SECURITIES AND EXCHANGE COMMISSION
Washington 20549
____________________
SCHEDULE 14D-9
___________________
Solicitation/ Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
___________________
PROMETHEUS INCOME PARTNERS,
a California Limited Partnership
(Name of Subject Company)
____________________
PROMETHEUS INCOME PARTNERS,
a California Limited Partnership
(Name of Person(s) Filing Statement)
____________________
Units of Limited Partnership Interest
(Title of Class of Securities)
____________________
742941 10 7
(CUSIP Number of Class of Securities)
____________________
Vicki R. Mullins
Chief Financial Officer
Prometheus Development Co., Inc.
350 Bridge Parkway
Redwood City, California 94065-1517
(415) 596-5300
(Name, address and telephone number of person authorized to receive
notice
and communications on behalf of the person(s) filing statement)
Copy to:
Gary Apfel, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars, Suite 1600
Los Angeles, California 90067
(310) 788-1000
INTRODUCTION
This Solicitation/ Recommendation Statement on Schedule 14D-9
(this Schedule 14D-9) relates to (1) an unsolicited offer by Prom
Investment Partners, L.L.C., a Delaware limited liability company (the
Initial Bidder, and together with its affiliates, Apollo), to
purchase a portion of the outstanding units of limited partnership
interest (Units) of Prometheus Income Partners, a California Limited
Partnership (the Partnership), and (2) an agreement entered into by
the Partnership with PIP Partners - General, LLC, a California limited
liability company (PIP General), to make a tender offer a portion of
the Units.
Item 1. Security and Subject Company
This Schedule 14D-9 relates to the Units. The name and address
of the principal executive offices of the Partnership are Prometheus
Income Partners, a California Limited Partnership, 350 Bridge Parkway,
Redwood City, California 94065-1517.
Item 2. Tender Offer of the Bidder
(a) This Schedule 14D-9 relates to the tender offer (the Apollo
Tender Offer) made by Apollo, disclosed in a Tender Offer Statement
on Schedule 14D-1 (the Apollo Schedule 14D-1), dated October 18,
1996, to purchase up to 9,000 issued and outstanding Units at $405 per
Unit less the amount of any distributions declared or made with
respect to the Units between October 18, 1996 and the date of payment
of the purchase price (the Apollo Purchase Price) for the Units, net
to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated
October 18, 1996 (the Apollo Offer to Purchase), and the related
Letter of Transmittal, copies of which were filed with the Apollo
Schedule 14D-1 and received by the Partnership on October 21, 1996.
Prior to the Partnership's receipt of the Apollo Schedule 14D-1, the
Partnership had no knowledge of the Apollo Tender Offer or Apollo's
interest in the Partnership and thus had not been given an opportunity
to consider the Apollo Tender Offer, inquire of Apollo's experience or
intentions, or negotiate with Apollo to ensure that its offer and
plans were beneficial to the Partnership and the Limited Partners.
The Apollo Schedule 14D-1 states that the address of the Initial
Bidder's principal executive offices is Prom Investment Partners,
L.L.C., 1301 Avenue of the Americas, 38th Floor, New York, New York,
10019.
According to the Apollo Tender Offer, the managing member of the
Initial Bidder is AP-GP Prom Partners, Inc., a newly formed Delaware
corporation ("AP-GP") which is ultimately controlled by Apollo Real
Estate Capital Advisors II, Inc. ("Apollo Advisors"), as general
partner of Apollo Real Estate Advisors II, L.P. ("AREA II"), the
general partner of Apollo Real Estate Investment Fund II, L.P., a
recently formed private real estate investment fund and the sole
shareholder of AP-GP. The Apollo Offer states that the directors of
Advisors are Leon D. Black and John J. Hannan, who were founding
principals of Apollo Advisors, L.P., the respective managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P. and Apollo
Investment Fund III, L.P., private securities investment funds, and,
together with William L. Mack, of Apollo Real Estate Advisors, L.P.
and AREA II, the respective managing general partners of Apollo Real
Estate Investment Fund, L.P. and Apollo Real Estate Investment Fund
II, L.P. The business address for Messrs. Black, Hannan and Mack is
1301 Avenue of the Americas, New York, New York 10019.
(b) This Schedule 14D-9 also relates to the tender offer (the
PIP General Tender Offer) which PIP General has agreed to make,
summarized in an Agreement (the PIP General Tender Offer Agreement),
dated November 4, 1996, between PIP General and the Partnership (filed
herewith as Exhibit (a)(1)), to purchase up to 9,000 issued and
outstanding Units at $450 per Unit less the amount of any
distributions declared or made with respect to the Units between the
commencement of such tender offer and the date of payment of the
purchase price (the PIP General Purchase Price) for the Units, net
to the Seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the PIP General Tender Offer
Agreement. The number of Units acquired by PIP General as part of the
PIP General Tender Offer would be limited to that number of Units
transferable without triggering a termination of the Partnership. See
Item 8. Limitations on Transfers. PIP General has advised the
Partnership that the address of PIP General's principal executive
offices is 350 Bridge Parkway, Redwood City, California, 94065.
PIP General has informed the Partnership that it is beneficially
owned by Mr. Sanford N. Diller, the beneficial owner, President,
Secretary and a director of Prometheus Development Co., Inc. (the
General Partner), the general partner of the Partnership.
Item 3. Identity and Background
(a) The name and address of the Partnership, which is the person
filing this statement, are set forth in Item 1 above.
(b)(1) Except as described below, there are no material
contracts, agreements, arrangements or understandings or any actual or
potential material conflicts of interest between the General Partner
or its affiliates, on the one hand, and the Partnership, its executive
officers, directors or affiliates, on the other hand.
The PIP General Offer.
Pursuant to the PIP General Tender Offer Agreement, filed as
Exhibit (a)(1) hereto, PIP General has agreed to make the PIP General
Tender Offer. The principal terms of the PIP General Tender Offer
will include the following:
(A) A purchase price of $450 in cash for each Unit up to a
maximum of 9,000 Units, with proration among tendering Limited
Partners (as hereinafter defined) if more than 9,000 Units are
tendered;
(B) The PIP General Tender Offer will commence on or about
November 7, 1996 or soon thereafter as practicable (Commencement
Date), and will expire no sooner than 20 business days following the
Commencement Date;
(C) No minimum number of Units will be required to be
tendered by the Limited Partners;
(D) The maximum number of Units that PIP General will
accept will be 9,000 Units representing approximately 47.4% of all of
the outstanding Units, in order to avoid termination of the
Partnership under both section 708 of the Internal Revenue Code of 1986, as
amended, and as otherwise prohibited by the Partnership Agreement (as
hereinafter defined);
(E) The purchase price payable by PIP General will be
offset by Partnership distributions made or declared to selling
Limited Partners after the Commencement Date;
(F) Each tendering Limited Partner will, in connection
with a tender pursuant to the PIP General Tender Offer, grant to PIP
General a proxy to vote the tendered Units, similar to the proxy that
is contemplated under the Apollo Tender Offer;
(G) PIP General will have the right to extend, terminate,
or modify the PIP General Tender Offer at any time, subject to the
reasonable consent of the Partnership; and
(H) The PIP General Tender Offer may be conditioned upon
(i) the same conditions as the Apollo Tender Offer, except for the
condition contained therein that requires a minimum number of Units to
be tendered, and (ii) the Partnership obtaining the consent of
Prudential Insurance Company of America (the "Lender") to the
transaction contemplated hereby pursuant to those certain Deeds of
Trust each dated November 17, 1987 and related Promissory Notes (the
"Loan Documents") or the waiver of the Lender of the limitation on
sales, transfers or other disposition of Partnership interest
contained in the Loan Documents to the extent such apply to the
transfers contemplated by this Agreement.
As an inducement to PIP General to make the PIP General Tender
Offer, the Partnership has agreed, among other things, to disseminate,
at the Partnership's expense, the PIP General Tender Offer materials
to the Limited Partners and others in accordance with the rules and
regulations of the Securities and Exchange Commission (the SEC). In
addition, the Partnership has agreed to reimburse PIP General for all
of its legal, accounting, printing, filing, copying, mailing,
solicitation and all other costs, fees and expenses incurred in
connection with the PIP General Offer. The Partnership has also
agreed to indemnify, defend, save and hold harmless PIP General, its
officers, directors, members, shareholders, partners, employees,
attorneys, agents and representatives from and against any demands,
claims, causes of action, lawsuits, losses, liabilities, costs,
expenses and damages relating to, associated with or arising from the
PIP General Tender Offer, the Apollo Tender Offer, and any related
proceedings.
For a complete description of the terms and conditions of the PIP
General Tender Offer, reference is hereby made to the PIP General
Tender Offer Agreement, filed as Exhibit (a)(1) hereto, which is
hereby incorporated by such reference. All statements related to the
PIP General Tender Offer Agreement are qualified in their entirety by
the terms and provisions of the PIP General Tender Offer Agreement.
Relationship of Special Committee Members to PIP General.
A Special Committee (the Special Committee) of the Board of
Directors of the General Partner (consisting of the directors of the
General Partner other than Mr. Sanford N. Diller) has been formed to
consider the Apollo Tender Offer, the PIP General Tender Offer (as
defined below) and other offers, if any, that may be made for the
Units (collectively, the Offers). The members of the Special
Committee are also officers and employees of the General Partner.
They are also employees of other affiliates of Mr. Diller that are not
parties to any contracts, agreements, arrangements or understandings,
and do not have any actual or potential conflicts of interest, with
the Partnership.
The Partnership Agreement.
Pursuant to the Partnership's Second Amended and Restated
Agreement of Limited Partnership, (filed as Exhibit (c)(1) hereto, the
Partnership Agreement), the General Partner is the sole general
partner of the Partnership. All of the outstanding shares of the
General Partner are beneficially owned by Mr. Sanford N. Diller. Mr.
Diller is also President, Secretary and a director of the General
Partner. The General Partner has responsibility for all aspects of
the Partnership's operations. The Units are held by approximately
1,300 holders of record (the Limited Partners).
The Partnership Agreement for the Partnership contains numerous
provisions relating to the rights and obligations of the General
Partner and the Partnership, including without limitation; the
financial arrangement between the General Partner and the Partnership.
Under Section 5.3 of the Partnership Agreement, for each fiscal
quarter, subject to certain limitations contained in the Partnership
Agreement, the Partnership is to distribute all Distributable Cash
from Operations (as defined in the Partnership Agreement) as follows:
(a) Distributable Cash from Operations is to be distributed
quarterly and initially is to be distributed 100% to the Limited
Partners until the Limited Partners have received a sum each year
equal to a 10% Priority Return (as defined in the Partnership
Agreement); (b) after the receipt by the Limited Partners of a 10%
Priority Return, Distributable Cash from Operations is to be
distributed 100% to the General Partner until the General Partner has
received 5% of the aggregate cash distributed to the Limited Partners
in that year; and (c) thereafter, the Partnership is to distribute 95%
to the Limited Partners and 5% to the General Partner. Allocations of
income and loss and distributions of cash among the Limited Partners
are made pro rata based upon the number of Units held by the Limited
Partners.
The officers and directors of the General Partner receive no
direct remuneration in such capacities from the Partnership. The
beneficial owner, President, Secretary and a director of the General
Partner, Mr. Diller, also owns PIP General, which has agreed to make
the PIP General Tender Offer. The Limited Partners collectively
received aggregate distributions of Distributable Cash from Operations
in 1995 of approximately $1,550,000 and, through February 1996, have
received aggregate distributions of Distributable Cash from Operations
of approximately $375,000 in 1996. As previously reported,
subsequent to the February 1996 distribution the General Partner
determined that, in order to enable the Partnership to build reserves
to pay for repair and/or replacement costs related to the hardboard
siding at the Partnership Properties (see Item 4. The Solicitation
or Recommendation - (a) Recommendations of the General Partner -
Resolution of Hardboard Siding Problem), it was in the best interest
of the Partnership to temporarily suspend cash distributions. The
General Partner did not receive any distributions of Distributable
Cash from Operations in either 1995 or 1996.
Under Sections 5.4 of the Partnership Agreement, net proceeds
from the sale or refinancing of the Partnership Properties would be
utilized or distributed in the following priority (to the extent funds
are available): (a) to the payment of current Partnership obligations,
liabilities and expenses; (b) to the setting up of reserves which the
General Partner may, in its sole discretion, deem necessary for
Partnership debts or liabilities, whether payable or not yet payable,
including any contingent or unforeseen liabilities or obligations; and
(c) the balance would be distributed in the following order: (1) 100%
to the Limited Partners until each Limited Partner has received an
amount equal to (i) the excess of (A) a 10% Priority Return, less (B)
the sum of all previous cash distributions during the term of the
Partnership other than distributions of invested capital pursuant to
Section 5.4 (c)(1) of the Partnership Agreement; (ii) if applicable to
a Limited Partner, an Incentive Priority Return; and (iii) the Limited
Partners' remaining Invested Capital. Notwithstanding the foregoing,
the General Partner would be entitled to its Subordinated Property
Disposition Interest (as defined in the Partnership Agreement) upon
the sale of either or both of the Properties. Any balance from such
sale or refinancing of the Partnership Properties would be distributed
85% to the Limited Partners and 15% to the General Partners.
Notwithstanding the foregoing distributions of net proceeds from
the sale or refinancing arising from the termination of the
Partnership would be distributed first in proportion to, and to the
extent of, the positive capital account balances of the Limited
Partners and the General Partners, and thereafter as set forth above.
The General Partner also is entitled to receive a Subordinated
Property Disposition Interest pursuant to Sections 7.7 and 7.8 of the
Partnership Agreement equal to the lesser of (a) 3% of gross sale
price of a Partnership Property or (b) one-half of the competitive
real estate brokerage commission which would be charged by
unaffiliated parties rendering similar services, but subordinated to
the return to the Limited Partners of their Invested Capital plus a
10% Priority Return and, as appropriate, the Incentive Priority
Return. All real estate brokerage commissions or similar fees payable
to all persons involved in the sale of a Partnership Property may not
exceed 6% of the sales price.
Because the timing and amount of Distributable Cash from
Operations and profits or losses of the Partnership received by, or
allocated to, the General Partner and the Limited Partners may be
affected by various determinations by the General Partner under the
Partnership Agreement, including whether or not to sell or refinance
any of the properties owned by the Partnership (the Partnership
Properties) and the timing of any such sale or refinancing, the
establishment and maintenance of reasonable reserves, the level of
amortization of indebtedness, and other matters, the General Partner
may have a conflict of interest with respect to such determinations.
Article 4 of the Partnership Agreement provides for the
allocation of the Net Profits and Net Losses among the General
Partners and the Limited Partners.
Under Section 5.7 of the Partnership Agreement, if immediately
prior to the dissolution and termination of the Partnership the
General Partner's capital account has a deficit balance and the
Partnership's assets available for distribution upon dissolution and
termination are insufficient to provide distributions to Limited
Partners equal to their aggregate invested capital, the General
Partner shall be obligated to contribute to the Partnership that
amount of capital (if any) equal to the lesser of (a) an amount
sufficient to restore its capital account to zero, or (b) 1.01% of the
aggregate Capital Contributions of the Limited Partners, less any
capital previously contributed by the General Partner.
If the General Partner ceases to be a general partner upon the
occurrence of certain events set forth in the Partnership Agreement (a
Terminating Event), including withdrawal, removal as a result of the
Majority Vote of the Limited Partners, bankruptcy, reorganization or
dissolution and termination of the General Partner, then, pursuant to
Section 12.2 of the Partnership Agreement, the Partnership will, at
the election of the Partnership, either (a) purchase the General
Partner's interest or (b) convert to that of a special limited
partnership interest. Upon conversion of its interest to that of a
special Limited Partner, the terminated General Partner retains the
same rights to profits, losses, and distributions as before the
Terminating Event and would be entitled to the voting rights accorded
other Limited Partners. If the terminated General Partner's interest
is repurchased, it would receive from the Partnership the then present
value of its interest in the Partnership, determined by agreement of
the terminated General Partner and the Partnership. If such parties
cannot agree, the purchase price would be determined in accordance
with the then current rules of the American Arbitration Association,
with the expense of arbitration borne equally by the parties. If the
termination of the terminated General Partner was voluntary, the
method of payment for its interest would be under a non-interest
bearing unsecured, promissory note with principal payable from
distributions which the terminated General Partner otherwise would
have received under this Agreement if it had remained as General
Partner. If the termination is involuntary, the method of payment
would be a promissory note bearing interest at the reference rate of
the bank specified by the terminated General Partner, with equal
payments of principal and interest over a term of five years.
Under Section 6.6 of the Partnership Agreement, the Partnership
is permitted to engage in various transactions involving the General
Partner and its affiliates, as more fully described in the Partnership
Agreement.
Under Section 7.1 of the Partnership Agreement, the Partnership
reimburses the General Partner or its affiliates for (a) the actual
cost to the General Partner or its affiliates of goods and materials
used for or by the Partnership and obtained from entities which are
not affiliated with the General Partner; (b) expenses for specified
administrative services; (c) other administrative services, provided
that such services are necessary to the prudent operation of the
Partnership; and (d) funds advanced to the Partnership by the General
Partner or its affiliates pursuant to the Management Agreement (as
defined below); provided, however, that no reimbursement under
clause (c) above is permitted for services for which the General
Partner or its affiliates receive a separate fee and the amount of
such expenses may not exceed the lesser of (i) the actual cost of such
services or (ii) 90% of the amount which the Partnership would be
required to pay to independent third parties for comparable services.
For 1995, the General Partner or its affiliates, other than Maxim
Property Management (which was entitled to additional reimbursements
under the Management Agreement), did not receive any reimbursement for
direct or other administrative and out-of-pocket expenses.
Section 6.7 of the Partnership Agreement exculpates the General
Partner, its officers, directors and affiliates from liabilities to
the Partnership and indemnifies the General Partner, its officers,
directors and affiliates against liability to third parties resulting
from its or their acts or omissions, except in the event such
liabilities or losses resulted from misconduct or negligence (gross or
ordinary). As a result of the exculpation and indemnification
provisions, a Limited Partner may be entitled to a more limited right
of action than he or she would otherwise have if such provisions were
not included in the Partnership Agreement.
For further information regarding the Partnership Agreement,
reference is hereby made to the Partnership Agreement, filed as
Exhibit (c)(1) hereto, which is hereby incorporated by such reference.
All statements related to the Partnership Agreement are qualified in
their entirety by the terms and provisions of the Partnership
Agreement.
The Management Agreement.
The Partnership does not have any employees. Instead, Prom
Management Group, Inc., a California corporation, dba Maxim Property
Management (which formerly conducted business under the name The
Prometheus Company, Maxim), the majority of which is beneficially
owned by Mr. Diller, employs all of the personnel for the projects and
for the operation of the Partnership's developments and properties
pursuant to a Management and Operating Agreement, dated as of
October 1, 1992, by and between the Partnership and the Prom
Management Group, Inc., dba The Prometheus Company (filed as Exhibit
(c)(2) hereto, the Management Agreement). The senior management
personnel also act in such capacities for certain other real estate
partnerships in which Mr. Diller and other officers of the General
Partner hold interests. Maxim receives a fixed monthly fee, equal to
5% of the total operating revenues of the Partnership's properties
(the Partnership Properties), for such services, and is reimbursed
fully for all of its out-of-pocket expenditures (including salary and
salary-related expenses) incurred in connection therewith. In 1995,
the fixed management fee paid by the Partnership to Maxim was
approximately $219,000 and Maxim was reimbursed approximately $69,000
for office expenses related to the Partnership. The corresponding
amounts in the first nine months of 1996 were $189,000 and $111,000,
respectively. In addition, the Partnership Properties incurred
approximately $1,165,000 of operating expenses in 1995, of which
approximately $246,000 represented a pass-through of expenses relating
to on-site property management personnel hired by Maxim. The
corresponding amounts in the first nine months of 1996 were $1,019,000
and $201,000, respectively. In addition, the Partnership has agreed
to indemnify, protect, defend and hold harmless Maxim and its
principals, directors, partners, officers, shareholders, agents, and
employees for certain costs, expenses and other liabilities arising
out of their activities under the Management Agreement, except as a
result of willful misconduct.
In addition, Maxim is entitled to receive the following fees:
(a) A supervisory fee, subject to the terms and conditions of the
Partnership Agreement, equal to 8% of the total amount of expenditures
for projects in excess of five thousand dollars; (b) A legal fee equal
to 3.25 times the base hourly salary for legal matters in which Maxim
spends more than five hours per month monitoring, supervising,
corresponding or performing other related legal work; (c) A data
processing fee equal to $2.40 per apartment; and (d) An administrative
fee equal to 5% of the gross payroll attributable to the Partnership
Properties.
For further information regarding the Management Agreement,
reference is hereby made to the Management Agreement, filed as Exhibit
(c)(2) hereto, which is hereby incorporated by such reference. All
statements related to the Management Agreement are qualified in their
entirety by the terms and provisions of the Management Agreement.
Other Contracts with Affiliates.
The Partnership has entered into certain leases pursuant to a
Master Rent Agreement (the "Master Rent Agreement") between each of
the Partnership Properties and an affiliate of the General Partner,
pursuant to which such affiliate subleases corporate apartments to
third parties. The Master Rent Agreement contains standard rental
terms that are the same as those of other tenants of the Partnership
Properties and rentals paid pursuant to the Master Rent Agreement are
at market rates. The apartments are leased typically for a lease term
of one year or less. For further information regarding the Master
Rent Agreement, reference is hereby made to the Master Rent Agreement,
filed as Exhibit (c)(3) hereto, which is hereby incorporated by
reference. All statements related to the Master Rent Agreement are
qualified in their entirety by the terms and provisions of the Master
Rent Agreement.
The Partnership has entered into a Work Order and Contract (each
a "Paint Agreement") with respect to each of the two Partnership
Properties between Maxim, on behalf of the Partnership, and an
affiliate of the General Partner, pursuant to which such affiliate
provides services to paint the exteriors of the Partnership
Properties. For further information regarding the Paint Agreements,
reference is hereby made to the Paint Agreement, filed as Exhibits
(c)(4) and (c)(5) hereto, which are hereby incorporated by reference.
All statements related to the Paint Agreement are qualified in their
entirety by the terms and provisions of the Paint Agreements.
(b)(2) Except as described below, to the best knowledge of
the Partnership, there are no material contracts, agreements,
arrangements or understandings or any actual or potential material
conflicts of interest between the Partnership, the General Partner or
its affiliates, on the one hand, and Apollo, or their respective
executive officers, directors or affiliates, on the other hand.
The Apollo Schedule 14D-1 states that the Initial Bidder is an
owner of five Units. Under the Partnership Agreement, Apollo has not
complied with the conditions for the transfer of such Units.
Therefore, as provided in the Partnership Agreement, the purported
assignment of these five Units is null and void, and hence Apollo does
not own any Units.
In the event Apollo were to receive tenders for or otherwise to
acquire a substantial number of Units in accordance with the terms and
conditions of the Partnership Agreement, the consent of the General
Partner (which may not be unreasonably withheld) would be required in
order for Apollo to become a substitute Limited Partner. The General
Partner has not decided under what circumstances, if any, it would
admit Apollo as a substitute Limited Partner. In the event that
Apollo were to receive tenders for or otherwise to acquire a
substantial number of Units or the General Partner were to admit
Apollo as a substitute Limited Partner with respect to a substantial
number of Units, Apollo may be in a position to (a) prevent
non-tendering Limited Partners entitled to vote on Partnership matters
from taking action they desire but that Apollo opposes, and (b) take
action desired by Apollo but opposed by non-tendering Limited Partners
entitled to vote on Partnership matters. Under the Partnership
Agreement, a meeting of the Limited Partners may be called by Limited
Partners holding 10% or more in interest of the then outstanding Units
for any matters on which the Limited Partners may vote. A majority in
interest of the Limited Partners is entitled to take action with
respect to a variety of matters, including: removal of the General
Partner as the general partner of the Partnership; election of a
successor general partner; dissolution of the Partnership; approval or
disapproval of the sale of the Partnership Properties; any amendments
to the Partnership Agreement (subject to the consent of the General
Partner); and an election to continue the business of the Partnership.
If it were admitted as a substitute Limited Partner, Apollo, when
voting on such matters, would, according to the Apollo Offer, be
expected to vote Units owned and acquired by it in its interest, which
may not be in the interest of other Limited Partners or the General
Partner.
For information regarding litigation that the Partnership has
commenced against Apollo, see Item 8. Additional Information to be
Furnished - California Transaction.
Item 4. The Solicitation or Recommendation
(a) Recommendations of the General Partner
The Special Committee met with its financial and legal advisors
to review and consider the Apollo Tender Offer and the PIP General
Tender Offer and to determine what course of action is in the best
interest of the Partnership, the Limited Partners who may be inclined
to tender their Units, the Limited Partners who are not inclined to
tender their Units, the Limited Partners who tender their Units but
who will nonetheless remain as Limited Partners if more than 9,000
Units are ultimately tendered since a maximum of 9,000 Units will be
accepted, the tenants of the Partnership Properties and all people
employed to manage, develop and otherwise operate the Partnership
Properties. Based on its analysis and its consultation with its
advisors, the Special Committee has determined that while the PIP
General Tender Offer is substantially better than the Apollo Tender
Offer, unless a Limited Partner has a current or anticipated need or
desire for liquidity, it is in the best interests of the Limited
Partners to retain their Units (and not to tender to either PIP
General or Apollo) until the hardboard siding problem has been
resolved. The Special Committee has also determined that it is in the
best interest of the Partnership, all of the Limited Partners and the
tenants of the Partnership properties, that those Limited Partners who
do have a current or anticipated need or desire for liquidity should
tender their Units to PIP General in accordance with the terms of the
PIP General Tender Offer. Accordingly, the Special Committee
recommends that all Limited Partners reject the Apollo Tender Offer
and that only those Limited Partners who have a current or anticipated
need or desire for liquidation tender all, or a portion of, their
Units to PIP General in accordance with the terms of the PIP General
Tender Offer.
(b) The Special Committee reached the conclusions set forth in
Item 4(a) above after considering a variety of factors, including,
without limitation, the following:
Valuation
The Special Committee believes that, if the hardboard siding
problem can be resolved on favorable economic terms (see - Hardboard
Siding and Other Management Issues below), the value of the Units is
substantially greater than the price offered therefor in either of the
Tender Offers. This determination was based upon a variety of
factors, including, without limitation, the following:
(i) E&Y Kenneth Leventhal Real Estate Group (Ernst & Young, LLP)
(EYKL) has been retained as an advisor to the Special Committee.
Based on an appraisal it performed, EYKL orally advised the Special
Committee on November 4, 1996 that in EYKL's opinion the aggregate
market value of the Partnership Properties is $44,200,000.
EYKL also determined the current market value per Unit. In
determining the market value of a Unit, EYKL considered other factors
which reflect the on-going nature of the Partnership operations.
Among the factors considered were the marketability of the Units and
the minority interests held by individual Limited Partners. Based on
such factors, EYKL orally advised the Special Committee on November 4,
1996 that in its opinion the market value of a Unit is $683. EYKL did
not perform procedures which would allow them to render an opinion as
to the fairness of the transaction, nor did they render an opinion on
the adequacy, from a financial point of view, of the consideration
offered by Apollo to the Limited Partners as part of the Apollo Tender
Offer.
(ii) (1) The Special Committee's knowledge of the Partnership's
business, (2) the real estate market generally and in the area where
the Partnership Properties are located and (3) the Special Committee's
belief that Apollo's principal motivation is to pay as little as
possible for the Units and to sell them for as much as possible (the
Special Committee noted that Apollo stated in the Apollo Schedule 14D-
1 that it undertook no efforts to determine if the Apollo Purchase
Price is fair).
(iii) The opinion of the Special Committee that the Units are
long-term, illiquid investments and the full value of an investment in
the Units can only be realized by a Limited Partner who retains his,
her or its Units through to the sale of the Partnership Properties
followed by the liquidation of the Partnership.
(iv) No active trading market exists for the Units. Because the
Units are not listed on an exchange or quoted as reported on Nasdaq,
they are essentially illiquid. Limited private sales and sales
through certain intermediaries are the only current means for a
Limited Partner to liquidate an investment in Units. The Special
Committee believes that trading prices of any such sales do not
reflect the values inherent in the Units. In this regard, the Special
Committee anticipates that, in view of the absence of a public market
for the Units, once the Tender Offers have expired, the price for
Units through privately negotiated sales and sales through
intermediaries may be substantially less than the purchase price under
the Offer.
Timing of Offer
The Special Committee has determined that it is not a good time
for Limited Partners to sell Units. Such determination was made based
upon many factors, including, without limitation, the following:
(ii) The opinion of the Special Committee that Apollo's interest
in acquiring the Units, as well as interests in other real estate
partnerships, is based on the perception that the Units, as well as
other real estate limited partnership units, are grossly undervalued
when compared to the underlying value of the real estate owned by such
partnerships.
(iii) The opinion of the Special Committee that the trading price
of the Units is currently depressed due to the existence of the
hardboard siding problem and the Partnership's need to conserve cash
rather than continue making distributions as it had done in the past.
Resolution of Hardboard Siding Problem
The Special Committee believes that, at the current time, it is
not possible to predict what the ultimate impact of the hardboard
siding problem will be on the value of the Partnership Properties and
the Units. However, for the reasons described below the Special
Committee believes that, properly managed, the hardboard siding
problem can be resolved in a reasonable manner which will then allow
the Partnership to realize the full value of the Partnership
Properties resulting in greater value per Unit than either of the
Tender Offers.
The Partnership Properties, which together comprise 358 apartment
units, were constructed with hardboard siding. The Partnership has
learned that hardboard siding of the same type as that used at the
Partnership Properties is failing to perform as expected in a number
of projects in various parts of the United States, including in a 370
unit apartment project that is managed by Maxim, the same corporation
that manages the Partnership Properties, and where the hardboard
siding is the same as that which was used at the Partnership
Properties . The 370 unit project is located in the same county as
the Partnership Properties and is subject to the same general climate
conditions. As previously reported, a wood technology expert was
retained by Maxim to test the performance of the hardboard siding at
several properties managed by Maxim, including the Partnership
Properties. On November 1, 1996, this expert presented a preliminary
verbal report to Maxim which indicated that the physical
characteristics of the hardboard siding at the Partnership Properties
had deteriorated dramatically since the construction of the
Partnership Properties. The expert indicated that this deterioration
is in stark contrast to the performance of real wood.
In early September 1996, a structural engineer retained on behalf
of Maxim to investigate the hardboard siding at several properties
including the Partnership Properties reported that his preliminary
findings indicate damage which on the surface does not currently
appear to be major. However, such engineer has recommended destructive
testing in view of the deterioration, since there could be significant
problems which are not evident from the tests conducted to date.
Maxim is in the process of obtaining proposals to conduct such
destructive testing. In the 370 unit project referred to above, when
the first evidence of deterioration was discovered the problem also
did not appear to be major. The problem deteriorated rapidly,
however, and is currently believed to involve structural and other
damages which, exclusive of attorney's fees and other costs of
litigation, the owner's representatives contend exceed $28 million.
There is litigation pending against the manufacturer, architect and
various subcontractors relating to the 370 unit project; discovery in
that litigation has involved reviewing thousands of documents and will
require the depositions of numerous experts. The General Partner is
extremely concerned about the hardboard siding used on and the extent
of damage caused to the Partnership Properties. The Partnership
Properties and the 370 unit apartment project are different, and
therefore exact comparisons cannot be made in evaluating the
consequences and the resulting damages from the hardboard siding
problem. The General Partner has instituted litigation on behalf of
the Partnership similar to that pending with regard to the 370 unit
project.
In reaching the conclusions set forth above, the Special
Committee was advised by certain consultants, experts and attorneys as
to matters the Special Committee believes are relevant to their
analysis of the hardboard siding problem. Specifically, such advisors
explained to the Special Committee the current status of the hardboard
siding problem at the Partnership Properties, set forth the defendants
and possible defendants in the related litigation matter (including
some background of such entities) and described the potential
insurance coverage available to help satisfy the applicable claims.
In addition, such advisors told the Special Committee that, in their
opinion, the experience of Maxim and certain affiliates thereof
(including Mr. Diller) in managing the legal and business aspects of a
similar hardboard siding problem at another property managed by Maxim
should be invaluable in attempting to address the hardboard siding
problem at the Partnership Properties.
Taxes
The Special Committee believes that most Limited Partners who are
subject to income tax are likely to recognize a large gain on the sale
of their Units pursuant to either of the Tender Offers. Thus, such
Limited Partner selling Units will ultimately realize less net cash
than the consideration to be paid in either of the Tender Offers. See
the discussion under in Item 8. Additional Information to be
Furnished - Tax Issues.
Source of Financing of the Tender Offers
The Apollo Schedule 14D-1 does not indicate how Apollo would
finance the payment of the Apollo Purchase Price. The Apollo Schedule
14D-1 merely states that it is the present contemplation of Apollo
that it will obtain all of the funds necessary from capital
contributions from its members who have an aggregate net worth
substantially in excess of the amount required to purchase the Units.
The Special Committee is unable to evaluate the ability of Apollo to
obtain capital contributions from unnamed members. In contrast,
on November 1, 1996, PIP General informed the Special Committee that
the source of the PIP General Purchase Price would be a contribution
of funds therefor from Mr. Sanford N. Diller or an entity controlled
by Mr. Diller and that, if necessary, the source of the capital
contribution would be a loan from Bank of America. PIP General
provided the Special Committee with a letter from Bank of America to
Mr. Diller, dated November 1, 1996, which stated that Bank of America
believed it could issue a line of credit to Mr. Diller in an amount
substantially in excess of the amount required to consummate the PIP
General Tender Offer.
Threat to Corporate Policy Posed by Apollo Tender Offer
(i) In evaluating Apollo as an appropriate purchaser of the
Units, the Special Committee considered information in SEC filings
concerning Apollo's recent attempt to acquire Arvida/JMB Partners,
L.P. (Arvida), a real estate limited partnership with property
located in Florida. On June 19, 1996, an affiliate of Apollo Advisors
commenced a tender offer for 46% of Arvida's units at $411 per unit
which was subsequently raised to $461 per unit. The Schedule 14D-1
filed in connection with that offer expressly represented that it was
being made for investment purposes and that the purchaser does not
have any present plans or intentions with respect to a merger,
organization or liquidation of the partnership, a sale of assets or
refinancing of any of the partnership's properties or a change in the
management. Apollo was only able to attract 20% of the units with
that offer. However, four months later, Apollo commenced a new offer
for 25% of the units at a higher price per unit of $500. This time,
though, Apollo revealed its intentions in the accompanying Schedule
14D-1 filed October 17, 1996 which stated, [T]he Purchaser is seeking
to acquire control of the business of the Partnership. The SEC
filing went on to say that the purchaser had filed preliminary proxy
material with the SEC to remove the general partner and replace it
with an affiliate of Apollo Advisors.
The Apollo Schedule 14D-1 expressly states that, just like the
original Schedule 14D-1 filed in Arvida, the offer is being made for
investment purposes and that, just like the Schedule 14D-1 in Arvida,
The Purchaser does not currently intend to change current management
or the operation of the Partnership and does not have current plans
for any extraordinary transaction involving the Partnership.
However, in the opinion of the Special Committee, these claims by
Apollo are not credible in view of Apollo's history in Arvida and
other situations. Furthermore, the Special Committee noted that while
Apollo claims that it has no intention to change management, to this
date no one from Apollo or Liquidity Financial Advisors, Inc.
("Liquidity Financial"), Apollo's financial advisor, has contacted the
General Partner. The Special Committee believes that any potential
purchaser of the 47.4% of an entity (such as Apollo pursuant to the
Apollo Tender Offer) that intends to keep management unchanged would
reach out to such management, and would not make an unsolicited tender
offer without some form of prior contact. Accordingly, the Special
Committee believes that Apollo has undisclosed plans regarding the
Partnership, including a management change.
(ii) In contrast, the PIP General Tender Offer Agreement provides
that it is PIP General's intention that, if PIP General gains
effective control of the Partnership, the corporate policy of the
Partnership will continue in effect and that the Partnership's ability
to resolve favorably the hardboard siding problem will be maximized.
The Special Committee believes that this continuation of policy is in
the best interest of the Partnership, the Limited Partners and the
tenants and employees at the Partnership Properties.
(iii) Each of the Partnership Properties is subject to a Loan
Agreement and a Deed of Trust, Security Agreement and Fixture Filing
with Assignment of Rents (collectively, the "Loan Documents") in
connection with certain debt incurred by the Partnership as part of
the development of the Partnership Properties. Such loan documents
contain a limit on the sale, transfer or other disposition, in the
aggregate, of fifty percent (50%) or more of any interest in the
Partnership unless consent or waiver of the lender is obtained. A
violation of such provision would allow the lender thereunder to,
among other things, accelerate the payment of all principal and
interest and charge the Partnership a prepayment fee. The
consummation of either of the Offers, when combined with previous
sales, transfers or other dispositions of Units, would result in a
violation of such limitation and allow such lender to accelerate such
loans unless consent or waiver of the lender is obtained.
