SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
___________________
PROMETHEUS INCOME PARTNERS,
a California limited partnership
(Name of Subject Company)
PIP PARTNERS - GENERAL, LLC,
a California limited liability company
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
742941 10 7
(CUSIP Number of Class of Securities)
___________________
Mr. Sanford N. Diller
PIP PARTNERS - GENERAL, LLC
350 Bridge Parkway,
Redwood City, California 94065-1517
(415)596-5300
Copy to:
Samuel H. Gruenbaum, Esq.
Cox, Castle & Nicholson, LLP
2049 Century Park East
Twenty-Eighth Floor
Los Angeles, California 90067
(310) 277-4222
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
Calculation of Filing Fee
Transaction Valuation*
Amount of Filing Fee
$4,050,000
$810
* For purposes of calculating the filing fee only. This
amount assumes the purchase of 9,000 units of limited partnership
interest ("Units") of the subject company for $450 per Unit in
cash.
Check box if any part of the fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and date
of its filing.
Amount previously paid: N/A Filing party: N/A
Form or registration no.: N/A Date filed: N/A
(Continued on following pages)
(Page 1 of 7 pages)
1. Name of Reporting Person; S.S. or I.R.S. Identification No.
of Above Person
PIP PARTNERS - GENERAL, LLC, a California limited liability
company
_________________________________________________________________
2. Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) (b)
_________________________________________________________________
3. SEC Use Only
_________________________________________________________________
4. Sources of Funds (See Instructions)
AF; BK
_________________________________________________________________
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Item 2(e)
or 2(f)
6. Citizenship or Place of Organization
California
_________________________________________________________________
7. Aggregate Amount Beneficially Owned by Each Reporting Person
No Units of Limited Partnership Interest; however, an
affiliate of the Bidder (i.e. the sole general partner of the
Subject Company) owns a 5% interest in the distributable cash
from operations of the Subject Company and 15% interest in the
net proceeds from the sale or other disposition of the properties
owned by the Subject Company, subject in both cases to certain
priorities of the limited partners of the Subject Company.
_________________________________________________________________
8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares (See Instructions)
_________________________________________________________________
9. Percent of Class Represented by Amount in Row (7)
0% of the Limited Partnership Interests. 100% of the
general partnership interests of the Subject Company.
_________________________________________________________________
10. Type of Reporting Person (See Instructions)
00
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Prometheus
Income Partners, a California limited partnership (the
"Partnership"), which has its principal executive offices at 350
Bridge Parkway, Redwood City, California 94065-1517.
(b) This Schedule 14D-1 relates to the offer by PIP
PARTNERS - GENERAL, LLC, a California limited liability company
(the "Purchaser"), to purchase up to 9,000 issued and outstanding
units of limited partnership interest ("Units") of the
Partnership at $450 per Unit less the amount of any distributions
declared or made with respect to the Units between November 8,
1996 and the date of payment of the purchase price (the "Purchase
Price") for the Units by the Purchaser, net to the seller in
cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 8,
1996 (the "Offer to Purchase") and the related Letter of
Transmittal, copies of which are attached hereto as Exhibits
(a)(1) and (a)(2), respectively. Information concerning the
number of outstanding Units is set forth in the Introduction to
the Offer to Purchase and is incorporated herein by reference.
(c) The information set forth in Section 13
("Purchase Price Considerations") of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) The information set forth in Section 10
("Certain Information Concerning the Purchaser") and Schedule I
to the Offer to Purchase is incorporated herein by reference.
(e)-(f) During the last five years, neither the
Purchaser nor, to the best of its knowledge, any of the persons
listed in Schedule I or referred to in Section 10 ("Certain
Information Concerning the Purchaser") of the Offer to Purchase
(i) has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) was a party
to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or
is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, Federal or
state securities laws or finding any violation of such laws.
(g) The information set forth in Schedule I to the
Offer to Purchase is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE
SUBJECT COMPANY.
(a) The Purchaser is an affiliate of the general
partner of the Partnership, Prometheus Development Co., Inc., a
California corporation ("General Partner"). Accordingly, the
terms of the Partnership's limited partnership agreement (the
"Partnership Agreement") are discussed in Section 9 ("Certain
Information Concerning the Partnership") of the Offer to Purchase
which is incorporated herein by reference. In addition, the
information set forth in Section 10 ("Certain Information
Concerning the Purchaser") of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in Section 11
("Background of the Offer") of the Offer to Purchase is
incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 12 ("Source
of Funds") of the Offer to Purchase is incorporated herein by
reference.
