by any other Person, whether on an exchange, over
the counter, in private transactions or in other transactions, and
whether for the Partnership or for any plan maintained or sponsored by
the Partnership, including securities of the Partnership of a different
class or series than the Interests, whether debt or equity, redeemable
or nonredeemable, convertible or nonconvertible, and including
securities with different rights, preferences, privileges, allocations
and tax consequences;
(Y) To qualify to do business in any other state,
territory, dependency or foreign country;
(Z) To make donations, regardless of specific benefit
to the Partnership, for the public welfare, to community or hospital
funds, or for charitable, educational, scientific, civic, political or
similar purposes;
(AA) To pay pensions, and to establish, participate in
and maintain as plan sponsor or otherwise, pension, profit sharing,
bonus, purchase, option, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions for any or all of
the employees of the Partnership, and any partner, shareholder,
director, officer, employee or agent of a General Partner or any
Affiliate, including plans, trusts and provisions which may provide for
the ownership, acquisition, holding, or disposition of Units or any
other securities of the Partnership; and to indemnify and purchase and
maintain insurance on behalf of, any fiduciary of such retirement,
incentive and benefit plans, trusts or other provisions, including,
without limitation, health insurance, medical and dental reimbursement,
life insurance, accident insurance, disability insurance and other
plans, trusts or provisions;
(BB) To put into effect and carry out any plan of
reorganization or arrangement and the orders of the court or judge
entered in a proceeding for reorganization or arrangement under any
applicable statute of the United
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States or of any state, local or other jurisdiction, and to undertake
any proceeding and perform any act provided in the plan or directed by
such orders, without further action by any Partner or Assignee. Such
power and authority may be exercised and such proceedings and acts may
be undertaken, as may be directed by such orders, by the trustee or
trustees of the Partnership appointed in the reorganization or
arrangement proceeding (or a majority thereof), or if none is appointed
and acting, by the Managing General Partner or a master or other
representative appointed by the court or judge, with like effect as if
exercised and taken by unanimous action of the Partners and Assignees;
(CC) To distribute money or Partnership Property to
Partners and Assignees in accordance with this Agreement regardless of
the source of such money or Partnership Property, including, without
limitation, money borrowed by the Partnership or by the Managing
General Partner on behalf of the Partnership;
(DD) To possess and exercise any additional powers and
rights of general partners in a limited partnership, including, without
limitation, those granted under the Act and any other applicable laws,
to the extent not inconsistent with this Agreement;
(EE) To take any and all action, conduct all
proceedings and execute all rights and privileges, contracts and
agreements of any kind whatsoever, although not specifically mentioned
in this Agreement, that the Managing General Partner may deem necessary
or appropriate to conduct the business of the Partnership or to carry
out the purposes of the Partnership. The expression of any power or
authority of the Managing General Partner in this Agreement shall not
limit or exclude any other power or authority which is not specifically
or expressly set forth in this Agreement.
3.4 LIABILITY OF GENERAL PARTNER. The General Partner shall be liable
to the Partnership and the Limited Partners and Assignees for gross negligence
or gross misconduct but neither the General Partners nor their Associates shall
be liable to either the Partnership or the Limited Partner or to Persons who
have acquired interests in the Interests, whether as Assignees or otherwise, for
errors in judgment or for any acts or omissions that do not constitute willful
misconduct. If this Section 3.4 shall, for any reason and to any extent, be
invalid or unenforceable, it is intended that this Section 3.4 shall be
construed to exculpate the General Partners and their Associates to the fullest
extent permitted by law.
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3.5 SIMILAR ACTIVITIES OF GENERAL PARTNERS. The General Partners and
their respective Associates may, directly or indirectly (including, without
limitation, through a Related Person or other entity in which the General
Partner or any such Related Person holds an ownership interest), engage in any
and all aspects of the business of owning, holding, developing, controlling,
acquiring, purchasing, managing, disposing of and otherwise dealing with real,
personal or mixed property; act as a partner (limited or general), shareholder,
director, officer, employee or agent of any entity (including GOCO, Glenborough
Partners and Glenborough Corporation) engaging in such business or activities;
or engage in any other businesses and activities, whether the same be
competitive with the Partnership, any Operating Limited Partnership (as defined
in the Limited Partnership Agreement of Glenborough Partners), Glenborough
Partners, the Limited Partner or otherwise, for their own account and for the
account of others, without having or incurring any obligation to offer any
interest in such properties, businesses or activities to the Partnership or any
Partner or Assignee and nothing herein contained shall be deemed to prevent any
General Partner or any such Related Person from conducting such other business
and activities. Neither the Partnership, nor any of the Partners or Assignees
shall have any rights by virtue of this Agreement in any independent business
ventures of a General Partner or any such Related Person. However, all records
kept and maintained by the Managing General Partner for the Partnership pursuant
to this Agreement shall be maintained separately from those for other operations
of the General Partners, including other partnerships for which a General
Partner is a general partner.
3.6 INDEMNIFICATION OF GENERAL PARTNERS.
(A) The General Partners and each of their respective Associates
(individually an "Indemnitee") shall, to the fullest extent permitted by law, be
indemnified and held harmless by the Partnership from and against all losses,
claims, damages, liabilities (joint and several), expenses (including, without
limitation, attorneys' fees and expenses, and any expenses of establishing a
right to indemnification under this Section 3.6), judgments, fines, settlements
and other amounts (collectively "Liability") arising from or incurred in
connection with any claim, demand, action, suit or proceeding (including, but
not limited to, claims, demands, actions, suits and proceedings by, in the name
of or on behalf of, the Partnership), whether civil, criminal, administrative or
investigative and whether threatened, pending or completed (collectively
"Proceeding") in which the Indemnitee may be involved, or threatened to be
involved, as a party or otherwise by reason of: (i) its status at any time as a
General Partner or Associate of a General Partner; (ii) its management of the
Partnership; and/or (iii) any act performed or omitted to be performed by it at
any time in connection with the
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business, property or affairs of the Partnership whether or not such Indemnitee
continues to be a General Partner or an Associate of a General Partner at the
time such Liability is paid or incurred, if: (a) such Liability was not the
result of gross negligence or gross misconduct by the Indemnitee, and the
Indemnitee determined, in good faith, that the course of conduct which caused
the Liability was in the best interests of the Partnership; or (b) a court of
competent jurisdiction determines upon application that, despite the fact that
the requirements of clause (a) are not satisfied, in view of all the
circumstances, the Indemnitee is fairly and reasonably entitled to
indemnification for such Liabilities as such court may deem proper.
(B) The termination of a Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that the Indemnitee did not determine in good faith
that the course of conduct which caused the Liability was in the best interests
of the Partnership.
(C) Any Liability for which the Partnership and the Indemnitee are
jointly liable shall, if the Indemnitee is entitled to indemnification under
this Section 3.6, be satisfied first from the assets of the Partnership. The
indemnification provided by this Section 3.6 shall be recoverable out of the
assets of the Partnership, including any insurance proceeds, and shall not be
recoverable out of any other assets of the Limited Partners.
(D) Expenses (including attorneys' fees and expenses) incurred in
defending any Proceeding shall be paid by the Partnership in advance of the
final disposition of such Proceeding upon receipt of an undertaking by or on
behalf of the Indemnitee to repay such amount if it shall ultimately be
determined by a court of competent jurisdiction that the Indemnitee is not
entitled to indemnification as authorized by this Section 3.6.
(E) The indemnification provided by this Section 3.6 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, vote of the Partners, as a matter of law or otherwise both as to
action in the Indemnitee's capacity as a General Partner or Associate of a
General Partner and to action in another capacity, shall continue as to an
Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
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(F) The Partnership shall, to the extent commercially reasonable,
purchase and maintain insurance on behalf of the Indemnitees and such other
Persons as the Managing General Partner shall determine against any Liability
which may be asserted against or expense which may be incurred by such persons
in connection with Partnership activities (including, without limitation, any
Proceeding) whether or not the Partnership would have the power to indemnify
such persons against such Liability under the provisions of this Agreement.