(iv) Apollo's financial advisor (as set forth in the Apollo
Offer) is Liquidity Financial. On September 17, 1996, the Court of
Chancery of Delaware, New Castle, found that Liquidity Financial was
trying to obtain voting lists for improper purposes in connection
with a tender offer involving other parties. The improper purposes
included trying to obtain the lists in anticipation of a possible
tender offer, to be conducted by a separate entity and in which
[Liquidity Financial's] interest would at best be token.
Accordingly, the court found that Liquidity Financial's interest
related solely to the investment fund's interest as a potential
buyer, not to [Liquidity Financial's] interest as limited partners.
The Special Committee believes that an entity such as Liquidity
Financial is not appropriate to be involved in the management of the
Partnership which carries with it a fiduciary duty to the Limited
Partners.
(v) The Apollo Tender Offer is conditioned upon, among other
things, a minimum of 4,750 Units being tendered and not withdrawn
prior to the expiration of the Apollo Tender Offer. If Apollo does
not receive tenders for such minimum number of Units, it would not,
according to the Apollo Tender Offer, be required to purchase any
tendered Units. In contrast, there is no minimum number of Units
required to be tendered as part of the PIP General Tender Offer.
Accordingly, holders of Units tendered and not withdrawn pursuant to
the PIP General Tender Offer will, unless some other condition of the
PIP General Tender Offer is not met, have at least some of its Units
purchased in accordance with such tender offer.
(vi) The Special Committee believes that it is vital to the
interests of the Partnership and the Limited Partners, and the
protection of the value of the Partnership Properties and the value of
the Units, that the general partner of the Partnership have experience
not only in the management and operation of apartment units, but also
in dealing with hardboard siding.
Based upon a review of various SEC filings, the Special Committee
is unaware of any experience that Apollo may have with hardboard
siding problems of the kind facing the Partnership. On the contrary,
the persons who control the General Partner, including, but not
limited to, Mr. Diller, have extensive hands-on dealings with and
management of issues which grow out of hardboard siding problems which
are similar to those existing at the Partnership Properties. Such
persons have engaged in extensive analysis of studies concerning the
hardboard siding problems; they are presently in litigation against
manufacturers, subcontractors, insurers and others as a result of
hardboard siding problems; and they have dealt with issues involving,
among others, lenders, tenants, partners, insurers, attorneys and
others as a result of hardboard siding problems.
The Special Committee believes that the General Partner is best
able to manage the Partnership's affairs in order to effectively deal
with all issues resulting from the hardboard siding problem in order
to which protect the Partnership Properties, the Partnership, the
Limited Partners and the Units.
Alleged Misstatements in Apollo Tender Offer
The Special Committee is of the opinion that the Apollo Tender
Offer contains a number of false and misleading statements. These
alleged misstatements can be grouped in the following categories:
(i) false and misleading statements concerning Unit prices in the
secondary market, (ii) false and misleading statements concerning
Apollo's true intentions with respect to the Partnership,
(iii) Apollo's failure to provide required financial information
concerning the bidder and its parent, (iv) false and misleading
statements concerning how Apollo obtained the names and addresses of
the Limited Partners to whom copies of the tender offer were mailed,
and (v) false and misleading statements concerning Apollo's putative
ownership of 5 Units.
A more complete description of alleged the misstatements in the
Apollo Tender Offer appears in the complaint that the Partnership
filed against Apollo and entities associated with Apollo to
preliminarily and permanently enjoin the Apollo Tender Offer. The
Complaint was filed November 4, 1996 in the United States District
Court for the Northern District of California.
On November 4, 1996, the Partnership sent a letter to the Limited
Partners in which it made the recommendations set forth in this
Schedule 14D-9 and summarized the reasons therefor. The letter, which
is filed as Exhibit (a)(3) hereto, is hereby incorporated herein by
reference thereto.
Item 5. Persons Retained, Employed or to be Compensated
The Partnership has engaged E&Y as advisor to the Special
Committee to prepare an appraisal of the Partnership Properties and a
valuation of the market value of the Units and to advise the Special
Committee as to other matters in connection with the Offers. The
Partnership has agreed to pay E&Y on an hourly basis for work
performed by E&Y (the aggregate of which has been estimated to be
approximately $50,000). The Partnership also has agreed to reimburse
E&Y for its reasonable out-of-pocket costs, and to indemnify it
against certain expenses, costs and other liabilities in connection
with its engagement, including liabilities under the federal
securities laws. E&Y has been previously been engaged by certain
affiliates of the General Partner to provide audit and other services.
Except as described above, neither the Partnership nor any person
acting on its behalf has employed, retained or compensated, or intends
to employ, retain or compensate, any other person or class of persons
to make solicitations or recommendations to holders of Units on its
behalf concerning the Offers.
Item 6. Recent Transactions and Intent With Respect to Securities
(a) To the best knowledge of the Partnership, neither the
Partnership, the General Partner nor any executive officer, director,
affiliate, subsidiary of the Partnership or General Partner effected
any transaction in the Units during the past 60 days.
(b) To the best knowledge of the Partnership, none of the
persons referred to in Item 6(a) presently intends to tender to
Apollo or PIP General any Units owned by such persons or entity
pursuant to either of the Tender Offers.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) On October 22, 1996, in response to the Apollo Tender Offer,
Mr. Diller informed representatives of the Partnership that he was
considering, either directly or through an affiliate, making a
competing tender offer for up to 9,000 Units. From October 22, 1996
to October 31, 1996, Mr. Diller discussed with such representatives
questions with respect thereto.
On October 28, 1996, the Special Committee (comprised of
directors of the General Partner other than Mr. Diller) was
established by the General Partner's Board of Directors.
On October 31, 1996, Mr. Diller met with the Special Committee
and informed the members thereof that he was considering making a
tender offer for up to 9,000 Units at a price of $415 per Unit. Mr.
Diller indicated that he believed it to be in the best interest of the
Partnership and the Limited Partners that they not tender their Units
at this time because of the existence of the hardboard siding problem
and its impact on the value of the Partnership property and the Units;
however, he indicated that he was prepared to make a competing tender
offer which, in his view, would protect the interests of all of the
Limited Partners. Mr. Diller informed the Special Committee that in
order to induce him to make a competing tender offer, he required
reimbursement by the Partnership of the costs and expenses incurred in
connection with the tender offer and indemnification by the
Partnership. The Special Committee encouraged Mr. Diller to increase
the price of his proposed tender offer and it indicated that it would
consider, in connection with a higher price, his request for expense
reimbursement and indemnification.
On November 1, 1996, Mr. Diller submitted to the Special
Committee a proposal pursuant to which an affiliate would agree to
make a tender offer to acquire up to 9,000 Units at a price of $435
per Unit. This proposal also included a provision for reimbursement
of costs and expenses and a provision for indemnification of the
bidder and its affiliates by the Partnership, consistent with the
provisions presented to the Special Committee on October 31, 1996.
The Special Committee informed Mr. Diller later that day that it
believed that in order for it to support a tender offer by Mr.
Diller's affiliate, the price per Unit should be increased to $475.
The Special Committee indicated that it was in the process of
reviewing the other terms and conditions of Mr. Diller's proposal and
that, if Mr. Diller would respond promptly to the Special Committee's
request for an increased price, the Special Committee expected to be
in a position to discuss the proposal by mid-day on November 3, 1996.
Later on November 1, 1996, Mr. Diller responded to the Special
Committee that in the interest of protecting the Partnership and the
many investors who will necessarily remain limited partners even after
conclusion of the tender offer activity, Mr. Diller would increase the
proposed tender offer price to $445 per Unit.
On November 3, 1996, the Special Committee informed Mr. Diller
that it desired that he raise the proposed tender offer price to $455.
On November 4, 1996, Mr. Diller said that he would raise his offer to
$450. The Special Committee agreed to that price. Thereafter on
November 4, 1996, PIP General and the Partnership executed an
agreement that memorialized the understanding of the parties (filed as
Exhibit (a)(1) hereto).
Except as described above, no negotiation is being undertaken or
is underway by the Partnership in response to either tender offer
which relates to or would result in:
(1) an extraordinary transaction such as merger or
reorganization, involving the Partnership or any subsidiary of the
Partnership;
(2) a purchase, sale or transfer of a material amount of
assets by the Partnership or any subsidiary;
(3) a tender offer for or other acquisition of securities
by or of the Partnership; or
(4) any material change in the present capitalization or
dividend policy of the Partnership.
(b) Except as described above or in Item 3(b), there are no
transactions, board resolutions, agreements in principle or signed
contracts in response to either Tender Offer which relate to or would
result in one or more of the matters referred to in Item 7(a).
Item 8. Additional Information to be Furnished.
Tax Issues.
The following is a brief summary of the tax consequences to a
Limited Partner subject to federal income taxation of selling his, her
or its Units under the terms of either of the Tender Offers. In
general, such Limited Partner will recognize gain or loss on the sale
of Units equal to the difference between the Limited Partner's amount
realized on the sale and the Limited Partner's adjusted tax basis in
the Units sold. The amount realized with respect to a Unit sold is
generally the sum equal to the amount of cash received by the Limited
Partner plus an amount of Partnership liabilities allocable to the
Unit. The amount of a Limited Partner's adjusted tax basis in the
Units sold will vary depending upon the Limited Partner's particular
circumstances and will be affected by allocations of Partnership
income, gain or loss, cash distributions made by the partnership to
the Limited Partner and the amount of Partnership liabilities
allocable to the Units.
While each Limited Partner should consult his, her or its tax
adviser as to the particular tax consequences of selling Units
pursuant to either of the Offers, the following will generally
quantify the federal income tax consequences of such sale to Limited
Partners subject to federal income taxation. A Limited Partner's
basis will vary depending upon when that Limited Partner became a
partner in the Partnership and what that Limited Partner paid for his,
her or its Units. For purposes of the analysis below, the basis
amount equals the average basis per Unit for a Limited Partner who has
been a partner since the beginning of the Partnership. Additionally,
since both the amount realized and the adjusted tax basis would
include a like amount of allocable Partnership liabilities, such has
been excluded from the analysis below.
Apollo Offer PIP
General Offer
For an Individual Investor Per Unit Per Unit
Sale price $405 $450
Average tax basis at September 30, 1996 145 145
Gain on sale $260 $305
Sale price $405 $450
Less federal capital gain tax (28% X Gain on Sale) 73
85
Net cash after federal tax $332 $365
At this point, it is estimated that virtually all of the gain
will be subject to federal capital gains tax rates if the Limited
Partner held the Units for more than one year. In general, the other
tax consequences as set forth in the Offers should be considered and
factored into the above analysis. In addition, the gain on sale will
also be subject to state tax consequences.
Limitations on Transfers.
Pursuant to the Partnership Agreement, no transfer or assignment
of Units which, when considered with all other transfers or
assignments during the twelve-month period ending with such transfer
or assignment, would, in the opinion of counsel to the Partnership,
cause a termination of the Partnership for federal income tax purposes
(which termination may occur when 50% or more of the total interest in
the Partnership capital and profits is transferred by sale or exchange
in a twelve-month period) shall be effective. Depending upon the
number of Units tendered pursuant to the Offers, sales of Units on the
secondary market for the twelve-month period following completion of
the Offers may be limited. The Partnership will not process any
requests for transfers of Units during such twelve-month period which
the Partnership believes would cause a tax termination of the
Partnership. For the period from November 1, 1995 to November 4,
1996, 461.5 (approximately 2.4%) of the Units were transferred. The
aggregate number of Units being sought pursuant to each of the Offers
equals approximately 47.4% of the Units and together equal
approximately 94.8% of the Units. However, because of the tax-related
transfer restrictions, in no event will an aggregate of 47.6% or more
of the Units be acquired pursuant to the Offers (reduced to the extent
of any prior transfers of Units within the preceding twelve months
unless such previously transferred Units can be traced to Units
accepted for purchase under the Offers). Thus, depending on the
number of Units acquired in the Offer which closes first, it is
possible that only a limited number of Units could be purchased
pursuant to the later-closing Offer.
A Limited Partner may recognize gain or loss on the sale of Units
pursuant to the Offers depending on the specific circumstances of the
Limited Partner. In addition, the ability of a Limited Partner to
fully utilize losses may depend on whether the Limited Partner sells
all or less than all of his or her Units pursuant to the Offers. The
Partnership does not anticipate that a Limited Partner who does not
tender his, her or its Units under the Offers will realize any
material tax consequences as a result of the election not to tender
his, her or its Units. Each Limited Partner should consult his, her
or its own tax advisor as to the particular tax consequences to such
Limited Partner of selling or not selling Units pursuant to the
Offers.
Secondary market sales activity for the Units, including
privately negotiated sales, has been limited and sporadic. The
Partnership's Annual Report on Form 10-K for the year ended December
31, 1995 states that [n]o public market for Units exists or is
expected to be established for the Units. The General Partner
established a Limited Liquidity Plan which provides Limited Partners
with the option, subject to certain conditions, to have their Units
repurchased by the Partnership (or a person designated by the
Partnership). Privately negotiated sales and sales through
intermediaries currently are the only other means available to a
Limited Partner to liquidate an investment in Units (other than offers
to purchase, including the Offers) because the Units are not listed or
traded on any exchange or quoted on any NASDAQ list or system. High
and low sales prices of Units may be obtained through certain entities
such as Partnership Profiles, Inc., an independent, third-party source
which reports such information; however, the gross sales prices
reported by Partnership Profiles, Inc. do not necessarily reflect the
net sales proceeds received by sellers of Units, which typically are
reduced by commissions and other secondary market transaction costs to
amounts less than the reported prices. The Partnership anticipates
that, in view of the absence of an established market for the Units,
once the Offers have expired, the price for Units through privately
negotiated sales and sales through intermediaries may be substantially
less than the purchase price under either of the Offers.
California Litigation
On November 4, 1996, the Partnership and the General Partner
commenced an action against Apollo under the Williams Act to
preliminarily and permanently enjoin the Apollo Tender Offer. The
action, which was brought in the United States District Court for the
Northern District of California, is entitled, Prometheus Income
Partners, a California Limited Partnership v. Prom Investment
Partners, LLC, AP-GP Prom Partners Inc., Apollo Real Estate Capital
Advisors II, Inc., Apollo Real Estate Advisors II, L.P., Apollo Real
Estate Investment Fund II, L.P., Liquidity Financial Group, L.P., and
Liquidity Financial Corp. The Complaint alleges, among other things,
that the Apollo Schedule 14D-1 is materially incomplete and misleading
in violation of the disclosure and antifraud requirements of Sections
14(d) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. sections
78n (d)-(e), and the rules and regulations promulgated under that Act
by the Securities and Exchange Commission.
Item 9. Material to be Filed as Exhibits.
The following Exhibits are filed herewith:
(a)(1) Agreement to Make Tender Offer, dated November 4, 1996
between the Partnership and PIP General
(a)(2) Form of Letter to Limited Partners, dated October 25,
1996
(a)(3) Form of Letter to Limited Partners, dated November 4,
1996
(c)(1) Second Amended and Restated Limited Partnership
Agreement of Prometheus Income Partners, a California
Limited Partnership, by and among Prometheus Development
Co., Inc., a California corporation as the General Partner,
and Prom XX, Inc., a California corporation, as the Initial
Limited Partner, and the parties admitted as Limited
Partners.
(c)(2) Management and Operating Agreement, dated as of
October 1, 1992, by and between Prometheus Income Partners
and Prom Management Group, Inc. dba The Prometheus Company,
with attached form of letter dated January 1, 1994 of
Prometheus Management Group dba Maxim Property Management.
(c)(3) Master Rent Agreement between Alderwood Apartments or
Timberleaf Apartments and The Corporate Living Network.
(c)(4) Work Order and Contract between Maxim Property
Management and Apollo Paint company dated August 21, 1996
re: Timberleaf Apartments
(c)(5) Work Order and Contract between Maxim Property
Management and Apollo Paint Company dated September 20, 1995
re: Alderwood Apartments
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is
true, complete and correct.
PROMETHEUS INCOME PARTNERS,
a California Limited Partnership
By: Prometheus Development Co.,
Inc.,
a California corporation
By:_____________________________
_
Name: Vicki Mullins
Title: Chief Financial
Officer
Exhibit (a)(1)
AGREEMENT TO MAKE TENDER OFFER
This Agreement, dated as of November 4, 1996, is entered into
between PROMETHEUS INCOME PARTNERS, a California Limited Partnership
(the "Partnership"), and PIP PARTNERS - GENERAL, LLC, a California
limited liability company ("PIP General").
AGREEMENT
The parties, intending to be legally bound hereby, agree as
follows:
1. The PIP General Tender Offer
1.1 The Terms of the PIP General Tender Offer
PIP General agrees that on the Commencement Date (as defined
below), PIP General shall make a tender offer on United States
Securities and Exchange Commission ("SEC") Schedule 14D-1 Tender Offer
Statement and related offers and documentation (collectively the "PIP
General Tender Offer") and file the same in accordance with the SEC's
rules and regulations governing tender offers. The terms and
conditions of the PIP General Tender Offer shall be as follows:
a. A purchase price of $450 in cash for each unit of
limited partnership interest (the "Units") of the Partnership;
b. The offer will commence on November 7, 1996, or as
soon thereafter as practicable ("Commencement Date"), and will expire
no sooner than 20 business days following the Commencement Date,
unless extended in the sole discretion of PIP General;
c. There will be no minimum number of Units required to
be tendered by holders of Units (the "Limited Partners");
d. The maximum number of Units that PIP General will
accept will be 9,000 Units representing 47.4% of all of the
outstanding Units, or such lesser number as necessary in order to
avoid termination of the Partnership under section 708 of the Internal
Revenue Code of 1986, as amended, or as otherwise prohibited under the
Partnership Agreement of the Partnership (the Partnership
Agreement);
e. The purchase price payable by PIP General will be
offset by Partnership distributions made or declared to a selling
Limited Partner after the Commencement Date;
f. Each tendering Limited Partner will also grant to PIP
General a proxy to vote the tendered Units, similar to the proxy
granted in the tender offer made by Prom Investment Partners, L.L.C.,
a Delaware limited liability company, in connection with that certain
Schedule 14D-1, dated October 18, 1996 (the "Apollo Tender Offer");
g. PIP General will reserve the right to extend,
terminate, amend and/or modify the PIP General Tender Offer at any
time, subject to the reasonable consent of the Partnership; and
h. The PIP General Tender Offer may be conditioned upon
(i) the same conditions as the Apollo Tender Offer, except for the
condition contained therein that requires a minimum number of Units to
be tendered, and (ii) the Partnership obtaining the consent to the
transfers of Units contemplated hereby from the lender pursuant to
those certain Deeds of Trust secured by the Partnership's properties
and related Promissory Notes (the "Loan Documents") or the waiver by
such lender of the limitation on sales, transfers or other
dispositions of Partnership interests contained in the Loan Documents
to the extent such apply to the transfers contemplated by this
Agreement.
1.2 Recommendation by Partnership. The Partnership will file
with the SEC a Schedule 14D-9 on November 4, 1996 in which the
Partnership will recommend to its Limited Partners that those of the
Limited Partners wishing to sell their Units should tender same to PIP
General pursuant to the PIP General Tender Offer.
1.3 Partnership Dissemination of PIP General Tender
Offer/Reimbursement of Expenses. The Partnership will, among other
things, do the following:
a. On the Commencement Date or as soon as practicable
thereafter, promptly disseminate the PIP General Tender Offer
materials to the Limited Partners and others in accordance with SEC's
rules and regulations, at the Partnership's expense; and
b. Upon commencement of the PIP General Tender Offer and
from time to time thereafter as requested by PIP General, shall
reimburse PIP General for all of its legal, accounting, printing,
filing, copying, mailing, solicitation, and all other costs, fees, and
expenses incurred in connection with this Agreement and the
preparation and review of all schedules, forms, disclosure statements,
offers, transmittals, reports, press releases, letters, memoranda, and
any and all other documents or communications utilized in connection
with the PIP General Tender Offer, the partnership's response to the
Apollo Tender Offer, whether or not filed with the SEC or delivered to
Limited Partners, and any other actions taken in connection with any
of the foregoing. The Partnership will promptly reimburse PIP General
for the above expenses as incurred upon submission by PIP General of
requests for payment along with reasonable evidence of such expenses.
1.4 Information Agent/Depositary. PIP General shall select such
information agent/depositary to be utilized in connection with the PIP
General Tender Offer, subject to the Partnership's reasonable
approval.
1.5 Communications/Press Releases. All press releases and other
communications from PIP General to Limited Partners in connection
with the PIP General Tender Offer shall be subject to the prior review
and reasonable approval of the Partnership.
1.6 Cooperation. The Partnership will provide at its expense to
PIP General and its agents and representatives, as requested, copies
of the partnership agreement of the Partnership currently in effect
(the "Partnership Agreement") and amendments thereto, financial
information related to the Partnership that is otherwise public,
partner information and addresses, and all SEC and other governmental
reports and filings concerning the Partnership, to the extent the same
are pertinent to the contents of the PIP General Tender Offer. PIP
General will provide, at the Partnership's expense, to the Partnership
and its agents and representatives: (a) copies for approval by the
Partnership of all SEC and other governmental reports and filings
concerning the PIP General Tender Offer, as well as drafts of the PIP
General Tender Offer, prior to the filing of the same with the SEC,
and (b) information about PIP General and the officers, directors,
members, agents and representatives to the extent the same relates to
(i) such persons' experience in the development, construction, and
management of real estate projects, including dealings with hardboard
sidings problems of the type being suffered by the Partnership, and
(ii) other background information required pursuant to Schedule 14D-1
or 14D-9.
2. Conditions to PIP General's Obligations.
The obligations of PIP General to commence and effect the closing
of the PIP General Tender Offer (the "Closing") shall be subject to
the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by PIP General:
2.1 No Injunction. There shall not be in effect any injunction,
order or decree of a court of competent jurisdiction that restrains,
prohibits or delays the PIP General Tender Offer.
2.2 Representations, Warranties and Agreements. (a) The
representations and warranties of the Partnership set forth in this
Agreement shall be true and correct in all material respects as of the
Commencement Date and the date of Closing under the PIP Tender Offer,
except to the extent such representations and warranties expressly
relate to an earlier date, and (b) the Partnership shall have
performed and complied in all material respects with the agreements
contained in this Agreement required to be performed and complied with
by it prior to or at the Closing.
2.3 No Breach or Conflicts. There shall not be (a) any
violation of any provision of the Partnership Agreement or (b) any
violation, conflict with, default or breach (or event, which notice or
lapse of time or both, would constitute a default or breach) under any
material agreement, contract, instrument, deed of trust or commitment
to which the Partnership is party or by which it or its properties is
bound or affected or (c) any violation of any statute or law or any
judgment, decree, order, regulation or rule of any court or other
governmental body applicable to the Partnership.
3. Conditions to The Partnership's Obligations.
The obligations of the Partnership to fulfill the obligations
under sections 1.3, 1.6 and 7 shall be subject to the satisfaction at
or prior to the Closing of the following conditions, any one or more
of which may be waived by the Partnership:
3.1. Representations, Warranties and Agreements. (a) The
representations and warranties of PIP General set forth in this
Agreement shall be true and correct in all material respects as of the
date of this Agreement, and (b) PIP General shall have performed and
complied in all material respects with the agreements contained in
this Agreement required to be performed and complied with by it prior
to or at the Closing.
4. Representations and Warranties of the Partnership.
The Partnership represents and warrants to PIP General that the
Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of California; the Partnership
has the requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder; the execution,
delivery and performance of this Agreement have been duly authorized
by all necessary action of the Partnership, and this Agreement
constitutes a valid and binding obligation of the Partnership,
enforceable against it in accordance with its terms, except
bankruptcy, insolvency, reorganization, receivership, moratorium, and
other similar laws affecting the rights and remedies of creditors
generally, or under general principles of equity.
5. Representations and Warranties of PIP General.
PIP General represents and warrants to the Partnership that PIP
General is a limited liability company duly organized, validly
existing and in good standing under the laws of California; PIP
General has the requisite power and authority to execute and deliver
this Agreement and to perform its obligations hereunder; the
execution, delivery and performance of this Agreement have been duly
authorized by all necessary action of PIP General, and this Agreement
constitutes a valid and binding obligation of PIP General, enforceable
against it in accordance with its terms, except bankruptcy,
insolvency, reorganization, receivership, moratorium, and other
similar laws affecting the rights and remedies of creditors generally,
or under general principles of equity. It is PIP General's intent to
continue the corporate policy of the Partnership in effect
presently.
6. Covenants and Other Agreements.
6.1 Access. Between the date of this Agreement and the
consummation of the PIP General Tender Offer, the Partnership shall
(a) give PIP General and its authorized representatives full access to
all offices and other facilities and properties of the Partnership
and to the books and records of the Partnership, (b) permit PIP
General to make inspections thereof, and (c) cause its officers and
its advisers (including, without limitation, its auditors, attorneys,
financial advisors and other consultants, agents and advisors) to
furnish PIP General with such financial and operating data and other
information with respect to the business and properties of the
Partnership, and to discuss with PIP General and its authorized
representatives the affairs of the Partnership, all as PIP General may
from time to time reasonably request, except in no event shall the
Partnership be obligated to do any of the foregoing if such should
result in the waiver, in whole or in part, of the Partnership's
attorney-client privilege as to any matter.
7. Indemnification.
The Partnership shall indemnify, defend, save, and hold harmless
without limitation PIP General, its officers, directors, members,
shareholders, partners, employees, affiliates, attorneys, agents and
representatives (collectively the "Indemnitees") from and against any
and all demands, claims, causes of action, lawsuits, losses,
liabilities, costs, expenses and damages (including, but not limited
to, travel costs, attorneys' fees and costs, associated expert fees
and discovery costs of whatever nature) relating to, associated with
or arising from any of the following: (a) the PIP General Tender
Offer; (b) any investigation by any state or federal governmental
authorities relating to the PIP General Tender Offer or the Apollo
Tender Offer; (c) any administrative proceedings conducted by state or
federal authorities relating to the PIP General Tender Offer or the
Apollo Tender Offer; (d) any suits, legal proceedings, or other
actions by any of the Limited Partners of the Partnership, whether
directly or derivatively, and regardless of whether individually or as
a class, relating to the PIP General Tender Offer or the Apollo Tender
Offer; (e) any actions by either the bidder under the Apollo Tender
Offer, any agent, representative or affiliate of such bidder, or any
person associated with the bidder or such other persons under the
Apollo Tender Offer; and (f) any proceedings relating to the
foregoing. Any Indemnitee may defend itself with legal counsel
selected by such Indemnitee and reasonably approved by the
Partnership.
8. Miscellaneous.
8.1 Jurisdiction. Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State
of California, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of California,
and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein.
8.2 Captions. The captions in this Agreement are for
convenience of reference only and shall not be given any effect in the
interpretation of this Agreement.
8.3 No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement. Any waiver must be in writing.
8.4 Exclusive Agreement; Amendment. This Agreement supersedes
all prior agreements, understandings, arrangements, whether written or
oral, between the parties with respect to its subject matter and is
intended (with the documents referred to herein) as a complete and
exclusive statement of the terms of the agreement between the parties
with respect thereto. This Agreement cannot be changed or terminated
except by a written instrument executed by the party or parties
against whom enforcement thereof is sought; provided, however, nothing
contained herein will modify, limit or in any way affect the
provisions in the Partnership Agreement of the Partnership, and the
rights and obligations of the General Partner and the Partnership,
with regard to any matters contained in the Partnership Agreement,
including, but not limited to, the rights of the General Partner and
its affiliates to reimbursement of expenses and other items and
indemnification as provided for in the Partnership Agreement.
8.5 Counterparts. This agreement may be executed in
counterparts, each of which shall be considered an original, but all
of which together shall constitute the same instrument.
8.6 Governing Law. This agreement and (unless otherwise
provided) all amendments hereof and waivers and consents hereunder
shall be governed by the law of the State of California without giving
effect to any conflict of law provisions.
8.7 Attorneys' Fees. In any action or proceeding brought by a
party to enforce any provision of this Agreement, the prevailing party
shall be entitled to recover the reasonable costs and expenses
incurred by it in connection with that action or proceeding
(including, but not limited to, attorneys' fees and expenses and
expert witness fees).
(signatures on next page)
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year shown opposite their signatures.
PROMETHEUS INCOME PARTNERS,
a California limited partnership
By: Prometheus Development Co., Inc.,
a California corporation
Its general partner
By: _________________________
Its:_________________________
PIP PARTNERS - GENERAL, LLC,
a California limited liability company
By:
By:__________________________
Its:_________________________
Exhibit (a)(2)
[Prometheus Income Partners Letterhead]
October 25, 1996
To the Limited Partners:
By now you may have become aware of an unsolicited tender offer for up
to 9,000 Units of Limited Partnership Interest in Prometheus Income
Partners (such number of Units would represent approximately 47% of
the outstanding Units). The unsolicited tender offer was made by Prom
Investment Partners L.L.C., a Delaware limited liability company
unaffiliated with Prometheus Income Partners and ultimately controlled
by Apollo Real Estate Capital Advisors II, Inc.
There is no action that you need to take at this time. The General
Partner of Prometheus Income Partners is in the process of reviewing
the tender offer with its advisors and will advise you during the week
of November 4, 1996 as to its recommendation in connection with the
tender offer. Under the terms of the unsolicited tender offer, you
have until November 15, 1996 to tender your units if you determine to
do so.
We request that you wait to decide whether or not to accept or reject
the tender offer until the General Partner advises you of its
position on the tender offer.
Sincerely,
Prometheus Development Co., Inc.
General Partner
Exhibit (a)(3)
[PROMETHEUS INCOME PARTNERS LETTERHEAD]
Dear Limited Partners:
As you may be aware, an unsolicited tender offer for
approximately 47.4% of the Units of Prometheus Income Partners, a
California Limited Partnership, at $405 per Unit was commenced on or
about October 18, 1996 by a newly formed entity calling itself Prom
Investment Partners, L.L.C. DESPITE ITS CONFUSINGLY SIMILAR NAME,
THIS OFFER DID NOT COME FROM THE PARTNERSHIP OR THE GENERAL PARTNER.
A Special Committee of the Board of Directors of the General
Partner has carefully considered the offer from Prom Investment
Partners, L.L.C. and has determined that, for a multitude of reasons,
discussed in greater detail below, this offer is grossly misleading,
possibly illegal, and not in the best interests of individual
Unitholders or the Partnership. Accordingly, the Special Committee
strongly recommends that this offer be rejected.
However, for those of you who for whom it would be
advantageous to liquidate your investment at this time, there is an
alternative which the Special Committee does recommend. At the
request of the Partnership, Mr. Sanford N. Diller, a director of the
General Partner (as well as its beneficial owner, president and
secretary), has formed a company, PIP Partners - General, L.L.C.,
which has agreed to make a competing tender offer for up to 9,000
Units representing approximately 47.4% of the Units of the Partnership
at a price per Unit of $450. The Special Committee (which did not
include Mr. Diller) has carefully considered the terms of the proposed
PIP General offer and recommends that those Limited Partners who have
a current or anticipated need or desire for liquidation tender all, or
a portion, of their Units to PIP General in accordance with the terms
of that offer. It is the opinion of the Special Committee that all
other Limited Partners should retain their Units at this time. It is
anticipated that the PIP General offer will commence on or about
November 7, 1996.
In making these determinations and recommendations, the
Special Committee was guided by the following:
1. The opinion of E&Y Kenneth Leventhal Real Estate
Group, an affiliate of Ernst & Young, LLP, an independent financial
advisor retained by the Special Committee, that the market value of a
limited partnership interest in the Partnership is $683 per Unit.
2. The opinion of the Special Committee that now is not
the optimal time to sell the Units because limited partnership
interests in real estate limited partnerships like the Partnership are
undervalued generally, particularly in light of the improving real
estate market, including the market in Northern California (where the
Partnership's properties are located).
3. The numerous statements in the offer to purchase from
Prom Investment Partners, L.L.C., which in the opinion of the
Special Committee are misleading to many investors. Among other
things, the Special Committee found that:
l The statements grossly exaggerate the benefits of the
offer by comparing the offer of $405 per Unit to the
weighted average price per Unit during the period June
1, 1996 to July 31, 1996 of $265.18, when the weighted
average price per Unit for the most recent two-month
period, August 1, 1996 to September 30, 1996, was
actually $334.72. What is more, the offer omits to
mention that, in the most recent two-month period
ended September 30, 1996, the price per Unit actually
traded as high as $406.30 -- which is obviously higher
than his $405 offer -- and substantially higher than
the $271.32 figure Prom Investment Partners, L.L.C.
cited in its offer to purchase.
l The Special Committee did not believe the statement
that the offer was being made for investment
purposes to be credible. A similar representation
regarding investment purposes was made four months ago
by a company affiliated with Prom Investment
Partners, L.L.C. in making a tender offer for another
real estate limited partnership and, four months
later, proxy documents filed with the SEC reveal that
that company is now trying to replace the general
partner of that partnership with its own
representatives.
l The failure to provide to Limited Partners any
financial information concerning Prom Investment
Partners, L.L.C.; nor was any financial information
provided concerning any of the myriad other entities
affiliated with this entity.
l The failure to disclose that, rather than ask the
General Partner directly for the list of Limited
Partners in order to make the tender offer, the list
was acquired by getting one of the Limited Partners,
Liquidity Fund #34 LP, to ask for it without revealing
why it was being asked for, when the list was turned
over, rewarding that particular Limited Partner by
making an affiliate of that entity a financial
advisor and giving it a substantial financial stake
in the outcome of the Prom Investment Partners,
L.L.C. offer.
4. The opinion of the Special Committee is that it would
not be in the best interests of the Partnership and the Limited
Partners, or for the protection of the value of the Partnership
Properties and the value of the Units, to allow Prom Investment
Partners, L.L.C. to obtain control of the Partnership. The Special
Committee is of the opinion that the General Partner of the
Partnership must have experience not only in the management and
operation of apartment units, but also in dealing with hardboard
siding. As previously disclosed by the Partnership, and as explained
by the Partnership in its filings with the SEC recommending rejection
of the offer from Prom Investment Partners, L.L.C., in the
properties owned by the Partnership, as well as certain of the
buildings owned by parties affiliated with the Partnership, hardboard
siding used on such buildings has deteriorated -- a circumstance which
can have a major impact on the value and marketability of the
properties. The Special Committee is of the opinion that, as between
Prom Investment Partners, L.L.C. and the General Partner, the
General Partner has far superior capability and expertise in dealing
with this problem.
The Special Committee, in full consideration of the facts,
has instructed its counsel to take every appropriate action to ensure
that the unsolicited (and possibly illegal) tender offer of Prom
Investment Partners, L.L.C. does not succeed. Accordingly, the
Partnership and the General Partner have filed suit to preliminarily
and permanently enjoin Prom Investment Partners, L.L.C. and the
various entities with which it is affiliated, from proceeding with its
tender offer. The suit was filed on November 4, 1996 in the United
States District Court for the Northern District of California.
In the event that you have already tendered your Units to
Prom Investment Partners, L.L.C., there is a way to withdraw your
tender. Attached hereto is a form for that purpose entitled "Notice
of Withdrawal of Previously Tendered Units." Please complete it and
mail it as instructed on the form.
We will keep you advised as material events develop.
Sincerely,
PROMETHEUS DEVELOPMENT CO., INC.
PROMETHEUS INCOME PARTNERS
TO: THE HERMAN GROUP, INC.
By Hand/Overnight Delivery
THE HERMAN GROUP, INC.
26th Floor
2121 San Jacinto Street
Dallas, Texas 75201
By Facsimile (214) 999-9348 or (212) 999-9323
Confirm by telephone (800) 992-6147
Gentlemen:
The following limited partnership units (the Units) of
Prometheus Income Partners, a California Limited Partnership (the
Partnership), previously tendered to Prom Investment Partners L.L.C.
pursuant to its offer to purchase up to 9,000 Units (the Apollo
Tender Offer) are hereby withdrawn. A failure to complete the
Section Number of Units Tendered shall be deemed to indicate the
intent of the undersigned that all Units tendered to Prom Investment
Partners L.L.C. are hereby withdrawn.
All registered Unitholder(s) must sign exactly as name(s) appear(s) on
the Partnership records. See Instruction 3.
(Print Name(s))
Number of
Units
Tendered:
Dated:
(Signature(s))
If signing as a trustee, executor, administrator, guardian, attorney-
in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following
information and see Instruction 3.
Name(s) and
Capacity:
Address:
City, State: Zip Code:
Area Code and Tel. No.