(b) The information set forth in Section 12 ("Source
of Funds") of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 12 ("Source
of Funds") of the Offer to Purchase is incorporated herein by
reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF
THE BIDDER.
(a)-(b) The information set forth in Section 8
("Purpose of the Offer; Future Plans") of the Offer to Purchase
is incorporated herein by reference.
(c)-(e) Not applicable.
(f)-(g) The information set forth in Section 7
("Effects of the Offer") of the Offer to Purchase is incorporated
herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction
and Section 10 ("Certain Information Concerning the Purchaser")
of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in Section 9 ("Certain
Information Concerning the Partnership"), Section 10 ("Certain
Information Concerning the Purchaser") and Section 11
("Background of the Offer") of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 ("Certain Fees
and Expenses") of the Offer to Purchase is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
NOT APPLICABLE. The Purchaser is a newly formed
entity. The source of the funds for the purchase of the Units is
a capital contribution from Mr. Sanford N. Diller, an affiliate
of the Purchaser, and the source of the capital contribution will
be a loan from the Bank of America, unless Mr. Diller utilizes
other sources. The information set forth in Section 12 ("Source
of Funds") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 9 ("Certain
Information Concerning the Partnership"), Section 10 ("Certain
Information Concerning the Purchaser") and Section 11
("Background of the Offer") of the Offer to Purchase is
incorporated herein by reference.
(b)-(d) The information set forth in Section 15
("Certain Legal Matters") of the Offer to Purchase is
incorporated herein by reference.
(e) NONE. However, for a discussion of a complaint
that the Subject Company filed against "Apollo" (as defined in
the Offer to Purchase) and entities associated with Apollo to
preliminarily and permanently enjoin the Apollo Tender Offer (as
defined in the Offer to Purchase), see Section 11 ("Background of
the Offer") of the Offer to Purchase which is incorporated herein
by reference.
(f) The information set forth in the Offer to
Purchase and the related Letter of Transmittal is incorporated
herein in its entirety by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated November 8, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Cover Letter, dated November 8, 1996, from
PIP PARTNERS - GENERAL, LLC to the holders of Units.
(b)(1) Letter, dated November 1, 1996, from Bank
of America.
(b)(2) Letter, dated November 7, 1996, from Bank
of America.
(c) Agreement to Make Tender Offer, dated November 4,
1996 between the Subject Company and the Bidder.
(d) None.
(e) Not applicable.
(f) Not applicable.
(g) Second Amended and Restated Agreement of Limited
Partnership of Prometheus Income Partner, a California limited
partnership.
(h) 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.
(i) Master Rent Agreement between Alderwood
Apartments or Timberleaf Apartments and the Corporate Living
Network.
(j)(1) Work Order and Contract between Maxim
Property Management and Apollo Paint Company, dated August 21,
1996 re: Timberleaf Apartments.
(j)(2) Work Order and Contract between Maxim
Property Management and Apollo Paint Company, dated September 20,
1995 re: Alderwood Apartments.
SIGNATURES
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: November 8, 1996
PIP PARTNERS - GENERAL, LLC, a California limited liability
company
By: PromHill, Inc., a California corporation, its
Manager
By:
Name: Sanford N. Diller
Title: President
EXHIBIT INDEX
EXHIBIT
NO. TITLE
(a)(1) Offer to Purchase dated November 8, 1996
(a)(2) Letter of Transmittal
(a)(3) Cover Letter, dated November 8, 1996, from PIP
PARTNERS - GENERAL, LLC to the holders of Units
(b)(1) Letter, dated November 1, 1996, from Bank of
America.
(b)(2) Letter, dated November 7, 1996, from Bank of
America.
(c) Agreement to Make Tender Offer, dated November 4, 1996
between the Subject Company and the Bidder.
(d) None.
(e) Not applicable.
(f) Not applicable.
(g) Second Amended and Restated Agreement of Limited
Partnership of Prometheus Income Partner, a California limited
partnership.
(h) 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.
(i) Master Rent Agreement between Alderwood Apartments or
Timberleaf Apartments and the Corporate Living Network.