(G) For purposes of this Section 3.6, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by an Indemnitee of its duties to the Partnership
also imposes duties on, or otherwise involves services by, an Indemnitee to such
plan or participants or beneficiaries of such plan. Excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall be deemed a Liability and action taken or omitted by an Indemnitee with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by an Indemnitee to be in the interests of the
participants and beneficiaries of such plan shall be deemed to be for a purpose
which is in the best interests of the Partnership. Any payments to an Indemnitee
shall be solely from assets of the Partnership and shall not be paid from
employee benefit plan assets.
(H) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 3.6 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies.
(I) Notwithstanding the foregoing, an Indemnitee shall not be entitled
to indemnification hereunder for any Liability imposed in a Proceeding arising
from or out of a violation of state or federal securities laws associated with
the offer and sale of Units. Indemnification will be allowed for settlements and
related expenses of Proceedings alleging securities law violations, and for
expenses incurred in successfully defending such Proceedings, providing that a
court either (i) approves the settlement and finds that indemnification of the
settlement and related costs should be made; or (ii) approves indemnification of
litigation costs if a successful defense is made.
(J) If any provision of this Section 3.6, or the application thereof,
shall, for any reason and to any extent, be invalid or unenforceable, the
remainder of this Section 3.6 and the application thereof shall not be affected
thereby, it being the intent of this Section 3.6 to indemnify and hold harmless
the Indemnitees to the fullest extent permitted by applicable law.
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3.7 OTHER MATTERS CONCERNING GENERAL PARTNERS.
(A) Each of the General Partners may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
(B) Each of the General Partners may consult with and employ counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants, advisers and Persons selected by it (who may serve as such for and
be employed by the Partnership or any Related Person), and any opinion of such
Person as to matters which the General Partner believes to be within that
Person's professional or expert competence shall be full and complete
authorization and protection with respect to any action taken, suffered, or
omitted by the General Partner hereunder in good faith and in accordance with
such opinion.
(C) Each of the General Partners may execute any of the powers
hereunder or perform any duties hereunder either directly or by or through
agents, including, without limitation, any Related Person, and a General Partner
shall not be responsible for any misconduct, negligence, or willful act on the
part of any agent appointed with due care by any General Partner.
(D) Any and all fees commissions, compensation and other consideration
received by a General Partner or a partner, shareholder, director, officer,
agent or employee of a General Partner permitted hereunder shall be the
exclusive property of the recipient, in which the Partnership shall have no
right or claim, and the participation by any such Person in any agreement
permitted hereunder shall not constitute a breach by such Person of any duty
that it may owe the Partnership or the Limited Partners or Assignees under this
Agreement or by operation of law.
3.8 AGREEMENTS WITH A GENERAL PARTNER OR A RELATED PERSON.
(A) In addition to agreements, arrangements and transactions provided
for in or contemplated by this Agreement, a General Partner and any Related
Person may, directly or indirectly, deal with the Partnership, including,
without limitation, making loans to (but not borrowing from) the Partnership in
connection with carrying out the business of the Partnership or otherwise, as an
independent contractor or as an agent for others, and may receive from such
others or the Partnership, profits, compensation, commissions or other amounts
which the Managing General Partner in good faith believes to be reasonable
without having to account to the Partnership therefor,
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if the material facts as to the agreement or transaction and as to the
relationship or interest of the General Partner or Related Person are disclosed
or known to the partner of Glenborough Partners and such agreement or
transaction is specifically authorized, approved or ratified by a majority of
the Units held by the limited partners of Glenborough Partners. Compliance with
the provisions of this Section 3.8 (A) shall be a complete defense to any claim
of invalidity or for damages or other relief with respect to any such agreement
or transaction.
(B) The satisfaction of the following condition shall be a complete
defense to any claim of invalidity or for damages or other relief with respect
to any agreement or transaction between a General Partner or a Related Person
and another Person based upon the assertion of a breach of duty owed to the
Partnership by a General Partner or a Related Person in entering into such
agreement or transaction: the material facts as to the agreement or transaction
and as to the relationship or interest of the General Partner or Related Person
are disclosed or known to the partner of Glenborough Partners and such agreement
or transaction is specifically authorized, approved or ratified by a majority of
the Units held by the limited partners of Glenborough Partners.
3.9 CONVEYANCES. The Managing General Partner has the express authority
to convey title to any Partnership Property by a conveyance executed by the
Managing General Partner alone on behalf of the Partnership.
ARTICLE 4
Compensation of General Partners
4.1 COMPENSATION OF MANAGING GENERAL PARTNER. In consideration of the
services rendered by the Managing General Partner in managing the business and
affairs of the Partnership, the Partnership shall pay the Managing General
Partner fees consisting of the amounts described in Sections 4.2 through 4.7,
inclusive. The Managing General Partner may divide, allocate or pay the
compensation it receives under this Agreement among its Associates and other
Persons, or may assign to or subcontract with other Persons (including
Glenborough Corporation) any of its management duties hereunder together with
some or all of such compensation, as it determines in its sole discretion. All
compensation paid the Managing General Partner shall be paid in United States
dollars.
4.2 PROPERTY MANAGEMENT FEE. The Managing General Partner shall be
entitled to a fee (the "Property Management Fee") determined as follows:
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(A) With regard to any Partnership Property leased to multiple tenants,
including apartments and condominiums (except as provided in subsection (C)
hereof), a sum equal to five percent (5%) of the monthly Gross Receipts
collected by the Partnership. For purposes of this Section 4.2, "Gross Receipts"
shall mean all rentals and other charges due the Partnership from tenants of
Partnership Property, including, without limitation, expense passthrough items
such as real property taxes and insurance, and rentals or fees paid for parking.
(B) With regard to any non-residential Partnership Property leased to a
single tenant, a sum equal to three percent (3%) of the monthly Gross Receipts
collected by the Partnership.
(C) With regard to any Partnership Property consisting of single-family
residences or scattered condominiums, a sum equal to ten percent (10%) of the
monthly Gross Receipts collected by the Partnership.
(D) The Property Management Fee shall be computed as of the end of each
calendar month with respect to the gross receipts of such month and shall be
paid to the Managing General Partner as soon as practicable thereafter.
4.3 INCENTIVE FEE. The Managing General Partner shall be entitled to a
fee (the "Incentive Fee") determined as follows:
(A) An amount equal to one-half of one percent (.5%) of the sum of the
monthly weighted average of the fair market value ("Fair Market Value") of the
real property (as real property is determined under California law) of the
Partnership and the Book Value of all other Partnership Property as determined
in accordance with this Section.
(B) The Fair Market Value of the Partnership's real property shall be
determined in accordance with the following and the provisions of Section 4.3
(D).
(1) For the year 1994, with respect to that real
property acquired by the Partnership, it shall be the purchase price
thereof ("Original Value").
(2) For the year 1995, with respect to that real
property acquired by purchase during 1994, it shall be the Original
Value thereof, as increased by the CPI Adjustment, as defined herein
("Adjusted Original Value").
(3) For 1996 and each even-numbered year thereafter, it
shall be the appraised value of such real property, as of the end of
each such year, as determined by independent appraisals ("Biennial
Appraised Value").
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(4) For 1997 and each odd-numbered year thereafter, it
shall be the most recent Biennial Appraised Value as adjusted by the
CPI Adjustment ("Adjusted Biennial Appraised Value").
(5) Where in any year, the Partnership should acquire
additional real property, the aggregate prices paid therefor by the
Partnership shall, subject to the provisions of subsection (E) hereof,
be added to the Original Value, Adjusted Original Value, Biennial
Appraised Value or Adjusted Biennial Appraised Value for such year, as
appropriate, the sum of the two being hereafter referred to as the
"Base Value".
(C) The CPI Adjustment shall be the adjustment described in Section
4.3(D) and shall be determined by utilizing the Consumer Price Index for All
Urban Consumers of All Items for the United States (base year 1982 - 1984 =
100), published by the United States Department of Labor, Bureau of Labor
Statistics ("CPI Index"). For those years in which the CPI Adjustment is to be
made, the beginning index ("Beginning Index") shall be the CPI Index for the
month of December of the prior year and the extension index ("Extension Index")
shall be the CPI Index for the month of December of that year.