(See Instructions on third page)
(To be completed only if signatures were guaranteed on original Letter
of Transmittal)
Name and Address of Eligible Institution:
Authorized Signature:
Title:
Name: Date:
1. DELIVERY OF NOTICE OF WITHDRAWAL. If withdrawing Units
previously tendered pursuant to the Apollo Tender Offer, please fully
complete, execute, detach and send the attached Notice of Withdrawal
of Previously Tendered Units of the Partnership (the Notice of
Withdrawal) to The Herman Group. The Herman Group must receive the
Notice of Withdrawal prior to 12:00 midnight, New York City time, on
November 15, 1996, unless further extended in accordance with the
Apollo Tender Offer. Receipt of the facsimile transmission of the
Notice of Withdrawal should be confirmed by telephone at the number
set forth on the Notice of Withdrawal.
2. INADEQUATE SPACE. If the space provided in the Notice of
Withdrawal is inadequate, all such additional information should be
listed on a separate schedule and attached as part of the Notice of
Withdrawal.
3. SIGNATURE ON NOTICE OF WITHDRAWAL. The Notice of Withdrawal
must be signed, as applicable, by the person(s) who signed the Letter
of Transmittal related to the Apollo Tender Offer, in the same manner
as such Letter of Transmittal was signed. The signatures must
correspond exactly with the name(s) as they appear on the Partnership
records. If any Units tendered pursuant to the Apollo Tender Offer
are registered in the names of two or more joint holders, all such
holders must sign, as applicable, the Notice of Withdrawal. If the
Notice of Withdrawal is signed by any trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
others acting in a fiduciary or representative capacity, such persons
should so indicate when signing and must submit proper evidence of
their authority to act.
4. GUARANTEE OF SIGNATURES. If the signature or signatures
were guaranteed on the Letter of Transmittal, then it or they must be
guaranteed on the Notice of Withdrawal.
Exhibit (c)(1)
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
PROMETHEUS INCOME PARTNERS
A CALIFORNIA LIMITED PARTNERSHIP
THIS SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT is
made by and among Prometheus Development Co., Inc., a California
corporation, as the General Partner, and Prom XX, Inc., a California
corporation, as the Initial Limited Partner, and the parties admitted
as Limited Partners.
RECITALS
Alderwood Apartments, Ltd., a California Limited Partnership (the
"Partnership"), was organized under the California Revised Limited
Partnership Act and under a Limited Partnership Agreement, dated as of
April 15, 1985 (the "Original Agreement"), with Prometheus Partners-
Alderwood Apartments, Ltd., a California Limited Partnership, as its
general partner. Prometheus Development Co., Inc. was added as a
general partner of the Partnership on September 2, 1986. Upon the
withdrawal of the Partnership's original general partner, Prometheus
Development Co., Inc. became the sole general partner of the
Partnership on September 4, 1986. The Partnership's name was changed
to Prometheus Development/Income Partners, a California Limited
Partnership, in September 1986. In December 1986, the Partnership's
name was changed to Prometheus Income Partners, a California Limited
Partnership.
The General Partner and the Initial Limited Partner entered into
the First Amended and Restated Limited Partnership Agreement, dated as
of September 19, 1986 (the "Amended Agreement"), under which the
Original Agreement was amended to provide for the public sale of
Units.
The General Partner has contributed $1,000 to the capital of the
Partnership. The Initial Limited Partner has contributed $10 to the
capital of the Partnership and shall withdraw as a Limited Partner and
have its interest redeemed at cost upon the admission of additional
Limited Partners.
The Partnership plans to develop, to hold, and ultimately to sell
two multi-family apartment complexes located in Santa Clara,
California. The principal investment objectives of the Partnership
are to preserve and protect the Partnership's capital, to obtain
capital appreciation from the effective management and sale of the
Properties, and to provide "tax sheltered" distributions of cash from
operations beginning in 1987.
The Partners now desire to amend and restate the Amended
Agreement.
NOW, THEREFORE, the Partnership's amended and restated
partnership agreement is set forth in its entirety as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms have the
definitions hereinafter indicated. These terms shall supersede and
replace any other definitions contained in the California Revised
Limited Partnership Act.
"Acquisition Expenses" shall mean expenses including but not
limited to legal fees and expenses, travel and communication expenses,
costs of appraisals, accounting fees and expenses, title insurance,
and miscellaneous expenses related to selection and acquisition of the
Properties.
"Acquisition Fees" shall mean the total of all fees and
commissions paid by any party in connection with the purchase of the
Properties by the Partnership, including real estate commissions,
selection fees, development fees, non-recurring management fee or any
fee of a similar nature, however designated.
"Act" shall mean the California Revised Limited Partnership Act,
as amended from time to time.
"Affiliate" shall mean (i) any Person or entity directly or
indirectly controlling, controlled by or under common control with
another Person or entity, (ii) any Person or entity owning or
controlling 10% or more of the outstanding voting securities of such
other entity, (iii) any officer, director or partner of such entity,
and (iv) any company for which such Person or entity acts as an
officer, director, trustee or partner.
"Agreement" shall mean this Second Amended and Restated Limited
Partnership Agreement as it may be amended or restated from time to
time.
"Assignee" shall mean a person who has acquired a beneficial
interest in one or more Units from a Limited Partner or an assignee
thereof but who is not a Substituted Limited Partner.
"Broker/Dealers" shall refer to the NASD registered broker-dealer
firms which have entered into a Selling Agreement with the Principal
Distributor for the sale of Units.
"Capital Contributions" shall mean $1,000 per Unit for all Units
sold including those sold net of underwriting commissions and the
Distributor Fee pursuant to Section 3.5 of the Agreement.
"Certificate(s) of Limited Partnership" shall mean the document,
and any amendments thereto, required to be executed by the General
Partner and/or Limited Partners and filed in the Office of the
California Secretary of State, and in the appropriate governmental
offices or county recorders of other states in which the Partnership
may do business, in order to create the Partnership and to obtain and
preserve the limitations on personal liability of the Limited Partners
under applicable law.
"Completion Date" shall mean the date on which the offering of
Units terminates, which shall be the earlier of (a) the date all of
the Units are sold, (b) February 12, 1988, unless the offering is
extended by the General Partner for up to an additional 12 months, or
(c) the date the General Partner, in its sole discretion, terminates
the offering.
"Completion Guaranty" shall mean the guaranty of the General
Partner to the Partnership, pursuant to Section 6.11 of the Agreement,
that the Properties will be completed free and clear of all financing
and construction liens (except any liens secured by deeds of trust
described in the Prospectus) at a total cost not to exceed
approximately $28,807,000, exclusive of negative cash flow associated
with lease-up expenses and the first year of operations.
"Completion Guaranty Fee" shall mean a fee equal to $600,000
payable to the General Partner in consideration for the Completion
Guaranty.
"Control Person" shall mean those persons who perform a function
similar to the chairman of the board or a member of the board of
directors, executive management (such as the president, vice
president, corporate secretary or treasurer), senior management (such
as the vice president of an operating division who reports directly to
executive management), or a person holding 5% or more equity interest
in the General Partner or its Affiliates or having the power to direct
or control the direction of the General Partner or its Affiliates,
whether through ownership of voting securities, by contract or
otherwise.
"Cost of Partnership Property" shall mean the total consideration
paid to acquire a Property, whether paid to the seller, the General
Partner or any other person, including cash and all liens and
mortgages on the Property but excluding points and prepaid interest
and the "Cost Of All Partnership Properties" shall be the sum total of
the "Cost of Partnership Property" for each Property.
"Credit Enhancement" shall mean a credit instrument including but
not limited to a bond from a AAA insurance company, a forward
commitment from a lender or a letter of credit satisfactory to and for
the benefit of the lender of the permanent financing insuring that the
loans secured by the Properties will be paid within a specified period
after the permanent financing is funded.
"Distributable Cash from Operations" shall mean the funds
provided from Partnership operations, excess Working Capital Reserves
and interest on the Partnership's cash and investments, without
deduction for non-cash expenses (such as depreciation and amortization
and any accrued debt service not yet payable), but after deducting
cash funds used to pay all other expenses, debt payments, capital
improvements and repairs, replacements, and after provision for
Working Capital Reserves.
"Distributions" (whether or not this term is capitalized) shall
mean any cash distributed to the Partners arising from their interests
in the Partnership but shall not include any compensation to the
General Partner or its Affiliates or any Partnership expense
reimbursements.
"Distributor Fee" shall mean the fee equal to 1% of gross
offering proceeds which is payable to the Principal Distributor.
"Drexel" shall mean Drexel Burnham Lambert Incorporated, the
investment banker which may provide permanent financing for the
Properties.
"Effective Gross Collections" shall mean all funds collected from
the Properties, including rents, security deposits and furniture
rentals, and revenues from carport, storage and laundry.
"Escrow Agent" shall mean Security Pacific National Bank, 333 S.
Beaudry, Los Angeles, California.
"Financial Forecast" shall mean the forecast included in the
Prospectus as Exhibit A.
"Front-End Fees" shall mean any fee, commission or expense paid
by any party for any services to the Partnership during the
Partnership's organization and acquisition phase, including
Organization and Offering Expenses, investment advisory fees,
Acquisition Fees, Acquisition Expenses, Initial Partnership Management
Fee, Completion Guaranty Fee, Initial Property Management Fee and
similar fees however designated.
"General Partner" shall mean Prometheus Development Co., Inc., a
California corporation, in its capacity as the general partner of the
Partnership, or the successor general partner of the Partnership.
"Gross Offering Proceeds" (whether or not this term is
capitalized) shall mean the aggregate amount of cash contributed to
the Partnership by purchasers of Units before deduction of underwrit-
ing commissions and the Distributor Fee or any other fees, received on
or before the Completion Date. For purposes of calculating
underwriting commissions and the Distribution Fee, Gross Offering
Proceeds shall not include the proceeds from any Units sold net of
underwriting commissions and the Distributor Fee.
"IRA" shall mean an Individual Retirement Account.
"Incentive Priority Return" shall mean the amount in addition to
the 10% Priority Return necessary to provide an 11% simple return for
the period from January 1, 1988 through December 31, 1988, on the
Invested Capital of each Limited Partner who subscribes for Units on
or before June 1, 1987, or any later date determined at the discretion
of the General Partner. This return shall be paid out of Net Proceeds
from Sale or Refinancing.
"Initial Lease-Up Fee" shall mean that one-time fee equal to
$106,000 payable to the General Partner pursuant to Section 7.5(d) of
the Agreement for obtaining initial tenants for the Properties.
"Initial Limited Partner" shall mean Prom XX, Inc., a California
corporation, in its capacity as the initial limited partner of the
Partnership.
"Initial Partnership Management Fee" shall mean that fee equal to
$291,000 payable to the General Partner, pursuant to Section 7.3 of
the Agreement, for organizing the Partnership, arranging for and
negotiating construction financing, arranging for and negotiating
permanent financing, obtaining (in connection with the permanent
financing) a Credit Enhancement satisfactory to the lender of the
permanent financing, insuring that the Partnership will meet certain
obligations, selecting and supervising professionals to perform
services for the Partnership, establishing Partnership accounts,
including an escrow account for use in connection with the offering of
the Units, and establishing a reporting system for submitting tax
information and periodic reports to the Limited Partners and
regulatory authorities.
"Initial Property Management Fee" shall mean the excess of the
Property Management Fee earned during the Lease-Up Period over 5% of
the Effective Gross Collections for such period.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
"Invested Capital" for a Limited Partner shall mean that Limited
Partner's Capital Contributions less the sum of all distributions (but
not distributions of Distributable Cash from Operations) made to the
Limited Partner and any prior owners of the Units.
"Investment in Properties" shall mean the amount of Gross
Offering Proceeds paid or allocated to the purchase, development,
construction or improvement of Properties, Working Capital Reserves
not in excess of 5% of the Gross Offering Proceeds and any other cash
payments such as interest and taxes but excluding Front-End Fees.
"Lease-Up Period" shall mean the period commencing on the date
certificates of occupancy are issued with respect to the Properties'
units and terminating on the date the aggregate occupancy rate of the
Properties is equal to 50% or more.
"Lender" shall mean the commercial or institutional lender which
will provide permanent financing or construction financing for the
Properties.
"Limited Partners" shall mean the Initial Limited Partner and any
other persons who are admitted to the Partnership as additional or
Substituted Limited Partners. Reference to a "Limited Partner" shall
be to any one of the Limited Partners.
"Loan Commitment Guaranty" shall mean the obligation of the
General Partner through December 31, 1991, to loan sufficient funds or
to arrange for a loan of funds to the Partnership to cover any
Operating Deficit for any calendar quarter.
"Majority Vote" shall mean the vote of Limited Partners who are
entitled to vote, consent or act and are holders of record of a
majority of the outstanding Units.
"Net Proceeds from Sale or Refinancing" shall mean, unless
otherwise specified (i) the net cash funds or proceeds (including lump
sum prepayments by buyers) resulting from the financing, refinancing
or sale of Partnership assets, after deduction of all expenses
incurred in connection therewith, including any real estate
commissions (and the Subordinated Property Disposition Interest) and
brokerage fees paid to third parties, plus (ii) all net cash proceeds
subsequently received on any installment payments on promissory notes
and/or installment contracts held by the Partnership in connection
with the sale of Partnership assets after payment of or provision for
any underlying indebtedness related to assets sold plus cash reserves
and working capital on hand, less (iii) such amounts for Working
Capital Reserves and other reserves as the General Partner deems
necessary for future Partnership operations.
"Net Profits" and "Net Losses" shall mean the profits and losses
of the Partnership determined in accordance with accounting methods
followed for federal income tax purposes.
"Operating Deficit" shall mean for any period the excess of (i)
all expenses from ongoing operations excluding the effect of non-
operating, extraordinary or capital items of the Partnership paid in
cash (which excludes non-cash expenses such as depreciation,
amortization and any accrued debt service not yet payable) less (ii)
the sum of funds provided from Partnership operations, Working Capital
Reserves and interest on the Partnership's cash and short term
investments.
"Organization and Offering Expenses" shall mean those expenses
incurred in connection with the registration of the Units and the
subsequent offer and sale of the Units under applicable federal and
state securities laws (or exemptions therefrom), including
underwriting commissions and the Distribu-tor Fee, and any other
expenses actually incurred and directly related to the qualification,
offer and sale of Units including without limitation such expenses as:
(i) registration and qualification fees, filing fees and taxes, (ii)
the costs of printing, amending, supplementing and distributing the
Registration Statement and Prospectus, (iii) the costs of obtaining
regulatory clearance, (iv) the costs of printing and distributing
sales materials used in connection with the offer and sale of Units,
(v) the costs related to investor and Broker/Dealer sales meetings,
(vi) accounting and legal fees incurred by the Partnership in
connection with any of the foregoing, and (vii) escrow fees.
"Partners" shall mean the General Partner and the Limited
Partners, collectively, and reference to a "Partner" shall be to any
one of the Partners.
"Partnership" shall mean Prometheus Income Partners, a California
Limited Partnership.
"Person" (whether or not this term is capitalized) shall mean any
natural person, partnership, corporation, association or other legal
entity.
"Principal Distributor" shall mean Prometheus Capital, Inc., a
California corporation.
"Principal Distributor Agreement" shall mean that certain
agreement between the Principal Distributor and the Partnership
concerning the sale of the Units.
"Properties" shall mean both the Alderwood Apartments and the
Timberleaf Apartments, as more specifically described in the
Prospectus. "Property" shall mean one of the Properties.
"Property Management Fee" shall mean the fee payable to the
General Partner, pursuant to Section 7.5 of the Agreement, for the
ordinary property management services related to the Properties.
"Prospectus" shall mean the final prospectus as filed by the
Partnership with the Securities and Exchange Commission pursuant to
Rule 424(b) and as supplemented from time to time.
"Proxy" shall mean a written authorization signed by a Partner or
the Partner's attorney-in-fact giving another person the power to vote
with respect to the interest of that Partner. "Signed" for the
purposes of this definition means the placing of Partner's name on the
proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the Partner or Partner's attorney-in-
fact.
"Qualified Plan" shall mean any trust established pursuant to the
terms of a Keogh plan or corporate pension, profit sharing or stock
bonus plan which meets the requirements of Section 401 et seq. of the
Internal Revenue Code.
"Reference Rate" shall mean the rate of interest announced from
time to time by a specified bank as its "reference rate," "prime rate"
or comparable rate. For purposes of the interest rate reimbursements
described herein, interest will be compounded daily on a 360-day year.
"Registration Statement" shall mean the Registration Statement on
Form S-11 (Reg. No. 33-9164), as amended, filed by the Partnership
with the Securities and Exchange Commission for the registration of
the Units.
"Selling Agreement" shall mean that certain Selling Agreement
between the Principal Distributor and a Broker/Dealer relating to the
offer and sale of Units.
"Subordinated Property Disposition Interest" shall mean an amount
to be paid to the General Partner upon sale or exchange of a Property
in the amount up to 3% of the gross sales price of a Property,
subordinated as indicated in Section 7.8(a) of the Agreement.
"Subscriber" shall mean a person who has completed a subscription
agreement and submitted it together with payment for the number of
Units being purchased to the General Partner.
"Subscription Agreement" shall mean the prescribed subscription
agreement, a form of which is included as Exhibit D to the Prospectus,
which must be executed as a condition precedent to becoming a Limited
Partner.
"Substituted Limited Partner" shall mean an assignee of a Limited
Partner or a substituted Limited Partner who is admitted at the
discretion of the General Partner, as a Limited Partner pursuant to
Section 11.5 of the Agreement.
"10% Priority Return" shall mean a 10% per annum cumulative
simple preferred return on the Invested Capital of each Limited
Partner, computed from the last day of the calendar quarter in which
the Limited Partner was admitted to the Partnership.
"Unit" shall mean a unit of limited partnership interest in the
Partnership.
"Working Capital Reserves" shall mean the reserve cash necessary
for the Partnership to meet its ongoing operating expenses as well as
any other anticipated cash obligations whether of a capital nature or
otherwise. All additions to and reductions from Working Capital
Reserves shall be determined at the sole discretion of the General
Partner.
ARTICLE 2
GENERAL PROVISIONS
2.1 Formation of the Partnership
The parties hereto confirm that the Partnership was formed
under the Act with such variations and terms as provided in this
Agreement.
2.2 Name of the Partnership
The name of the Partnership shall be "Prometheus Income
Partners, a California Limited Partnership," or such other name as
shall be selected from time to time by the General Partner upon
written notice to the Limited Partners.
2.3 Purposes
Subject to the limitations set forth in this Agreement, the
purposes of the Partnership are to develop and hold the Properties as
an investment; to raise capital for the foregoing; to develop, manage,
operate, lease, alter, improve and maintain the Properties; to acquire
additional personal property and construct or renovate such additional
real estate improvements on the Properties as are appropriate to the
operation of the Properties; to act in all other respects as the owner
of the Properties; to finance and refinance by mortgage or unsecured
loan or any combination thereof; ultimately to sell, transfer,
exchange or otherwise dispose of part or all of the Properties; and to
conduct such other activities as may be necessary or incidental to or
desirable in connection with the foregoing.
2.4 Principal Place of Business and Office of the Partnership
The principal place of business and office of the
Partnership shall be located at 20300 Stevens Creek Boulevard, Suite
100, Cupertino, California 95014, or such other place or places as the
General Partner may from time to time designate by notice to the
Limited Partners. In addition, the Partnership may maintain such
other offices as the General Partner deems advisable.
2.5 Term
The Partnership shall commence upon the filing with the
California Secretary of State of the Certificate of Limited
Partnership and shall continue until December 31, 2016, unless sooner
dissolved and terminated pursuant to the provisions of Article 13
hereof.
2.6 General Partner
The name and place of business of the General Partner is as
follows:
Prometheus Development Co., Inc.
20300 Stevens Creek Boulevard, Suite 100
Cupertino, California 95014
2.7 Certificate of Limited Partnership
The General Partner has caused to be filed a Certificate of
Limited Partnership with the California Secretary of State in
accordance with the terms of the Act.
2.8 Other Acts/Filings
The Partners and Assignees shall from time to time execute
or cause to be executed all such certificates, fictitious business
name statements, and other documents, and do or cause to be done all
such filings, recordings, publishings, and other acts as the General
Partner may deem necessary or appropriate to comply with the
requirements of law for the formation and operation of the Partnership
in all jurisdictions in which the Partnership shall desire to conduct
business.
2.9 Agent for Service of Process
The agent for service of process for the Partnership in
California shall be Stephen R. Koch or such other eligible individual
California resident or corporation qualified to act as an agent for
service of process as the General Partner shall designate.
ARTICLE 3
CAPITAL CONTRIBUTIONS AND RELATED MATTERS
3.1 Capital Contributions by the General Partner
The General Partner has contributed $1,000 to the capital of
the Partnership in consideration of its interest in the Partnership.
Except as provided in Section 5.7, the General Partner shall not be
required to make any additional contributions to the Partnership or to
reimburse any other Partner.
3.2 Capital Contributions by the Initial Limited Partner and the
Limited Partners
(a) Initial Limited Partner. The Initial Limited Partner
has contributed the sum of $10 to the capital of the Partnership.
Upon the admission of additional Limited Partners pursuant to Section
3.2(b), the Initial Limited Partner's interest shall be redeemed at
cost and the Initial Limited Partner shall have no further interest in
the Partnership.
(b) Initial Offering. The Partnership intends to offer
for subscription up to 19,000 Units for the price of $1,000 per Unit,
subject to Section 3.5, and admit each person who subscribes for at
least five Units (two Units if the person subscribing is an IRA or
Qualified Plan) as an additional Limited Partner in the Partnership,
subject to the provisions of Section 3.4 of this Agreement; provided,
however, that the General Partner, in its sole discretion, may waive
the minimum Unit purchase requirement with respect to any investor,
provided that any initial investor (other than an IRA or a Qualified
Plan) shall purchase no less than 2.5 Units ($2,500). Each purchaser
shall contribute $1,000 per Unit, subject to Section 3.5, to the
capital of the Partnership, payable in full in cash upon subscription.
3.3 No Action or Consent Necessary by Limited Partners
for Admission of Other Limited Partners
No action or consent by Limited Partners shall be required
in connection with the admission of new or Substituted Limited
Partners to the Partnership. Only the consent of the General, Partner
is necessary for the admission or substitution of any Limited Partners
to the Partnership.
3.4 Subscriptions and Admission
(a) The General Partner shall admit as Limited Partners
Subscribers who have been accepted and who submitted subscriptions on
or before the Completion Date, and amend any documents necessary for
admission, not later than (i) 15 days after the release from escrow of
the Subscriber's funds to the Partnership or (ii) the last day of each
calendar month. Subscriptions will be accepted or rejected by the
Partnership within 30 days of their receipt; if rejected, all funds
shall be returned to the Subscriber within 10 business days of the
decision to reject.
(b) Initially, subscriber funds shall be deposited in an
escrow account at Security Pacific National Bank, and Security Pacific
National Bank, shall be the Escrow Agent. While held in such account,
subscription funds shall be invested in permissible, short-term,
highly liquid investments in which there is appropriate safety of
principal. Subscription funds shall not be released from the escrow
account until subscriptions for at least 4,000 Units have been
received, accepted and deposited in such account. After this minimum
amount has been received, at the sole discretion of the General
Partner, the subscription funds may be released to the Partnership
from the escrow account. In any event, no subscription funds will be
released from the escrow account until such funds equal at least
$4,000,000. The General Partner, at its discretion, may terminate the
offering of Units at any time prior to the release of subscription
funds from the escrow account to the Partnership. If the $4,000,000
minimum is not received prior to the Completion Date or the offering
is terminated prior to the release of subscription funds from the
escrow account, subscription funds together with any interest earned
thereon shall be returned promptly to the investors. After 4,000 or
more Units have been sold and the General Partner has requested the
release of the Subscribers' funds from the escrow account, investors
shall be admitted to the Partnership. After release of the
Subscribers' funds from the escrow account, subsequent subscriptions
shall be deposited in a Partnership account and any interest earned
thereon shall remain in the Partnership.
(c) The General Partner may decline to accept any
Subscriber for Units for any reason. If rejected, all subscription
monies shall be returned to the Subscriber promptly.
3.5 Purchase of Units by General Partner and Related Parties
The purchase of Units by the General Partner, its
Affiliates, certain of its agents, Broker/Dealers, and their employees
shall be net of any underwriting commissions and the Distributor Fee.
Any such Units purchased by the General Partner, its Affiliates,
certain of its agents, Broker/Dealers, or their employees shall be
held as Limited Partner Units and be entitled to all rights as such.
If the subscription funds are released to the Partnership in
accordance with Section 3.4(b), the General Partner or its Affiliates
shall be obligated to purchase any Units remaining unsold on the
Completion Date. The General Partner and its Affiliates shall hold
all Units they purchase for investment purposes and not for resale.
3.6 Assessments or Additional Contributions
Units are nonassessable, and no Limited Partner shall be
required to make additional contributions to the capital of the
Partnership in excess of the Limited Partner's subscription.
3.7 No Withdrawal of Contributions
No Limited Partner shall have the right to withdraw a
contribution to the Partnership.
3.8 Return of Capital
There is no agreement for or time set for the return of any
contribution of any Limited Partner. To the extent funds are
available therefor, the General Partner may return contributions out
of operating revenue or out of proceeds of sale or refinancing or any
other assets of the Properties, after reserving sufficient funds for
payment of debts, working capital, contingencies, replacements, and
withdrawals of capital, if any, and to the extent of available funds,
the General Partner shall return said capital at dissolution and
termination, as set forth in this Agreement.
3.9 No Interest on Capital Contributions
No Partner shall be entitled to interest of any kind on
account of a Capital Contribution.
3.10 No Priority
Except as otherwise provided in this Agreement, no limited
Partner shall have priority over any other Limited Partner as to
return of contributions, allocations of income, gain, loss, deduction,
credit, or as to distributions.
3.11 Securities Laws
To accomplish the purposes of this Article, the General
Partner is hereby authorized to do all things necessary to admit
Limited Partners, including, but not limited to, registering the Units
for sale with the Securities and Exchange Commission, qualifying the
Units for sale with state securities regulatory authorities or
perfecting exemptions from qualification, and entering into such
underwriting or agency arrangements for the offer and sale of Units
upon such terms and conditions as the General Partner may deem
advisable.
3.12 Temporary Investment of Partnership Capital
Proceeds from the sale of Units and other Partnership funds
shall be held in one or more Partnership accounts for the exclusive
use of the Partnership and may be temporarily invested in (a)
obligations with a maturity of one year or less that are issued or
insured by the United States government or its agencies, (b)
repurchase agreements covering such governmental obligations, (c)
certificates of deposit and banker's acceptances issued by banks
having a net worth of at least $50,000,000, (d) investment grade
commercial paper, (e) bank accounts, or (f) money market funds. Any
interest thereon shall inure to the benefit of the Partnership, and
the Limited Partners shall not receive interest on funds contributed
by them.
3.13 Investment in Properties
The Partnership shall apply to Investment in Properties a minimum
percentage of Gross Offering Proceeds which is equal to the greater
of:
(a) 80% of the Gross Offering Proceeds reduced by .1625%
for each 1% of indebtedness encumbering the Properties; or
(b) 67% of the Gross Offering Proceeds.
The "percentage of indebtedness encumbering Partnership
Properties" is the percentage resulting when the indebtedness on the
Properties (whether the debt is on a Property when purchased or placed
on Property at the time of purchase) is divided by the Cost of All
Partnership Properties excluding Front-End Fees.
ARTICLE 4
TAX ALLOCATIONS
4.1 Definitions
For purposes of this Article 4, the following phrases shall have
the meanings indicated below:
"Minimum Gain" shall have the meaning ascribed in the Treasury
Regulations under Section 704(b) of the Internal Revenue Code, i.e.,
generally, the excess, if any, of the outstanding balance of
nonrecourse liabilities to which the Properties are subject over the
Partnership's adjusted basis in the Properties for tax purposes.
Should such definition of "minimum gain" be changed, the General
Partner may, in its discretion and without the consent of the Limited
Partners, modify the definition of "Minimum Gain" contained herein to
effectuate the intent of the Partners as expressed in Section 4.2.
"Operating Net Profits" and "Operating Net Losses" shall mean Net
Profits and Net Losses other than Net Profits and Net Losses realized
on sales or other, dispositions of the Properties.
4.2 General Rule
It is the intention of the Partners that each Partner's
distributive share of tax items shall be determined and allocated in
accordance with the allocation provisions of this Agreement to the
fullest extent permitted by Sections 704(b) and (c) of the Internal
Revenue Code. Therefore, if the Partnership is advised by counsel or
its accountants that the allocation provisions of this Agreement are
unlikely to be respected for federal income tax purposes, the General
Partner is granted the authority in Section 15.2 to amend the
allocation provisions of this Agreement to the extent deemed necessary
by counsel or its accountants to effect the plan of allocations and
distributions of Distributable Cash from Operations and Net Proceeds
from Sale or Refinancing provided in this Agreement. The General
Partner shall have the discretion to adopt and revise such rules,
conventions and procedures as it believes appropriate with respect to
the admission of Limited Partners to reflect Partners' interests in
the Partnership at the close of the year.
4.3 Allocation to Initial Limited Partner
During the period that the Initial Limited Partner is the only
Limited Partner in the Partnership, Net Profits and Net Losses shall
be allocated 1% to the General Partner and 99% to the Initial Limited
Partner. Thereafter, Net Profits and Net Losses shall generally be
allocated as set forth in Sections 4.4 to 4.8.
4.4 Net Profits and Net Losses from Operations
(a) If Distributable Cash from Operations is distributed
during the year in question, Operating Net Profits shall be allocated
among the General Partner and the Limited Partners in proportion to
the Distributable Cash from Operations distributed to them, provided
that in no event will the Limited Partners receive an allocation in
excess of 99% of the Operating Net Profits. If no cash is distributed
during the year in question, Operating Net Profits shall be allocated
99% to the Limited Partners and 1% to the General Partner.
(b) Operating Net Losses shall be allocated 1% to the
General Partner and 99% to the Limited Partners.
4.5 Net Profits and Net Losses on Sale or Other Disposition of a
Property
(a) Net Profits realized on sale or other disposition of
either or both of the Properties shall be allocated and capital
account balances determined prior to any distribution of Net Proceeds
from Sale or Refinancing. Such Net Profits shall be allocated first
99% to the Limited Partners and 1% to the General Partner until the
capital account balances of the Limited Partners in the aggregate
equal the amount of Net Proceeds from Sale or Refinancing which would
be distributable to the Limited Partners pursuant to Section 5.4(c)(1)
before any distribution could be made pursuant to Section 5.4(c)(2);
second if the Partnership does not treat the Subordinated Property
Disposition Interest as deductible or includible in the basis of the
Property to which it relates, an amount of Net Profits equal to such
Subordinated Property Disposition Interest shall be allocated to the
General Partner; and thereafter 85% to the Limited Partners and 15% to
the General Partner. With respect to Net Profits allocated to the
Limited Partners, if a Limited Partner's capital account balance (on a
per Unit basis) equals the amount of Net Proceeds from Sale or
Refinancing which must be distributed to such Limited Partner before a
distribution can be made under Section 5.4(c)(2) while other Limited
Partners' capital account balances are less than such amount on a per
Unit basis, the portion of Net Profits, if any, that would otherwise
be allocated to the Limited Partner whose capital account balance
equals such amount shall be instead allocated to Limited Partners
whose capital accounts are less than such amounts.
(b) Notwithstanding the provisions of Section 4.5(a), upon
the sale or disposition of a Property, before allocating Net Profits
under Section 4.5(a), (i) Net Profits up to an amount equal to the sum
of the negative capital account balances of the Partners having
negative capital account balances shall be allocated to the Partners
having negative capital account balances in the ratio that the
negative capital account balance of each bears to the aggregate
negative capital account balances, and (ii) Net Profits thereafter
shall be allocated pursuant to Section 4.5(a).
(c) Net Losses realized on sale of either or both of the
Properties shall be allocated first to Partners with positive capital
accounts, in the proportion that the capital account balance of each
bears to the aggregate capital account balances of all Partners with
positive capital accounts, and thereafter 99% to the Limited Partners
and 1% to the General Partner.
4.6 Allocation of Nonrecourse Deductions and Minimum Gain
Chargeback
Allocations under this Agreement of nonrecourse deductions, as
defined in Treasury Regulation Section 1.704-1(b)(4)(iv), are intended
to be made in accordance with the Regulations under Section 704(b) of
the Internal Revenue Code. In the event the General Partner shall
determine that it is advisable to modify the allocations contained in
this Agreement to comply with such Regulations, the General Partner is
authorized hereby to make such modifications. If there is a net
decrease in Minimum Gain during a taxable year, all Partners with a
deficit capital account balance at the end of such year (excluding
from each Partner's deficit capital account balance any amount that
such Partner is obligated to restore under this Agreement as well as
any addition thereto pursuant to the next to last sentence of Treasury
Regulation Section 1.704-1(b)(4)(iv)(f) computed with respect to the
amount of Minimum Gain after such net decrease) will be allocated,
before any other allocation is made of Partnership items for such
taxable year, items of income and gain for such year (and, if
necessary, subsequent years) in the amount and in the proportions
needed to eliminate such deficits as quickly as possible. For
purposes of the preceding sentence, Partners' capital accounts shall
be reduced for the items described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5), and (6). The Minimum Gain chargeback
allocated in any taxable year shall consist first of gains recognized
from the disposition of items of Partnership Property subject to one
or more nonrecourse liabilities of the Partnership to the extent of
the decrease in Minimum Gain attributable to the disposition of such
items of Property, with the remainder of such Minimum Gain chargeback,
if any, made up of a pro rata portion of the Partnership's other items
of income and gain for that year. If, however, such gains exceed the
amount of the Minimum Gain chargeback, a proportional share of each
such gain shall constitute a part of the Minimum Gain chargeback.
4.7 Provisional Allocation
In the event that an amount claimed by the Partnership, which
constitutes a deductible expense in any tax year of the Partnership,
is treated as a payment made to a Partner in his capacity as a member
of the Partnership for income tax purposes, income and gain of the
Partnership for such year shall first be allocated to the recipient of
such payment and no deductions and losses of the Partnership shall be
allocated thereto.
4.8 Special Allocations
Notwithstanding any other provision of this Agreement to the
contrary:
(a) Operating Net Losses allocable to the Limited Partners
shall be first allocated to any Limited Partner whose capital account
balance is greater in amount than the capital account balance of any
other Limited Partner, until such time as the balance in each Limited
Partner's capital account on a per Unit basis equals the balance in
the capital account of every other Limited Partner, and thereafter
among all Limited Partners on a per Unit basis.
(b) In no event shall any losses be allocated to any
Limited Partner whose capital account has been reduced to zero (unless
such Limited Partner agrees to make up any negative balance in his
capital account) until the capital accounts of all Limited Partners
have been reduced to zero. If any Limited Partner's capital account
has been reduced to zero at any time when any other Limited Partners'
capital accounts have positive balances, any such losses shall be
allocated among such Limited Partners with positive capital account
balances in the proportion which such positive balances bear to each
other (for purposes of determining proportionality such positive
capital account balances shall be determined as of the date of such
allocation). After the capital accounts of all Partners have been
reduced to zero, losses shall again be allocated as otherwise provided
in this Agreement, except that in no event shall losses be allocated
to any Limited Partner if such allocation would not be recognized
under Section 704 of the Internal Revenue Code and such losses shall
be reallocated first to Limited Partners with respect to whom such
allocation would be recognized and thereafter to the General Partner.
(c) Any recapture under Section 1245 or Section 1250 of
the Internal Revenue Code shall be allocated to those Partners who
were allocated the deductions to which such recapture relates.
(d) In the event any of the Partners receive an
adjustment, allocation or distribution described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which results
in a deficit in the capital account balance of such Partners, such
Partners shall be allocated 100% of all items of income or gain to the
extent of the lesser of (i) the amount of such adjustment, allocation
or distribution, or (ii) the deficit in such Partner's capital account
balance, pro rata in accordance with such amount.
(e) Nondeductible, nonamortizable syndication expenses
(other than underwriting commissions and the Distributor Fee)
shall be allocated 100% to the Limited Partners and divided among such
Limited Partners from time to time so that to the extent possible an
equal amount of such expenses is allocated to each Unit. Underwriting
commissions and the Distributor Fee shall be allocated directly to the
Limited Partner with respect to whose Units such commissions and fees
were actually charged.
ARTICLE 5
DISTRIBUTIONS OF CASH
5.1 Prior to Admission of Additional Limited Partners
During the period that the initial Limited Partner is the
only limited partner in the Partnership, all distributions of cash
shall be made at the sole discretion of the General Partner and shall
be made 1% to the General Partner and 99% to the Initial Limited
Partner.
5.2 Subsequent to Admission of Additional Limited Partners
After the period specified in Section 5.1, Partnership
distributions shall be made in the manner set forth in Sections 5.3
and 5.4.