(j)(1) Work Order and Contract between Maxim Property
Management and Apollo Paint Company, dated August 21, 1996 re:
Timberleaf Apartments.
(j)(2) Work Order and Contract between Maxim Property
Management and Apollo Paint Company, dated September 20, 1995 re:
Alderwood Apartments.
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
UP TO 9,000 UNITS OF LIMITED PARTNERSHIP INTEREST
of
PROMETHEUS INCOME PARTNERS
$450 NET PER UNIT OF LIMITED PARTNERSHIP INTEREST
by
PIP PARTNERS - GENERAL, LLC,
AN AFFILIATE OF THE GENERAL PARTNER
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK, NEW YORK TIME,
ON DECEMBER 9, 1996, UNLESS EXTENDED.
PIP PARTNERS - GENERAL, LLC, a California limited liability
company (the "Purchaser"), and an affiliate of the General
Partner (as defined below), hereby offers to purchase up to 9,000
of the issued and outstanding units of limited partnership
interest (the "Units") of Prometheus Income Partners, a
California limited partnership (the "Partnership"), at a purchase
price of $450 per Unit, net to the seller in cash (the "Purchase
Price"), without interest thereon, upon the terms and subject to
the conditions set forth in this Offer to Purchase (the "Offer to
Purchase") and in the related Letter of Transmittal, as each may
be supplemented, modified or amended from time to time (which
together constitute the "Offer"). The Purchase Price will be
automatically reduced by the aggregate amount of distributions
per Unit, if any, made or declared by the Partnership after
November 8, 1996 and on or prior to the Expiration Date (as
defined in Section 1 ("Terms of the Offer")). In addition, if a
distribution is made or declared after the Expiration Date but
prior to the date on which the Purchaser pays the Purchase Price
for the tendered Units, the Purchaser will offset the amount
otherwise due a Limited Partner (as defined herein) pursuant to
this Offer in respect of the tendered Units which have been
accepted for payment but not yet paid for by the amount of any
such distribution. LIMITED PARTNERS WHO TENDER THEIR UNITS WILL
NOT BE OBLIGATED TO PAY ANY COMMISSIONS OR PARTNERSHIP TRANSFER
FEES, IF ANY, WHICH COMMISSIONS AND FEES WILL BE BORNE BY THE
PURCHASER. The 9,000 Units sought pursuant to this Offer
represent, to the best knowledge of the Purchaser, approximately
47.4% of the Units outstanding as of the date of this Offer.
____________________
THE PURCHASER AND THE GENERAL PARTNER OF THE PARTNERSHIP ARE
AFFILIATED: THE BENEFICIAL OWNER OF THE PURCHASER IS THE
BENEFICIAL OWNER OF THE GENERAL PARTNER.
____________________
The address of Purchaser's principal executive offices is:
350 Bridge Parkway,
Redwood City, California 94065-1517
____________________
IF, AS OF THE EXPIRATION DATE, MORE THAN 9,000 UNITS ARE VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN, THE PURCHASER WILL ONLY
ACCEPT FOR PURCHASE ON A PRO-RATA BASIS A MAXIMUM OF 9,000 UNITS,
SUBJECT TO THE TERMS AND CONDITIONS HEREIN. SEE SECTION 14
("CONDITIONS OF THE OFFER.") A LIMITED PARTNER MAY TENDER ANY OR
ALL UNITS OWNED BY SUCH LIMITED PARTNER; HOWEVER, TENDERS OF
FRACTIONAL UNITS WILL ONLY BE ACCEPTED IF ALL OF THE UNITS HELD
BY SUCH LIMITED PARTNER ARE TENDERED.