(D) If the Extension Index has increased over the Beginning Index, the
Fair Market Value shall be determined by multiplying the Base Value of the real
estate for such year by a fraction, the numerator of which is the Extension
Index, and the denominator of which is the Beginning Index. In no case shall the
Fair Market Value of real property for an odd-numbered year be less than the
Base Value thereof for that year. If the CPI Index is changed so that the base
year differs from that used for the Beginning Index, the CPI Index shall be
converted in accordance with the conversion factor published by the United
States Department of Labor, Bureau of Labor Statistics. If the CPI Index is
discontinued or revised, such other government index or computation with which
it is replaced shall be used in order to obtain substantially the same result as
would be obtained if the CPI Index had not been discontinued or revised.
(E) The Fair Market Value of the Partnership real property and the Book
Value of all other Partnership Property shall be determined on a monthly
weighted average basis to reflect the period of ownership of such Partnership
Property for such year. The monthly weighted average for the first and last year
of the Partnership shall be based on a denominator equal to the number of months
of existence of the Partnership in such year.
(F) The Incentive Fee shall be paid to the Managing General Partner on
a monthly basis by taking one-twelfth (1/12th)
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of the Incentive Fee based on the most recent Fair Market Value determination
hereunder; except that at the end of each year, the Incentive Fee for that year
shall be recomputed as herein provided, and the Managing General Partner shall
thereupon be entitled to the balance of the Incentive Fee. Any overpayment of
the Incentive Fee shall be deducted from the next monthly payments of the
Incentive Fee to fall due for the following year.
(G) The Incentive Fee shall be paid to the Managing General Partner
only to the extent that the combined Net Operating Cash Flow of the Partnership,
the Limited Partner, and all other partnerships included within the definition
of an Operating Limited Partnership as that term is defined in Section 1.1 of
the Limited Partnership Agreement of Glenborough Partners during such year
exceeds an amount equal to one dollar and fifty cents ($1.50) multiplied by the
monthly weighted average number of the outstanding limited partnership Units. To
the extent the Incentive Fee cannot be paid for any year it shall lapse.
4.4 TRANSACTION FEE.
(A) The Managing General Partner shall be entitled to a fee upon the
sale, exchange or purchase of any property of the Partnership equal to two
percent (2%) of the sale proceeds or the purchase price (the "Transaction Fee");
provided, however, that no Transaction Fee shall be payable on such transactions
with Affiliates or for sales in which the Managing General Partner participates
in real estate commissions as set forth in Section 4.12 hereof. The sale
proceeds or the purchase price of the property shall be the total of all
consideration received or paid, as the case may be, including, but not limited
tot all cash, the principal amount of any note or promise to pay, and the fair
market value of any other property paid or transferred in connection with the
sale or purchase. For purposes of this Section 4.4, an exchange shall be deemed
one transaction. The principal amount of a note or promise to pay bearing no
interest or interest at other than market rates shall be adjusted as provided in
Section 4.4(B) in computing the sale proceeds or the purchase price to reflect
market interest rates. In addition, the entry into a lease of real property or
improvements to real property (other than a lease of office space required for
administration of the Partnership) by the Partnership, as lessee, shall be
deemed a purchase and the present value of the lease payments over the term of
the lease, excluding any option periods and any increases in payments which
cannot be calculated at the time of the entry into the lease, discounted at the
interest rate on five-year Treasury Notes, or comparable indices if five-year
Treasury Notes are no longer customarily quoted ("Adjustment Index"), prevailing
on the date of entry into the lease, shall be deemed the purchase price on which
the Transaction Fee shall be computed. The exercise by the Partnership or any
other Person of any option to purchase and the consummation of such purchase,
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whether or not related to any lease, shall be deemed a separate transaction for
purposes of the application and computation of the Transaction Fee under this
Section 4.4.
(B) ADJUSTMENT METHOD. Except as may be otherwise specified, the
principal amount of any note or promise to pay required to be adjusted under
Section 4.4(A) shall be adjusted in accordance with the same principles used by
the Partnership for financial reporting purposes and shall be based on the
Adjustment Index, defined in Section 4.4(A) above.
(C) PAYMENT. The Transaction Fee shall be paid as soon as practicable
after consummation of the transaction with respect to which the fee is accrued.
4.5 REFINANCING FEE. The Managing General Partner shall be entitled to
a fee ("Refinancing Fee") equal to one percent (1%) of the net loan refinancing
proceeds received from third Persons on the refinancing of any Partnership
Property, but only if the refinancing results in:
(A) A new loan with a materially lower interest rate or better payment
terms; or
(B) Proceeds which are available for other Partnership purposes; or
(C) Funds for the repayment of an existing loan that is due or will
become due in the near future.
The amount of net loan refinancing proceeds shall equal the principal
amount of the loan less points, loan processing fees and other loan costs. The
Refinancing Fee shall be paid to the Managing General Partner as soon as
practicable after the loan refinancing proceeds have been made available to the
Partnership.
4.6 NO REPAYMENT. The Managing General Partner shall not be required to
return to the Partnership all or any part of any fee properly computed and paid
to it, notwithstanding any subsequent event.
4.7 ACCRUAL UPON CHANGE IN MANAGING GENERAL PARTNER. If the Managing
General Partner ceases to serve in that capacity as of any day (the "Termination
Date") for any reason, the Property Management Fee and the Incentive Fee shall
be accrued on a prorata daily basis to and including the Termination Date. The
Property Management Fee and the Incentive Fee payable to any new Managing
General Partner shall accrue from and after the Termination Date. The Property
Management Fee and the Incentive Fee shall be paid to the Managing General
Partner at such time as it would otherwise be payable for the period in which
the Termination Date occurs.
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4.8 JOINT VENTURES. References herein to any property acquired, owned
or disposed of by the Partnership shall include the Partnership's interest from
time to time in any underlying property held by any joint venture, partnership
or other entity or form of ownership in which the Partnership has an interest
("Partnership's Share in Underlying Property"). Without limiting the generality
of the foregoing, the Property Management Fee, Incentive Fee, Transaction Fee,
and any other fee which may become payable to the Managing General Partner shall
apply to and be based upon not only any wholly-owned property, but also the
Partnership's Share in Underlying Property. There shall, however, be no
duplication of fees as a consequence of this provision.
4.9 CHANGE IN COMPENSATION. With the approval of holders of the Units
held by limited partners of Glenborough Partners in accordance with Section 3.8,
the Managing General Partner may propose and effect any additional or substitute
compensation plans or arrangements for compensation to be paid to it as Managing
General Partner; provided, however, that in voting on such matters (as well as
the amendment of this Section), the General Partners and Glenborough Partners
and their respective Affiliates shall vote their interests for, against, or
abstain in the same proportion as all other limited partners of Glenborough
Partners vote for, against, or abstain on such matters and provided further,
that there shall be no retroactive changes in the compensation paid to the
Managing General Partner.
4.10 FRINGE BENEFITS. At the expense of the Partnership, any officer or
employee of the Managing General Partner who performs services for the Managing
General Partner in connection with the conduct of Partnership business shall be
entitled to participate in any health insurance, medical and dental
reimbursement, life insurance, accident insurance, disability insurance or any
other plans, trusts or provisions, or any other employee benefit plans or
arrangements established by the Partnership, as if such officer or employee were
an officer or employee of the Partnership.
4.11 EXPENSES OF GENERAL PARTNER. The Partnership shall pay all
expenses, disbursements and advances reasonably incurred by the General Partners
and their Affiliates in connection with the organization of the Partnership and
the conduct of Partnership business, including, without limitation, office
expenses, secretarial expenses, software acquisition, data processing services
and expenses for entertainment, travel and similar items, including amounts paid
to any Person employed or retained to perform services for the Partnership. The
Partnership shall promptly reimburse the General Partners and their Affiliates
for any such items paid by the General Partners or their Affiliates. The General
Partners and their Affiliates
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shall also receive a reasonable reimbursement for their general and
administrative costs allocable to the management and operation of the
Partnership, as determined by the Managing General Partner in its discretion;
provided, however, that such costs shall be reasonable in amount and necessary
to the functions of the Partnership. Such costs shall include salaries and
compensation of legal and leasing personnel, and costs incurred in connection
with servicing Partnership notes receivable, but shall exclude salaries and
compensation of the officers and directors of any General Partner.