5.3 Distributions of Cash from Operations
Distributable Cash from Operations shall be distributed quarterly
and initially shall be distributed 100% to the Limited Partners until
the Limited Partners have received a sum each year equal to a 10%
Priority Return, as determined from time to time; provided, however,
that Distributable Cash from Operations realized by the Partnership
during 1987 shall be apportioned among the Limited Partners in a
manner which reflects the number of days in 1987 after the date on
which the Escrow Agent or the General Partner received a Limited
Partner's Capital Contribution. The Incentive Priority Return will be
distributed from Net Proceeds from Sale or Refinancing. After the
receipt by the Limited Partners of a 10% Priority Return,
Distributable Cash from Operations shall be distributed 100% to the
General Partner until the General Partner has received 5% of the
aggregate cash distributed to the Limited Partners in that year
pursuant to the first sentence of this Section 5.3. Thereafter,
Distributable Cash from Operations shall be distributed 95% to the
Limited Partners and 5% to the General Partner in that year.
5.4 Distributions of Net Proceeds from Sale or Refinancing
Net Proceeds from Sale or Refinancing shall be utilized or
distributed in the following priority (to the extent funds are
available):
(a) To the payment of current Partnership obligations,
liabilities and expenses.
(b) To the setting up of reserves which the General
Partner may, in its sole discretion, deem necessary for Partnership
debts or liabilities, whether payable or not yet payable, including
any contingent or unforeseen liabilities or obligations. Such
reserves may be held for disbursement by the General Partner in the
Partnership bank account or delivered to an independent escrow holder
selected by the General Partner to be held for the purpose of
disbursing such reserves in payment of any of the Partnership's
contingent liabilities or liabilities not yet due. At such time as
the General Partner shall determine, any balance remaining in such
reserves shall be distributed in accordance with this Section 5.4.
(c) The balance shall be distributed to Partners in the
following order:
(1) 100% to the Limited Partners until each Limited
Partner has received an amount equal to (i) the excess of (A) a
10% Priority Return, less (B) the sum of all previous cash
distributions during the term of the Partnership other than
distributions of Invested Capital pursuant to this Section
5.4(c)(1), (ii) if applicable to a Limited Partner, an Incentive
Priority Return and (iii) the Limited Partners' remaining
Invested Capital. Notwithstanding the foregoing, the General
Partner shall be entitled to its Subordinated Property
Disposition Interest upon the sale of either or both of the
Properties, as subordinated in the manner set forth in Section
7.8 (a).
(2) The balance:
(A) 85% to the Limited Partners; and
(B) 15% to the General Partner.
(3) Notwithstanding the foregoing provisions of this
Section 5.4, distributions of Net Proceeds from Sale or
Refinancing arising from the termination of the Partnership
(which term shall, for this purpose, mean the sale or other
disposition of both of the Properties) shall (after all Net
Profits from such sale or other disposition have been allocated
pursuant to Article 4) be distributed first in proportion to, and
to the extent of, the positive capital account balances of the
Partners, and thereafter as set forth above.
5.5 Consent to Distributions
Any distribution made to a Partner pursuant to this Agreement
shall be deemed to be consented to by the Partners.
5.6 Capital Accounts
Individual capital accounts shall be maintained for each Partner.
Each Partner's capital account shall consist of such Partner's
original contribution of capital increased by such Partner's (a)
additional contributions of capital, and (b) allocable share of
Partnership income and gains (including income exempt from tax) and
decreased by such Partner's share of (c) distributions, (d) allocable
share of Partnership losses, and (e) expenditures of the Partnership
not deductible in computing its taxable income and not properly added
to the tax basis of any Partnership asset. The foregoing provisions
and the other provisions of this Agreement relating to capital
accounts are intended to comply with applicable Treasury Regulations
promulgated under Section 704 of the Internal Revenue Code and shall
be interpreted and applied in a manner consistent with such
Regulations. In the event the General Partner shall determine it is
advisable to modify the manner in which the capital accounts, or any
credits or debits thereto, are computed in order to comply with such
Regulations, the General Partner may make such modifications, provided
such modification is not likely to have a material effect on the
amounts distributed to any Partner pursuant to Article 5 hereof upon
dissolution of the Partnership.
5.7 General Partner's Obligation to Make Up Negative Capital
Account
If, immediately prior to the dissolution and termination of the
Partnership, the General Partner's capital account has a deficit
balance and the Partnership assets available for distribution upon
dissolution and termination are insufficient to provide distributions
to Limited Partners equal to their Invested Capital, the General
Partner shall be obligated to contribute to the Partnership that
amount of capital (if any) equal to the lesser of (a) an amount
sufficient to restore its capital account to zero, or (b) 1.01% of the
aggregate Capital Contributions of the Limited Partners, less any
capital previously contributed by the General Partner.
5.8 Limited Partners' Share of Allocations and Distributions
Except as otherwise provided in this Agreement, allocations of
income, gain, loss, deduction, credit, and distributions to the
Limited Partners as a group shall be further allocated and distributed
among the Limited Partners in proportion to the ratio of the number of
Units owned by the Limited Partner to the total outstanding Units as
of the relevant dates of determining such allocations and
distributions. Units held by the General Partner or its Affiliates
will be treated similarly.
Allocations of tax items shall be determined using an interim
closing of the books as of the date Limited Partners are deemed
admitted pursuant to such convention or other method as the General
Partner shall select for the Partnership.
5.9 Allocation Between Assignor and Assignee
The portion of the income, gain, loss, deductions and credits of
the Partnership for any fiscal year of the Partnership during which a
Unit is assigned by a Limited Partner (or by an Assignee or successor
in interest to a Limited Partner) that is allocable in respect of such
Unit shall be apportioned between the assignor and the assignee of the
Unit on the basis of the number of days during such fiscal year that
each is the owner thereof, without regard to (a) the results of
Partnership operations before or after the effective date of the
assignment, or (b) any distributions made to the Partners before or
after the effective date of the assignment; provided, however, that
(i) gain or loss on the sale or other disposition of either or both of
the Properties shall be allocated to the owner of the Unit on the date
of such sale or other disposition, (ii) distributions of Net Proceeds
from Sale or Refinancing shall be made to the owner of record of the
Unit on the date of the sale or refinancing, (iii) the General Partner
may in its sole discretion modify the foregoing allocation in any
reasonable manner required or permitted by the Internal Revenue Code
or applicable regulations or rulings thereunder. The effective date
of an assignment of a Unit shall be as designated by the General
Partner pursuant to Section 11.3(b).
5.10 Timing of Distributions
Quarterly distributions, if any, will be made to holders of
record as of the last day of the respective quarter. Distributions
will be made without regard to the number of days during the quarter
that a person is a Limited Partner.
5.11 Limitations on Distributions
The Partnership may be restricted from making distributions under
the terms of notes, mortgages or other types of debt obligations which
it may issue or assume in conjunction with borrowed funds, and
notwithstanding the provisions of this Article 5, distributions may
also be restricted or suspended, whenever the General Partner
determines, in its absolute discretion, that such action is in the
best interests of the Partnership. All distributions are subject to
the payment of Partnership expenses and the maintenance of reasonable
reserves.
ARTICLE 6
MANAGEMENT OF THE PARTNERSHIP
6.1 Management Powers of the General Partner
The Partnership shall be managed by the General Partner. Subject
only to the limitations specifically contained in this Agreement, the
General Partner shall have the full, exclusive and absolute right,
power and authority to manage and control the Partnership and the
property, assets and business thereof. The General Partner shall have
all of the rights, powers and authority conferred upon it by law or
under other provisions of this Agreement. Without limiting the
generality of the foregoing, such powers include the right, in the
General Partner's sole discretion, on terms and conditions determined
by the General Partner, subject only to the provisions of Section 6.2.
to:
(a) Acquire, purchase, renovate, improve, and own the
Properties and any other property or assets that the General Partner
determines are necessary or appropriate or in the best interests of
the business of the Partnership, and to acquire and exercise options
for the purchase of any such property;
(b) Construct buildings and make other improvements on the
real estate owned by the Partnership;
(c) Borrow money (including but not limited to sums under
the mortgage loans for the Properties and any Credit Enhancement
required in connection with the permanent financing), issue evidences
of indebtedness in connection therewith, refinance, increase the
amount of, modify, amend or change the terms of, or extend the time
for the payment of, any indebtedness or obligation of the Partnership,
secure such indebtedness by mortgage, deed of trust, pledge or other
lien on Partnership assets, and prepay in whole or in part, refund,
refinance, increase, modify, consolidate, or extend the maturity of,
any indebtedness or obligation of the Partnership;
(d) Cause the Partnership and itself as General Partner to
offer and sell Units through the Principal Distributor which shall
engage the Broker/Dealers to assist in the sale of Units;
(e) Pay all expenses, underwriting commissions and the
Distributor Fee incurred in connection with the sale of Units;
(f) Sell, exchange, lease or otherwise dispose of the real
estate and other property and assets owned by the Partnership, or any
part thereof, or any interest therein;
(g) Enter into any partnership agreement or joint venture
with any person acceptable to the General Partner and which is engaged
in any business or transaction in which the Partnership is authorized
to engage in; provided, however, that the Partnership shall have a
controlling interest in such other venture and duplicate property
management or other fees shall not be paid with respect to such
venture. The Partnership shall not be permitted to invest in a joint
venture arrangement with another partnership formed by the General
Partner or its Affiliates unless (i) such other partnership has
investment objectives which are substantially identical with those of
the Partnership, (ii) the compensation of the sponsor of the other
partnership should be substantially identical with the Partnership's
compensation of the General Partner and its Affiliates, (iii) the
Partnership has a right of first refusal to buy the property owned by
the venture if the other partnership desires to sell, and (iv) the
investment of each partnership in the venture is on substantially the
same terms and conditions;
(h) Sue on, defend or compromise any and all claims or
liabilities in favor of or against the Partnership and to submit any
or all such claims or liabilities to arbitration (including without
limitation claims of the Partnership in respect of unpaid Capital
Contributions, or amounts which may be required to be returned to the
Partnership);
(i) File applications, communicate and otherwise deal with
any and all governmental agencies having jurisdiction over, or in any
way affecting, the Partnership's assets or any part thereof or any
other aspect of the Partnership business;
(j) Make or revoke any election permitted the Partnership
by any taxing authority;
(k) Maintain such insurance coverage for public liability,
fire and casualty, and any and all other insurance necessary or
appropriate to the business of the Partnership (including without
limitation errors and omission insurance, subject to the limitations
of Section 6.7(e), the policy for which shall be considered the sole
property of the General Partner), in such amount and of such type, as
it shall determine from time to time;
(l) Determine whether or not to apply any insurance
proceeds for either Property to the restoration of such Property or to
distribute the same;
(m) Retain legal counsel, auditors and other professionals
in connection with the Partnership business and to pay therefor such
remuneration as the General Partner may deem reasonable and proper;
(n) Retain other services of any kind or nature in
connection with the Partnership business and to pay therefor such
remuneration as the General Partner may deem reasonable and proper;
(o) Employ persons in connection with the Partnership
business on such terms and for such compensation as the General
Partner may deem reasonable and proper, subject however to the
limitations set forth in Article 7 and provided that any agreements
for services with the General Partner or its Affiliates shall be
terminated immediately on the dissolution of the Partnership;
(p) Negotiate and conclude agreements on behalf of the
Partnership with respect to any of the rights, powers and authority
conferred upon the General Partner;
(q) Purchase, lease, rent, or otherwise acquire or obtain
the use of machinery, equipment, tools, materials, and all other kinds
and types of real or personal property that may in any way be deemed
necessary, convenient, or advisable in connection with carrying on the
business of the Partnership;
(r) Guaranty the payment of money or the performance of
any contract or obligation by any person, firm, or corporation on
behalf of the Partnership;
(s) Alter, improve, repair, raze, refurbish, replace and
rebuild either or both Properties;
(t) Repurchase Units on behalf of the Partnership in
accordance with Section 11.7 if such purchase does not impair the
capital or operation of the Partnership;
(u) Act directly or through Affiliates, under non-
exclusive listings, as a real estate broker for the purchase and sale
of the Properties, and enter into listing agreements or other
agreements with third party brokers with regard to the acquisition and
disposition of Partnership assets;
(v) File tax returns on behalf of the Partnership and
elect such methods of cost recovery or make any other tax elections or
determinations as the General Partner shall deem desirable;
(w) Enter into the transactions described in or
contemplated by the Prospectus;
(x) Amend this Agreement pursuant to the terms of any
Power of Attorney from Limited Partners or pursuant to the terms of
this Agreement;
(y) Require in any or all Partnership contracts that the
General Partner and its Affiliates shall not have any personal
liability thereon and that the person or entity contracting with the
Partnership is to look solely to the Partnership assets for
satisfaction, and to require the satisfaction of contracts on which
the General Partner and its Affiliates have personal liability prior
to contracts on which they have no such personal liability;
(z) Execute, acknowledge, and deliver any and all
instruments, on behalf of the Partnership or otherwise, which it shall
deem necessary or appropriate to effectuate the rights, authority and
power of the General Partner, and to take all such action in
connection therewith as it shall in its discretion deem necessary or
appropriate;
(aa) Hold each of the Properties in its own name or in the
name of an Affiliate thereof (and assume loans in connection
therewith) and temporarily hold title thereto for the purpose of
facilitating the development of the Properties, the borrowing of money
or the obtaining of financing by the Partnership, or for any other
purpose related to the business of the Partnership; provided that each
of the Properties is purchased by the Partnership for a purchase price
no greater than the cost of such Property to the General Partner; and
provided further that there is no difference in the interest rates of
the loans secured by the Properties at the time acquired by the
General Partner and the time acquired by the Partnership nor any other
benefit arising out of the transaction to the General Partner.
(bb) Make or arrange long-term and short-term loans,
including loans from its Affiliates, to the Partnership, receive
interest or other financing charges or fees, provided that the
interest charges or fees are not in excess of amounts charged by third
party financing institutions on comparable loans for the same purpose
or, if the funds for a loan are obtained by the General Partner or one
of its Affiliates from a lending institution, the rate and other fees
which the General Partner or its Affiliates is required to pay the
lending institution;
(cc) Execute, deliver and perform under the mortgage loans,
the Credit Enhancement, and related documents; and
(dd) Perform any and all other acts the General Partner
deems necessary or appropriate to the Partnership business.
6.2 Restrictions on General Partner
The General Partner, without the approval of a Majority Vote of
Limited Partners or such other vote as may be specified, shall have no
authority to:
(a) Do any act in contravention of this Agreement;
(b) Confess a judgment against the Partnership;
(c) Possess Partnership property or assign rights to
Partnership property, for other than a Partnership purpose;
(d) Perform any act (other than an act required by this
Agreement or any act performed in good faith reliance upon counsel's
opinion) which would, at the time such act occurs, subject any Limited
Partner to liability as a general partner in any jurisdiction;
provided, however, that no such act shall be performed without first
obtaining the approval of any Limited Partner who may be subjected to
general partner liability as a result of the act;
(e) Use Distributable Cash from Operations or Net Proceeds
from Sale or Refinancing to acquire real property;
(f) Commingle, or cause the Partnership to commingle,
Partnership funds with those of any other person or entity except the
funds of other limited partnerships sponsored by the General Partner
or its Affiliates held in an account or accounts established and
maintained for the purpose of making disbursements to (i) Partners and
creditors of the Partnership and to the holders of Units and (ii)
partners and creditors of such other limited partnership; provided,
however, that any such accounts shall be structured and maintained in
such a manner that Partnership funds are protected from claims of such
other partnerships and their creditors;
(g) Cause the Partnership to purchase, sell, assign or
lease either or both of the Properties, including a purchase from or a
sale or lease to the General Partner or its Affiliates, except for the
assignment of the Properties by Affiliates of the General Partner to
the Partnership and the leasing of the rental units of the Properties
as set forth in the Prospectus;
(h) Directly or indirectly pay or award any finder's fees,
commissions, or other compensation to any person engaged by a
potential investor for investment advice as an inducement to such
advisor to advise the purchaser regarding the purchase of Units;
provided, however, that the General Partner shall not be prohibited
from paying underwriting commissions, the Distributor Fee, other
normal commissions, sales incentives, or from reimbursing accountable
expenses incurred in connection with the offering in accordance with
Section 7.1, in an aggregate amount of up to 10% of the Gross Offering
Proceeds (plus up to .5% of the Gross Offering Proceeds for due
diligence expenses) payable to the Principal Distributor, which may
reallow some or all of the underwriting commissions, Distributor Fee
and due diligence expenses to the Broker/Dealers;
(i) Cause the Partnership to enter into any agreement with
the General Partner or its Affiliates unless that agreement is subject
to termination without penalty by the Partnership upon notice of sixty
(60) days or less;
(j) Receive a rebate or participate in any reciprocal
business arrangements which would enable it to do so;
(k) Cause the Partnership to exchange Units for property;
(l) Cause the Partnership to loan money to the General
Partner or its Affiliates;
(m) Cause the Partnership to invest in a limited
partnership interest of another partnership;
(n) Cause the Partnership to enter into any loans secured
by either or both of the Properties if the outstanding principal and
accrued and unpaid interest under the Partnership's secured loans,
including the principal under the contemplated loan, would exceed 80%
of the then current value of its Properties; or
(o) Provide or cause its Affiliates to provide insurance
brokerage services to the Partnership.
6.3 Limited Partners Have No Management Powers
The Limited Partners shall have no voice or participation in the
management of the Partnership business, and no power to bind the
Partnership or to act on behalf of the Partnership in any manner
whatsoever, except by specifically authorized voting rights contained
in this Agreement.
6.4 General Partner's Duty to Devote Time
The General Partner shall devote such time and attention to the
business of the Partnership as it shall determine, in the exercise of
its reasonable judgment, to be necessary for the conduct of the
Partnership business; provided, however, that the General Partner
shall not be required to devote full time and attention to the
Partnership or to its business.
6.5 General Partner May Engage in Other Activities
The General Partner and its officers, directors, shareholders,
agents, employees and Affiliates shall have the right to engage in any
other business (including, but not limited to, acting as a partner in
other partnerships formed for the purpose of investing in real estate)
and to compete, directly or indirectly, with the business of the
Partnership, and neither the Partnership nor any Partners shall have
any rights or claims as a result of such activities. Furthermore, the
General Partner shall not be obligated to share any business
opportunities with the Partnership or with the Limited Partners. The
Partners hereby waive any and all rights and claims which they may
otherwise have against the General Partner and its officers,
directors, shareholders, agents, employees and Affiliates as a result
of any such activities.
6.6 Dealing with the Partnership
Except as limited by Section 6.2, the General Partner and any
Affiliates shall have the right to contract or otherwise deal with the
Partnership for the sale or lease of property, the rendition of
services and other purposes, and to receive payments and fees from the
Partnership in connection therewith as the General Partner shall
determine, provided that such payments or fees for services, other
than those specifically covered in Article 7, shall be equal to the
lesser of (i) the cost to the General Partner and its Affiliates for
providing such services, or (ii) 90% of the competitive price which
would be charged by independent parties providing similar services in
the same or a comparable geographic location, and provided that such
agreements are terminable upon no more than 60 days' notice.
6.7 Liability and Indemnity
(a) General. The Partnership, its receiver or its
trustee, shall indemnify the General Partner and its Affiliates
against and save them harmless from any loss, (including, but not
limited to, attorneys' fees and court costs), suffered by the
Partnership which arises out of any action or inaction of the General
Partner or its Affiliates, if the General Partner or its Affiliates
have determined, in good faith, that such course of conduct was in the
best interest of the Partnership and that such course of conduct did
not constitute negligence or misconduct of the General Partner or its
Affiliates. The General Partner and its Affiliates shall be
indemnified by the Partnership against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims
sustained by them in connection with the Partnership, provided that
the same were not the result of negligence or misconduct on the part
of the General Partner or its Affiliates.
(b) Partnership Assets Must First Be Used. All judgments
against the Partnership and the General Partner or Affiliates wherein
the General Partner or such other persons are entitled to
indemnification, must first be satisfied from Partnership assets
before the General Partner or such other persons are responsible for
these obligations.
(c) No Presumption. The termination of any action, suit
or proceeding by judgment or settlement shall not, of itself, create a
presumption that the General Partner or its Affiliates are not
entitled to indemnification or are not entitled to the protection
afforded by this Section 6.7.
(d) Securities Laws. Notwithstanding Section 6.7(a), the
General Partner and its Affiliates and any person acting as a
Broker/Dealer shall not be indemnified for any losses, liabilities or
expenses arising from or out of an alleged violation of federal or
state securities laws unless (i) there has been a successful
adjudication on the merits of each count involving alleged securities
law violations as to the particular indemnitee, or (ii) such claims
have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (iii) a
court of competent jurisdiction approved a settlement of the claims
against a particular indemnitee. In any claim for indemnification of
federal or state securities law violations, the party seeking
indemnification shall place before the court the position of the
Securities and Exchange Commission and the Massachusetts state
securities commission with respect to the issue of indemnification for
securities law violations.
(e) Insurance. The Partnership shall not incur the cost
of that portion of any insurance other than public liability
insurance, which insures any party against any liability for which
indemnification is prohibited under this Section 6.7.
(f) Advances from Partnership. The advance of Partnership
funds to the General Partner or its Affiliates for legal expenses and
other costs incurred as a result of a legal action is permissible only
if (i) the legal action relates to the performance of duties or
services by the General Partner or its Affiliates, (ii) the legal
action is initiated by a third party who is not a Limited Partner, and
(iii) the General Partner and its Affiliates undertake to repay the
advanced funds to the Partnership in cases in which they would not be
entitled to indemnification.
6.8 Reserves
The Partnership shall maintain reasonable reserves for normal
repairs, replacements, working capital, and contingencies in an
initial amount to be determined by the General Partner, which may be
increased or decreased from time to time as determined by the General
Partner.
6.9 Fiduciary Duty of the General Partner
The General Partner shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Partnership,
whether or not in its possession or control, and it shall not employ,
or permit another to employ, such funds or assets in any manner except
for the benefit of the Partnership.
6.10 Loan Commitment Guaranty
The General Partner shall lend or arrange to lend to the
Partnership as provided in the Loan Commitment Guaranty Agreement the
amount of any Operating Deficit for any calendar quarter for the
period beginning January 1, 1987 through December 31, 1991. Such a
loan shall be made within 15 days after the Operating Deficit for the
quarter is determined, and shall bear interest at the rate then
charged to the Partnership by its principal lender and shall be repaid
when funds are available to the Partnership.
6.11 Completion Guaranty
The General Partner guaranties pursuant to the Completion
Guaranty Agreement that the Properties will be completed free and
clear of all financing and construction liens (except any liens
secured by deeds of trust described in the Prospectus) at a total cost
to the Partnership not to exceed approximately $28,807,000, including
the purchase price of the Properties, but excluding negative cash flow
associated with lease-up expenses and the first year of operations.
This guaranty shall survive the admission of Limited Partners to the
Partnership. The General Partner does not warrant compliance with the
conditions or standards of the construction agreements with respect to
the Properties.
ARTICLE 7
COMPENSATION AND REIMBURSEMENT OF
EXPENSES TO THE GENERAL PARTNER
AND ITS AFFILIATES
The General Partner and its Affiliates shall be entitled to
receive as a cost of the Partnership each and all of the following
amounts as fees, compensation, and reimbursement in addition to their
rights to reimbursement of ongoing expenses as set forth in Article
14.
7.1 Reimbursement of Expenses
(a) Organization and Offering Expenses. To the extent
that Organization and Offering Expenses and services were paid or
furnished by the General Partner or its Affiliates rather than from
Partnership funds, the General Partner or its Affiliates shall receive
a reimbursement for all such expenses and services. The Partnership
shall not be required to pay or reimburse the General Partner or any
Affiliate of the General Partner for Organization and Offering
Expenses which exceed fifteen percent (15%) of the Gross Offering
Proceeds as of the Completion Date.
(b) Other Expenses. The Partnership shall reimburse the
General Partner or its Affiliates for the actual cost to the General
Partner or its Affiliates (or pay directly the actual cost) of goods
and materials used for or by the Partnership and obtained from
entities unaffiliated with the General Partner. The Partnership shall
also pay or reimburse the General Partner or its Affiliates for
expenses incurred in connection with the provision of administrative
services necessary to the prudent operation of the Partnership,
provided that such reimbursement shall be at the lower of (i) actual
cost to the General Partner or its Affiliates, or (ii) 90% of the
competitive price which would be charged by independent parties for
comparable administrative services in the same geographical location.
(c) Nonreimbursable Expenses. The General Partner will
pay and will not be reimbursed by the Partnership for the following
expenses: (i) salaries, fringe benefits, travel expenses and other
administrative items of individuals who are Control Persons of the
General Partner or its Affiliates, (ii) those overhead expenses of the
General Partner or its Affiliates which include their rent,
depreciation, utilities and capital equipment, (iii) Organization and
Offering Expenses in excess of 15% of Gross Offering Proceeds, (iv)
expenses related to the performance of those services for which the
General Partner or its Affiliates are entitled to compensation by way
of the Property Management Fee, Initial Partnership Management Fee,
Completion Guaranty Fee or Subordinated Property Disposition Interest
and (v) all other expenses which are unrelated to the business of the
Partnership.
7.2 Reimbursement for Sums Advanced to the Partnership
To the extent that the General Partner or its Affiliates have
advanced or will advance funds to the Partnership, the General Partner
or its Affiliates shall be reimbursed for such funds.
7.3 Initial Partnership Management Fee
In consideration for organizing the Partnership, arranging for
and negotiating construction financing, arranging for and negotiating
permanent financing, obtaining (in connection with the permanent
financing) a Credit Enhancement satisfactory to the lender of the
permanent financing, selecting and supervising professionals to
perform services for the Partnership, establishing Partnership
accounts, including an escrow account for use in connection with the
offering of Units, and establishing a reporting system for submitting
tax information and periodic reports to the Limited Partners and
regulatory authorities, the General Partner shall receive an Initial
Partnership Management Fee of $291,000, which shall be payable
proportionately from Capital Contributions and any remaining balance
due on the Completion Date.
7.4 Completion Guaranty Fee
The General Partner shall receive a Completion Guaranty Fee, in
consideration for the Completion Guaranty, in the amount of $600,000
payable proportionately from Capital Contributions and any remaining
balance due on the Completion Date; provided, however, that in no
event shall such fee exceed 90% of the competitive price which would
be charged by a non-Affiliate for rendering similar services in the
same or a comparable geographic location.
7.5 Property Management Fee; Initial Lease-Up Fee
(a) The General Partner shall act as the property manager
and shall receive a Property Management Fee equal to five percent (5%)
of the Effective Gross Collections in managing the Properties
including acting as a liaison with tenants and monitoring and
supervising the following services: (i) collection of rentals, (ii)
payment of all mortgages, (iii) obtaining and maintaining appropriate
insurance for the Properties, (iv) leasing activities, (v) property
inspection and maintenance, (vi) accounting, services, (vii) legal
services, (viii) tax calculations and payments, (ix) bookkeeping
services and (x) similar ordinary management services necessary for
the orderly management of the Properties. However, during the Lease-
Up Period of the Properties, the Property Management Fee shall equal
the greater of (A) five percent (5%) of the Effective Gross
Collections or (B) one-half (1/2) of five percent (5%) of the Effective
Gross Collections assuming the Properties were leased at their market
rates. Additional sums shall also be payable to the General Partner
for performing certain extraordinary services, including without
limitation data processing services, payroll services and collections
with respect to the Properties.
(b) In addition, the General Partner shall receive, to the
extent that the manager performs services outside the normal and
customary services provided by independent third party property
managers, reimbursement for direct salary expenses of employees
performing such services. The provision of such services does not
constitute part of the duties or obligations of the General Partner in
its capacity as General Partner of the Partnership.
(c) The Property Management Fee shall be paid monthly to
the General Partner, or any unaffiliated property management firm
which the General Partner in its sole discretion may select. To the
extent that the Partnership has insufficient cash to pay the Property
Management Fee in any amount, the fee shall be accrued and paid as
soon as the Partnership has sufficient cash available.
(d) The Property Manager shall also receive a one-time
Initial Lease-Up Fee of $106,000 for extraordinary services provided
during the lease-up of the Properties, including but not limited to
establishing a marketing plan, maintaining on-site personnel, showing
units and interviewing and evaluating prospective tenants. The
Initial Lease-Up Fee shall be paid monthly from rental revenues,
prorated over the period commencing with the completion of the
Properties and continuing until the Properties are 95% occupied. In
no event shall the Initial Lease-Up Fee exceed 90% of the competitive
price which would be charged by a non-Affiliate for rendering similar
services in the same or a comparable geographic location.
7.6 Share of Distributable Cash from Operations
The General Partner shall receive its share of Distributable Cash
from Operations as set forth in Sections 5.1 and 5.3.
7.7 Subordinated Property Disposition Interest
For brokerage services in connection with the sale of a Property,
the Partnership shall pay the General Partner a Subordinated Property
Disposition Interest. The Subordinated Property Disposition Interest
shall equal the lesser of: (i) a percentage of the gross sales price
of a Property equal to onehalf of the percentage rate customarily
charged for similar services by unaffiliated parties that render the
same services as an ongoing public activity in the same geographic
location for comparable property, or (ii) three percent (3%) of the
gross sales price of a Property. The Subordinated Property
Disposition Interest shall be payable upon the close of escrow of the
sale of each Property; provided, however, that payment shall be
subordinated as provided in Section 7.8(a). Notwithstanding the
foregoing to the contrary, the aggregate commissions paid to all
persons for the sale of the Properties, whether or not they are
Affiliates of the General Partner, shall not exceed six percent (6%)
of the selling price of each Property, but otherwise there is no
limitation on or subordination of real estate commissions paid to non-
Affiliates. Any Subordinated Property Disposition Interest not paid
to the General Partner due to a lack of available cash shall be a
liability of the Partnership and shall be paid when cash becomes
available.
7.8 Fees and Share Upon Sale or Refinancing
The General Partner shall receive the following items of
distribution and compensation:
(a) Upon the sale of a Property, the Subordinated Property
Disposition Interest will be subordinated to the return to the
Limited Partners of the portion of their Invested Capital attributable
to the Property sold plus a 10% Priority Return and, as appropriate,
the Incentive Priority Return on the average daily balance of Invested
Capital attributable to the Property sold. A Limited Partner's
portion of Invested Capital attributable to the Property sold will be
calculated by multiplying his Invested Capital by a fraction, the
numerator of which shall equal the cost of the Property sold and the
denominator of which shall equal the cost of both of the Properties;
provided, however, that the Subordinated Property Disposition Interest
shall not be paid to the General Partner until the Limited Partners
have received at least a 6% cumulative simple return on their total
Invested Capital.
(b) Upon a sale or a refinancing of a Property, its share
of Net Proceeds from Sale or Refinancing as set forth in Section 5.4.
7.9 Loans by the General Partner to the Partnership
The General Partner or its Affiliates may, but are not obligated
to (except as set forth in Section 6.10), loan or advance funds to the
Partnership, and receive interest or other financing charges or fees,
provided that the interest charges or fees are not in excess of
amounts charged by third party financing institutions on comparable
loans for the same purpose or, if the funds for a loan are obtained by
the General Partner from a lending institution, the rate and other
fees which the General Partner is required to pay to the lending
institution. In no event shall the General Partner or its Affiliates
charge the Partnership a prepayment charge or penalty in connection
with any loans or advances to the Partnership from the General Partner
or its Affiliates.
7.10 Fees Payable on Cessation as the General Partner
If the General Partner ceases to be the General Partner pursuant
to Section 12.1, any fee, commission, or reimbursement of expenses
payable according to the provisions of this Agreement which is then
accrued, but not yet paid, shall be paid by the Partnership to the
General Partner or, if appropriate, an Affiliate thereof, in cash,
within 30 days of the date the General Partner ceases to be the
General Partner.
ARTICLE 8
BOOKS, RECORDS, ACCOUNTS AND REPORTS
8.1 Books and Records
(a) The Partnership shall continuously maintain an office
in the State of California, at which the following books and records
shall be kept:
(1) A current list of the full name and last known
business or residence address of each Partner set forth in
alphabetical order together with the contribution and the share in
profits and losses of each Partner;
(2) A copy of the Certificate of Limited Partnership
and all certificates of amendments thereto, together with executed
copies of any powers of attorney pursuant to which any such
certificate has been executed;
(3) 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;
(4) Copies of this Agreement and all amendments
thereto;
(5) Financial statements of the Partnership for the
six most recent fiscal years;
(6) The Partnership's books and records for at least
the current and past three fiscal years; and
(7) Copies of each appraisal of the Properties.
(b) The Partnership shall also maintain at its principal
office such additional books and records as are necessary for the
operation of the Partnership.
8.2 Limited Partners' Rights Regarding Books, Records and Tax
Information
(a) Upon the request of a Limited Partner, the General
Partner shall promptly deliver to the Limited Partner, at the expense
of the Partnership, a copy of the items set forth in Sections
8.1(a)(1), (2), and (4).
(b) Each Limited Partner or any person designated by a
Limited Partner to act on his behalf has the right upon reasonable
request:
(1) To inspect and copy during normal business hours,
at the Limited Partner's expense, any of the Partnership's records
required to be kept of the Partnership; and
(2) To obtain from the General Partner promptly after
becoming available, at the Limited Partner's expense, a copy of the
Partnership's federal, state and local income tax or information
returns for each year.
(b) The General Partner shall promptly furnish to a
Limited Partner a copy of any amendment to this Agreement executed by
the General Partner pursuant to a power of attorney from the Limited
Partner.
(c) The General Partner shall send to each Partner within
75 days after the end of each taxable year such information as is
necessary to complete federal and state income tax or information
returns.
8.3 Accounting Basis and Fiscal Year
The Partnership's books and records (a) shall be kept on a basis
chosen by the General Partner in accordance with the accounting
methods followed by the Partnership for federal income tax purposes,
(b) shall reflect all Partnership transactions, (c) shall be
appropriate and adequate for the Partnership's business and for the
carrying out of all provisions of this Agreement, and (d) shall be
closed and balanced the end of each Partnership fiscal year. The
fiscal year of the Partnership shall be the calendar year, unless
otherwise determined by the General Partner.
8.4 Reports
(a) Annual Statements. The General Partner shall have
prepared at least annually, at Partnership expense: (i) annual
financial statements including a balance sheet, statement of income or
loss, statement of partners' equity, statement of changes in financial
position and a cash flow statement, all of which, except the cash flow
statement, shall be prepared in accordance with generally accepted
accounting principles and accompanied by an auditor's report
containing an opinion of an independent certified public accountant;
(ii) Partnership information necessary in the preparation of the
Limited Partners' federal and state income tax returns; (iii) a report
of the activities of the Partnership during the period covered by the
report; (iv) a statement as to the reimbursements received during the
year by the General Partner and its Affiliates from the Partnership,
including a verification of the allocation of the costs to the
Partnership by independent certified public accountants; (v) a tabular
comparison of the results from operations with the Financial Forecast;
and (vi) a report identifying distributions from (A) Distributable
Cash from Operations of that year, (B) Distributable Cash from
Operations of prior years, and (C) Net Proceeds from Sale or
Refinancing and other sources. Copies of the financial statements and
reports shall be distributed to each Limited Partner within 120 days
after the close of each taxable year of the Partnership; provided,
however, that all Partnership information necessary in the preparation
of the Limited Partners' federal income tax returns shall be
distributed to each Limited Partner not later than 75 days after the
close of each fiscal year of the Partnership.
(b) Quarterly Reports. The General Partner shall cause to
be prepared quarterly, at Partnership expense, a report containing:
(i) a statement of the compensation received by the General Partner
and its Affiliates during the quarter from the Partnership, which
statement shall set forth the services rendered by the General Partner
and its Affiliates and the amount of fees received; (ii) a balance
sheet which may be unaudited; (iii) a statement of income for the
quarter then ended, which may be unaudited; (iv) a cash flow statement
for the quarter then ended, which may be unaudited; and (v) other
relevant information. Copies of the statements shall be distributed
to each Limited Partner within 60 days after the end of each quarterly
period. The information required by Form 10-Q (if required to be
filed with the Securities and Exchange Commission) will be supplied to
each Limited Partner within 45 days after the end of each quarterly
period.
(c) Unaudited Financial Statements. Until the Partnership
is registered under Section 12(g) of the Securities Exchange Act of
1934, as amended, the General Partner shall cause to be prepared, at
Partnership expense, a semi-annual report covering the first six
months of Partnership operations in each calendar year, and semi-
annually thereafter, unaudited financial statements (consisting of a
balance sheet, a statement of income or loss for the first six-month
period and a statement of cash flow for the first six-month period)
and a statement of other pertinent information regarding the Partner-
ship and its activities during the six-month period covered by the
report. Copies of the statements and other pertinent information
shall be distributed to each Limited Partner within 60 days after the
close of the six-month period covered by the report of the
Partnership. If the Partnership has more than 35 Limited Partners,
Limited Partners representing at least five percent (5%) of the Units
may make a written request to the General Partner for an income
statement of the Partnership for the initial three-month, six-month,
or nine-month period of the current fiscal year ended more than 30
days prior to the date of the request and a balance sheet of the
Partnership as of the end of that period. The statement shall be
delivered or mailed to the Limited Partners making the request within
30 days thereafter. Copies of the financial statements, if any, filed
with the Securities and Exchange Commission shall be distributed to
each Limited Partner within 60 days after the close of the quarterly
period covered by the report of the Partnership.
(d) General Partner's Certificate. The financial
statements referred to in this Section 8.4 which are unaudited shall
be accompanied by a certificate of the General Partner that such
financial statements were prepared without audit from the books and
records of the Partnership.
8.5 Tax Returns
The General Partner, at Partnership expense, shall cause to be
prepared income tax returns for the Partnership and shall further
cause such returns to be timely filed with the appropriate
authorities.
8.6 Filings with Regulatory Agencies
The General Partner, at Partnership expense, shall cause to be
prepared and timely filed with appropriate federal and state
regulatory and administrative bodies, all reports required to be filed
with such entities under then current applicable laws, rules and
regulations. Any Limited Partner shall be provided with a copy of any
such report upon request at such Limited Partner's expense.
8.7 Tax Matters Partner
The General Partner is hereby designated as the "tax matters
partner" of the Partnership in accordance with Section 6231(a)(7) of
the Internal Revenue Code and is authorized, at the Partnership's sole
cost and expense, to represent the Partnership and each Limited
Partner in connection with all examinations of the Partnership affairs
by tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services
and costs connected therewith. Each Limited Partner agrees to
cooperate with the General Partner and to do or refrain from doing any
and all things reasonably required by the General Partner to conduct
such proceeding. The General Partner shall have the right to settle
any audits without the consent of the other Partners and to take any
and all other actions on behalf of the Partners or the Partnership in
connection with any tax audit or judicial review proceeding to the
extent permitted by applicable law and regulations.
ARTICLE 9
CERTAIN MATTERS AND VOTING RIGHTS
AFFECTING LIMITED PARTNERS
9.1 Limitations
No Limited Partner shall (a) have the authority or power in his
capacity as a Limited Partner to act as agent for or on behalf of the
Partnership or any other Partner, to do any act which would be binding
on the Partnership or any other Partner, or to incur any expenditures
on behalf of or with respect to the Partnership, (b) have any of his
obligations to make contributions or to return distributions
compromised except upon approval of the General Partner, or as
otherwise required by Section 15666 of the Act, (c) have any right to
demand or receive property other than money upon distribution from the
Partnership, or (d) be compelled to accept a distribution of any asset
in kind from the Partnership in lieu of a proportionate distribution
of money being made to other Partners.
9.2 Liability of Limited Partners
The liability of each Limited Partner (in the capacity as a
Limited Partner) for the losses, debts and obligations of the
Partnership shall be limited to the Limited Partner's Capital
Contribution, and the Limited Partner's share of any undistributed
assets of the Partnership; provided, however, that under applicable
partnership law, a Limited Partner may, under certain circumstances,
be required to return to the Partnership amounts previously
distributed to such Limited Partner for the benefit of Partnership
creditors, with interest. Any such obligation to return distributions
and pay interest shall be the sole obligation of the Limited Partners
and not of the General Partner.
9.3 Voting Rights
(a) Limited Partners shall have the right, by Majority
Vote to take the following actions:
(1) Amend this Agreement, subject to the conditions
contained in Article 15 hereof;
(2) Dissolve and wind up the Partnership;
(3) Remove the General Partner;
(4) Approve or disapprove the sale of either or both
of the Properties, except in the orderly liquidation and winding up of
the Partnership upon its dissolution;
(5) Admit a general partner or elect to continue the
business of the Partnership after the removal of the General Partner
where there is no remaining general partner; and
(6) Elect to continue the business of the Partnership
as set forth in Section 13.2(b).
(b) The unanimous approval of all the Limited Partners
shall be required for the admission of a general partner or the
election to continue the business of the Partnership after the general
partner ceases to be a general partner (other than by removal) where
there is no remaining general partner.
(c) Notwithstanding any provision contained in the Act to
the contrary, the Limited Partners shall have no voting rights other
than as expressly set forth in this Agreement.
ARTICLE 10
MEETINGS
10.1 Place of Meetings
Meetings of the Partners may be held at any place within or
outside of California, at a time and place convenient to the Limited
Partners, as determined by the General Partner.
10.2 Calling of Meetings
A meeting of the Partners may be called by the General Partner or
by Limited Partners holding more than ten percent (10%) of the
outstanding Units for any matters on which the Limited Partners may
vote.
10.3 Notices
(a) Whenever Partners are required or permitted to take
any action at a meeting, a written notice of the meeting shall be
given not less than 15, nor more than 60 days before the date of the
meeting to each Partner entitled to vote at the meeting. The 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 be
transacted.
(b) Notice of a Partners' meeting or any report shall be
given either personally or by mail or other means of written
communication, addressed to the Partner at the address of the Partner
appearing on the books of the Partnership or given by the Partner to
the Partnership for the purpose of notice, or, if no address appears
or is given, at the place where the principal executive office of the
Partnership is located or by publication at least once in a newspaper
of general circulation in the county in which the principal executive
office is located. The notice or report 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 of
mailing of any notice or report in accordance with the provisions of
this Article, executed by the General Partner, shall be prima facie
evidence of the giving of the notice or report.
If any notice or report addressed to the Partner at the address
of the 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
the notice or report to the Partner at the address, all future notices
or reports shall be deemed to have been duly given without further
mailing if they are available for the Partner at the principal
executive office of the Partnership for a period of one year from the
date of the giving of the notice or report to all other Partners.
(c) Upon written request to the General Partner by any
person entitled to call a meeting of Partners, the General Partner
shall provide, within 10 days from the date the request is received,
the Partners entitled to vote with a notice of the meeting specifying
that the meeting will be held at the time requested by the person
calling the meeting, not less than 15 nor more than 60 days after the
receipt of the request.
10.4 Adjournment
When a Partners' meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and
place thereof are, announced at the meeting at which the adjournment
is taken. 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 45 days or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each Partner of record entitled to
vote at the meeting in accordance with this Article 10.
10.5 Waiver of Notice and Consent to Meeting
The transactions of any meeting of 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,
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 and except 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 not so included, if the
objection is expressly made at the meeting. Neither the business to
be transacted at nor the purpose of any meeting of Partners need be
specified in any written waiver of notice, except as provided in
Section 10.6.
10.6 Validity of Vote for Certain Matters
Any Partner approval at a meeting, other than unanimous approval
by those entitled to vote, pursuant to Section 9.3 hereof, shall be
valid only if the general nature of the proposal so approved was
stated in the notice of meeting or in any written waiver of notice.
10.7 Quorum
(a) A majority of the Units held by Limited Partners
represented in person or by proxy shall constitute a quorum at a
meeting of Partners.
(b) The 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 Partners to leave
less than a quorum, if any action taken (other than adjournment) is
approved by the requisite vote necessary under Section 9.3.
(c) 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
outstanding Units held by Limited Partners represented either in
person or by proxy, but no other business may be transacted, except as
provided in Section 10.7(b).
10.8 Action Without a Meeting
Any action which may be taken at any meeting of the Partners may
be taken without a meeting if a consent in writing, setting forth the
action so taken, shall be signed by Partners having not less than the
minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all entitled to vote thereon were
present and voted. In the event the Limited Partners are requested to
consent on a matter without a meeting, each Partner shall be given
notice of the matter to be voted upon in the same manner as described
in Section 10.3. In the event the General Partner, or Limited Partners
representing more than ten percent (10%) of the Units, request a
meeting for the purpose of discussing or voting on the matter, the
notice of a meeting shall be given in accordance with Section 10.3 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 shall be effective 15 days after the required
minimum number of voters have signed the consent, however, the action
will be effective immediately if the General Partner and Limited
Partners holding at least ninety percent (90%) of the outstanding
Units have signed the consent.
10.9 Use of Proxies
The use of proxies in connection with this Article 10 will be
governed in the same manner as in the case of corporations formed
under the California General Corporation Law.
10.10 Record Date
In order that the Partnership may determine the Partners of
record entitled to notices of meeting or to vote, or entitled to
receive any distribution or to exercise any rights in respect of any
other lawful action, the General Partner, or Limited Partners holding
more than ten percent (10%) of the outstanding Units, may fix, in
advance, a record date, which is not more than 60 nor less than 15
days prior to the date of the meeting and not more than 60 days prior
to any other action. If no record date is fixed:
(a) The record date for determining Partners entitled to
notice of or to vote at a meeting of Partners shall be at the close of
business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held.
(b) The record date for determining Partners entitled to
give consent to Partnership action in writing without a meeting shall
be the day on which the first written consent is given.
(c) The record date for determining Partners for any other
purpose shall be at the close of business on the day on which the
General Partner adopts it, or the 60th day prior to the date of the
other action, whichever is later.
(d) The determination of Partners of record entitled to
notice of or to vote at a meeting of Partners shall apply to any
adjournment of the meeting unless the General Partner, or the Limited
Partners who called the meeting, fix a new record date for the
adjourned meeting, but the General Partner, or the Limited Partners
who called the meeting, shall fix a new record date if the meeting is
adjourned for more than 45 days from the date set for the original
meeting.
ARTICLE 11
ASSIGNMENT OF INTERESTS;
SUBSTITUTED LIMITED PARTNERS; LIMITED LIQUIDITY PLAN
11.1 Sale, Transfer, or Assignment of Interest of the General
Partner
The General Partner may not sell or transfer all or any Part of
its general partnership interest (not including any Units it holds) in
the Partnership except in connection with the merger, consolidation,
or reorganization of the General Partner into another entity or the
transfer of ownership of the ownership interest in the General Partner
or the assumption of the rights and duties of the General Partner or
by another entity in connection with any such transaction or as set
forth in Article 7. The General Partner may also hold Units, the sale
or transfer of which is subject to Section 11.2. Notwithstanding the
foregoing, the General Partner may assign any part of its interest in
subordinated distributions under Section 5.4(c) to any person or
entity.
11.2 Assignment of Units
A Limited Partner may not sell, transfer, assign, pledge, or
otherwise dispose of any or a part of his Units (whether voluntarily
or by operation of law) (hereinafter collectively referred to as an
"assignment"), except as follows and as set forth in Section 11.7:
(a) A Limited Partner may assign one or more of his Units
if in compliance with this Section 11.2 and Sections 11.5 or 11.6. No
consent or approval of any of the Limited Partners shall be required
for such assignment.
(b) Any assignment must be by a written instrument, in a
form satisfactory to the General Partner and accepted by it, which
instrument has been duly executed by the assignor of such Units. A
Limited Partner shall notify the General Partner of an assignment or
transfer by operation of law of a beneficial interest in any Units
which occurs without a transfer of record ownership.
(c) An Assignee shall be required to pay a reasonable sum
to reimburse the Partnership and the General Partner in connection
with such assignment, with such sum to be determined by the General
Partner in its sole discretion. The sum shall be intended to cover
any legal fees, accounting fees, overhead charges, and other fees or
expenses incurred by the Partnership and its counsel as a result of
any such assignment.
(d) The General Partner may require an opinion of counsel,
in form and substance satisfactory to it in its sole discretion, by
counsel experienced in securities laws matters, covering (i) that the
proposed assignment will be in compliance with applicable securities
laws, rules and regulations, and (ii) such other matters as may be
determined by the General Partner in its sole discretion. The fee for
such counsel shall be paid by the assignor.
Any purported assignment of Units which is not in compliance with
this Agreement is hereby declared to be null and void and of no force
or effect whatsoever.
11.3 Assignee's Rights
(a) An assignment of a Unit does not entitle the Assignee
to become or to exercise any rights of a Partner. An assignment
entitles the Assignee to receive, to the extent assigned, only the
distributions and allocation of profits and losses to which the
assignor would be entitled after the effective date of assignment as
set forth below. A Limited Partner remains a Partner upon assignment
of all or part of the Limited Partner's Units, subject to the
possibility of the Assignee becoming a Substituted Limited Partner
pursuant to Section 11.5.
(b) The "effective date" of an assignment shall be that
date specified in the written instrument whereby the General Partner
consents to the assignment, which date shall not be later than the
first day of the quarter following receipt by the General Partner of a
written notice of assignment and the fulfillment of all conditions
precedent to such assignment provided for in this Agreement. Notwith-
standing anything to the contrary contained in this Agreement, the
Partnership and the General Partner shall be entitled to treat an
assignor or transferor of Units as the absolute owner thereof in all
respects, and shall incur no liability for allocations of income,
gain, loss, deductions, credits, or distributions made to such
assignor or transferor until the effective date of an assignment shall
have passed.
11.4 No Assignment Allowed Under Certain Circumstances
Anything herein contained to the contrary notwithstanding, no
Limited Partner shall have the right, without express written approval
from the General Partner, to assign his Units, or any portion thereof,
if such assignment would result (directly or indirectly) in the (a)
termination of the Partnership for tax purposes; (b) violation of the
Securities Act of 1933 or any rules or regulations thereunder, or any
applicable state securities laws or any rules or regulations
thereunder; (c) violation of any investment representation given by
such Limited Partner in connection with his acquisition of Units; (d)
treatment of the Partnership as an association taxable as a
corporation; or (e) acquisition by an Assignee who is a resident
alien, non-resident alien, sellers or related parties of the sellers
of the Properties, or holder of a mortgage loan on the Properties.
11.5 Substituted Limited Partners
(a) An Assignee shall not become a Substituted Limited
Partner unless the General Partner gives its express written consent
to such substitution (which consent may not be unreasonably withheld)
and receives such instruments and documents, and a reasonable transfer
fee, as the General Partner shall require.
(b) The assignor Limited Partner shall cease to be, and
the Assignee shall become, a Limited Partner, as to the Units so
assigned, as of the date on which the Assignee has satisfied the
requirements set forth above and as of the date of effectiveness.
(c) The General Partner is hereby authorized to do all
things necessary to effect the admission of any such Substituted
Limited Partner, including, but not limited to, the filing of an
amended Certificate of Limited Partnership (if necessary), and each
Limited Partner hereby agrees (and each Substituted Limited Partner,
upon the execution of the instruments referred to in Section 11.5(a),
shall be deemed to have agreed) that he shall, at the request of the
General Partner, execute and deliver any such amended Certificate of
Limited Partnership.
(d) Unless and until any Assignee, transferee, heir or
legatee becomes a Substituted Limited Partner, his status and rights
shall be limited to the rights of an Assignee. An Assignee who does
not become a Substituted Limited Partner shall have no right to
inspect the Partnership's books or to vote on any of the matters on
which a Limited Partner would be entitled to vote. An Assignee who
has become a Substituted Limited Partner has, to the extent the
assignor's Units are assigned, the rights and powers, and is subject
to the restrictions and liabilities, of a Limited Partner under this
Agreement. In no event, however, is an assignor released from the
assignor's liabilities, if any, to the Partnership pursuant to
Sections 15622(d), 15652 and 15666 of the Act.
(e) The General Partner shall cause this Agreement and any
separate Certificate of Limited Partnership (if required by law) to be
amended to reflect the substitution of Limited Partners at least once
in each fiscal quarterly period of the Partnership.
(f) Any person admitted to the Partnership as a
Substituted Limited Partner shall be subject to and bound by all the
provisions of this Agreement as if originally a party to this
Agreement.
11.6 Death, Incompetency or Bankruptcy of a Limited Partner
The death, adjudication of incompetency or bankruptcy of a
Limited Partner shall not dissolve the Partnership. If a Limited
Partner who is an individual dies or a court of competent jurisdiction
adjudges the Limited Partner to be incompetent to manage the Limited
Partner's personal property, the Limited Partner's executor,
administrator, guardian, conservator, or other legal representative
may exercise all the Limited Partner's rights for the purposes of
settling the Limited Partner's estate or administering the Limited
Partner's property. The executor, administrator, guardian,
conservator, or other legal representative, as applicable, of the
deceased, incompetent or bankrupt Limited Partner shall nevertheless
continue to be liable for all of his obligations as a Limited Partner.
11.7 Limited Liquidity Plan
Commencing on January 1, 1989, and each year thereafter, the
Limited Partners shall have the option to have their Units repurchased
by the Partnership or a person designated by the Partnership subject
to the terms and conditions set forth in this Section 11.7.
(a) Purchase Price. The purchase price of any Units
repurchased by the Partnership or person designated by the Partnership
pursuant to this Section 11.7 shall equal 80% of the value of such
Units as established by the General Partner. The General Partner
shall use a sales/liquidation analysis of the Partnership to establish
the value of the Units. Such analysis shall determine the net
proceeds from a sale of the Properties, based on independent
appraisals, adjusted for Working Capital Reserves, increased by the
book value of other Partnership assets and decreased by Partnership
debts, obligations and disposition costs. The General Partner shall
then determine, in accordance with the provisions of Sections 5.3 and
5.4, the amount of such proceeds which would be distributed to any
Limited Partner requesting repurchase. This amount shall be the
established value of a Limited Partner's Units, of which a Limited
Partner would receive 80% if his Units are repurchased.
(b) Appraisal. Upon receipt of a repurchase request from
a Limited Partner, the Partnership shall have the Properties appraised
by an independent M.A.I. appraiser; provided, however, that if the
Properties have been appraised at any time during the 12 months
preceding the repurchase request, the General Partner, in its sole
discretion, may elect to use either or both of the prior appraisals
and forego the reappraisal of either or both of the Properties. The
purchase of Units under this plan shall be suspended during any period
when one or both of the Properties are being reappraised. The expense
of the appraisals shall be borne by the Partnership.
(c) Exercise. Repurchases shall be made on a quarterly
basis. A Limited Partner shall provide the Partnership with written
notice of the election to have his Units repurchased. The repurchase
shall be made in the calendar quarter following the quarter in which
the notice is received by the Partnership. The Partnership shall, if
necessary, have one or both of the Properties appraised, calculate the
value of the Units and provide the Limited Partner notice of the
purchase price for his Units no later than 45 days prior to the date
the repurchase is scheduled to occur. The Limited Partner shall have
30 days to confirm or revoke his repurchase election. If no notice is
received within this period, the Limited Partner shall be deemed to
have revoked the repurchase election. If in any quarter the requests
for repurchase exceed the funds available for repurchase, priority
shall be given to the requests in the order in which they were
received by the Partnership. If a Limited Partner's request for
repurchase is not satisfied in a given quarter, such Partner's
priority based on the date his request was received shall carry over
to subsequent quarters. Any Limited Partners electing not to proceed
will be given priority in the order in which their elections are
received in any subsequent quarter.
(d) Funding. Each quarter the General Partner shall
review the requests for repurchase and based on the number of
requests, allocate up to 10% of the Distributable Cash from Operations
for the purpose of making repurchases. Any funds set aside for
repurchases which are not used in the quarter so allocated shall be
promptly distributed with the next distribution to the Partners in
accordance with Section 5.3.
(e) Limitations. The Partnership shall not repurchase in
the aggregate more than 5% of the outstanding Units (exclusive of
Units owned by the General Partner, its Affiliates or their employees)
as of the Completion Date; provided, however, the General Partner, at
its discretion, may increase the percentage of Units eligible for
repurchase on a temporary or permanent basis. In addition, repur-
chases shall not be made if they would result in a "termination" of
the Partnership within the meaning of Section 708(b) of the Internal
Revenue Code.
ARTICLE 12
TERMINATION OF THE GENERAL PARTNER
12.1 Cessation of the General Partner
(a) The General Partner shall cease to be the General
Partner of the Partnership only upon the happening of any of the
following events (hereinafter referred to as a "Terminating Event" and
the General Partner affected as the "Terminated General Partner"):
(1) The General Partner withdraws from the
Partnership:
(2) The General Partner is removed as the General
Partner of the Partnership pursuant to Section 9.3(a)(3);
(3) Ninety (90) days after the Limited Partners have
received written notification (which notification shall be given by
the General Partner as prompted, as practicable) that an order for
relief against the General Partner has been entered under Chapter 7 of
the federal bankruptcy law, or that the General Partner (i) has made a
general assignment for the benefit of creditors, (ii) has filed a
voluntary petition under the federal bankruptcy law, (iii) has filed a
petition or answer seeking for the General Partner any bankruptcy,
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law, or regulation,
(iv) has filed 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 this nature, or (v) has sought,
consented to, or acquiesced in the appointment of a trustee, receiver,
or liquidator of the General Partner or of any or all substantial part
of the General Partner's properties;
(4) Ninety (90) days after the Limited Partners have
received written notification (which notification shall be given by
the General Partner as promptly as practicable) of one of the
following events: (i) commencement of any proceeding against the
General Partner seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
statute, law, or regulation, and the proceeding has not been
dismissed, or (ii) if within 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 any or all substantial part of
the General Partner's properties, the appointment is not vacated or
stayed, or within 60 days after the expiration of any such stay, the
appointment is not vacated; and
(5) The dissolution and termination of the General
Partner.
(b) Upon a Terminating Event where the business of the
Partnership is continued, the interest of the Terminated General
Partner in the Partnership shall be converted or purchased as set
forth in Section 12.2 below.
(c) Upon a Terminating Event, the agency relationship
between the Partnership and the Terminated General Partner shall be
terminated, and the Terminated General Partner shall have no liability
for any debts or liabilities of the Partnership incurred after the
Terminating Event.
12.2 Conversion or Purchase of Interest of Former General Partner
(a) If the business of the Partnership continues after a
Terminating Event, the Terminated General Partner's interest shall, at
the election of the Partnership, either (i) convert to that of a
special limited partner interest or (ii) be purchased by the
Partnership. Whether the General Partner's interest is converted or
repurchased, the Partnership shall pay all amounts then accrued and
owing to the General Partner and its Affiliates. The Partnership
shall provide notice of its election under this Section 12.2 to the
Terminated General Partner within 30 days from the date of the
election to continue its business. If notice is not so provided, the
Terminated General Partner's interest shall be converted. Upon
conversion of its interest to that of a special Limited Partner, the
Terminated General Partner shall retain the same rights to profits,
losses, and distributions as before the Terminating Event and shall be
entitled to the voting rights accorded other Limited Partners. If the
Terminated General Partner's interest is repurchased, it shall receive
from the Partnership the then present value of its interest in the
Partnership, determined by agreement of the Terminated General Partner
and the Partnership. If such parties cannot agree, the purchase price
shall be determined in accordance with the then current rules of the
American Arbitration Association, with the expense of arbitration
borne equally by the parties. If the termination of the Terminated
General Partner was voluntary, the method of payment for its interest
shall be under a non-interest bearing unsecured, promissory note with
principal payable from distributions which the Terminated General
Partner otherwise would have received under this Agreement if it had
remained as General Partner. If the termination is involuntary, the
method of payment shall be under a promissory note bearing interest at
the Reference Rate of the bank specified by the Terminated General
Partner, with equal payments of principal and interest over a term of
five years.
(b) If a Terminating Event Occurs and the business of the
Partnership is not continued, then the Partnership shall be terminated
and its assets distributed in accordance with Article 13.
12.3 Withdrawal by the General Partner
(a) The General Partner may withdraw from the Partnership
only upon providing the Limited Partners with 60 days' notice of its
intent to withdraw, obtaining Majority Vote of the Limited Partners
consenting to such withdrawal and upon the appointment of a successor
general Partner by Majority Vote of the Limited Partners.
(b) A withdrawal by the General Partner under the
conditions stated above shall not act as a breach of this Agreement.
In the event of a withdrawal by the General Partner meeting the
requirements of this Section 12.3, the withdrawing General Partner
shall be entitled to have his interest purchased or converted to that
of a special Limited Partner in accordance with Section 12.2.
12.4 Termination of Executory Contracts With the General Partner
or Affiliates
Upon a Terminating Event as set forth in Section 12.1, all
executory contracts between the Partnership and the Terminated General
Partner or any Affiliate thereof may be terminated by the Partnership
effective upon 60 days prior written notice of such termination to the
party so terminated. The Terminated General Partner or any Affiliate
thereof may also terminate and cancel any such executory contract
effective upon 60 days prior written notice to the Partnership.
12.5 Reports After Removal
Within 90 days after the Limited Partners have voted to remove
the General Partner, the General Partner shall have Prepared, at
Partnership expense, unaudited financial statements (balance sheet,
statement of income or loss, statement of Partners' equity, and
statement of changes in financial position) Prepared in accordance
with generally accepted accounting principles and shall cause such
statements to be mailed to the Limited Partners as soon as possible
after receipt thereof.
ARTICLE 13
DISSOLUTION AND TERMINATION
OF THE PARTNERSHIP
13.1 Dissolution
The Partnership shall be dissolved and its affairs shall be wound
up upon the happening of the first to occur of the following:
(a) Upon the General Partner ceasing to be the general
partner of the Partnership as set forth in Section 12.1 (a) hereof
(other than by removal) unless (i) there is at least one other General
Partner and all other remaining General Partner(s) elect to continue
the business of the Partnership or (ii) all Limited Partners agree to
continue the business of the Partnership and to admit one or more
General Partners pursuant to the voting right set forth in Section
9.3(b);
(b) On a date designated by vote of the limited Partners
pursuant to the exercise of the voting right set forth in Section
9.3(a)(2);
(c) The sale or other disposition of all of the
Partnership's assets and the receipt in cash of the proceeds thereof;
(d) Upon entry of a decree judicial dissolution; or
(e) On December 31, 2016.
13.2 Continuation of the Business of the Partnership
The business of the Partnership may be continued as follows:
(a) If the General Partner ceases to be a general partner
of the Partnership, any then remaining General Partner, without the
necessity for the consent of the Limited Partners, shall have the
right to continue the business of the Partnership.
(b) In all other events where a dissolution his occurred,
upon a Majority Vote of the Limited Partners consenting to the
continuation of the business of the Partnership, except that if the
General Partner ceases to be the general partner of the Partnership
(other than by removal) and there is no remaining General Partner, the
admission of a new General Partner or the election to continue the
business of the Partnership shall require the unanimous consent of all
Limited Partners.
13.3 Liquidation
(a) In the event of dissolution as provided in Section
13.1, if there has been no election to continue the Partnership as
provided for in this Agreement and following any sale of the
Partnership's real or personal property, the liquid assets of the
Partnership shall be distributed as follows:
(1) All of the Partnership's debts and liabilities to
persons (including Partners to the extent permitted by law) shall be
paid and discharged, but excluding secured creditors whose obligations
will be assumed or otherwise transferred on the liquidation of
Partnership assets and any reserve deemed necessary by the General
Partner for the payment of such debts shall be set aside; and
(2) The balance of such assets of the Partnership
shall be distributed to the Partners in amounts equal to the Partners'
positive balances in their capital accounts and otherwise in
accordance with Article 5.
(b) Upon dissolution, each Limited Partner shall look
solely to the assets of the Partnership for the return of his Invested
Capital, and shall be entitled only to a cash distribution of
Partnership property and assets in return thereof. If the Partnership
property remaining after the payment or discharge of the debts and
liabilities of the Partnership is insufficient to return the Invested
Capital of each Limited Partner, such Limited Partner shall have no
recourse against any other Limited Partner or against the General
Partner, except to the extent provided in Section 5.7. The winding up
of the affairs of the Partnership and the distribution of its assets
shall be conducted exclusively by the General Partner, who is hereby
authorized to do any and all acts and things authorized by law for
these purposes. In the event of dissolution or bankruptcy of the
General Partner or removal of the General Partner by the Limited
Partners and there is a failure to appoint a new General Partner, the
winding up of the affairs of the Partnership and the distribution of
its assets shall be conducted by the remaining General Partner, if
any, or by such person as may be selected by a Majority Vote of the
Limited Partners, which person is hereby authorized to do any and all
acts and things authorized by law for these purposes.
(c) In the event the Partnership is "liquidated" within
the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g), (i)
distributions shall be made pursuant to Section 13.3 to the Partners
who have positive capital accounts in compliance with Treasury
Regulation Section 1.7041(b)(2)(ii)(b)(2), and (ii) if the General
Partner's capital account has a deficit balance (after giving effect
to all contributions, distributions, and allocations for all taxable
years, including the year during which such liquidation occurs), the
General Partner shall contribute to the capital of the Partnership the
amount necessary to restore such deficit balance in compliance with
Section 5.7. Distributions pursuant to the preceding sentence may be
distributed to a trust established for the benefit of the Partners for
the purposes of liquidating Partnership assets, collecting amounts
owed to the Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership or of the General
Partner arising out of or in connection with the Partnership. The
assets of any such trust shall be distributed to the Partners from
time to time, in the reasonable discretion of the General Partner, in
the same proportions as the amount distributed to such trust by the
Partnership would otherwise have been distributed to the Partners
pursuant to this Agreement.
13.4 Cancellation of Certificate of Limited Partnership
Upon the completion of the distribution of Partnership assets as
provided in this Article 13 and the termination of the Partnership,
the General Partner or other person acting as liquidator (or the
Limited Partners, if necessary) shall cause the Certificate of Limited
Partnership of the Partnership to be cancelled and shall take such
other actions as may be necessary to legally terminate the
Partnership.
ARTICLE 14
PARTNERSHIP EXPENSES
14.1 Reimbursement to General Partner
The Partnership shall reimburse the General Partner for those
items specifically set forth in Article 7.
14.2 Payment of Expenses of the Partnership
All of the ongoing Partnership expenses shall be billed directly
to and paid by the Partnership. The Partnership's expenses will
include the following:
(a) Organization and Offering Expenses (subject to the
limitation in Section 7.1).
(b) Expenses connected with the Properties, which may
include, but are not limited to: (i) expenses in connection with the
acquisition, development, financing, refinancing and disposition of
the Properties; (ii) expenses in connection with the replacement,
alteration, repair, remodeling, refurbishment, and leasing of the
Properties; (iii) direct salary expenses for employees, other than
Control Persons, of the General Partner or its Affiliates performing
services outside the normal scope of activities required by the
General Partner; (iv) all operational costs of the Properties,
including taxes, utilities, insurance, cost of maintenance and repair,
mortgage payments, and all costs of borrowed money, taxes, and
assessments on Partnership property and other taxes applicable to the
Partnership; (v) all costs associated with the sale of the Properties,
including the costs of servicing any seller financing; (vi) legal,
accounting, audit, appraisal, engineering and other fees; and (vi)
fees and expenses paid to independent contractors, mortgage bankers,
brokers and servicers, leasing agents, consultants, on-site managers,
real estate brokers, insurance brokers, and other agents.
(c) Expenses of Partnership administration, including all
accounting, documentation, professional, asset management, and
reporting expenses of the Partnership, which may include, but are not
limited to: (i) preparation and documentation of Partnership
bookkeeping, accounting, and audits; (ii) preparation and
documentation of budgets, economic surveys, cash flow projections, and
working capital requirements; (iii) preparation and documentation of
Partnership state and federal tax returns; (iv) printing, engraving,
and other expenses and taxes incurred in connection with the issuance,
distribution, transfer, registration, and recording of documents
evidencing ownership of Units or in connection with the business of
the Partnership; (v) expenses of insurance as required in connection
with the business of the Partnership; (vi) expenses in connection with
distributions made by the Partnership to, and communications,
bookkeeping and clerical work necessary in maintaining relations with
limited Partners, including the cost of printing and mailing to such
persons reports of the Partnership and of preparation of proxy
statements and solicitations of proxies in connection therewith; (vii)
expenses in connection with preparing and mailing reports required to
be furnished to Limited Partners for investor, tax reporting, or other
purposes, or expenses associated with furnishing reports to Limited
Partners which the General Partner deems to be in the best interests
of the Partnership; (viii) expenses of revising, amending, converting,
modifying, or terminating the Partnership; (ix) costs incurred in
connection with any litigation in which the Partnership is involved as
well as any examination, investigation, or other proceedings conducted
by any regulatory agency of the Partnership, including legal and
accounting fees incurred in connection therewith; (x) costs of any
computer equipment or services used for or by the Partnership; (xi)
costs of any accounting, statistical, or bookkeeping equipment
necessary for the maintenance of the books and records of the
Partnership; (xii) costs of preparation and dissemination of
informational material and documentation relating to potential sale,
refinancing, or other disposition of Partnership property; (xiii)
supervision and expenses of professionals employed by the Partnership
in connection with any of the foregoing, including attorneys,
accountants, and appraisers; and (xiv) other Partnership
administration expenses.
(d) Other costs or expenses necessary or advisable for the
operation of the business of the Partnership.
ARTICLE 15
AMENDMENTS OF PARTNERSHIP DOCUMENTS
15.1 Amendments in General
Except as otherwise provided in this Agreement, this Agreement
may be amended only with the consent of the General Partner and by a
Majority Vote of the Limited Partners.
15.2 Amendments Without Consent of Limited Partners
In addition to any amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the
General Partner, without the consent of any of the Limited Partners,
which (a) add to the representations, duties or obligations of the
General Partner or surrender any right or power granted to the General
Partner herein, for the benefit of the Limited Partners; (b) correct
any error, resolve any ambiguity, or supplement any provision which
may be inconsistent with another provision hereof, or make any other
provision with respect to matters or questions arising under this
Agreement that is not inconsistent with the provisions of this
Agreement; (c) delete or add any provision of this Agreement required
to be so deleted or added by the Securities Exchange Commission or any
state securities commission or similar governmental authority for the
benefit or protection of the Limited Partners; (d) amend this
Agreement and any Certificate of Limited Partnership (if required) to
admit Limited Partners pursuant to Article 3 and Section 11.5; (e)
reflect reductions in the Capital Contributions of the Limited
Partners resulting from a return of capital; (f) amend this Agreement
upon advice of counsel or accountants that the provisions contained
herein are unlikely to be given effect for federal income tax
purposes, to the minimum extent necessary; any such new allocation
shall not give rise to any claim or cause of action by any Limited
Partner or Assignee; (g) elect for the Partnership to be governed by
any successor California statute governing limited partnerships; (h)
would make an amendment desirable to effectuate the intent of the
Partners, as long as any Partner who is adversely affected in any
material respect by such an amendment consents to the amendment if
there occurs any change in the law governing limited partnerships;
(i) makes any change necessary or advisable in the discretion of the
General Partner to cause the Partnership to be treated as a
partnership for federal income tax purposes, and (j) makes any other
change which does not adversely affect the rights of the Limited
Partners or Assignees in any material respect; provided, however, that
the General Partner shall not have the right under this subsection
15.2(j) to amend Articles 4, 5, 6 or 9, or Article 7, if the amendment
would increase the General Partner or its Affiliates compensation or
reimbursements.
15.3 Amendments Needing Consent of Affected Partners
Notwithstanding any other provision of this Agreement, without
the consent of the Partner or Partners to be adversely affected by any
amendment to this Agreement, this Agreement may not be amended to (a)
convert a Limited Partner's interest into a General Partner's
interest, (b) modify the limited liability of a Limited Partner, (c)
increase, add or alter any obligation of the General Partner, (d)
adversely affect the status of the Partnership as a partnership for
federal income tax purposes, or (e) otherwise modify the compensation,
distributions, or rights of reimbursement to which the General Partner
is entitled or affect the duties of the General Partner or the
indemnification to which the General Partner and its Affiliates are
entitled under Section 6.7.
15.4 Amendments to Certificates of Limited Partnership
(a) The General Partner shall cause to be filed with the
California Secretary of State, within 30 days after the happening of
any of the following events, an amendment to the Certificate of
Limited Partnership reflecting the occurrence of any of the following
events:
(1) A change in the name of the Partnership;
(2) A change in either of the following:
(i) The street address of the Partnership's
principal executive office.
(ii) If the principal executive office is not in
California, the street address of an office in California;
(3) A change in the address of or withdrawal of the
General Partner, or a change in the address of the agent for service
of process, unless a corporate agent is designated, or appointment of
a new agent for service of process;
(4) The admission of a General Partner and that
Partner's address; and
(5) The discovery by the General Partner of any false
or erroneous material statement contained in the Certificate of
Limited Partnership.
(b) Any Certificate of Limited Partnership filed or
recorded in jurisdictions other than California shall be amended as
required by applicable law.
(c) The Certificate of Limited Partnership may also be
amended at any time in any other manner deemed appropriate by the
General Partner.
15.5 Amendments After Change of Law
This Agreement and any other Partnership documents may be amended
and refiled, if necessary, by the General Partner without the consent
of the Limited Partners if there occurs any change that permits or
requires an amendment of this Agreement under the Act or of any other
Partnership document under applicable law, so long as no Partner is
adversely affected in any material respect (or consent is given by
such Partner).
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 Notices
(a) Any written notice, offer, demand or communication
required or permitted to be given by any provision of this Agreement
shall be deemed to have been sufficiently given for all purposes if
delivered personally to the party to whom the same is directed or if
sent by certified mail addressed (i) if to the General Partner, to the
principal place of business and office of the Partnership specified in
this Agreement and (ii) if to a Limited Partner, to such Limited
Partner's address as set forth on his Subscription Agreement or any
other address provided to the General Partner by such Limited Partner.
(b) Any such notice that is sent by certified mail shall
be deemed to be given two (2) days after the date on which the same is
mailed.