4.12 COMMISSIONS ON CERTAIN SALES. The Managing General Partner or an
Affiliate thereof, shall be entitled to receive a commission upon the sale of
single-family residences (but not including condominiums or residential units
sold in bulk), where substantial services have been rendered in connection with
such sale. Such commission shall be an amount equal to a maximum of four percent
(4%) of the sale proceeds where no third Person is employed in connection with
the sale of the Partnership Property and a minimum of two percent (2%) of the
sale proceeds where a third Person or Persons are employed in connection with
the sale of Partnership Property; provided, however, that in no event shall the
total commission paid to all Persons in connection with the sale of such
Partnership Property be less than four percent (4%) or more than seven percent
(7%) of the sale proceeds (as that term is defined in Section 4.4(A)).
ARTICLE 5
The Limited Partners, Assignees and Transferrees
5.1 LIMITED LIABILITY. No Limited Partner or Assignee (unless such
Limited Partner or Assignee is a General Partner or otherwise participates in
the control of the business of the Partnership) shall be personally liable for
any of the debts of the Partnership or for any Net Losses beyond the amount of
the Capital Contribution made or agreed to be made to the Partnership by the
Limited Partner or Assignee and any undistributed Net Income allocated to the
Limited Partner or Assignee. However, to the extent required by law, each
Limited Partner or Assignee receiving any actual or constructive distribution
may be liable to return such distribution if and to the extent that, immediately
after giving effect to the distribution, all liabilities of the Partnership,
other than liabilities to Partners or Assignees on account of their interest in
the Partnership and liabilities as to which recourse of creditors is limited to
specific property of the Partnership, exceed the fair value of the Partnership
Property; provided, however, that the fair value of any Partnership Property
that is subject to a liability as to which recourse of creditors is so limited
shall be included in the Partnership Property for purposes of this sentence only
to the extent that the fair value of such
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Partnership Property exceeds such liability. Any Limited Partner returning all
or any part of a distribution actually received by an Assignee or successor of
the Limited Partner shall be subrogated to the Partnership's right to seek a
return to the Partnership of the distribution from the Assignee or such
successor. In no event shall any Limited Partner or Assignee be obligated under
any circumstances to make any Capital Contribution to the Partnership for any
purpose whatsoever, other than Capital Contributions described in Article 7.
5.2 RESTRICTIONS ON LIMITED PARTNERS AND ASSIGNEES.
(A) No Limited Partner or Assignee shall participate as such in the
management and control of the business of the Partnership, transact any business
for the Partnership, or attempt to do so, unless such Limited Partner or
Assignee is also the Managing General Partner or a Related Person or other
Person employed or engaged to transact any such business by or on behalf of the
Managing General Partner or the Partnership. The transaction of any such
business by a Limited Partner or Assignee employed or engaged to do so by or on
behalf of the Managing General Partner or the Partnership shall not be in his,
her or its capacity as Limited Partner or Assignee and shall not affect, impair
or eliminate the limitations on the liability of the Limited Partner or Assignee
under this Agreement.
(B) No Limited Partner or Assignee shall have the power to represent,
sign for or bind the Managing General Partner, any other General Partner or the
Partnership, unless such Limited Partner or Assignee is also the Managing
General Partner or a Related Person or other Person given such power by the
Managing General Partner.
5.3 OUTSIDE ACTIVITIES. A Limited Partner or Assignee shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities in direct competition with the Partnership. Neither the Partnership
nor any of the Partners or Assignees shall have any rights by virtue of this
Agreement in any independent business ventures of any other Limited Partner or
Assignee.
5.4 NO WITHDRAWAL OR DISSOLUTION. No Limited Partner shall at any time
withdraw from the Partnership, except as provided in this Agreement. No Limited
Partner shall have the right to have the Partnership dissolved or the right to a
Return of Capital from the Partnership, except as provided in this Agreement.
The legal incompetency, bankruptcy, insolvency, termination, dissolution,
withdrawal or death of a Limited Partner shall not cause a dissolution of the
Partnership.
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5.5 ASSIGNEES. The creation of Assignees pursuant to Section 11.2 does
not dissolve the Partnership. An Assignee may become a Substituted Limited
Partner as provided in Section 12.1. Until an Assignee becomes a Substituted
Limited Partner, the Assignee has no right to notice of or to vote at any
meeting of Partners or upon any matters upon which Limited Partners may vote, to
require any information or account of Partnership transactions or to inspect
Partnership books, and is otherwise subject to the limitations under the Act on
the rights of an Assignee who has not become a Substituted Limited Partner. An
Assignee has the rights and obligations appurtenant to a Unit to share in the
Net Income and Net Losses of the Partnership and to receive distributions.
5.6 TRANSFEREES. An assignment of a Limited Partner's Interests does
not dissolve the Partnership or entitle the transferee to become or to exercise
any rights of a Limited Partner. The transferee has the right to become a
Substituted Limited Partner pursuant to an assignment as provided in Section
12.1. A Limited Partner remains a Limited Partner upon transfer of all or part
of the Limited Partner's Interests until the transferee becomes a Substituted
Limited Partner pursuant to Section 12.1. A transferee who does not become a
Substituted Limited Partner has no right to notice of or to vote at any meeting
of Partners or upon any matters upon which a Limited Partner may vote, to
require any information or account of Partnership transactions or to inspect the
Partnership books, and is otherwise subject to the limitations under the Act on
the rights of a transferee or Assignee who has not become a Substituted Limited
Partner. Any distribution or payment to the Partner or Assignee of record or the
personal representative of such Partner or Assignee shall acquit the Partnership
of liability to the extent of such payment to any person who may have an
interest in such payment by reason of an assignment by the Partner or Assignee
or the successors or assignees of the Partner or Assignee, or by reason of the
death of such Partner or Assignee or otherwise.
ARTICLE 6
Approval by Limited Partners; Amendments
6.1 APPROVAL BY LIMITED PARTNER. Subject to Sections 6.2 and 6.3, the
approval of a Majority Interest shall be required only for the matters specified
below (including, however, without limitation, those matters on which limited
partners are given the right to vote under the Act) and no other matters:
(A) The following actions may be taken by the Managing General Partner
only with the affirmative vote of a Majority Interest:
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(1) the sale, exchange, lease or other transfer (other
than encumbrances) of all or substantially all of the assets of the
Partnership in a single transaction or in multiple interrelated
transactions, except in the liquidation and winding up of the business
of the Partnership upon its dissolution. For purposes of this
subsection, "substantially all of the assets of the Partnership" shall
mean ninety percent (90%) of the asset value of the Partnership
Property, as determined in accordance with generally-accepted
accounting principles, at the end of the most recently completed fiscal
quarter of the Partnership;
(2) the dissolution of the Partnership, other than
pursuant to Sections 14.1(A), (B), (C) and (E);
(3) an election to continue the business of the
Partnership other than after there is no remaining or surviving General
Partner;
(4) an amendment to this Agreement, including, without
limitation, an amendment extending the term of this Agreement, except
for amendments described in Sections 6.3 and 6.4;
(5) Any matter requiring approval of the holders of
Units of Glenborough Partners pursuant to Section 3.8.
(B) A General Partner may be removed only with the approval of a
Majority Interest.
(C) Except under circumstances described in clause (D), a new General
Partner may be admitted with only the approval of a Majority Interest and with
the separate concurrence of the other General Partner(s).
(D) If there is no remaining or surviving General Partner, a new
General Partner(s) may be admitted or an election to continue the business of
the Partnership may be made only upon the approval of all the Limited Partners.
6.2 RIGHTS CONDITIONAL. The rights set forth in Section 6.1 (A) shall
not be exercised unless the Partnership shall have received the written opinion
of counsel for the Partnership to the effect that the exercise of such right or
the action proposed to be taken with respect to any particular matter: (A) shall
not cause the Limited Partner to be deemed to be taking part in the management
and control of the business and affairs of the Partnership so as to subject the
Limited Partner or Assignees to unlimited liability therefor; (B) will not
jeopardize the status of the Partnership as a partnership under
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applicable tax laws and regulations; or (C) is otherwise permissible under the
state statutes then governing the rights, duties and liabilities of the
Partnership and the Partners and Assignees. If counsel for the Partnership has
indicated that it is unable or unwilling to deliver such an opinion, the
Managing General Partner may take any action described in Section 6.1 (A)
without the need for approval of the Limited Partner, provided that such action
is not otherwise prohibited by this Agreement or by law.
6.3 AMENDMENTS BY THE MANAGING GENERAL PARTNER. Subject to Section 6.4,
the Managing General Partner may, without prior notice to or consent of any
Partner or Assignee, amend any provision of this Agreement: (A) to cure any
ambiguity, omission, defect or inconsistency; (B) if in its opinion such
amendment does not have a materially adverse effect upon the Limited Partners
and Assignees or the Partnership, as the case may be; or (C) the amendment is
necessary, in the opinion of counsel to the Partnership, to prevent the
Partnership or the General Partners or the partners, directors or officers of a
General partner from being in any manner subject to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, whether or not substantially similar to
plan asset regulations currently applied or proposed by the Department of Labor;
or (D) the amendment is necessary, in the opinion of counsel to the Partnership,
to prevent the Partnership from being taxable as a corporation under the Code. A
copy of such amendment shall thereafter be furnished promptly to the Limited
Partner and Assignees. In the event an amendment shall have been approved
pursuant to this Section 6.3, the Managing General Partner and, if necessary,
the Limited Partner, shall execute such amendment, certificate and other
documents as may be reasonably required for the purpose of effectuating the
same.
6.4 PROHIBITED AMENDMENTS. Except with the unanimous consent of all
Partners, no amendments shall modify the provisions regarding amendment of this
Agreement or the liabilities of the Partners or change the form of Partnership
to a general partnership.
ARTICLE 7
Capital Contributions and Initial Issuance of Interests
7.1 [Intentionally left blank.]
7.2 CONTRIBUTION BY PARTNERS. On the Closing Date, the Partners shall
contribute to the Partnership Property as follows:
(A) The Limited Partner shall contribute $315,000.00.
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(B) The General Partners shall not be required to contribute to the
Partnership; provided, however, that in consideration of services rendered, the
General Partners shall, in the respective shares shown in Section 7.1, receive
and hold a one percent (1%) interest in the Net Income and Net Loss of the
Partnership, including a one percent (1%) interest in cash items of Partnership
income, gain, loss, deduction or Tax Credits.
7.3 DISTRIBUTION OF INTERESTS.
(A) Effective as of the Closing Date and in consideration of the
transfer provided in Section 7.2 (A), the Partnership shall issue to the Limited
Partner 990 Interests. Thereafter, interests of the Limited Partner in the
Partnership shall be represented and expressed in terms of Interests.
(B) In consideration for services and to represent the General
Partners' interest in the Partnership provided for in Section 7.2 (B), the
Partnership shall issue 10 Interests to the General Partners in the proportions
provided for in Section 7.1.
(C) After the issuance of Interests provided for in 7.3 (A) and (B)
above, Interests shall be held one percent by the General Partners and
ninety-nine percent (99%) by the Limited Partner.
7.4 GENERAL PARTNER INTERESTS. The Interests issued to the Managing
General Partner and Robert Batinovich as General Partners, shall be designated
as General Partner Interests.
7.5 DISTRIBUTION OF CAPITAL. A Partner or Assignee shall be entitled to
a distribution which constitutes a Return of Capital from time to time
throughout the duration of the Partnership in such amounts and at such times as
the Managing General Partner, in its sole discretion, deems appropriate. Such
distributions shall be made only if the conditions specified in Section 9.1 have
been met or as provided in Section 7.1 with respect to the initial $1,000 cash
contribution.
7.6 NO INTEREST ON CAPITAL CONTRIBUTION. Partners and Assignees shall
not receive interest on or with respect to all or any part of their Capital
Contributions.
7.7 CREDITOR'S INTEREST IN THE PARTNERSHIP. No creditor who makes a
loan to the Partnership shall have or acquire at any time as a result of making
the loan, any direct or indirect interest in the profits, capital or property of
the Partnership other than as a creditor.
7.8 NATURE OF INTERESTS. All property owned by the Partnership, whether
real or personal, tangible or intangible,
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shall be deemed to be owned by the Partnership as an entity, and none of the
Partners shall have any direct ownership of such property.
7.9 ONE PERCENT INTEREST OF GENERAL PARTNERS AND ADDITIONAL CAPITAL
CONTRIBUTIONS. Notwithstanding anything to the contrary that may be expressed or
implied herein, the interests of all of the General Partners, taken together, in
each material item of Partnership income, gain, loss, deduction or Tax Credits,
as provided by Section 8.1, will be equal to at least one percent (1%) of each
such item at all times during the existence of the Partnership. In determining
the General Partners' interests in such items, interests held by the General
Partners as general partners of the Limited Partner or of any Operating Limited
Partnership, as defined in the Limited Partnership Agreement of Glenborough
Partners and Units owned by the General Partners shall not be taken into
account. Additional Capital Contributions shall be made to the Partnership only
with the approval of all Partners. If additional Capital Contributions are made,
such Capital Contributions shall be made by each Partner in accordance with its
Allocable Share; provided, however, that the General Partners shall, at all
times, be deemed to own as General Partners (in the respective percentages set
forth in Section 7.1, one percent (1%) of the outstanding interests in the
Partnership and no further contribution or consideration shall be required of
the General Partners for their General Partner interests. Additional Interests
shall be issued to evidence such additional capital contributions and to
maintain the General Partners' interest as aforesaid. If property other than
cash is contributed, the Managing General Partner shall determine the value of
such property.
ARTICLE 8
Allocation of Net Income, Net Loss and Tax Credits
8.1 GENERAL ALLOCATION.
(A) Net Income and Net Loss for each month shall be determined by the
Partnership and allocated among the Partners and Assignees in accordance with
their Allocable Shares.
(B) For federal, state or other tax purposes, all items of income,
gain, loss or deduction and all Tax Credits (including any such items arising
from a joint venture or a partnership in which the Partnership has an interest)
shall be determined using the accounting method designated by the Managing
General Partner and shall be allocated to the Partners and Assignees in
accordance with their Allocable Shares, subject to the provisions and
adjustments described in this subsection. If the Partnership is deemed to have
been terminated and reformulated pursuant to Section 708 of the Code,
depreciation, depletion, gain or loss
32
<PAGE>
shall be allocated among the Partners and Assignees so as to take account of the
variation between the basis of property deemed contributed to the Partnership by
each Partner or Assignee at the time of its reformulation and the fair market
value of such property at the time of such contribution pursuant to Section
704(c) of the Code. Depreciation, depletion, gain or loss (including the tax
consequences of any basis reduction made by a contributing Partner under Code
Sections 108, 483 and 1274) with respect to property contributed to the
Partnership shall be allocated among the Partners and Assignees to the extent
required under Section 704(c) of the Code and Treasury Regulations promulgated
under Code Section 704(b) and (c) so as to take into account, for tax purposes,
the difference between the basis of such property and its initial Book Value.
The Managing General Partner is authorized to adopt such methods of allocating
such items, consistent with applicable law and Regulations.
8.2 ALLOCATION ON TRANSFER. The Partnership shall use the monthly
convention specified in the Conference Committee Report to Section 72 of the Tax
Reform Act of 1984 in determining allocations on transfer. Under this
convention, Interest transfers after the 15th day of a month shall be treated as
occurring immediately after the close of business of the last day of the month,
and Interest transfers during the first fifteen (15) days of a month shall be
treated as occurring immediately before the opening of business of the first day
of the month.
ARTICLE 9
Cash Distributions
9.1 TIME AND AMOUNT OF CASH DISTRIBUTIONS.
(A) As of the close of each fiscal quarter and each fiscal year, and at
any other time the Managing General Partner deems appropriate, the Cash
Available for Distribution shall be calculated and, if the Managing General
Partner deems appropriate in its sole discretion, all or any portion thereof
shall be distributed to the Partners and Assignees of record on the Record Date
set for the distribution, and each Partner and Assignee shall receive his
Allocable Share thereof.