(c) The General Partner may change its address for
purposes of this Agreement by giving written notice of such change to
the Limited Partners, and any Limited Partner may change his address
for purposes of this Agreement by giving written notice of such change
to the General Partner, in the manner hereinbefore provided for the
giving of notices.
16.2 Article and Section Headings
The Article and Section headings in this Agreement are inserted
for convenience and identification only and are in no way intended to
define or limit the scope, extent or intent of this Agreement or any
of the provisions hereof.
16.3 Construction
Whenever the singular number is used herein, the same shall
include the plural; and the neuter, masculine and feminine genders
shall include each other. If any language is stricken or deleted from
this Agreement, such language shall be deemed never to have appeared
herein and no other implication shall be drawn therefrom. The
language in all parts of this Agreement shall be in all cases
construed according to its fair meaning and not strictly for or
against the General Partner or the Limited Partners.
16.4 Severability
If any covenant, condition, term or provision of this Agreement
is illegal, or if the application thereof to any Person or in any
circumstance shall to any extent be judicially determined to be
invalid or unenforceable, the remainder of this Agreement, or the
application of such covenant, condition, term or provision to Persons
or in circumstances other than those to which it is held invalid or
unenforceable, shall not be affected thereby, and each covenant,
condition, term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
16.5 Governing Law
This Agreement shall be construed and enforced in accordance
with, and governed by, the internal laws of the State of California.
16.6 Counterparts
This Agreement may be executed in one or more counterparts each
of which shall, for all purposes, be deemed an original and all of
such counterparts, taken together, shall constitute one and the same
Agreement binding on all of the Partners.
16.7 Entire Agreement
This Agreement constitutes the entire agreement of the parties.
All prior agreements among the parties, whether written or oral, are
merged herein and shall be of no force or effect. This Agreement
cannot be changed, modified or discharged orally but only by an
agreement in writing. There are no representations, warranties, or
agreements other than those set forth in this Agreement, the Subscrip-
tion Agreement, or the Prospectus, if any.
16.8 Cross-References
All cross-references in this Agreement, unless specifically
directed to another Agreement or document, refer to provisions in this
Agreement.
16.9 Power of Attorney to the General Partner
(a) Each Limited Partner hereby irrevocably makes,
constitutes, and appoints the General Partner and any person
designated by it, with full substitution, its agent and attorney-in-
fact in his name, place and stead, to make, execute, swear to and
acknowledge, amend, file, record and deliver the following documents
and any other documents deemed by the General Partner necessary for
the business of the Partnership: (i) any Certificate of Limited
Partnership, required or permitted to be filed on behalf of the
Partnership, and any and all certificates as necessary to qualify or
continue the Partnership as a limited partnership or partnership
wherein the Limited Partners thereof have limited liability in the
states where the Partnership may be doing business, and all
instruments which effect a change or modification of the Partnership
in accordance with this Agreement; (ii) this Agreement and any
amendments thereto in accordance with this Agreement; (iii) any other
instrument which is now or which may hereafter be required or
advisable to be filed for or on behalf of the Partnership; (iv) any
agreement to secure payment of additional contributions due from that
Limited Partner; (v) any document which may be required to effect the
continuation of the Partnership, the admission of an additional or
Substituted Limited Partner, or the dissolution and termination of the
Partnership (provided such continuation, admission or dissolution and
termination is in accordance with the terms of this Agreement), or to
reflect any reductions in amount of contributions of Partners; (vi)
any document, instrument, application, certificate, or order required
to be made, executed, acknowledged, or sworn to in connection with the
withdrawal or receipt from escrow of any cash of a Limited Partner in
connection with his purchase of Units, consistent with the Prospectus;
in each case having the power to execute such instruments on his
behalf, whether the undersigned approved of such action or not; and
(vii) any additions, deletions and corrections to the Subscription
Agreement which does not adversely affect the position of the Limited
Partners.
(b) This Power of Attorney is a special Power of Attorney
coupled with an interest, and shall not be revoked and shall survive
the assignment, delivery, or transfer by the undersigned of all or
part of his interest in the Partnership and, being coupled with an
interest, shall survive the death or disability or cessation of the
existence as a legal entity of the undersigned, except that where the
assignee has been approved by said attorney, as General Partner of the
Partnership, for admission to the Partnership as a Substituted Limited
Partner, this Power of Attorney shall survive the delivery of such
assignment for the sole purpose of enabling said attorney to execute,
acknowledge and file any instrument necessary to effectuate said
substitution.
(c) Each Limited Partner hereby gives and grants to his
said attorney full power and authority to do and perform each and
every act and thing whatsoever requisite, necessary or appropriate to
be done in or in connection with this Power of Attorney as fully to
all intents and purposes as he might or could do if personally
present, hereby ratifying all that his said attorney shall lawfully do
or cause to be done by virtue of this Power of Attorney.
(d) The existence of this Power of Attorney shall not
preclude execution of any such instrument by the undersigned
individually on any such matter. A person dealing with the
Partnership may conclusively presume and rely on the fact that any
such instrument executed by such agent and attorney-in-fact is
authorized, regular and binding without further inquiry.
(e) This Power of Attorney may be exercised by an officer
of the General Partner by a facsimile signature of such officer, or by
listing all of the Limited Partners executing any instrument with a
single signature of one of the officers of the General Partner acting
as attorney-in-fact for all of them.
16.10 Further Assurances
The Limited Partners shall execute and deliver such further
instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement.
16.11 Successors and Assigns
Subject in all respects to the limitations on transferability
contained herein, this Agreement shall be binding upon, and shall
inure to the benefit of, the heirs, administrators, personal
representatives, successors and assigns of the respective parties
hereto.
16.12 Waiver of Action for Partition
Each of the parties hereto irrevocably waives during the term of
the Partnership and during the period of its liquidation following any
dissolution, any right that he may have to maintain any action for
partition with respect to any of the assets of the Partnership.
16.13 Creditors
None of the provisions of this Agreement shall be for the benefit
of or enforceable by any of the creditors of the Partnership or the
Partners.
16.14 Remedies
The rights and remedies of the Partners hereunder shall not be
mutually exclusive, and the exercise by any Partner of any right to
which he is entitled shall not preclude the exercise of any other
right he may have.
16.15 Authority
Each individual executing this Agreement on behalf of a
partnership, corporation, or other entity warrants that he is
authorized to do so and that this Agreement will constitute the
legally binding obligation of the entity which he represents.
16.16 Tax Elections
The General Partner shall cause the Partnership to make all
elections required or permitted to be made for income tax purposes in
such manner as the General Partner in its sole discretion deems
appropriate or necessary. However, it is not anticipated that the
General Partner will elect, in accordance with Section 754 of the
Internal Revenue Code, to adjust the basis of the Partnership property
as described in Sections 734 and 743 of the Internal Revenue Code.
16.17 Signatures
The signature of the General Partner shall be sufficient to bind
the Partnership to any agreement or on any document, including, but
not limited to, documents drawn or agreements made in connection with
the acquisition or disposition of any assets.
16.18 Withholding Taxes
In the event that the Partnership is obligated to withhold taxes
with respect to any Partner:
(a) Any tax required to be withheld shall be charged to
that Partner's capital account as if the amount of such tax had been
distributed to such Partner;
(b) The General Partner shall have the right to make a
loan to such Partner in an amount equal to the amount of tax required
to be withheld to the extent that cash is needed to make the
withholding payments attributable to that Partner; and
(c) The General Partner may retain appropriate portions of
a Partner's distributions until any withholding obligations relating
to that Partner are satisfied and may apply such distributions to any
loan made pursuant hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of ________________, 1987.
GENERAL PARTNER:
Prometheus Development Co., Inc., a California corporation
By /S/ SANFORD N. DILLER
Sanford N. Diller
President
INITIAL LIMITED PARTNER:
Prom XX, Inc., a California corporation
By /S/ SANFORD N. DILLER
Sanford N. Diller
President
ADDITIONAL LIMITED PARTNERS
Pursuant to Signatures on Subscription Agreement
Upon admission of the additional
Limited Partners set forth in
Schedule A, the Initial Limited
Partner hereby withdraws as a Partner
of the Partnership upon redemption
for the cost of its interest.
Prom XX, Inc.,
a California corporation
By /S/ SANFORD N. DILLER
Sanford N. Diller
President
Exhibit (c)(2)
MANAGEMENT AND OPERATING AGREEMENT
AGREEMENT
THIS AGREEMENT (the "Agreement") made this 1st day of October, 1992
(the "Effective Date"), by and between PROMETHEUS INCOME PARTNERS, a
California limited partnership ("Owner"), and THE PROMETHEUS COMPANY
("Operator").
RECITALS:
A. Owner is the owner of that certain improved real property and the
improvements thereon known as Alderwood/Timberleaf Apartments,
consisting of 234 units, located at 900 Pepper Tree Lane, Santa Clara,
California 95051; and Timberleaf Apartments, consisting of 124 units,
located at 2147 Newhall Street, Santa Clara, California
95051(collectively, the "Property").
B. Owner desires to obtain the services of Operator for the
purpose of managing, operating, maintaining and leasing the Property,
and Operator desires to provide such services.
C. Operator holds a California real estate brokerage license through
an authorized officer of Operator, as may be required for the services
to be provided by Operator hereunder.
AGREEMENT:
NOW, THEREFORE, IN CONSIDERATION OF the promises and covenants
contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Owner and
Operator agree as follows:
ARTICLE 1
APPOINTMENT OF OPERATOR
1.1 Appointment and Acceptance.
Owner hereby appoints Operator, and Operator hereby accepts
appointment as Owner's exclusive agent to manage, operate, maintain,
and lease the Property on the terms and conditions set forth herein.
ARTICLE 2
TERM
2.1 Term.
Subject to the early termination provisions of Section 2.2, the term
of this Agreement shall commence on the 1st day of October, 1992, and
shall continue to and include the 30th day of September, 1993 (the
"Expiration Date"). This Agreement shall automatically continue after
the Expiration Date on a month-to-month basis, subject to the right of
either party to terminate this Agreement by giving termination. The
Management Fees (as defined in Section 3.1) during the period
following the Expiration Date shall be at the rates in effect on the
Expiration Date, unless the parties agree otherwise in writing.
2.2 Early Termination.
Notwithstanding the provisions of Section 2.1, this Agreement and the
obligations of the parties hereunder may be terminated prior to the
Expiration Date as follows:
2.2.1 Destruction or Sale of The Property.
Upon the sale, condemnation, or destruction of twenty-five percent
(25%) or more of the Property, either party may terminate this
Agreement by giving written notice of termination to the other party
within fifteen (15) days after receipt of notice of such event; and
this Agreement shall terminate thirty (30) days after receipt of such
notice of termination.
2.2.2 Legal Compliance.
Upon the failure of Owner to comply with any requirement, rule, order,
determination, ordinance or law of any federal, state, local or other
governmental authority affecting the Property, or the operation or use
thereof, within thirty (30) days after having received written notice
of such noncompliance from Operator, Operator may terminate this
Agreement by giving Owner written notice of termination within fifteen
(15) days after the expiration of such thirty (30) day period,
provided, however, that if more than thirty (30) days are required for
such compliance and Owner begins to cure such noncompliance within
fifteen (15) days after written notice thereof from Operator and
diligently pursues such cure to completion, Owner shall have a
reasonable time to complete such cure, and provided further that Owner
shall not be required to so cure any such noncompliance during the
period that Owner is actively contesting such requirement in good
faith. This Agreement shall terminate ten (10) days after receipt of
such notice of termination.
2.2.3 Default.
Upon a default by either party in the performance of any of its
obligations hereunder which continues for thirty (30) days after
written notice from the nondefaulting party to the defaulting party
specifying such default, the nondefaulting party may terminate this
Agreement by giving the defaulting party written notice of termination
within fifteen (15) days after the expiration of such thirty (30) day
period; provided, however, that if more than thirty (30) days are
required to cure such default and the defaulting party begins to cure
such default within fifteen (15) days after written notice thereof
from the nondefaulting party, and diligently pursues such cure to
completion, the defaulting party shall have a reasonable time to
complete such cure. This Agreement shall terminate ten (10) days
after receipt of such notice of termination. After the filing of a
petition in bankruptcy, by or against either party, which has not been
dismissed within thirty (30) days after filing, or upon the making of
an assignment for the benefit of creditors or to take advantage of any
insolvency act by either party, the other party may terminate this
Agreement by giving written notice of termination to said party within
fifteen (15) days after receipt of notice of such event; and this
Agreement shall terminate ten (10) days after receipt of such notice
of termination.
2.2.4 Notice.
Upon thirty (30) days prior written notice of termination given by one
party to the other, either party may terminate this Agreement; and
this Agreement shall terminate thirty (30) days after receipt of such
notice of termination.
2.3 Effect of Termination.
Upon termination of this Agreement for any reason, Operator shall
cease to act as the agent of Owner hereunder, and the parties shall
have no further rights or obligations hereunder except as follows:
2.3.1 Records.
Operator shall deliver to Owner all Books, Records, and Documents (as
defined in Subsection 4.3.1) and cooperate to facilitate the orderly
transition of management of the Property; provided, however, that
Operator shall be compensated at its then current hourly rate for any
services provided after the termination date;
2.3.2 Accounting.
Operator shall complete all accounting and reporting functions for the
period ending on the termination date, and shall deliver to Owner an
accounting of all funds of Owner held or controlled by Operator and
shall turnover all such funds to Owner, after deducting any amounts
due and owing Operator for Management Fees or for reimbursement of
expenditures made by Operator for the benefit of Owner or the
Property;
2.3.3 Compensation.
Owner shall pay Operator any and all compensation and reimbursements
due and owing Operator hereunder, which has not been paid pursuant to
Subsection 2.3.2; and
2.3.4 Survival.
The provisions of Articles 8 and 9 shall survive the termination of
this Agreement.
ARTICLE 3
COMPENSATION - MANAGEMENT FEES
3.1 General.
Subject to Subsection 2.2.4, Operator shall be compensated for its
services to be paid as provided in Exhibit "A" attached hereto and
incorporated herein by this reference (collectively the "Management
Fees"). The fixed management fee shall be paid in monthly
installments in advance on the first day of each month. Operator is
hereby authorized to pay the Management Fees and any reimbursements
due and owing Operator from the funds of Owner in the General Account
(as defined in Subsection 6.1.2) or any other funds of Owner, as part
of the operating expenses of the Property. Management Fees for any
partial month shall be prorated according to the actual number of days
during such month that this Agreement was in effect based on a 30-day
month. Operator shall be reimbursed for any out-of-pocket expenses
incurred by Operator in connection with Operator's obligations
hereunder which are to be performed "at Owner's expense" at the time
of such expenditure. Except as expressly provided otherwise in this
Agreement, all expenses incurred by Operator or third parties in the
management, operation, maintenance or leasing of the Property shall be
at Owner's expense. Operator shall be separately compensated, in
addition to the Management Fees, at Operator's then current hourly
rate for any services which are to be provided by Operator hereunder
"at Owner's expense."
ARTICLE 4
OPERATOR AUTHORITY AND OBLIGATIONS
4.1 General. Operator is hereby authorized and agrees, subject to
the terms and conditions hereof, to manage, operate, maintain and
lease the Property in accordance with the customs and practices of
professional managers of similar properties in the area where the
Property is located, and to provide customary management services at
the Property for the ordinary and usual day-to day operation of the
Property consistent with that which is necessary and appropriate for
buildings similar to the improvements located on the Property.
4.2 Collection of Monies.
Operator shall use commercially reasonable efforts and means to
collect the rents and other charges due from tenants, parking charges,
and all other charges and revenues of the Property. Upon Operator's
recommendation and Owner's written approval, Operator may institute
legal proceedings on behalf of and in the name of Owner for the
collection of sums payable in connection with the operation and use of
the Property. Owner authorizes Operator to undertake on behalf of and
in the name of Owner, all customary steps to accomplish the lawful
dispossession and eviction of tenants, guests, and other persons from
the Property. Operator shall use Operator's administrative personnel
to handle small claims trials and administrative hearings to the
extent that Operator, in its sole and absolute discretion, determines
that such personnel are so qualified. Owner shall cooperate with
Operator, execute documents and appear personally as may reasonably be
required for the prosecution of any legal proceedings. Operator may
consult legal counsel by and on behalf of Owner and at Owner's
expense, with respect to any legal proceedings, without Owner's
consent; provided, however, that Operator shall obtain Owner's written
consent before retaining legal counsel and experts to appear and
represent Owner in legal proceedings at Owner's expense.
4.3 Books, Records and Documentation.
4.3.1 Maintenance.
Operator shall maintain either at Operator's principal office or at
the Property, complete and separate books, records and documents
relating to the management, operation, maintenance and leasing of the
Property, including, without limitation, all original contracts and
leases, and amendments and extensions thereof, correspondence with
tenants and prospective tenants, computations of rental adjustments,
maintenance and preventive maintenance programs, schedules and logs,
tenant improvements and construction records, inventories of personal
property and equipment, correspondence with vendors, job descriptions
of positions necessary for the operation of the Property,
correspondence with federal, state, local, or other governmental
authorities, informational brochures, and records of accounts held or
maintained by Operator with respect to the Property (collectively, the
"Books, Records, and Documents"). Unless otherwise instructed by
Owner, in writing, Operator shall prepare the books and records of
account in conformity with generally accepted accounting principles
consistently applied. Owner shall have the right, at Owner's expense,
to examine, audit and take originals and copies of said Books, Records
and Documents at the place where Operator maintains said records at
reasonable times and upon reasonable notice; provided, however, that
(i) Owner shall leave copies with Operator of any originals so removed
and (ii) provided Owner shall not unreasonably interfere with
Operator's ability to perform its obligations hereunder.
4.3.2 Reports.
(a) Monthly.
Operator shall deliver to Owner, on or before the twentieth (20th) of
each month, financial and management information for the immediately
preceding month, showing a profit and loss statement, a balance sheet,
a cash reconciliation statement, and the status of the Security
Deposit Account (as defined in Subsection 6.1.3, if any, for such
month. Monthly accounting reports shall be in a format determined by
Operator and approved by Owner. Operator shall also, upon written
request from Owner, furnish such further accounting and fiscal
information as may be reasonably necessary to meet Owner's reasonable
financial information requirements. Any excessive demands imposed on
Operator by Owner with respect to reporting requirements, including,
without limitation, reports not generated by Operator in the ordinary
course of business, overnight delivery costs in excess of two packages
per month and wiring of funds in excess of one time per month, shall
be at Owner's expense.
(b) Annual.
Operator shall deliver the following reports on the Property to Owner
at the same time that Operator submits the proposed annual budget
prior to the commencement of each fiscal year: market analysis;
rental rate recommendations; a listing of all capital improvement and
all repair, maintenance, renovation and replacement expenditures
(together with estimated costs for each item) anticipated to be made
during the upcoming fiscal year; a payroll analysis including a salary
or wage description for every on-site employee listed in Subsection
4.18.2, and a review of all real estate, personal property,
assessments and other taxes affecting the Property.
4.4 Annual Audit.
The services provided by Operator hereunder in return for the
Management Fees do not include an annual audit. Upon written request
from Owner, at the end of each fiscal year for the Property, or upon
the termination of this Agreement, Operator shall arrange for and
coordinate by and on behalf of Owner and at Owner's expense, an annual
audit of the Books, Records and Documents of the Property and/or the
preparation for execution by Owner of all forms, reports, and returns
required by any federal, state, local, or other governmental
authorities relating to the Property, by a firm of certified public
accountants approved by Owner. All such services by third party
accountants shall be paid for by Owner and the contract for any such
audits or preparation of forms shall be between the firm of certified
public accountants and Owner. Any additional accounting services,
outside of the normal monthly recording requirements, which are
required of Operator in connection with such third party accountant
services, shall be at Owner's expense.
4.5 Repairs and Maintenance.
Operator shall use good faith efforts by and on behalf of Owner and at
Owner's expense, to maintain the Property in a first class condition,
shall regularly inspect the readily accessible areas of Property,
shall take normal and customary precautions against fire, vandalism,
burglary and trespass on the Property, and shall arrange to have all
customary repairs and maintenance performed. Operator is authorized
to make all customary expenditures pursuant to this Section 4.5 for
any single item costing Two Thousand Five Hundred Dollars ($2,500) or
less, or any amount which has been approved for such item in the
applicable Annual Budget (as defined in Section 7.2). All other
expenditures shall be approved of in advance by Owner.
Notwithstanding the foregoing, Operator is authorized to undertake any
emergency repairs to the Property which are immediately necessary for
the preservation or safety of the Property or persons, or which are
required to avoid suspension of necessary services to the Property,
without the prior written consent of Owner; provided, however, that
Operator shall use reasonable efforts to contact and secure the prior
approval of Owner if Operator, in its reasonable discretion, estimates
that any such emergency expenditure may exceed Five Thousand Dollars
($5,000).
4.6 Security Service.
Unless otherwise agreed in writing by the parties, Operator shall hire
on behalf of Owner and at Owner's expense, a security service for the
Property.
4.7 Capital Expenditures.
Operator is authorized to make customary expenditures by and on behalf
of Owner and at Owner's expense, with respect to alterations, capital
improvements, renovations or replacements of furniture, fixtures or
equipment on the Property for any single item so long as it does not
exceed fifteen percent (15%) or Two Thousand Five Hundred Dollars
($2,500), whichever is less, of the amount originally approved for
such item in the applicable Annual Budget. All other expenditures
shall have the prior written approval of Owner. Operator shall
furnish Owner information regarding any such expenditure in excess of
Two Thousand Five Hundred Dollars ($2,500) in Operator's monthly
report for the month of such expenditure.
4.8 Disposition of Fixed Assets.
Operator is authorized to dispose of fixed assets which have a stated
original value of One Thousand Five Hundred Dollars ($1,500) or less.
All other dispositions of fixed assets of the Property shall have the
prior written approval of Owner. Operator shall furnish Owner
information regarding any disposition of fixed assets in Operator's
monthly report for the month of such disposition.
4.9 Service Contracts and Equipment Leases.
Operator is authorized to negotiate and enter into by and on behalf of
Owner and at Owner's expense, all contracts and equipment leases as
are required in the ordinary course of business for the management,
operation, maintenance, and leasing of the Property for which the
total amount payable is Five Thousand Dollars ($5,000) or less, and
the term of which does not exceed one (1) year. All other contracts
and equipment leases shall have the prior written approval of Owner.
Notwithstanding the foregoing, Operator is authorized to enter into
any contract in an emergency which is immediately necessary for the
preservation or safety of the Property or persons, or which is
required to avoid suspension of necessary services to the Property,
without the prior written consent of Owner; provided, however, that
Operator shall use reasonable efforts to contact and secure the prior
approval of Owner if Operator, in its reasonable discretion, estimates
that any such emergency expenditure may exceed Five Thousand Dollars
($5,000).
4.10 Supplies.
Operator shall purchase by and on behalf of Owner and at Owner's
expense, such supplies and expendable items as are necessary to
operate and maintain the Property. When taking bids or issuing
purchase orders, Operator shall use commercially reasonable efforts to
secure for Owner's benefit any discounts, commissions, or rebates
obtainable in connection with such purchases.
4.11 Inventory.
Operator shall conduct and prepare a physical inventory of the
personal property, materials, and equipment of Owner used in
connection with the Property, at the commencement and termination of
this Agreement and at the end of each fiscal year.
4.12 Insurance.
4.12.1 Property Insurance.
Operator shall not knowingly permit the use of the Property for any
purpose which might increase the premium payable under, render any
loss uncollectible under, or void any policy of insurance relating to
the Property. Operator is authorized to settle by and on behalf of
Owner any and all claims in the amount of Five Thousand Dollars
($5,000) or less against any policy of insurance relating to the
Property, including, without limitation, the execution of proof of
loss, the adjustment of losses, the signing of receipts, and the
collection of proceeds. All other insurance claims shall be settled
by Operator only with the prior written consent of Owner.
4.12.2 Workers Compensation Insurance.
While this Agreement is in effect, Operator shall obtain and maintain
in full force and effect Workers' Compensation insurance for all of
Operator's corporate employees providing services for the Property,
and all on-site employees hired for the Property, in the amount of the
statutory limit, including broad form all states coverage and
Employer's Liability of at least Five Hundred Thousand Dollars
($500,000). Operator shall pay, at Operator's expense, for the cost
of all such insurance for all corporate employees of Operator (other
than on-site employees as set forth below), including, without
limitation, the personnel listed in Subsection 4.18.1. Operator shall
pay, at Owner's expense, for the cost of all such insurance for
on-site employees hired for the Property, including, without
limitation, the personnel listed in Subsection 4.18.2, which costs
shall be reimbursed to Operator at Operator's current Workers'
Compensation rates. Operator shall furnish Owner with certificates of
any such insurance upon written request from Owner therefor.
4.12.3 Fidelity Bond.
While this Agreement is in effect, Operator shall furnish to Owner, at
Owner's expense, a fidelity bond in an amount sufficient to cover all
on-site employees employed by Operator who are be responsible for
handling any monies belonging to Owner. Operator will not be
responsible for fidelity claims below Operator's deductible of ten
thousand dollars ($10,000).
4.13 Compliance with Legal Requirements.
Operator shall use reasonable and customary means to obtain current
information and to comply, at Owner's expense, with any requirement,
rule, order, determination, ordinance or law of any federal, state,
local or other governmental authority affecting the Property, or the
operation or use thereof, subject to the limitations set forth in
Sections 4.5, 4.7 and 4.9. Notwithstanding the foregoing, Operator
shall not take any action regarding legal compliance during the period
that Owner is actively contesting any such requirement.
4.14 Reporting Requirements.
Upon receipt of Owner's written approval thereof, Operator shall
prepare, execute and file by and on behalf of Owner any customary and
standard reports and documents required by any governmental authority
having jurisdiction over Owner or the Property; provided, however,
that the preparation and filing of any special report or document that
is not routinely required in the day-to-day management, operation,
maintenance or leasing of the Property shall be at Owner's initiative
and expense. Nothing herein shall be deemed to require Operator to
assume the responsibility to alert Owner of all reporting requirements
which may be required by law.
4.15 Licensing/Permits.
Operator agrees to maintain, at Operator's expense, on a current basis
all licenses required of Operator for the conduct of its business as
property manager of the Property. Operator shall obtain and maintain,
at Owner's expense, on a current basis all customary licenses and
permits required of Owner for the operation, management, maintenance
and leasing of the Property.
4.16 Energy Conservation.
Operator shall use reasonable and customary means to control the use
of utilities at the Property in light of the existing condition of the
improvements on the Property so as to minimize total utility costs and
satisfy Owner's obligations to tenants and other occupants and users
of the Property.
4.17 Advertising.
Operator shall advertise the Property at Owner's expense for rent at
such times and by use of such media as it deems reasonable, subject to
the limitation of the amounts so allocated in the applicable Annual
Budget, or such other amount approved in writing by Owner.
4.18 Employment of Personnel.
Operator shall hire, train, supervise, direct the work of, pay, and
discharge all personnel reasonably necessary for the management,
operation, maintenance and leasing of the Property. Such personnel
shall in every instance be employees of Operator and not of Owner.
Owner shall have no right to supervise or direct such employees. The
terms "employees" or "personnel" shall be deemed to mean and include
employment of a casual, temporary, or part-time nature.
4.18.1 Off-Site Employees.
The salaries, wages, other compensation and fringe benefits
(including, without limitation, social security, taxes, worker's
compensation insurance, and the like), and travel, entertainment and
other expenses shall be paid by Operator, at Operator's expense, for
the following off-site employees working in connection with the
Property on a nonexclusive basis:
(a) Executive personnel and employees of Operator charged with
general administration of Operator's performance of this Agreement,
and with the general supervision, direction, and control of personnel
listed in this Subsection 4.18.1;
(b) A property manager (Regional Manager) for the Property who shall
be experienced in the administration and operation of an asset of the
size, character, and quality of the Property and who shall devote such
time as is necessary to the on-site supervision of the Property to
permit its operation on a basis comparable to other similar
properties;
(c) Bookkeepers and accountants;
(d) Record-keeping personnel;
(e) Secretaries;
(f) Purchasing personnel.
4.18.2 On-Site Employees.
The salaries, wages, other compensation and fringe benefits
(including, without limitation, social security, taxes, worker's
compensation insurance, and the like), and other expenses shall be
paid by Operator, at Owner's expense, for the following on-site
employees working in connection with the Property:
(a) Building Manager: A full-time person who is experienced in the
administration and operation of an asset of the size, character, and
quality of the Property;
(b) Chief Engineer: A full-time building engineer/maintenance person
with background and experience in the administration and operation of
repair and maintenance programs for an asset of the size, character,
and quality of the Property. Such person shall be capable of and may
perform minor maintenance and repair on the Property;
(c) Assistant to the On-site Building Manager;
(d) On-site Leasing Coordinator (if applicable);
(e) Such other personnel required to operate and maintain the Property
including, without limitation, full and/or part-time air-conditioning
mechanics, electricians, plumbers, painters, carpenters,
groundskeepers, janitorial and custodial persons, and security guards.
Such other personnel shall be hired only if compensation for such
positions is included in the applicable Annual Budget, or approved in
writing by Owner.
All reasonable travel and entertainment expenses incurred by the
Building Manager shall be at Owner's expense. No moving expenses or
educational expenses of any on-site personnel will be paid or
reimbursed by Owner unless such amount is so allocated in the
applicable Approved Budget or approved in writing by Owner.
4.19 Leasing.
Operator shall make diligent efforts to secure and/or retain tenants
for the Property, recognizing that the goal of leasing is to achieve
the highest possible occupancy at the best possible rental rates.
Prior to the execution of a new lease by a tenant, Operator shall in
good faith conduct such investigations of the financial responsibility
and general reputation of the prospective tenant, as are ordinarily
and customarily performed by the managers of similar properties in the
area where the Property is located. Operator shall submit
recommendations for a schedule of asking rents for the Property at the
same time that Operator submits proposed annual budgets for the
Property to Owner.
4.20 Taxes.
Upon written request from Owner, Operator shall verify bills for real
estate, personal property or other taxes, improvement assessments, and
other similar charges which are or may become liens against the
Property or which may be levied on the basis of ownership, operation,
or use of the Property. Upon written request from Owner, Operator
shall give advice and assistance to Owner in the negotiation and
prosecution of all claims for the reduction or equalization of
property tax assessments and other tax assessments affecting the
Property; provided, however, that Operator shall have no obligation to
prosecute claims for a reduction of taxes or other assessment
affecting the Property, or any appeals thereof. Upon written request
from Owner, Operator shall file all personal property tax returns
related to the Property after timely execution and delivery of such
returns to Operator by Owner.
ARTICLE 5
OWNER DUTIES AND OBLIGATIONS
5.1 Insurance.
While this Agreement is in effect, Owner shall be responsible for the
insurance required in this Section 5.1. All such insurance coverage
shall be placed with companies rated AA or higher with Standard and
Poors or A, Class XV, with Bests, in such amounts as shall be
reasonably acceptable to Operator, and otherwise in conformity with
the requirements of any mortgage secured by the Property. Owner's
insurance shall name Operator as an additional insured, as its
interests may appear, and shall provide that the insurer shall be
obligated to give Operator thirty (30) days prior written notice of
any expiration, cancellation or material change in policy coverage.
Owner shall deliver to Operator a certificate or certificates of said
insurance. It is further agreed that Owner's insurance shall be
primary, and that any insurance which may be provided by Operator is
excess and non-contributing.
5.1.1 Casualty.
Owner shall cause to be obtained and maintained in full force and
effect, fire and extended coverage insurance and other customary
insurance for the Property.
5.1.2 General Liability.
Owner shall obtain and keep in full force and effect public liability,
including personal injury and contractual liability, insurance with
respect to the Property, and the operation and use thereof, with
coverage of not less than $1,000,000 CSL per occurrence for bodily
injury and property damage, and not less than $5,000,000 policy
general aggregate with a deductible not in excess of $10,000.
5.1.3 Waiver of Subrogation.
Each party on behalf of itself and its' insurance carriers hereby
waives any subrogation rights it may have against the other party.
5.2 Debt Service, Taxes and Assessments.
Owner shall pay all debt service, taxes, impositions, or assessments
relating to the ownership, operation or use of the Property (including
without limitation improvement assessments, real estate taxes,
personal property taxes, taxes on income or rents, or any charges
similar to or in lieu of any of the foregoing) prior to the
delinquency date therefor.
5.3 Consent.
Owner shall not unreasonably withhold or delay any consents or
approvals requested by Operator hereunder; and Owner shall cooperate
as necessary and appropriate in the Operator's performance of
Operator's duties hereunder.
5.4 Payments.
Owner shall promptly make any deposits or payments required of Owner
hereunder.
ARTICLE 6
BANK ACCOUNTS
6.1 Establishment of Accounts.
Operator shall establish bank accounts for the management, operation,
maintenance and leasing of the Property as set forth below. Owner may
select the banks or other institutions to be used for such accounts
and may designate Owner's choice of the type of account to be used, by
prior written notice to Operator, subject to Operator's right to
maintain such accounts as are reasonably required for the proper
performance of Operator's duties hereunder.
6.1.1 Depository Account.
Operator shall establish a "Depository Account" to be used solely for
the Property, in the name of Prometheus Income Partners, DBA which
shall be used for the deposit of all funds received from the operation
of the Property, unless Owner agrees in writing that the General
Account (as defined in Subsection 6.1.2) shall be used for such
purpose. Upon Owner's written request, this account may also be used
for reserves and/or impounds for taxes and insurance. The Depository
Account shall be an interest bearing account, subject to the terms and
conditions imposed by the banking institution. Owner shall be
responsible for maintaining a minimum balance of Two Thousand Five
Hundred Dollars ($2,500) in the Depository Account. The maximum
balance for the Depository Account shall be determined based upon the
applicable Approved Budget and desired level of reserves and may be
adjusted from time to time as necessary and agreed upon in writing by
the parties.
6.1.2 General Account.
Operator shall establish and maintain a "General Account" in the name
of Operator, which shall be a commingled account and used as a
centralized disbursement account by Operator with respect to the
different properties managed by Operator, the funds of which shall be
used to pay the normal and customary expenses of the management,
operation, maintenance and leasing of the Property pursuant to this
Agreement. The General Account shall also be used to pay insurance
premiums, ad valorem taxes on real and personal property, and debt
service related to the Property if requested in writing by Owner. The
General Account shall also be used for disbursements of excess cash
proceeds of the Property to Owner. Owner acknowledges and agrees that
the General Account may be used by Operator for purposes other than
those related to the Property, and that Owner's funds may be
commingled in the General Account with the funds of Operator and other
parties. Operator shall maintain at all times complete records which
trace the transactions and balances in the General Account separately
for each party and/or property.
6.1.3 Security Deposit Account.
Operator shall establish a "Security Deposit Account" to be used
solely for the Property in the name of Alderwood/Timberleaf, if
required by applicable law, for the retention of security deposits
delivered in connection with leases of any portion of the Property.
If no Security Deposit account is established pursuant to this
Subsection 6.1.3, the security deposits for the Property shall be held
in the depository account.
6.1.4 Petty Cash Fund.
Operator may also maintain a petty cash fund from money in the General
Account and make payments therefrom for expenses incurred in
connection with the management, operation, maintenance and leasing of
the Property in a manner customary in the property management
business.
6.2 Transfer of Funds.
Operator shall regularly wire transfer funds from the Depository
Account to the General Account in amounts required to cover the
disbursements from the General Account made by Operator with respect
to the Property. Upon written request from Owner, at the end of each
month, Operator shall remit to Owner the cash balance remaining in the
Depository Account which is in excess of the $2,500 minimum balance
provided for in Subsection 6.1.1.
6.3 Initial Deposit and Contingency Reserve.
Immediately upon commencement of this Agreement, Owner shall remit to
Operator the sum of N/A Dollars ($), plus an additional sum of N/A
Dollars ($) as a contingency reserve, to be deposited in the
Depository Account as an initial deposit representing the estimated
disbursements to be made in the first month following the commencement
of this Agreement.
6.4 Funds Provided by Owner.
If the funds collected by Operator from the operation of the Property
are not sufficient to pay the expenses incurred and authorized to be
paid in the management, operation, maintenance and leasing of the
Property and to make all payments and reimbursements to Operator
pursuant hereto, Operator shall submit to Owner a statement showing
such shortfall and identifying the bills and charges requiring payment
and/or reimbursement, and Owner shall immediately deposit funds
sufficient to make all such payments and reimbursements in the
Depository Account.
ARTICLE 7
ANNUAL BUDGETS
7.1 Submission of Annual Budgets.
Upon the earlier to occur of the commencement of the term of this
Agreement or the completion of construction of the improvements on the
Property (for new development property), and thereafter at least
forty-five (45) days prior to the beginning of each fiscal year for
the Property, Operator shall prepare and submit to Owner for Owner's
approval a proposed annual budget for the Property for the following
fiscal year, or the balance of the current fiscal year, as the case
may be, consisting of (a) the estimated income and expenses and (b)
the estimated capital expenditures. The proposed annual budgets shall
be prepared on a monthly basis and shall be made assuming accrual
basis accounting, unless Owner requests otherwise in writing. Each
proposed annual budget shall include a detailed explanation to support
the estimated numbers.