(B) Notwithstanding the provisions of Section 9.1(A), any distribution
shall be made only if:
(1) All liabilities of the Partnership, except
liabilities to the General Partners and to the Limited Partner and
Assignees on account of the Capital Contribution and liabilities as to
which recourse of creditors is limited to specified property, have been
paid or after such distribution, there will remain Partnership Property
with a fair value sufficient to pay such liabilities, provided that
33
<PAGE>
the fair value of any Partnership Property that is subject to a
liability as to which recourse of creditors is limited shall be
included in Partnership Property for purposes of this subsection only
to the extent that the fair value of such Partnership Property exceeds
such liability;
(2) The Managing General Partner determines in good
faith that such distributions may be made without materially affecting
the ability of the Partnership to pay obligations (including contingent
liabilities) of the Partnership as they fall due; and
(3) Such distribution may be made without violating
any provision of the Act.
(C) Nothing in this Agreement or this Section shall serve as a
limitation on the Managing General Partner's right to retain or use the
Partnership's assets or its revenues as, in the opinion of the Managing General
Partner, may be required to satisfy the anticipated present and future cash
needs of the Partnership, whether for operations, liabilities, expansion,
improvements, acquisition or otherwise.
9.2 DISTRIBUTIONS OF PARTNERSHIP PROPERTY. In its sole discretion, the
Managing General Partner may distribute to Partners and Assignees, Partnership
Property other than Cash Available for Distribution. In its sole discretion, the
Managing General Partner may distribute to Partners and Assignees additional
Interests or securities of the Partnership which have been authorized and issued
pursuant to the terms of this Agreement.
ARTICLE 10
Accounting and Reports
10.1 FISCAL YEAR. The fiscal year of the Partnership shall end on
December 31 of each year, unless the Managing General Partner determines that it
is in the best interest of the Partnership and its Partners to utilize a
different fiscal year and the permission of the Internal Revenue Service has
been obtained.
10.2 REPORTS.
(A) As soon as practicable, but in no event later than ninety (90)
days, after the close of the calendar year, the Managing General Partner shall
prepare or cause to be prepared and furnish to each Person who was a Partner or
Assignee of record during the Partnership's fiscal year, the information
reasonably necessary for the preparation of such Person's United States federal
income tax return and any state or local income or
34
<PAGE>
other tax returns required of such Person as a result of the operations of the
Partnership. The Partners and Assignees agree to furnish the Managing General
Partner with such information as may be necessary or helpful in preparing the
tax returns or other filings of the Partnership.
(B) As soon as practicable, but in no event later than one hundred
twenty (120) days after the close of each fiscal year, the Managing General
Partner shall mail or deliver to each Partner and each Assignee of record an
annual report containing financial statements of the Partnership (which may be
consolidated with the financial statements of the Limited Partner) for the
fiscal year, including a balance sheet and statements of operations, changes in
Partners' equity and changes in financial position at the end of or for the most
recent fiscal year. Such statements are to be prepared in accordance with
generally-accepted accounting principles and shall include the opinion of a firm
of independent public accountants selected by the Managing General Partner, and
are to be accompanied by a supplementary summary (except as disclosed in the
financial statements), by classification of the total fees and compensation,
including any overhead reimbursement and indemnification, paid by the
Partnership, directly or indirectly, to the General Partners.
(C) If and to the extent required by the Act or applicable state or
federal securities laws, as soon as practicable, but in no event later than
sixty (60) days after the close of each fiscal quarter, except the last fiscal
quarter of each fiscal year, the Managing General Partner shall mail or
otherwise furnish to each Partner and Assignee of record a quarterly report for
the fiscal quarter containing such financial and other information (which may be
condensed, including statements of operations for such fiscal quarter and since
the end of the last fiscal year, a balance sheet at the end of such period and a
certificate of the Managing General Partner to the effect that such financial
statements were prepared without audit from the books and records of the
Partnership) as the Managing General Partner deems appropriate.
10.3 TAX ELECTIONS. The Managing General Partner shall, in its sole
discretion, and as it deems in the best interests of the Partnership or the
Partners and Assignees, determine whether to make any available election and how
to make any necessary allocation for federal, state, local or other income tax
purposes.
10.4 BOOKS AND RECORDS. The Managing General Partner shall maintain all
records necessary for documenting and reporting the business and affairs of the
Partnership. The Managing General Partner shall maintain at the office of the
Partnership specified in Section 2.4: (A) a current list of the
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<PAGE>
full name and last-known business or residence address of each Partner and
Assignee set forth in alphabetical order together with the contribution and the
share in profits and losses of each Partner and Assignee; (B) a copy of the
Certificate of Limited Partnership and all certificates of amendment thereto,
together with executed copies of any powers of attorney pursuant to which any
certificate has been executed; (C) copies of the Partnership's federal, state
and local income tax or information returns and reports, if any, for the six
most recent taxable years or for such shorter time as the Partnership has been
in existence; (D) the original Agreement and all amendments thereto; (E) copies
of the financial statements of the Partnership for the six most recent fiscal
years or for such shorter time as the Partnership has been in existence; and (F)
the Partnership's books and records for at least the current and past three
fiscal years or for such shorter time as the Partnership has been in existence.
Any records maintained by the Partnership in the regular course of its business,
including the record of the holders of Interests, books of account, and records
of Partnership proceedings may be kept on, or be in the form of punch cards,
magnetic media, photographs, micrographics, or any other information storage
device, provided that the records so kept can be converted into clearly legible
written form within a reasonable period of time. Except for information kept
confidential by the Managing General Partner pursuant to the power described in
Section 3.3(T), all books, financial records, reports and accounts shall be open
to inspection by any Partner or duly authorized representative of the Partner on
reasonable notice during normal business hours, for any purpose reasonably
related to the Partner's interest as a Partner, and the Partner or the
representatives at the expense of the Partner shall have the further right to
make copies or excerpts therefrom; provided, however, that a copy of the
information described in clauses (A),(B),(C) and (D) of the second sentence of
this Section 10.4 shall be promptly delivered by the Managing General Partner,
at the expense of the Partnership, to any Partner requesting such information.
The Partner and the Partner's representatives shall not divulge to any Person
any confidential or proprietary data, information or property or any trade
secrets of the Partnership.
10.5 BANK ACCOUNTS. The Partnership shall establish and maintain
accounts in financial institutions (including, without limitation, national or
state banks, trust companies, or savings and loan institutions) in such amounts
as the Managing General Partner may deem necessary from time to time.
Partnership funds shall not be commingled with the funds of, or used as a
compensating balance on behalf of, any General Partner or any other Person.
Checks shall be drawn on and withdrawals of funds shall be made from any such
accounts for Partnership purposes and shall be signed by the Person or Persons
designated by the Managing General Partner. Temporary surplus funds of the
Partnership may be invested in commercial paper, time deposits,
36
<PAGE>
short-term government obligations or other investments as shall be determined by
the Managing General Partner.
ARTICLE 11
Transfer of Interests
11.1 TRANSFER OF INTERESTS.
(A) The term "transfer" when used in this Article with respect to a
Unit includes a sale, assignment, gift, exchange, or any other disposition.
(B) General Partner Interests are nontransferable without the consent
of all Partners except as provided in Article 7 and Section 13.1. The Limited
Partner hereby consents to any transfer pursuant thereto.
(C) Interests held by Limited Partners are nontransferable without the
consent of all Partners.
ARTICLE 12
Admission of Substituted and Additional Limited Partners
12.1 ADMISSION OF SUBSTITUTED LIMITED PARTNERS. A Limited Partner shall
have the power to give the transferee of such Person's Interests the right to
become a Substituted Limited Partner in the manner permitted in this Agreement.
An Assignee or transferee of an Interest may apply to become a Substituted
Limited Partner with respect to such Interest by executing and delivering a
Request and Power in form approved by the Managing General Partner. Upon receipt
by the Partnership of a completed and executed Request and Power, the name of
the transferee shall be added to the list of Limited Partners maintained by the
Partnership, whereupon such transferee shall become a Substituted Limited
Partner.