7.2 Approved Budgets.
The proposed annual budget, or any modification thereof, shall be
deemed approved by Owner, if Owner does not deliver Owner's written
objections and requests for modifications to Operator on or before the
date which is thirty (30) days after Owner's receipt thereof. Once so
approved, the proposed annual budget shall be the approved "Annual
Budget" for purposes of this Agreement. Operator shall make
reasonable modifications to the proposed annual budget as requested by
Owner and resubmit the proposed annual budget, as modified, to Owner;
provided, however, that if in Operator's sole and absolute discretion,
Owner's requested modifications make the Operator's performance of its
obligations hereunder infeasible, Operator shall have the right to
declare a default by Owner hereunder and terminate this Agreement as
provided in Section 2.2.4 by giving written notice thereof to Owner.
ARTICLE 8
ENVIRONMENTAL CONDITIONS
8.1 Owner's Representations and Warranties.
Owner represents and warrants to Operator that Owner has made full and
complete disclosure to Operator of the release, storage, use,
manufacture, presence, or the transportation of any Toxic or Hazardous
Substances in, on, around, about, to or from the Property; and Owner
has provided Operator with copies of all studies, reports, testing
results, surveys, operations and management plans performed by or for
Owner or its predecessors or other such information in Owner's
possession or control concerning or referring to Toxic or Hazardous
Substances and/or environmental conditions in, on, around or about the
Property. "Toxic or Hazardous Substances" as used herein includes,
any and all substances, materials and wastes regulated by federal,
state or local governmental authority, including, without limitation,
laws and regulations under California Proposition 65, the California
Asbestos Notification Law, CERCLA, RCRA, OSHA, and private actions
related or similar thereto, and including without limitation those
substances considered dangerous to the health or safety of building
occupants, PCB's, asbestos, substances known or suspected to be cancer
causing, underground storage tanks of any kind, and any other
contaminant or material reasonably considered to be potentially
harmful to human health or safety. Owner shall have a continuing
obligation to provide notice to Operator of any such Toxic or
Hazardous Substances. Owner represents and warrants for the benefit
and reliance of Operator that it has no knowledge or information
concerning any Toxic or Hazardous Substances which have been or are
in, on, around or about the Property except as disclosed to Operator
in writing pursuant to this Section 8.1 and listed on Exhibit C
attached hereto. Any misrepresentation by Owner under this Section
8.1 shall be deemed a default under this Agreement.
8.2 Indemnification. Owner shall indemnify, protect, defend and hold
Operator and Operator's affiliates, officers, directors, shareholders,
agents and employees harmless from any and all claims, losses,
liabilities, penalties, suits, actions or proceedings of any kind
including, without limitation, attorney's fees, expert witness fees,
and costs of suit arising out of or related to the release, storage,
use, manufacture, presence, or the transportation of any Toxic or
Hazardous Substances on, to or from the Property, or any
misrepresentation under Section 8.2, excepting only those claims
which result solely from the willful misconduct of such indemnified
party.
8.3 Owner Responsibility.
Owner shall be responsible for directly taking any action and
arranging for and entering into any contract or agreement with third
parties for the removal, disposal, remediation or abatement of Toxic
or Hazardous Substances which may be located in, on, around, or about
the Property, whether now known and disclosed by Owner or subsequently
discovered; and Operator shall have absolutely no obligations
hereunder with respect thereto. Any such contract or agreement shall
be made directly by Owner for Owner's own account. Owner shall not
use or permit the use of Toxic or Hazardous Substances in, on, around
or about the Property.
ARTICLE 9
GENERAL PROVISIONS
9.1 Relationship.
Operator and Owner shall not be construed as joint venturers or
partners, and neither shall have the power to bind or obligate the
other party except as expressly set forth in this Agreement. Operator
and Owner acknowledge and agree that Operator's relationship to Owner
is that of independent contractor and neither party shall represent to
anyone that such relationship is other than that of independent
contractor.
9.2 Assignment.
Operator may assign this Agreement only to a successor in interest to
Operator, upon prior written notice to Owner. Owner may assign this
Agreement only to a successor owner of the Property, upon prior
written notice to Operator. No other assignment of this Agreement
shall be permitted.
9.3 Successors and Assigns.
Subject to the limitations on assignment in Section 9.2, this
Agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their respective heirs, executors, successors, and
assigns.
9.4 Indemnification.
9.4.1 Scope. The parties acknowledge and agree that all contracts
with and obligations to third parties entered into by Operator
hereunder with respect to the Property shall be for the account of
Owner and shall be the obligations of Owner; and Owner agrees to and
hereby does indemnify, defend, protect, and hold Operator, and its
principals, officers, directors, shareholders, partners, employees,
and agents (collectively, "Indemnitees") harmless from and against any
and all claims, losses, liabilities, penalties, suits, actions or
proceedings of any kind including, without limitation, attorney's
fees, expert witness fees, and costs of suit arising out of or related
thereto. Owner agrees that Operator shall have the absolute right to
identify Owner as the principal contracting party in any and all
agreements entered into by Operator in connection with this Agreement
and to clarify that Operator is executing such agreement only as the
agent of Owner and that Owner should be solely responsible for all
obligations imposed on Operator pursuant to the terms of such
agreement and that Operator shall not have any such liability or
responsibility. Owner further hereby does indemnify, defend, protect,
and hold Indemnitees harmless from and against all liabilities,
claims, suits, damages, judgments, costs, and expenses of whatever
nature, including, without limitation, any attorneys' and expert
witness fees and costs of suit related to or arising out of any injury
to or death of any person(s), damage to property, loss of use of any
property, or any other matter arising out of or relating to this
Agreement, the Property, any actual or alleged violation of law with
respect to the management, operation, use or leasing of the Property,
or the conduct or omission of one or more of the Indemnitees, save and
except their willful misconduct. Owner shall promptly reimburse the
Indemnitees for all such amounts which the Indemnities are required to
pay in connection with such liabilities or in defense of any of the
foregoing matters.
9.4.2 Conditions.
Operator agrees to notify Owner of any claims for indemnification
under this Section 9.4 and to cooperate with Owner in connection with
the defense of any such claims which are the subject of the
indemnification set forth in Subsection 9.4.1.
9.5 Notices.
All notices provided for in this Agreement shall be given in writing
and served personally or by registered or certified mail, postage
prepaid, return receipt requested, at the following addresses until
such time as written notice of a change of address is given to the
other party pursuant to this Section 9.5:
To Owner: Prometheus Income Partners,
a California limited partnership
2600 Campus Drive
San Mateo, CA 94404
To Operator: The Prometheus Company
Attention: John H. Pringle
2600 Campus Drive, Suite 200
San Mateo, California 94403-2624
Notice shall be deemed given and received under this Section 9.5 upon
personal delivery or two (2) days after deposit in the U.S. Mail, as
required in this Section 9.5.
9.6 Entire Agreement/Modification/Construction.
This Agreement represents the entire agreement between the parties
with respect to the subject matter hereof. No alteration or
modification of this Agreement shall be binding unless in writing and
signed by both parties. Titles of Articles, Sections and Subsections
are for convenience only and neither limit nor amplify the provisions
of this Agreement itself. As used herein, the terms "herein,"
"hereof," "hereunder," and similar terms shall refer to this entire
Agreement. References to Sections and Subsections shall include all
subparts thereof.
9.7 Severability.
If any provision of this Agreement or the application thereof to any
party or circumstances shall be determined by any court of competent
jurisdiction to be invalid and unenforceable to any extent, the
remainder of this Agreement and the application of such provision to
any person or circumstance, other than those expressly determined
invalid or unenforceable, shall not be affected thereby and each
provision hereof shall be valid and shall be enforced to the fullest
extent permitted by law.
9.8 Applicable Law.
This Agreement shall be construed and enforced in accordance with the
laws of the State of California. Venue for any litigation hereunder
shall be in the County of San Mateo, State of California.
9.9 Operator.
The term "Operator" as used herein shall include any corporate
subsidiaries or affiliates of Operator who perform services for, in,
on or about the Property pursuant to this Agreement.
9.10 Attorneys' Fees.
If any dispute, litigation or arbitration between the parties arises
out of this Agreement, the losing party in such dispute, litigation or
arbitration shall pay to the prevailing party all costs of such
dispute, including without limitation, costs of arbitration,
attorney's fees, expert witness fees and costs of suit incurred by the
prevailing party in connection therewith. Additionally, the
prevailing party shall be entitled to all attorneys' fees and costs
incurred in enforcing any such judgment or award rendered in
connection with such matter. Any judgment or order entered in any
such matter or action shall contain a specific provision providing for
the recovery of attorneys' fees and costs incurred in enforcing such
award or judgment.
9.11 Limitation on Liability of Operator.
Operator, its agents, servants and employees shall have absolutely no
liability to Owner for any loss or expense related to the Property or
any obligations arising out of or relating to this Agreement or
otherwise, unless such loss or expense is caused solely by Operator's
fraud or willful misconduct.
WHEREFORE, the parties have executed this Agreement as of the
Effective Date.
OWNER: PROMETHEUS INCOME PARTNERS
By: Prometheus Development Co.
By: /s/ Virginia Bryant
Title: Vice President, Finance
Date: 10/1/92
OPERATOR: PROM MANAGEMENT GROUP, INC.
dba THE PROMETHEUS COMPANY
By: /s/ Virginia Bryant
Vice President
Date: 10/1/92
PROMETHEUS INCOME PARTNERS,
a California limited partnership
By: Prometheus Development Co., INC.,
it's general partner
By:/s/ Sanford N. Diller
Sanford N. Diller, President
EXHIBIT A
MANAGEMENT AND OPERATING AGREEMENT DATED, 19
Management Fees
All of the following shall comprise the Management Fees payable to
Operator hereunder:
1.Monthly Installments.
As compensation for its services under this Agreement, Operator shall
receive, in advance, on the first (1st) day of each month, a sum equal
to percent (%) of the total operating revenues of the Property, or
Dollars ($) per month, whichever is greater. The amount of the total
operating revenues of the Property is determined in accordance with
generally accepted principles of accounting, consistently applied.
Gross Income shall exclude the following:
(a) Fire and Extended Coverage loss reimbursements received or
accrued, unless they relate to the reimbursement of "lost rents" or
business interruption proceeds which shall be included as total
operating revenues;
(b) Tax rebates received or accrued;
(c) The portion of revenue determined to be a bad debt;
(d) Proceeds from the sale of assets received or accrued;
(e) Interest income received or accrued, except interest earned on
security deposits if held in separate accounts and if required by
state, county, or municipal authority.
Operator shall receive as fee for supervision of capital improvement
expenditures the amount of percent (%) of the total amount of
expenditures for projects in excess of Five Thousand Dollars ($5,000).
For legal matters in which Operator spends more than five (5) hours
per month monitoring, supervising, corresponding or other related
work, Operator shall receive an hourly fee of Dollars ($).
2. Data Processing Charges. Owner shall pay Operator for data
processing charges in the amount of Dollars ($) per one thousand
(1,000) square feet of rentable space per month. This charge may be
changed from time to time by the written agreement of the parties.
3.Personnel Administrative Fee. Owner shall pay Operator an
administrative fee in the amount of five percent (5%) of the gross
payroll attributable to the Property for the administration of the
employees listed in Subparts (a) through (e), inclusive, of Subsection
4.18.1.
OWNER:
By:
Title:
Date:
OPERATOR: PROM MANAGEMENT GROUP, INC.
dba THE PROMETHEUS COMPANY
By:
John H. Pringle
Date:
EXHIBIT A
MANAGEMENT AND OPERATING AGREEMENT DATED, 19
Management Fees
All of the following shall comprise the Management Fees payable to
Operator hereunder:
1. Monthly Installments.
As compensation for its services under this Agreement, Operator shall
receive, in advance, on the first (1st) day of each month, a sum equal
to percent (%) of the total operating revenues of the Property, or
Dollars ($) per month, whichever is greater. The amount of the total
operating revenues of the Property is determined in accordance with
generally accepted principles of accounting, consistently applied.
Gross Income shall exclude the following:
(a) Fire and Extended Coverage loss reimbursements received or
accrued, unless they relate to the reimbursement of "lost rents" or
business interruption proceeds which shall be included as total
operating revenues;
(b) Tax rebates received or accrued;
(c) The portion of revenue determined to be a bad debt;
(d) Proceeds from the sale of assets received or accrued;
(e) Interest income received or accrued, except interest earned on
security deposits if held in separate accounts and if required by
state, county, or municipal authority.
Operator shall receive as fee for supervision of capital improvement
expenditures the amount of percent (%) of the total amount of
expenditures for projects in excess of Five Thousand Dollars ($5,000).
For legal matters in which Operator spends more than five (5) hours
per month monitoring, supervising, corresponding or other related
work, Operator shall receive an hourly fee of Dollars ($).
2. Data Processing Charges.
Owner shall pay Operator for data processing charges in the amount of
Dollars ($) per one thousand (1,000) square feet of rentable space
per month. This charge may be changed from time to time by the
written agreement of the parties.
3. Personnel Administrative Fee.
Owner shall pay Operator an administrative fee in the amount of five
percent (5%) of the gross payroll attributable to the Property for the
administration of the employees listed in Subparts (a) through (e),
inclusive, of Subsection 4.18.1.
OWNER:
By:
Title:
Date:
OPERATOR: PROM MANAGEMENT GROUP, INC.
dba THE PROMETHEUS COMPANY
By:
John H. Pringle
Date:
January 1, 1994
Prometheus Income Partners
2600 Campus Drive
San Mateo, CA 94403
Re: Alderwood And Timberleaf Apartments
Gentlemen:
This is to inform you that Prom Management Group has changed the name
under which it is doing property management from The Prometheus
Company to Maxim Property Management. Please indicate your consent to
the foregoing change.
Yours truly,
Prom Management Group, a California corporation,
dba Maxim Property Management
By: / s / John H. Pringle
John H. Pringle, Senior Vice President
Agreed and accepted:
PROMETHEUS INCOME PARTNERS,
a California limited partnership
By: PROMETHEUS DEVELOPMENT CO., INC.,
a California corporation, its general partner
By: / s / John H. Pringle
________________________________
Exhibit (c)(3)
FORM MASTER RENTAL AGREEMENT
THIS AGREEMENT is entered into this ____________ day of
______________, 19 _____, between
____________________________________, hereinafter referred to as
"Management" and the following
Resident(s)__________________________________, hereinafter referred to
as "Resident(s)." Management does hereby rent to Resident(s),
Apartment Number ___________ located at
California, under the following terms and
conditions (as used herein, the term "Management" includes any and all
owners of record of the property comprising the complex and their
partners, associates, officers, directors, employees, and agents).
TERM, RENT, AND DEPOSIT
1. It is agreed that the monthly rental shall commence on the _______
day of _____, 19___ and will expire on ___________________.
Thereafter, it is mutually agreed that tenancy shall be on a
month-to-month basis; and the rent per month will be the same as the
rent in the last month of the term of the Rental Agreement, unless
management has given a 30-day written notice of change in terms of
this agreement.
2. Resident(s) agrees to pay rent to the Management for each month,
in advance, by check or money order (but not in cash) on the first day
of each month during the full term of this agreement in the sum of
$______________ for the apartment as described. There is no grace
period. Rent for the first month has been prepaid by Resident(s) in
the amount of $__________. All prorations of rent shall be made based
on a 30-day month. Rent is paid for days of move-in and move-out.
Resident(s) understands that adjustments in rental rates are
inevitable. Management reserves the right to increase or adjust
rental rates based on market conditions, operating expenses, financial
costs or any other factor at the sole discretion of Management upon
the expiration of the term of this Rental Agreement by giving 30 days
written notice prior to the expiration of the lease term.
3. Resident(s) further agree that they are jointly and severally
liable for all rent incurred during the term of this agreement,
whether or not in actual possession of the premises. In addition to
all other payments required of Resident(s) hereunder, Resident(s)
agrees to pay the following: $___________ Security deposit (to secure
faithful performance of Rental Agreement). The security deposit is
not intended, nor shall it be construed, to be applied as rent by
Resident(s); and the full monthly rent shall be paid on or before the
first day of every month, including the last month of possession or of
the lease term. Resident(s) agrees to pay for all utilities,
services, and charges (including without limitation, any utility or
service deposit based upon occupancy of the premises except
______________________________________________________________________
_________.
4. RESIDENT(S) AGREES TO PAY LATE CHARGES ON ALL RENT NOT PAID BY
THE FOURTH (4TH) DAY OF THE MONTH. LATE CHARGES WILL BE $50.00. IN
ADDITION, IF ANY CHECKS ARE RETURNED BY THE BANK FOR ANY REASON, THERE
WILL BE A FURTHER CHARGE OF $25.00 FOR EACH CHECK; MANAGEMENT'S
ACCEPTANCE OF ONE LATE PAYMENT DOES NOT WAIVE MANAGEMENT'S RIGHT TO
REFUSE SUBSEQUENT LATE PAYMENTS.
AGREEMENTS REGARDING OCCUPANCY
5. Resident(s) shall not sublet all or a portion of the premises or
assign the Rental Agreement without the prior written consent of
Management. Any sublet or assignment will not role se Resident(s) from
liability. Said premises are to be occupied solely as housing
accommodations by ___________ occupants only and for no other purpose
whatsoever.
6. Resident(s) shell keep said premises in a good state of
preservation. The Resident(s) shall not disturb, annoy, endanger ,or
interfere with other residents of the building or neighbors, nor use
the premises for any unlawful purposes, nor violate any law or
ordinance, nor commit waste or nuisance upon the or about the
premises.
7. Resident(s) agrees the commencement of this Rental Agreement that
the premises are clean and in good condition and repair. Resident(s)
agrees to leave the premises completely clean and in good condition
and repair when vacating it being understood that Resident(s) shall
not be responsible for reasonable wear and tear (due solely to the
passage of time), acts of God, and the elements. Resident(s)
acknowledges receipt, in duplicate, of the "Apartment Condition
Checklist." Resident(s), within five (5) days of occupancy of the
premises, agrees to return said Apartment Condition Checklist to
management with the condition of the apartment noting requests for
cleaning and maintenance as well as any existing deficiencies which
are not of a "repairable" nature, but are to be recorded as preying
this occupancy. Said Apartment Condition Checklist, when returned to
Management, shall be signed by the Resident(s); and one copy shall be
retained by Management. The Resident(s) shall have one copy
countersigned by Management, which is to be retained by the
Resident(s). If the form is not returned to Management and properly
countersigned within said period, it shall be conclusively presumed
that the premises were in good condition and repair as well as clean
at the time the Resident(s) occupied the same.
8. Resident(s) agrees not to keep my animal, bird, reptile, or pet
in the premises without the written permission of Management, and only
after paying the Management an additional deposit as required and
after complying with my pet policies which are in effect at that time
9. Resident(s) acknowledges that Resident(s) has examined, received,
and read the "Apartment Rules" - the same are a part of the terms and
conditions of tenancy.
10. Resident(s) agrees not to make any alterations, installations,
repairs, or redecorations of my kind, whether or not permitted by law,
to the premises without written consent by Management.
11. The invalidity or partial invalidity of any provision of this
Agreement shall not render the remainder of the Agreement invalid or
unenforceable.
12. Abandonment: Resident(s) shall not vacate or abandon the premises
at my time during the term of the Rental Agreement. If Resident(s)
abandons or vacates the premises, or is dispossessed by process of law
or otherwise, any personal property belonging to Resident(s) and left
on the premises shall, at the option of Management, be deemed
abandoned; and Management will have the ripest, but not the
obligation, to remove therefrom all or my personal property in the
manner as prescribed by law Under the terms of this Agreement,
discovery of abandonment will constitute commencement of a 30-day
notice period.
13. Resident(s) acknowledges that the premises (the building and the
complex of which the premises and building are a part) is not a
"security" complex. Management makes no representation nor warranties
that the building or complex is secure from theft or my other criminal
activity perpetrated by my Resident(s) or others. Security officers,
to the extent that they may be in the complex and other security
facilities, provided by the Management are for the Resident(s)
convenience only; and the Management makes no warranty or
representations as to the effectiveness of any such security officers
or facilities, including apartment windows and doom as deterrents
against any criminal activity, damage, or injury to Resident(s) or my
invitee of the Resident(s), or the personal property of the
Resident(s) or any invitee of the Resident(s).
14. Management will not be responsible for damages to any person for
any interruption or reduction in utilities, cable, and telephone or
services.
15. Miscellaneous terms: Resident(s) agrees to comply with any energy
conservation programs implemented by Management NO ORAL AGREEMENTS
HAVE BEEN ENTERED INTO, AND THIS AGREEMENT SHALL NOT BE MODIFIED
UNLESS SUCH MODIFICATION IS IN WRITING Time shall be of the essence
regarding the agreement.
16. Absent specific written instructions to the contrary subject to
the following conditions: Resident(s) hereby grants Management
authorization to enter the premises during normal business hours:
a) By having requested maintenance service within the premises.
b) By receipt of a 24-hour notice from Management requiring entry to
the premises.
c) To respond to emergency situations where a notice is clear
impractical.
d) To verify continuing occupancy if rent is unpaid, and it is
believed that the Resident(s) has vacated the premises.
e) To inspect and show the premises for the purpose of re-leasing
after a Notice to Vacate has been given by the Resident(s) to
Management.
TERMINATION OF TENANCY
17. Violation by resident(s) of my applicable ordinance or statute
shall be sufficient cause for termination of tenancy; Resident(s)
representation made in the rental application shall be considered
inducement of Management to execute this Rental Agreement
Misrepresentation in the application shall be considered as cause to
terminate this Rental Agreement. Each and every term, covenant, and
agreement herein contained shall be deemed a condition to Resident(s)
night to lease and occupy the premise Management would not have
Entered into this Rental Agreement except upon reliance that
Resident(s) shall fully perform each and every condition.
18. RESIDENT(S) AGREES TO DELIVER TO MANAGEMENT WRITTEN NOTICE OF
INTENTION TO VACATE AT LEAST THIRTY (30) DAYS PRIOR TO THE EXPIRATION
OF THE TERM OF THE LEASE OR THIRTY (30) DAYS NOTICE PRIOR TO
TERMINATION OF ANY MONTH-TO-MONTH TENANCY FAILURE OF RESIDENT(S) TO
PROVIDE WRITTEN NOTICE SHALL EXTEND THE TERM OF THE RENTAL AGREEMENT
FOR THIRTY (30) DAYS FROM THE DATE SUCH NOTICE IS GIVEN OR 30 DAYS
FROM THE DATE THE RESIDENT(S) SURRENDERS THE PREMISES TO MANAGEMENT,
WHICHEVER FIRST OCCURS. RESIDENT(S) SHALL BE LIABLE FOR RENT UNDER
THE TERMS OF THIS RENTAL AGREEMENT FOR SUCH PERIOD.
19. Management will inspect the premises, setting the requirements
for janitorial cleaning, carpet cleaning, drapery dry cleaning, and
interior repainting upon termination of tenancy to determine whether
there are any charges to the Resident(s) with regard to the
deficiencies in the condition of the premises. Resident(s) may be
present during this inspection, scheduled at the convenience of
Management. In the event there is any charge to the Resident(s), the
security deposit will be used to offset Management's charges; and the
balance will be refunded to the Resident(s). If said security
deposits are insufficient to cover said charges, Resident(s) shall
promptly pay any deficiency. Resident(s) agrees to pay costs for
cleaning and refurbishing the premises and returning said apartment to
the condition to which it was delivered to Resident(s), plus a factor
of 20% to offset the overhead cost of Management for contracting and
supervising the refurbishing work, for which the Resident(s) is
responsible. management's obligations, with respect to the cleaning
and security deposits, are those of a debtor and not a trustee, said
deposits shall not bear interest and can be commingled with
Management's general funds.
20. Resident(s) agrees that a hold-over tenancy past the ending date
of a proper notice to terminate by either party shall be a hold-over
tenancy commencing with the first day after the expiration of the
notice period, and that the rental rate shall be at the rate of TREBLE
the current rate until the apartment is vacated.
21. Any refund will be made jointly in the name of the Resident(s) of
record at the time of termination of tenancy and any sharing of
division of the settlement for these deposits among the Resident(s)
shall be the responsibility of the Resident(s), not the Management.
INSURANCE-LIABILITY
22. Management will not be liable for any damages or losses to person
or property caused by other residents or persons, theft, burglary,
assault, vandalism, or other crimes. Management shall not be liable
for personal injury or damages to, or loss of Resident(s) personal
property (furniture, jewelry, clothing, etc.) from fire, flood, water
leaks, rain, hail, ice, snow, explosions, interruption of utilities,
earthquake, or act any other act of God unless same is due to gross
negligence of Management. Resident(s) agrees to secure his own
insurance to protect against all of the aforementioned. Resident(s)
personal property is not insured by Management.
23. It is agreed that Management at its sole opinion may terminate
this Rental Agreement immediately where and when a destruction of the
premises, building, or complex has occurred and the repair and
restoration of said premises, building, or complex cannot be
reasonably completed within 7 days after it is commenced; or where the
loss is not covered by the Management's fire and extended insurance
policy then in effect; or if the premises, building, or complex are
taken under the power of eminent domain or transferred in lieu
thereof.
24. Resident(s) releases Management from any liability for loss or
damage to Resident(s) property while stored on said premises,
building. or complex. No property shall be stored outside the
dwelling premises without prior written consent of Management. Any
property so stored shall be removed immediately upon termination of
tenancy. In the event such property is not so removed, Management may
dispose of same without any liability to Resident(s) whatsoever, as
allowed by law.
25. Management shall not be liable for any damage occasioned by
water, being upon or coming through the room or opening of any nature,
in the building of which the premises are a part. In the event of
such penetration of water, Resident(s) shall promptly notify
Management. Resident(s) shall use reasonable care to cause all
windows and other openings in the premises to be closed in the event
of rain. Any defective condition on the premises which comes to the
attention of the Resident(s), wherein there is reason to believe it is
unknown to Management, shall be reported in writing to the Management
within 48 hours. When the defective condition may cause serious
damage to person or property, it shall be reported to management
immediately.
26. Resident(s) use of swimming pool, fitness equipment, laundry
rooms, or other amenities shall be at Resident(s) own risk and without
liability to management. This Rental Agreement is made on the express
condition that Management is to be free from all liability or loss
caused by Resident(s), or Resident(S) agents' or invitees' improper,
negligent, or intentional acts or omissions, including but not limited
to liability or loss arising out of injury to person or property,
while in or on, or in any way connected with the premised, buildings,
grounds, or facilities elsewhere in the complex, or with the
improvements or personal property therein or thereon, including any
liability for injury to the person or property of Resident(s) or
Resident(s)' agents or invitees. Resident(s) hereby covenants and
agrees to indemnify, hold harmless, and defend Management against all
claims, losses, or liabilities for injury or death to persons or
agents, or for damage to or loss of use of any property arising our of
any occurrence in, on, or about the premises, buildings, grounds, or
facilities located within the complex, if cause or contributed to by
Resident(s) or Resident(s)'agents or invitees. Such indemnification
shall include and apply to attorneys fees, investigator costs, and
other costs incurred by Management. Resident(s) shall further
indemnify, defend, and hold harmless Management from and against any
and all claims arising from any breach or default in the performance
of any obligation on Resident(s)' part to be performed under the terms
of this Rental Agreement. The provisions of this paragraph 26 shall
survive termination of the Rental Agreement with respect to any
damage, injury, death, breach, or default occurring prior to such
termination. All of said damages and costs shall be immediately paid
from Resident(s) to management; Resident(s) shall provide copies of
insurance policy for renter's and automobile coverage promptly upon
incident of loss.
DEFAULTS AND REMEDIES
28. In the event that Resident(s) breaches this Rental Agreement,
Management shall be allowed, at Management's discretion but not by way
of limitation, to exercise any or all remedies provided Owner by
California Civil Code Section 1951.2 and 1951.4. Damages the
Management "may recover" include the worth at the time of the award of
the amount by which the unpaid rent for the balance of the term after
the time of award (or for any short period of time specified in the
Rental Agreement) exceeds the amount of such rental loss for the same
period that Resident(s) proves could be reasonably avoided.
a. As required by law, you are hereby notified that your performance
as a resident of this property may be reported to credit reporting
agencies.
29. In the event of Default by Resident(s), Resident(s) agrees to pay
all costs of collection or enforcement of any term of this Rental
Agreement (whether or not an attorney is retained) or suit or recovery
is filed, including but not limited to reasonable attorney's fees and
all charges for service for, but not limited to, any notices, court
costs, filing fees, attorneys fees, interest, and discounts for
assignments to collection agencies.
a. At Management's sole discretion, Management may elect to have any
claims to disputes arising out of this Agreement decided by
arbitration in accordance with the rules of the American Arbitration
Association in effect at the time of the demand for arbitration. If
Management so elects, a demand for arbitration shall be filed with
Judicial Arbitration and Mediation Services, Inc., and delivered to
the other party in such dispute. The decision in writing of the
arbitrator appointed by such association shall be final and conclusive
as to all parties in such dispute. Should party fail to appear or
participate in such arbitration proceedings, the arbitrator may decide
on the evidence presented in such proceedings by the other party in
such dispute.
b. The parties hereby agree that they waive trail by jury in any
matter relating to, or arising out of, this Agreement.
30. In the event that it is necessary for either pal to retain an
attorney or to bring suit to enforce this Rental Agreement the
prevailing party shall be entitled to all attorneys fees and court
costs reasonably required to enforce the Rental Agreement, whether or
not suit is filed. These costs include, but are not limited to, all
attorney s fees, court costs miscellaneous led charges copying
charges, courier fees, etc. Interest shall accrue at a rate of 10% per
annum on any unpaid amount due until said amount is full paid.
NOTICES
31. Management employs, from time to time, management agents who are
authorized to act for and on behalf of the Management for the purposes
of service of process and for the purpose of receiving legal notice
and demands Resident(s) agrees to recognize and deal with these agents
only.
32. The Property Manager is the person authorized to manage the
premises and further authorized to act for and on the behalf of the
Management for the purpose of receiving notice and demands whose
address is the on-site Rental Office.
33. It is agreed that any notices which my be given from time to time
by Management to Resident(s), or that are required to be given under
the terms of this Rental Agreement or under the terms of the law, my
be served to the Resident(s) at the address of the rented premises, or
by mailing first-class mail, postage prepaid, to the resident g the
address of the rental premises.
MISCELLANEOUS
34. Resident(s) hereby acknowledges that any flat roofs, or portions
of roof area, adjacent to the rented premises are not designed and
should not be used for walking upon nor to have any objects of any
kind placed upon them at any time, and that Resident(s) understands
that any damages resulting from the violation of this requirement
including but not limited to, water leaks through, or damage to, the
roof will be the sole responsibility of the Resident(s), Damages will
be repaired; and Resident(s), in accordance with the Rental Agreement,
will be held responsible for, and will promptly pay for, the costs of
repair.
35. If a fire protection device, such as a smoke alarm or smoke
detector, is installed within the unit, the Resident(s) assumes
responsibility for the maintenance of said device upon taking
occupancy. This maintenance shall include smoke detectors and fire
extinguishers Resident(s) assumes liability for testing of devices or
periodically inspecting pressure gauges if any, and promptly reporting
any deficiencies to the Management upon notification to the Management
by the Resident(s), Management will make the necessary repairs in a
reasonable amount of time.
36. All Resident(s) should be aware that storage of firewood or other
storage items on patios, decks, and entry ways my cause damage to the
buildings As y such damage is the responsibility of the Resident(s),
Resident(s) agrees to take precautions to prevent remedy, default if
noticed, and pay Management the cost of repairs.
37. Resident(s) acknowledges receipt of keys, as follows:
Other
38. The undersigned acknowledges and understands that a large
artificial landscape waterway and lake is, or may be, constructed and
maintained throughout this complex. The undersigned recognizes the
presence of this hazard for children and unsupervised minors,
invitees, etc., and the necessity for proper and adequate supervision
by the Resident(s) of all such persons in the area of this lake or
waterway.
39. Resident(s) agrees to use designated parking space(s) exclusively
for the parking of motor vehicles, including automobiles, motorcycles,
and pickup trucks, but excluding trailers of any kind, boats, campers,
buses, or trucks larger than four ton pick-up. At no time can any
vehicle parked on premises be used as a device for signs.
40. Each of the parties hereto acknowledges receipt of an executed
duplicate copy of this Rental Agreement. All Resident(s) shall sign
this Rental Agreement and shall be jointly and severally liable
thereunder, and any subtenant or guest, whether or not considered to
be by Management, by taking occupancy, shall be deemed to have
knowledge of and to have consented to the terms of this Rental
Agreement.
Resident Date Manager Date
Resident Date Resident Date
Resident Date Resident Date
FORM ADDENDUM TO MASTER RENTAL AGREEMENT DATED
THIS AGREEMENT is entered into this day of 199 , by and
between Alderwood Apartments, "Management" and The Corporate Living
Network, "Resident". IN CONSIDERATION OF THEIR MUTUAL PROMISES,
MANAGEMENT and RESIDENT AGREE AS FOLLOWS:
1. Resident is renting from Management the premises located at:
900 Pepper Tree Lane #118
Santa Clara, CA 95051
2. This agreement is an Addendum and part of the Rental Agreement
and/or Lease between Management and Resident:
A. It is agreed that the monthly rental shall commence on
00/00/00, and will expire on 00/00/00.
B. Resident agrees to pay rent to the Management for each month,
in advance, by check or money order (but not in cash) on the first day
of each month during the full term of this agreement in the sum of
$0,000.00 for the apartment as described.
C. The pro-rate rent for the month of is $000.00.
3. This addendum is to be effective as of 00/00/00.
Alderwood Apartments
Agent
The Corporate Living Network
Resident
Exhibit (c)(4)
WORK ORDER AND CONTRACT
Maxim Property Management
Date: August 21, 1996
The undersigned "Contractor" agrees to perform the services specified
below ("Work") on the property located at: Timberleaf Apartments,
2147 Newhall Street, Santa Clara, CA 95050 ("Property").
Contractor shall perform the Work in accordance with the terms and
conditions of this contract, including the General Provisions on the
reverse side. This Contract is between Contractor and the legal owner
of the Property ("Owner"). Maxim Property Management ("MPM") manages
the Property. Owner has authorized MPM to sign this Contract on
behalf of Owner and to act on behalf of Owner as its agent under this
Contract. Contractor understands that MPM has no liability under this
Contract.
Attached are the following initialed or signed addendum documents
(initial, if
appropriate, or write "None"):
(a) N/A another form of contract; and/or (b) X plans, drawings,
or specifications
regarding the Work.
Such documents are made a part of this Contract and shall modify or
expand this Contract, but only with respect to the Description of
Work. Such documents shall not modify or expand any of the terms and
conditions set forth on the reverse side, and any provisions in such
documents which conflict with the terms and conditions on the reverse
side shall not be binding upon the parties.
Contractor shall commence the work by October 1, 1996.
Contractor shall complete the work by December 15, 1996.
COMPLETION OF WORK. Time is of the essence in this Contract.
Contractor shall complete all of the Work on or before the date agreed
upon by the parties. If Contractor fails to complete all of the Work
on or before such date and such failure is not caused by a natural
disaster or similar event beyond the control of Contractor, then
Contractor shall pay to Owner, upon demand, $0 per day up to and
including the day on which Contractor completes all of the Work.
Owner may offset such amount against any payment otherwise due
Contractor. Contractor hereby acknowledges that such amount
represents reasonable damages under the circumstances for failure to
complete the Work on time.
DESCRIPTION OF WORK
Contractor shall supply all necessary labor, materials, supervision,
equipment and other expertise for the preparation and painting of
exteriors of all buildings at Timberleaf Apartments to include
dumpster enclosures and carports. Paint color will match existing
colors. The work shall be completed in accordance with the attached
specifications identified as Addendum's A, B and C which more clearly
defines the work. Contractor to provide a certificate of insurance
naming Maxim Property Management and Timberleaf Apartments as
additional insured prior to commencing work.
PAYMENT SCHEDULE
Progress payment to be submitted at the end of each month for payment
net 30 days. All requests for payment will be accompanied by a lien
release.
In no event shall the total cost of the Work to Owner exceed
$55,000.00.
CONTRACTOR: Apollo Painting
/S/Mike Drouin
(Signature)
By: Mike Drouin
Title: General Manager
Contractor's License No.: 684104
Federal I.D. No.:
Address: 350 Bridge Parkway
Redwood City, CA 94065-1517
415-596-5343
OWNER: Prometheus Income Partners, a
California limited partnership
/S/ John Pringle
(Signature)
By: Maxim Property Management
By: John H. Pringle
Title: Vice President & General Manager
Address: 350 Bridge Parkway
Redwood City, CA 94065-1517
(415) 596-5300
"Contractors are required by law to be licensed and regulated by the
Contractors' State License Board. If this contract is to be performed
in California, any questions concerning a contractor may be referred
to the Registrar, Contractors' State License Board, 3132 Bradshaw
Road, Sacramento, California. Mailing Address: P. O. Box 26000,
Sacramento, California 95826."