12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS. A Person other than a
General Partner (acting in its capacity as a General Partner), the Limited
Partner or a substituted Limited Partner who makes a contribution to the capital
of the Partnership in a manner permitted by the terms of this Agreement may,
with the approval of the Managing General Partner, be admitted to the
Partnership as an Additional Limited Partner upon furnishing to the Managing
General Partner: (A) a Request and Power; and (B) such other documents or
instruments as may be required in order to effect admission as a Limited
Partner. Upon receipt of such documents, the Partnership shall add the name of
such Person to the list of Partners maintained by the Partnership, whereupon
such Person shall become an additional Limited Partner.
37
<PAGE>
ARTICLE 13
Removal, Resignation or Withdrawal of General Partner
13.1 REMOVAL OF GENERAL PARTNER. A General Partner may be removed from
office as provided in Section 6.1 and shall be removed if such General Partner
is removed as general partner of the Limited Partner or Glenborough Partners.
Such removal shall take effect sixty (60) days from the date of the action by
the Limited Partner. At such time, the assets, books and records of the
Partnership shall be surrendered to the remaining or successor General
Partner(s), provided that the remaining or successor General Partner(s) shall:
(A) hold or have acquired sufficient General Partner Interests (which shall be
obtained from the removed General Partner) so that the General Partner(s) who
will continue to serve as General Partner(s) hold and have designated, in the
aggregate, at least a one percent (1%) interest in the Partnership as General
Partner(s); and (B) have complied with the provisions of Section 13.4. If such
removal dissolves the Partnership, then the Partnership shall be reconstituted
and its business shall be continued with any remaining and successor General
Partner(s) as the General Partner(s) thereof, and they shall have the exclusive
right to possess Partnership Property to continue the business of the
Partnership. Removal of a General Partner shall not prejudice the rights of the
removed General Partner to compensation pursuant to Article 4 accrued as of the
date the removal takes effect. The value of a removed General Partner's Interest
shall be agreed to by all Partners.
13.2 WITHDRAWAL. A General Partner may withdraw, resign or retire on
ninety (90) days' advance written notice to the Partners. A General Partner
shall cease to be a General Partner on the effective date of its or his
withdrawal, resignation or retirement.
13.3 DISSOLUTION OR BANKRUPTCY OF GENERAL PARTNER. A General Partner
shall cease to be a General Partner upon the happening of any of the following
events:
(A) The dissolution of the General Partner or, if the General Partner
is an individual, the death of the General Partner or the entry by a court of
competent jurisdiction of an order adjudicating the General Partner incompetent
to manage his person or estate;
(B) The General Partner: (1) makes a general assignment for the benefit
of creditors; (2) commences a voluntary case under the federal bankruptcy law;
(3) files a petition or answer seeking for the General Partner any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law, or regulation; (4) files an answer or
other pleading admitting or failing to contest the material allegations of a
38
<PAGE>
petition filed against the General Partner in any proceeding of the nature
described in clause (3); or (5) seeks, consents to or acquiesces in the
appointment of a trustee, receiver, or liquidator of the General Partner or of
all or any substantial part of the General Partner's properties;
(C) An order for relief against the General Partner is entered under
Chapter 7 or 11 of the federal bankruptcy law;
(D) Sixty (60) days after the commencement of any proceeding against
the General Partner seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law,
or regulation, if the proceeding has not been dismissed;
(E) Sixty (60) days after the appointment without the General Partner's
consent or acquiescence of a trustee, receiver, or liquidator of the General
Partner or of all or any substantial part of the General Partner's properties,
if the appointment is not vacated or stayed, or sixty (60) days after the
expiration of any such stay, if the appointment is not vacated; or
(F) Upon the General Partner ceasing to be a general partner of either
the Limited Partner or Glenborough Partners for any reason other than the
dissolution of that partnership provided that there is no longer an Affiliate of
a General Partner serving as a general partner of such partnership.
13.4 LIABILITY AND RIGHTS. A General Partner shall be discharged from,
and the Partnership or any Person or Persons continuing the business of the
Partnership in the event it has been dissolved, shall assume and pay, as they
mature, all Partnership obligations and liabilities that exist on the date of
such General Partner's removal from the Partnership or on the date on which it
or he ceases to be a General Partner under Sections 13.2 or 13.3, and shall hold
such General Partner harmless from any action or claim arising or alleged to
arise from obligations and liabilities accruing after such date; provided,
however, that nothing in this Section 13.4 shall relieve or discharge, nor shall
the Partnership indemnify or hold harmless, such General Partner from any
individual obligation or liability of such General Partner (as distinguished
from a Partnership obligation or liability) to the Partnership or third parties.
On the date of removal of a General Partner or the date on which it ceases to be
a General Partner under Sections 13.2 or 13.3, or as soon thereafter as
possible, the Partnership or any Person or Persons continuing the business of
the Partnership shall file an amendment to the Certificate of Limited
Partnership reflecting the removal of the General Partner or the fact that the
General Partner has ceased to be a General Partner. The Partnership or any such
Person or Persons continuing the business of the Partnership shall promptly
notify all creditors of the
39
<PAGE>
Partnership as of such date: (A) of the removal of such General Partner and the
resulting dissolution of the Partnership (if the Partnership has dissolved) or
of the General Partner ceasing to be a General Partner pursuant to Sections 13.2
or 13.3, as the case may be; (B) that such General Partner shall not be
personally liable for the Partnership's obligations and liabilities after such
date; and (C) if applicable, of the assumption of all the Partnership's
obligations and liabilities by the Partnership or such Person or Persons
continuing the business of the Partnership. The Partnership or such Person or
Persons continuing the business of the Partnership (if the Partnership has
dissolved) shall use its or their best efforts to procure and execute an
agreement from creditors of the Partnership discharging such General Partner
from liability to such creditors as of the date the General Partner is removed
or ceases to be a General Partner. Such General Partner shall have the same
rights to inspect and make copies or excerpts of the books and records of the
Partnership as is provided to Partners pursuant to Section 10.4 until all
amounts due such General Partner as of the date the General Partner is removed
or ceases to be a General Partner pursuant to Section 3.6 and Article 4 have
been paid. The General Partner shall be a creditor of the Partnership as to all
such amounts owed to it or him by the Partnership. Any General Partner Interests
held by a General Partner after it or he has been removed, or it or he ceases to
be a General Partner, shall be transferred to such Person or Persons who remain
as or succeed such General Partner as General Partner(s).
13.5 SUCCESSOR AND PREDECESSOR GENERAL PARTNERS. Unless a General
Partner has been dissolved because of bankruptcy, insolvency, liquidation or
ceases to be a General Partner because of death, disability, incapacity or
incompetency or unless a General Partner has been removed as General Partner,
upon dissolution of a General Partner, any Person continuing the business of the
General Partner so affected shall immediately become a General Partner of the
Partnership (and shall become Managing General Partner if the General Partner so
affected was the Managing General Partner) without any action or vote of any
Person. If any dissolution of a General Partner causes a dissolution of the
Partnership, then the Partnership shall be reformed and reconstituted and its
business continued as provided in this Section and Article 14. If it is
necessary or advisable to reform and reconstitute the Partnership and to
continue its business, the remaining and successor General Partners shall elect
to reform and reconstitute the Partnership and to continue its business. When
any Person ceases to be a General Partner under this Agreement or a partner,
shareholder, director, officer, employee or agent of a General Partner, that
Person shall continue to have the benefit of any provisions of this Agreement
providing for indemnity, exculpation or insurance which protected such Person as
a General Partner or a partner,
40
<PAGE>
shareholder, director, officer, employee or agent of a General Partner, or which
limited or defined the liability of such Person.
ARTICLE 14
Dissolution, Winding Up and Liquidation
14.1 DISSOLUTION. The Partnership shall be dissolved at the expiration
of the term of the Partnership set forth in Section 2.5; provided, however, that
the Partnership shall be dissolved prior thereto without breach of this
Agreement upon occurrence of one of the following:
(A) The removal, resignation, retirement, withdrawal, bankruptcy,
insolvency, dissolution, liquidation, death, disability, incapacity or
incompetency of a General Partner; provided, however, that unless applicable law
shall under the circumstances require a dissolution notwithstanding an agreement
to the contrary, the Partnership shall not be dissolved but shall be continued
or, if dissolved, the business of the Partnership shall be continued by any
remaining or successor General Partner(s) upon obtaining the approval of a
Majority Interest. If no General Partner(s) remain or succeed or if the
remaining or successor General Partner(s) do not have the power under California
law to elect to continue or not to continue the business of the Partnership or
they elect not to continue the business, then, upon approval of all the Limited
Partners and the admission of one or more new General Partner(s), the
Partnership shall not be dissolved, but shall be continued or, if dissolved, the
business of the Partnership shall be continued;
(B) The Partnership becomes insolvent or bankrupt;
(C) The sale or other disposition of substantially all assets of the
Partnership and the cessation of active business;
(D) The passage of ninety (90) days after approval by a Majority
Interest to dissolve the Partnership; or
(E) The occurrence of any event which makes it unlawful for the
business of the Partnership to be continued.
Admission of a General Partner shall not cause the dissolution of the
Partnership.
14.2 AUTHORITY TO WIND UP. If dissolution occurs for any reason other
than the removal, resignation, retirement, withdrawal, bankruptcy, insolvency,
dissolution, liquidation, death, disability, incapacity or incompetency of the
Managing General Partner, the Managing General Partner shall have the authority
to wind up the business and affairs of the Partnership.
41
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If dissolution occurs by reason of the removal, resignation, retirement,
withdrawal, bankruptcy, insolvency, dissolution, liquidation, death, disability,
incapacity or incompetency of the Managing General Partner, and if the business
of the Partnership is not continued pursuant to Articles 13 or 14, the remaining
General Partner(s) shall have the authority to wind up the business and affairs
of the Partnership or, if no General Partner remains or survives, any Person
designated by a decree of court or designated by approval of a Majority Interest
shall wind up the affairs of the Partnership.
14.3 ACCOUNTING. Upon dissolution (if the business of the Partnership
is not continued), and again upon the termination of the Partnership after the
winding up of the affairs of the Partnership is complete, an accounting of the
Partnership shall be made and its financial statements shall be examined by the
independent public accountants of the Partnership, and a report thereon shall be
furnished to the General Partner(s) or legal representatives thereof and to all
Limited Partners and Assignees.
14.4 WINDING UP AND LIQUIDATION. Upon dissolution of the Partnership,
if the Partnership or the business of the Partnership is not otherwise continued
hereunder, it shall be wound up and liquidated. The Book Value of any assets not
sold shall be adjusted to their fair market value and any Net Income or Net Loss
shall be allocated to the Capital Accounts as if the Partnership recognized Net
Income or Net Loss equal to such adjustment. After such allocations, the assets
of the Partnerships shall be paid or distributed in the following order of
priority:
(A) To creditors, in the order of priority as provided by law, except
to secured creditors the obligations to whom will be assumed or otherwise
transferred on liquidation of the Partnership assets;
(B) Those amounts deemed necessary by the Persons winding up the
affairs of the Partnership for any contingent liabilities or obligations of the
Partnership shall be set aside as a reserve for contingent liabilities to be
distributed at such time and in such manner hereunder as the Persons winding up
the affairs of the Partnership shall determine in their sole discretion;
(C) To the General Partner(s) with respect to payments due to them
pursuant to Section 3.6 and Article 4;
(D) To each General Partner, Limited Partner and Assignee the amount of
their respective Capital Accounts.
42
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14.5 CLAIM OF LIMITED PARTNERS AND ASSIGNEES. No Limited Partner or
Assignee shall have the right or power to demand or receive property other than
cash, whether as a Return of Capital, a distribution, a payment on liquidation
or otherwise. The Limited Partners and Assignees shall look solely to the assets
of the Partnership for the payment of income allocated to the Limited Partners
or Assignees and the return of the Capital Contributions of the Limited
Partners, and if the assets of the Partnership remaining after payment or
discharge of the debts and liabilities of the Partnership are insufficient to
pay all or part of such income or Capital Contributions, no Limited Partner or
Assignee shall have any recourse against any General Partner, the Partnership or
any other Limited Partner or Assignee.
14.6 NO RESTORATION OF NEGATIVE CAPITAL ACCOUNTS. Neither the
Partnership nor any General or Limited Partner shall have the right to require
any Partner to restore a deficit balance in such Partner's Capital Account.
ARTICLE 15
Miscellaneous
15.1 NOTICES. All notices or other communications required or permitted
to be given pursuant to this Agreement shall, in the case of notices or
communications required or permitted to be given to the Limited Partner or his
Assignee, be in writing, and shall be considered as properly given or made if
personally delivered or if mailed by United States first class mail, postage
prepaid, or if sent by prepaid telegram, and addressed to the Limited Partner's
or Assignee's address for notices as it appears on the records of the
Partnership, and, in the case of notices or communications required or permitted
to be given to the General Partners or the Partnership, shall be in writing and
shall be considered as properly given or made if personally delivered, or if
sent by prepaid telegram, or if mailed by United States certified or registered
mail, postage prepaid, and addressed to the Managing General Partner at the
principal place of business of the Partnership as specified in Section 2.4. Any
Limited Partner or Assignee may change the address for notices, by giving notice
of such change to the Partnership, and the Managing General Partner may change
the address for notices to the General Partners or the Partnership by giving
notice of such change to the Limited Partner and his Assignee. Commencing on the
tenth (10th) day after giving of such notice, such newly-designated address
shall be such Partner's or Assignee's or the Partnership's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement. Any notice or other communication shall be deemed to
have been given as of the date on which it is personally delivered or, if mailed
or
43
<PAGE>
telegraphed to a General Partner which is not received by the General Partner
within ten (10) days after the date of its mailing or transmission shall be
deemed to have been given as of the date actually received by the General
Partner.
15.2 CHOICE OF LAW. This Agreement and all rights and liabilities of
the parties hereto with reference to the Partnership shall be subject to and
governed by the internal laws (and not the law pertaining to choice or conflict
of laws) of the State of California.
15.3 ARTICLE AND SECTION HEADINGS. The headings in this Agreement are
inserted for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
15.4 SOLE AGREEMENT. This Agreement and the exhibits hereto constitute
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings pertaining
thereto.
15.5 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts with the same effect as if all parties had all signed the
same document. All counterparts shall be construed together and shall constitute
one agreement. Each party shall become bound by the Agreement immediately upon
affixing his or her signature hereto, independently of the signature of any
other party.
15.6 REMEDIES CUMULATIVE. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which any
Person may be lawfully entitled.
15.7 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement, or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement,
or condition.
15.8 WAIVER OF ACTION FOR PARTITION. Each of the parties hereto
irrevocably waives during the term of the Partnership any right that he may have
to maintain any action for partition with respect to the Partnership Property.
15.9 ASSIGNABILITY. Subject to the restrictions on transferability
contained herein, each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the successors and assigns of the respective parties hereto.
44
<PAGE>
15.10 GENDER AND NUMBER. Whenever the context requires, the gender of
all words used hereby shall include the masculine, feminine and neuter, the
singular of all words shall include the singular and plural, and the plural of
all words shall include the singular and plural. Unless the context requires
otherwise, any reference to a General Partner shall include all General Partners
and any reference to the General Partners shall mean any General Partner.
15.11 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby, but
rather shall be enforced to the maximum extent permissible under applicable law.
15.12 ADDITIONAL DOCUMENTS. Each of the parties hereto agree to execute
and deliver such other and further documents, including without limitation,
designations, powers of attorney and other instruments, as the Managing General
Partner may reasonably request.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
GENERAL PARTNER:
GLENBOROUGH REALTY CORPORATION,
a California corporation
By: /s/ Robert Batinovich
----------------------------------
Title
----------------------------------
LIMITED PARTNER:
GOCO REALTY FUND I,
a California limited partnership
By: Glenborough Realty Corporation,
a California Corporation,
Its Managing Partner
By: /s/ Robert Batinovich
----------------------------
Title
----------------------------
45
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<NET-INCOME> 117557
<EPS-PRIMARY> 36.52
<EPS-DILUTED> 36.52
</TABLE>