See Reverse Side for General Provisions
MPM 091 (9/95)
GENERAL PROVISIONS
1. INCIDENTAL ITEMS. Contractor shall provide and pay for all
materials, labor, utilities, tools and equipment necessary to do the
Work. Contractor shall provide without extra charge all incidental
items required as a part of the Work, even though not specified
herein.
2. EXTRAS. Bills for extra work will be paid only if Owner has
approved the extra work in writing in advance of the work being
performed.
3. SUBCONTRACTS. Contractor shall not subcontract any portion of
the Work without prior written permission from Owner.
4. TAXES. Contractor shall pay all sales, use and other taxes
applicable to the performance of this Contract, and shall reimburse
Owner if the latter shall pay any such taxes.
5. SUPPLIERS' WARRANTIES. Contractor shall cause suppliers to issue
any warranties or guaranties directly to Owner, if possible. If any
supplier refuses to issue warranties or guaranties directly to Owner,
Contractor hereby assigns such warranties and guaranties to Owner, if
they are assignable.
6. LAWS AND PERMITS
(a) Contractor represents and warrants that the Work and any goods
furnished under this Contract shall comply with all applicable laws,
regulations, ordinances and rules.
(b) Contractor shall procure, at its expense, all necessary permits,
certificates or licenses required by all applicable laws, regulations,
ordinances and rules. Contractor shall supply Owner with copies of
such permits, certificates and licenses at Owner's request.
(c ) Contractor shall comply with all applicable laws, regulations,
ordinances and rules relating to hazardous or toxic materials,
including without limitation asbestos, PCBs and underground storage
tanks. If Contractor discovers any such materials on the Property,
Contractor shall promptly notify Owner and Maxim Property Management,
its own employees, and shall take all appropriate safety precautions
in performing the Work.
(d) Contractor shall comply with all applicable safety laws, rules
and regulations and all safety requirements of Owner and Maxim
Property Management to prevent injuries or damage to persons or
Property. Contractor shall specifically comply with the provisions of
the Occupational Safety and Health Act (OSHA) of 1970, as currently
amended, and hereafter from time to time amended, and the Consumers
Product Safety Act of 1972, as amended now or in the future.
7. INSURANCE
(a) Contractor shall maintain, at its expense, commercial general
liability insurance on an occurrence basis, including owner-contractor
protective liability and automobile liability-physical damage
insurance, or the equivalent, and Workers Compensation insurance as
required by law. The liability insurance shall have a combined single
limit of at least $1,000,000.00 or the equivalent. Owner may require
Contractor to obtain (at Owner's cost) builders' risk insurance, in
the form commonly referred to as "all risk" including flood and
earthquake. Contractor shall supply, prior to commitment of work,
insurance certificates naming the owner and Maxim Property Management
as additional insured and shall have the carrier delete the words
"endeavor to" from the notification clause, stipulating 30 days
notice.
(b) Any subcontractor hired by Contractor shall maintain the same
type of liability insurance as Contractor, with at least half the same
limits as stated in 7(a) above, and workers Compensation insurance as
required by law. Promptly after hiring a subcontractor, Contractor
shall furnish Owner with a certificate of the subcontractor's
liability insurance.
(c) Before Contractor starts the Work, Contractor shall provide to
Owner: (i) endorsements to the liability policies of Contractor and
subcontractors naming Owner and Maxim Property Management as
additional insureds; (ii) endorsements to such policies by which the
carriers agree to give Owner and Maxim Property Management thirty (30)
days prior written notice of cancellation or any change in such
policies; and (iii) certificates of insurance or copies of such
insurance policies.
8. CLEAN-UP. Contractor shall comply with Owner's reasonable
requirements regarding daily clean-up. Upon completion of the Work,
before leaving the Property, Contractor shall remove all surplus
material, containers and rubbish from the Property and shall leave the
Property clean and ready for occupancy. Contractor shall repair any
damage to the Property caused by the Work.
9. INSPECTION, ACCEPTANCE, PAYMENT. Owner shall at all times have
access to the Work. All materials and workmanship shall be subject to
inspection and acceptance prior to payment. Payments may be withheld
by Owner when he reasonably believes that: (a) the materials or
workmanship are defective; (b) any claim has been filed against
Contractor, Owner or Maxim Property Management arising out of the
Work; (c) Contractor has failed to make payments properly to
subcontractors; or (d) Contractor has failed to meet a deadline on
which payment is due. At Owner's sole and absolute discretion, Owner
may withhold the last payment to Contractor until thirty-five (35)
days after the lien free completion of the work herein.
10. INDEMNITY. Contractor agrees to indemnify, defend with counsel
selected by Owner, and hold Owner and Maxim Property Management, its
affiliates, subsidiaries, agents, employees, and servants harmless
from and against any claims, damages, losses, expenses and attorneys'
fees arising out of this Contract or the performance of the Work by
Contractor or subcontractors, its affiliates, subsidiaries, agents,
employees, and servants. This indemnity obligation is unqualified
with the single exception that it shall not apply to the portion of
any claim, damage or loss that arises out of Owner's sole negligence
or willful misconduct, but it shall apply without limitation to all
other claims, damages or losses including those that arise out of the
concurrent negligence, whether passive or active, of Owner or Maxim
Property Management, its affiliates, subsidiaries, agents, employees,
and servants. Owner may, at its election, withhold any moneys payable
hereunder and apply the same to the payment of any charges or expenses
arising under this paragraph.
The indemnity herein shall extend to the costs and expenses incurred
by Owner for administrative expenses, consultant fees, expert witness
costs, investigation expenses and costs incurred in settling
indemnified claims, whether such costs occurred before or after any
litigation is commenced. The indemnity herein shall survive the
termination of this Contract and shall continue in effect until any
and all claims, actions or causes of action with respect to any of the
matters indemnified against are fully and finally barred by the
applicable statute of limitations.
11. ARBITRATION. At Owner's sole discretion, Owner may elect to
have any claims or disputes arising out of this Contract decided by
arbitration in accordance with the rules of Judicial Arbitration and
Mediation Services/Endispute at San Francisco, California, in effect
at the time of the demand for arbitration. If Owner so elects, a
demand for arbitration shall be filed with Judicial Arbitration and
Mediation Services/Endispute at San Francisco, California and
delivered to the other party in such dispute. The decision in writing
of the arbitrator appointed by such association shall be final and
conclusive as to all parties to such dispute. Should the party fail
to appear or participate in such arbitration proceedings, the
arbitrator may decide on the evidence presented in such proceedings by
the other party to such dispute.
12. ATTORNEYS' FEES. If any dispute, litigation or arbitration
between the parties arises out of the Contract, the losing party in
such dispute, litigation or arbitration shall pay to the prevailing
party all costs of such dispute, including without limitation, costs
of arbitration or attorneys' fees and expert witness fees.
13. MISCELLANEOUS. Contractor may not assign this Contract
without the prior written consent of the Owner. This Contract may not
be modified except by a writing signed by the parties. If any
provision of the contract is unenforceable, this Contract shall be
governed by the law of the state in which the Property is located.
Owner's business and/or residence address shall be written on this
Contract if required by applicable law.
14. MATERIALS AND WORKMANSHIP. All materials shall be as specified.
All materials and workmanship shall be of good quality and shall be
subject to approval or rejection for cause by Owner. If Contractor
has good reason for objecting to the use of any material or method of
construction, he shall bring such objection to the attention of Owner.
Substitutions for specified equipment or materials must be approved
by Owner in writing prior to ordering or installation thereof.
15. LIENS. Contractor is responsible for the payment of any person
entitled to assert a lien arising out of the Work. Contractor shall
keep the Property free from mechanic's liens and immediately secure
the release of any stop notice filed. Contractor shall defend and
indemnify Owner against claims and costs arising out of a mechanic's
lien or stop notice. Owner has the right, but not the obligation, to
withhold funds from Contractor's payment sufficient to discharge
disputed sums or liens. Any lien shall be removed within 10 days at
Contractor's sole cost and expense.
16. FINAL PAYMENT. Contractor shall promptly provide Owner with a
list of all subcontractors, suppliers and all other persons that would
be entitled to assert a lien arising out of the Work. Contractor
shall update such list when necessary. Contractor shall certify such
list and all amendments to be true and correct. Final payment shall
not be due until Contractor delivers to Owner a lien release from
Contractor and all persons on such list as amended, in accordance with
statutory requirements.
17. GUARANTY. Final payment shall not relieve the contractor of any
responsibility for faulty materials or workmanship. Contractor
guarantees to repair or pay for any defects in materials or
workmanship which shall appear within a period of one year from the
date of completion of the Work or any longer period as provided by
statute or agreement of the parties.
18. RISK OF LOSS. Risk of loss of any goods or materials
incorporated in the Work shall not pass from Contractor to Owner until
final completion and acceptance of the Work by Owner.
19. BOND. Unless this requirement is waived by Owner, Contractor
shall furnish Owner a performance bond and recordable payment bond
satisfactory to Owner in the amount of this contract for protection
against loss or damage arising out of the Contract, including without
limitation, mechanics' liens. The sureties shall waive any rights to
approve change orders or modifications of this contract.
INITIALS ________________
________________
Revised 9/95
ADDENDUM A
Work Specifications and Conditions for Apollo Paint Company
Exterior Painting Project TIMBERLEAF APARTMENTS.
PART 1 - GENERAL
1.1 DESCRIPTION
A. Work Included:
1. Contractor shall supply all necessary material, labor,
supervision and equipment necessary for the repainting of the exterior
of ten buildings at the project in accordance with the paint and
surface material manufacturers suggestions and recommendations for the
preparation and preservation of surfaces to be painted.
B. Exclusions:
1. Contractor is not responsible for the trimming of plant
material where such material interferes with the access to the
exterior surface of the building.
2. Contractor is not responsible for security necessitated by
painting of this project.
1.2 QUALITY ASSURANCE
A. Contractor shall use an adequate number of skilled workmen who
are thoroughly trained and experienced in the necessary crafts and who
are completely familiar with the specified requirements and methods
needed for the proper performance of the work in this section.
B. Contractor shall comply with all manufacturers recommendations in
the handling and application of materials and shall perform all work
in keeping with good work practices as defined by industry standards
and local codes.
C. Contractor shall provide the Owner access for inspection by Owners
representative as requested in order to facilitate progress payments.
D. Contractor shall enlist the support of the material manufacturers
local
representative who is required to approve the application.
E. Contractor shall be responsible to solicit the opinions of the
siding manufacturer
with regard to recaulking of material joints as required under
the siding
manufacturers warranty.
1.3 SUBMITTALS
A. Contractor shall submit for Owners approval samples and technical
data sheets for caulking and sealing material for use on the project.
1.4 PRODUCT HANDLING & STORAGE
A. Storage:
1. Material for the project shall be stored in areas designated
by the building
manager.
B. Handling:
1. Material shall be handled in accordance with the
manufacturers recommendations, including thinning, mixing and
application.
PART 2 - PRODUCTS
2.1 EXTERIOR PAINT
A. Kelly Moore: 1240 Flat Latex solid finish for exterior siding.
B. Kelly Moore: 1700 Rust Inhibitive Enamel for all metal railings
and stair stringers.
C. Kelly Moore: 1250 Semi-Gloss Acrylic to all exterior doors.
2.2 APPLICATORS, TOOLS & EQUIPMENT
A. All tools and equipment used in the application of the materials
under this contract shall be of high quality and suitable for the
application.
PART 3 - EXECUTION
3.1 SURFACE CONDITIONS
A. Contractor shall prepare all surfaces to be painted or sealed in
accordance with the manufacturers recommendations and good work
practices. All surfaces to receive material shall be clean, dry and
free of dirt and other foreign material which would inhibit the
adhesion of the material to be applied.
B. Soiled surfaces are to be power washed clean. Prime with either
Kelly 250 exterior primer or 240 Kel-Bond primer and surface
conditioner as necessary.
C. Chalky powdery pealing, cracked or otherwise unsound existing
paint or coatings must be removed by a sand or water blast or other
appropriate methods to a sound surface. Prime the spot prime all bare
areas with Kelly Moore 250 exterior primer.
D. Miscellaneous repairs: Fill holes and voids with suitable
patching materials for the applicable substrate. All patched areas
should be cured and coated with Kel Seal 1108 Elast-o-Meric sealant..
E. Caulking requirements: Corner, vertical & horizontal joints
between trim and siding; siding and siding shall be caulked in
accordance with the siding manufacturers recommendation.
F. Contractor shall check doors, windows, expansion joints,
flashings and cappings around pipes, conduit, scuppers and caulk as
required.
3.2 APPLICATION
A. Material shall be thinned at a rate not to exceed that
recommended by the manufacturer or 1 pint per gallon which ever is
greater.
B. Paint materials shall be applied at a temperature range in
accordance with the manufacturers recommendation and/or 55 degrees
Fahrenheit to 110 degrees Fahrenheit if no such guidelines exist.
C. All surfaces shall receive a full Finnish coat of paint not less
than 1.7 mils dried thickness.
3.3 PROTECTION OF SURFACES NOT PAINTED
A. Contractor shall be responsible for the protection of surfaces
not painted (and not to be painted) and shall supply an adequate
number of tarps, covers or other maskings to protect landscape and
personal property throughout the course of the work.
PART 4 - WORK CONDITIONS
4.1 WORK HOURS
A. Contractor shall perform work under this contract between the
hours of 8 AM and 6 PM Monday through Friday (normal work hours).
Deviations from these hours shall be acceptable only if agreed to in
writing.
4.2 SCHEDULING
A. Contractor shall be responsible to coordinate his work with that
of the on-site property staff who are responsible for the notification
of all residents and will work together to coordinate access to areas
to be painted. Contractor shall post with the on-site staff his
intended schedule one week in advance so that proper notices can go
out.
4.3 SECURITY
A. Owner recognizes that in the course of painting the exterior of
the building, it is sometimes necessary to leave doors ajar to allow
the paint to cure. Where it is necessary to accomplish this, the
Owner shall be responsible to provide necessary security so as to
indemnify the contractor of this responsibility.
PART 5 - REMEDIAL WORK
5.1 MISC.
A. Contractor agrees to replace damage to other work or building
contents caused by their negligence within seven days of the
occurrence of such damage upon written notice.
PART 6 - WARRANTY UPON COMPLETION
6.1 WARRANTY
A. Contractor shall supply upon completion a written warranty
covering material and labor for a period of one year from completion.
PART 7 - PAYMENT
7.1 PROGRESS PAYMENT
A. Four progress payments equal to the amount of work completed less
10% retention shall be made net 20 days receipt of invoice and
notarized lean release. Final payment shall be made net 35 days
receipt of invoice plus release following the completion of the work.
Proposal (Addendum B)
To: Timerleaf Apartments
From: Apollo Painting
Date: 4-29-96
Re: Bid Request
We propose to furnish all labor and materials to complete the
following work.
Preparation:
1. All surfaces to be painted will be cleaned as needed.
2. All seams around windows and other painted areas will be caulked
as needed:
3. All surfaces will be sanded and primed as needed.
Painting:
1. All siding walls will receive one full finish coat of Kelly Moore
exterior flat Paint.
2. All metal handrails will receive on full finish coat of rust
inhibative paint.
3. All window and door frames will receive one full finish coat of
K.M. exterior semi gloss paint.
4. All lattice work will receive one full finish coat of K.M.
exterior flat paint.
5. All Stringers will receive one full finish coat of rust inhibative
paint.
6. All wood stairs will receive one full finish coat of K.M. exterior
semi gloss paint.
7. All wood railings and top caps will receive one full finish coat
of K.M. exterior semi gloss paint.
8. All metal gutters and metal trim to receive one full finish coat
of exterior semi gloss
9. All doors to receive one full finish coat of K.M. exterior semi
gloss paint.
10. All carports will receive one full finish coat of KM exterior flat
paint.
Misc. Notes:
1. All work to be done in a neat and professional manor.
2. A schedule will be set in advance with the property.
3. All trim paint will be "front face paint".
4. All landscaping in areas to be painted will be cleared by the
property.
5. Color to be the same color.
6. A secure storage area will be provided by the property.
MAIN BID: $55,000.00
Price good for 60 days from the date of the proposal.
Respectfully Submitted By:___________________________________________
Michael Drouin
ADDENDUM C
Page I of 2
TIMBERLEAF JOB SITE RULES
This is to inform all workmen of the established job site rules on the
Timberleaf
Apartments
Project:
I Workers will use only designated bathrooms.
2. Workers will not enter the Timberleaf Management Office or linger
near the entry, the pool or wander about on the site and during break
periods will remain in designated break areas.
3. Workers will not use any phones on the Timberleaf Apartments
project unless designated for public use.
4. Workers will work in peace and harmony with all other trades.
5. No unauthorized personnel will be allowed on the job site.
6. Workers may not have radios, music, tape machines, CD players,
walk-man players, televisions or other non-essentials which may
interfere with residents quite enjoyment.
7. Workers may not have pets on the project, in their vehicles on
the construction yard area, or in the proximity of the project.
8. Workers must wear short or long sleeve shirts and long pants at
all times (no tank tops). Clothes must be in good repair without
holes and tears and clean each morning. Clothing shall not contain
language, images, pictures, symbols, etc. which is immoral or
offensive in any manner to residents, Timberleaf Apartments Management
or other workers. Uniforms are preferred.
9. Work hours: 8:00 a,m. to 6:00 p.m.
10. All workers must be off site by 6:00 p.m.
11. Alcohol, illegal drugs and controlled substances of any kind are
prohibited
12. Professional conduct is required of all workers at all times.
13. Residents/guests privacy is to be respected at all times.
ADDENDUM C
Page 2 of 2
TIMBERLEAF JOB SITE RULES
14. Parking only in designated areas determined by Management.
15. Workers will use access as specified by Management.
Storage:
The location of storage will be determined by Management. All
siding/trim materials, excess scaffolding, etc. will be stored in this
location for the duration of the work on Timberleaf Apartments.
Management and Owner accepts no responsibility for the safekeeping of
any items used or stored on the premises.
Clean Up and Hold Harmless:
Contractor shall return storage to Management in a clean and orderly
condition and shall remove all equipment, supplies and debris at the
conclusion of work. Contractor shall hold Owner and Management
harmless from any loss, damages, claims or suits arising out of
Contractor's and Subcontractor's activities on the Property.
Job Site Meetings:
Contractor to apprise Property Manager of any incidents, change of
schedule and progress reports on a daily basis.
General:
It is understood and agreed that Contractor shall strictly enforce
rules and perform within requirements listed above. Failure to comply
with rules will constitute a failure to perform on this contract.
Exhibit (c)(5)
WORK ORDER AND CONTRACT
Maxim Property Management Date: Sept 20, 1995
The undersigned "Contractor" agrees to perform the services specified
below ("Work) on the property located at: Alderwood Apartments, 900
Pepper Tree Lane, Santa Clara, CA., 95051.Contractor shall perform
the Work in accordance with the terms and conditions of this contract,
including the General Provisions on the reverse side. This Contract
is between Contractor and the legal owner of the Property ("Owner").
Maxim Property Management ("MPM") manages the Property. Owner has
authorized MPM to sign this Contract on behalf of Owner and to act on
behalf of Owner as its agent under this Contract. Contractor
understands that MPM has no liability under this Contract.
Attached are the following initialed or signed addendum documents
(initial if appropriate, or write "None"):
(a) /I/ another form of contract; and/or (b) plans, drawings, or
specifications regarding the Work.
Such documents are made a part of this Contract and shall modify or
expand this Contract, but only with respect to the Description of
Work. Such documents shall not modify or expand any of the terms and
conditions set forth on the reverse side, and any provisions in such
documents which conflict with the terms and conditions on the reverse
side shall not be binding upon the parties.
Contractor shall commence the work by Oct. 2, 1995 ("Commencement
Date").
Contractor shall complete the work by Nov 31, 1995 ("Completion
Date")>
COMPLETION OF WORK. Time is of the essence in this Contract.
Contractor shall complete all of the Work on or before the date agreed
upon by the parties. If Contractor fails to complete all of the Work
on or before such date and such failure is not caused by a natural
disaster or similar event beyond the control of Contractor, then
Contractor shall pay to Owner, upon demand, $0 per day up to and
including the day on which Contractor completes all of the Work.
Owner may offset such amount against any payment otherwise due
Contractor. Contractor hereby acknowledges that such amount
represents reasonable damages under the circumstances for failure to
complete the Work on time.
DESCRIPTION OF WORK
Contractor shall supply all necessary material, labor, supervision
and equipment for the completion of the exterior painting as detailed
in the attached work specification from Apollo Painting.
PAYMENT SCHEDULE
Progress payments commensurate with the work progress net 30 days
receipt of invoice and lean release.
In no event shall the total cost of the Work to Owner exceed
$81,900.00
CONTRACTOR: Apollo Painting
/S/ MIKE DROUIN
(Signature)
By: Michael Drouin
Title: General manager
Contractor's License No.: 684-104
Federal I.D. No.:
Address: 2600 Campus Dr., suite 200
San Mateo, CA. 94403
(415)572-5343
OWNER: Alderwood Apartments
Prometheus Income Partners, a
California limited partnership
By: PROMETHEUS DEVELOPMENTS CO., INC., a California Corporation, its
general partner
By: _
(Officer of Corporation, Project Manager or Agent)
Address: 2600 Campus Drive, Suite 200
San Mateo, CA 94403
(415) 570-7800
"Contractors are required by law to be licensed and regulated by the
Contractor's State License Board. If this contract is to be performed
in California, any questions concerning a contractor may be referred
to the Registrar, Contractors' State License Board, 3132 Bradshaw
Road, Sacramento, California. Mailing Address: P. O. Box 26000,
Sacramento, California 95826."
See Reverse Side for General Provisions
MPM 091 (12/93)
GENERAL PROVISIONS
1. INCIDENTAL ITEMS. Contractor shall provide and pay for all
materials, labor, utilities, tools and equipment necessary to do the
Work. Contractor shall provide without extra charge all incidental
items required as a part of the Work, even though not specified
herein.
2. EXTRAS. Bills for extra work will be paid only if Owner has
approved the extra work in writing in advance of the work being
performed.
3. SUBCONTRACTS. Contractor shall not subcontract any portion of
the Work without prior written permission from Owner.
4. TAXES. Contractor shall pay all sales, use and other taxes
applicable to the performance of this Contract, and shall reimburse
Owner if the latter shall pay any such taxes.
5. SUPPLIERS' WARRANTIES. Contractor shall cause suppliers to issue
any warranties or guaranties directly to Owner, if possible. If any
supplier refuses to issue warranties or guaranties directly to Owner,
Contractor hereby assigns such warranties and guaranties to Owner, if
they are assignable.
6. LAWS AND PERMITS
(a) Contractor represents and warrants that the Work and any goods
furnished under this Contract shall comply with all applicable laws,
regulations, ordinances and rules.
(b) Contractor shall procure, at its expense, all necessary permits,
certificates or licenses
required by all applicable laws, regulations, ordinances, and rules.
Contractor shall supply Owner with copies of such permits,
certificates and licenses at Owner's request.
(c) Contractor shall comply with all applicable laws, regulations,
ordinances and rules relating to hazardous or toxic materials,
including without limitation asbestos, PCB's and underground storage
tanks. If Contractor discovers any such materials on the Property,
Contractor shall promptly notify Owner and Maxim Property Management,
its own employees, and shall take all appropriate safety precautions
in performing the Work.
(d) Contractor shall comply with all applicable safety laws, rules
and regulations and all safety requirements of Owner and Maxim
Property Management to prevent injuries or damage to persons or
Property. Contractor shall specifically comply with the provisions of
the Occupational Safety and Health Act (OSHA) of 1970, as currently
amended, and hereafter from time to time amended, and the Consumers
Product Safety Act of 1972, as amended now or in the future.
7. INSURANCE
(a) Contractor shall maintain, at its expense, commercial general
liability insurance on an occurrence basis, including owner-contractor
protective liability and automobile liability-physical damage
insurance, or the equivalent, and Worker's Compensation insurance as
required by law. The liability insurance shall have a combined single
limit of at least $1,000,000.00 or the equivalent. Owner may require
Contractor to obtain (at Owner's cost) builder's risk insurance, in
the form commonly referred to as "all risk" including flood and
earthquake.
(b) Any subcontractor hired by Contractor shall maintain the same
type of liability insurance as Contractor, with at least half the same
limits as stated in 7(a) above, and Worker's Compensation insurance as
required by law. Promptly after hiring a subcontractor, Contractor
shall furnish Owner with a certificate of the subcontractor's
liability insurance.
(c) Before Contractor starts the Work, Contractor shall provide to
Owner: (i) endorsements to the liability policies of Contractor and
subcontractors naming Owner and Maxim Property Management as
additional insureds; (ii) endorsements to such policies by which the
carriers agree to give Owner and Maxim Property thirty (30) day's
prior written notice of cancellation or any change in such policies;
and (iii) certificates of insurance or copies of such insurance
policies.
8. CLEAN-UP. Contractor shall comply with Owner's reasonable
requirements regarding daily clean-up. Upon completion of the Work,
before leaving the Property, Contractor shall remove all surplus
material, containers and rubbish from the Property and shall leave the
Property clean and ready for occupancy. Contractor shall repair any
damage to the Property caused by the Work.
9. INSPECTION, ACCEPTANCE, PAYMENT. Owner shall at all times have
access to the Work. All materials and workmanship shall be subject to
inspection and acceptance prior to payment. Payments may be withheld
by Owner when he reasonably believes that:
(a) the materials or workmanship are defective; (b) any claim has been
filed against Contractor, Owner or Maxim Property Management arising
out of the Work; (c) Contractor has failed to make payments properly
to subcontractors; or (d) Contractor has failed to meet a deadline on
which payment is due. At Owner's sole and absolute discretion, Owner
may withhold the last payment to Contractor until thirty-five (35)
days after the lien free completion of the work herein.
10. LIABILITIES OF PARTIES. Except for liabilities caused by
negligence of Owner or Maxim Property Management, its affiliates,
subsidiaries, agents, employees, and servants, Contractor agrees to
defend and indemnify Owner and Maxim Property Management, its
affiliates, subsidiaries, agents, employees, and servants, against any
claims damages, losses, expenses and attorneys' fees arising out of
this Contract or the performance of the Work by Contractor or
subcontractors, its affiliates, subsidiaries, agents, employees, and
servants. Owner may, at its election, withhold any monies payable
hereunder and apply the same to the payment of any charges or expenses
arising under this paragraph.
11. ARBITRATION. At Owner's sole discretion, Owner may elect to
have any claims or disputes arising out of this Contract decided by
arbitration in accordance with the rules of the American Arbitration
Association in effect at the time of the demand for arbitration. If
Owner so elects, a demand for arbitration shall be filed with the
American Arbitration Association and delivered to the other party in
such dispute. The decision in writing of the arbitrator appointed by
such association shall be final and conclusive as to all parties to
such dispute. Should any party fail to appear or participate in such
arbitration proceedings, the arbitrator may decide on the evidence
presented in such proceedings by the other party to such dispute.
12. ATTORNEYS' FEES. If any dispute, litigation or arbitration
between the parties arises out of the Contract, the losing party in
such dispute, litigation or arbitration shall pay to the prevailing
party all costs of such dispute, including without limitation, costs
of arbitration or attorneys' fees and expert witness fees.
13. MISCELLANEOUS. Contractor may not assign this Contract without
the prior written consent of the Owner. This Contract may not be
modified except by a writing signed by the parties. If any provision
of the contract is unenforceable, this Contract shall be governed by
the law of the state in which the Property is located. Owner's
business and/or residence address shall be written on this Contract if
required by applicable law.
14. MATERIALS AND WORKMANSHIP. All materials shall be as specified.
All materials and workmanship shall be of good quality and shall be
subject to approval or rejection for cause by Owner. If Contractor
has good reason for objecting to the use of any material or method of
construction, he shall bring such objection to the attention of Owner.
Substitutions for specified equipment or materials must be approved
by Owner in writing prior to ordering or installation thereof.
15. LIENS. Contractor is responsible for the payment of any person
entitled to assert a lien arising out of the Work. Contractor shall
keep the Property free from mechanic's liens and immediately secure
the release of any stop notice filed. Contractor shall defend and
indemnify Owner against claims and costs arising out of a mechanic's
lien or stop notice. Owner has the right, but not the obligation, to
withhold funds from Contractor's payment sufficient to discharge
disputed sums or liens. Any lien shall be removed within 10 days at
Contractor's sole cost and expense.
16. FINAL PAYMENT. Contractor shall promptly provide Owner with a
list of all subcontractors, suppliers and all other persons that would
be entitled to assert a lien arising out of the Work. Contractor
shall update such list when necessary. Contractor shall certify such
list and all amendments to be true and correct. Final payment shall
not be due until Contractor delivers to Owner a lien release from
Contractor and all persons on such list as amended, in accordance with
statutory requirements.
17. GUARANTY. Final payment shall not relieve the contractor of any
responsibility for faulty materials or workmanship. Contractor
guarantees to repair or pay for any defects in materials workmanship
which shall appear within a period of one year from the date of
completion of the Work or any longer period as provided by statute or
agreement of the parties. Owner shall give notice of observed defects
with reasonable promptness.
18. RISK OF LOSS. Risk of loss of any goods or materials
incorporated in the Work shall not pass from Contractor to Owner until
final completion and acceptance of the Work by Owner.
19. BOND. Unless this requirement is waived by Owner, Contractor
shall furnish Owner a performance bond and recordable payment bond
satisfactory to Owner in the amount of this contract for protection
against loss or damage arising out of the Contract, including without
limitation, mechanic's liens. The sureties shall waive any rights to
approve change orders or modifications of this contract.
INITIALS
ADDENDUM A
Work Specifications and Conditions for Apollo Paint Company
Exterior Painting Project ALDERWOOD APARTMENTS.
PART 1 - GENERAL
1.1 DESCRIPTION
A. Work Included:
1. Contractor shall supply all necessary material, labor,
supervision and equipment necessary for the repainting of the exterior
of twenty buildings at the project in accordance with the paint and
surface material manufacturers suggestions and recommendations for the
preparation and preservation of surfaces to be painted.
B. Exclusions:
1. Contractor is not responsible for the trimming of plant
material where such material interferes with the access to the
exterior surface of the building.
2. Contractor is not responsible to paint exterior
surfaces within the garage area nor those surfaces on the exterior
which are not painted.
3. Contractor is not responsible for security necessitated
by painting of this project
1.2 QUALITY ASSURANCE
A. Contractor shall use an adequate number of skilled workmen who
are thoroughly trained and experienced in the necessary crafts and who
are completely familiar with the specified requirements and methods
needed for the proper performance of the work in this section.
B. Contractor shall comply with all manufacturers recommendations in
the handling and application of materials and shall perform all work
in keeping with good work practices as defined by industry standards
and local codes.
C. Contractor shall provide the Owner access for inspection by
Owners representative as requested in order to facilitate progress
payments.
D. Contractor shall enlist the support of the material manufacturers
local representative who is required to approve the application.
E. Contractor shall be responsible to solicit the opinions of the
siding manufacturer with regard to recaulking of material joints as
required under the siding manufacturers warranty.
1.3 SUBMITTALS
A. Contractor shall submit for Owners approval samples and technical
data sheets for caulking and sealing material for use on the project.
1.4 PRODUCT HANDLING & STORAGE
A. Storage:
1. Material for the project shall be stored in areas designated
by thebuilding manager.
B. Handling:
1. Material shall be handled in accordance with the
manufacturers recommendations, including thinning, mixing and
application.
PART 2 - PRODUCTS
2.1 EXTERIOR PAINT
A. Kelly Moore: 1240 Flat Latex solid finish for exterior siding.
B. Kelly Moore: 1700 Rust Inhibitive Enamel for all metal railings
and stair stringers.
C. Kelly Moore: 1250 Semi-Gloss Acrylic to all exterior doors.
2.2 APPLICATORS, TOOLS & EQUIPMENT
A. All tools and equipment used in the application of the materials
under this contract shall be of high quality and suitable for the
application.
PART 3 - EXECUTION
3.1 SURFACE CONDITIONS
A. Contractor shall prepare all surfaces to be painted or sealed in
accordance with the manufacturers recommendations and good work
practices. All surfaces to receive material shall be clean, dry and
free of dirt and other foreign material which would inhibit the
adhesion of the material to be applied.
B. Soiled surfaces are to be powerwashed clean. Prime with either
Kelly Moore 250 exterior primer or 240 Kel-Bond primer and surface
conditioner as necessary.
C. Chalky powdery pealing, cracked or otherwise unsound existing
paint or coatings must be removed by a sand or water blast or other
appropriate methods to a sound surface. Prime the spot prime all
bare areas with Kelly Moore 250 exterior primer.
D. Miscellaneous repairs: Fill holes and voids with suitable
patching materials for the applicable substrate. All patched areas
should be cured and coated with Kel Seal.1108 Elast-o-Meric.
E. Caulking requirements: Corner, vertical & horizontal joints
between trim and siding; siding and siding shall be caulked in
accordance with the siding manufacturers recommendation.
F. Contractor shall check doors, windows, expansion joints,
flashings and cappings around pipes, conduit, scuppers and caulk as
required.
3.2 APPLICATION
A. Material shall be thinned at a rate not to exceed that
recommended by the manufacturer or 1 pint per gallon which ever is
greater.
B. Paint materials shall be applied at a temperature range in
accordance with the manufacturers recommendation and/or 55 degrees
Fahrenheit to 110 degrees Fahrenheit if no such guidelines exist.
C. All surfaces shall receive a full Finnish coat of paint not less
than 1.7 mils dried thickness.
3.3 PROTECTION OF SURFACES NOT PAINTED
A. Contractor shall be responsible for the protection of surfaces
not painted (and not to be painted) and shall supply an adequate
number of tarps, covers or other maskings to protect landscape and
personal property throughout the course of the work.
PART 4 - WORK CONDITIONS
4.1 WORK HOURS
A. Contractor shall perform work under this contract between the
hours of 8 AM and 6 PM Monday through Friday (normal work hours).
Deviations from these hours shall be acceptable only if agreed to in
writing.
4.2 SCHEDULING
A. Contractor shall be responsible to coordinate his work with that
of the on-site property staff who are responsible for the notification
of all residents and will work together to coordinate access to areas
to be painted. Contractor shall post with the on-site staff his
intended schedule one week in advance so that proper notices can go
out.
4.3 SECURITY
A. Owner recognizes that in the course of painting the exterior of
the building, it is sometimes necessary to leave doors ajar to allow
the paint to cure. Where it is necessary to accomplish this, the
Owner shall be responsible to provide necessary security so as to
indemnify the contractor of this responsibility.
PART 5 - REMEDIAL WORK
5.1 MISC.
A. Contractor agrees to replace damage to other work or building
contents caused by their negligence within seven days of the
occurrence of such damage upon written notice.
PART 6 - WARRANTY UPON COMPLETION
6.1 WARRANTY
A. Contractor shall supply upon completion a written warranty
covering material and labor for a period of one year from completion.
PART 7 - PAYMENT
7.1 PROGRESS PAYMENT
A. Four progress payments equal to the amount of work completed less
10% retention shall be made net 20 days receipt of invoice and
notarized lean release. Final payment shall be made net 35 days
receipt of invoice plus release following the completion of the work.
Proposal
To: Alderwood Apartments
From: Apollo Painting
Date: 4-11-95
Re: Bid Request
We propose to furnish all labor and materials to complete the
following work.
Preparation:
1. All surfaces to be painted will be cleaned as needed.
2. All seams around windows and other painted areas will be caulked
as needed:
3. All surfaces will be sanded and primed as needed.
Painting:
1. All siding walls will receive one full finish coat of Kelly Moore
exterior flat Paint.
2. All metal handrails will receive on full finish coat of rust
inhibative paint.
3. All window and door frames will receive one full finish coat of
K.M. exterior semi gloss paint.
4. All lattice work will receive one full finish coat of K.M.
exterior flat paint.
5. All Stringers will receive one full finish coat of rust inhibative
paint.
6. All wood stairs will receive one full finish coat of K.M. exterior
semi gloss paint.
7. All wood railings and top caps will receive one full finish coat
of K.M. exterior semi
gloss paint.
8. All metal gutters and metal trim to receive one full finish coat
of rust inhibative paint.
9. All Doors will receive on full finish coat of K.M. exterior semi
gloss paint.
Misc. Notes:
1. All work to be done in a neat and professional manor.
2. A schedule will be set in advance with the property.
3. All trim paint will be "front face paint".
4. All landscaping in areas to be painted will be cleared by the
property.
5. Color to be the same color.
6. A secure storage area will be provided by the property.
MAIN BID: $81,900.00
Price good for 60 days from the date of the proposal.
Respectfully Submitted By:___________________________________________
Michael Drouin
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