____________________
Before tendering, Limited Partners are urged to consider the
following factors:
Pursuant to an Agreement (the "PIP General Tender Offer
Agreement"), dated November 4, 1996, between Purchaser and the
Partnership (filed herewith as Exhibit (c)), the Purchaser agreed
to make a tender offer (this "Offer") in response to that certain
Schedule 14D-1 Tender Offer Statement dated October 18, 1996
filed by PROM INVESTMENT PARTNERS L.L.C., a Delaware limited
liability company (together with its affiliates, "Apollo") with
the United States Securities and Exchange Commission (the "SEC")
and disseminated to the Limited Partners, and all related offers
and documentation ("Apollo Tender Offer"). The reasons for this
Offer are as follows:
(i) To allow Limited Partners who have a current or
anticipated need or desire for liquidity to tender all or a
portion of their Units to Purchaser, an affiliate of the General
Partner, at a higher price than the Apollo Tender Offer. This
will also allow the General Partner to continue as the general
partner of the Partnership and, in the best interests of the
Limited Partners who continue as such after consummation of this
Offer, manage the Partnership's business and affairs in order for
the Partnership to obtain the benefit of the General Partner's
vast experience and knowledge in dealing with apartment projects
such as the Alderwood and Timberleaf properties owned by the
Partnership (the "Partnership Properties"), including dealing
with the hardboard siding problem currently affecting the
Partnership Properties (see "9. CERTAIN INFORMATION CONCERNING
THE PARTNERSHIP -- HARDBOARD SIDING PROBLEM"). The aim of the
foregoing is to protect the Partnership Properties, maximize
their value, and maximize the value of the Units; and
(ii) As an inducement to the Purchaser to make this Offer,
the Partnership has agreed, among other things, to disseminate,
at the Partnership's expense, the Offer materials to the Limited
Partners and others; to reimburse the Purchaser for all of its
costs, fees and expenses incurred in connection with this Offer;
and to indemnify the Purchaser, 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 this Offer,
the Apollo Tender Offer, and any related proceedings.
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) was
formed to consider the Apollo Tender Offer, this Offer and other
offers, if any, that may be made for the Units (collectively, the
"Offers"). Based on its analysis and its consultation with its
advisors, the Special Committee recommended that it is in the
best interest of the Partnership, all of the Limited Partners and
the tenants and employees at the Partnership Properties, that
those Limited Partners who have a current or anticipated need or
desire for liquidity should tender their Units to the Purchaser
in accordance with the terms of this Offer. The Special
Committee has determined that while this 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 The Purchaser or Apollo) until the
hardboard siding problem has been resolved. 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 liquidity tender all,
or a portion of, their Units to the Purchaser in accordance with
the terms of this Offer.
The Special Committee believes that Apollo has undisclosed
plans regarding the Partnership, including a management change,
and that such a change would be detrimental to the Partnership.
There is no minimum number of Units required to be tendered
as part of this Offer. However, 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.
Each of the Partnership Properties is subject to a loan
agreements 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 substantial prepayment fee
(approximately $1 million). The Purchaser is requiring, as a
condition to this Offer, that the lender under such loan
agreements either consent to the transactions contemplated under
this Offer or waive the limitations on sales, transfers or other
disposition of Partnership interests contained in the loan
agreements to the extent such apply to the transfers contemplated
by this Offer.
The Special Committee is of the opinion that the Apollo
Tender Offer contains a number of false and misleading
statements. A more complete description of the alleged
misstatements in the Apollo Tender Offer appears in the suit that
the Partnership filed against Apollo and entities associated with
Apollo to preliminarily and permanently enjoin the Apollo Tender
Offer. The suit 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,
and the rules and regulations promulgated under that Act. The
consequences of such litigation and the affect on the Apollo
Tender Offer are unknown.
Any Limited Partner who accepts this Offer and sells Units
may have a significant taxable gain.
Although the Purchaser cannot predict the future value of
the Partnership's assets on a per Unit basis, the Purchase Price
could differ significantly from the net liquidation proceeds that
would be realized following a current sale of the Partnership
Properties or that may be realized upon a future liquidation of
the Partnership. The Purchaser believes that the Purchase Price
is an attractive price at which to purchase Units.
As disclosed in the Schedule 14D-9 filed by the
Partnership on November 4, 1996 with the SEC (the "Partnership's
Schedule 14D-9"), E&Y Kenneth Leventhal Real Estate Group (Ernst
& Young, LLP) ("EYKL") was retained as an advisor to the Special
Committee as a result of the Apollo Tender Offer. 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 based on numerous
factors and 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
take into account any potential impact of the hardboard siding
problem.
Limited Partners are urged to consider carefully all of the
information contained herein before accepting this Offer.
Except for certain limited rights of a Limited Partner to
sell his Units under the Partnership Agreement, privately
negotiated sales and sales through intermediaries currently are
the only means available to a Limited Partner to liquidate an
investment in Units (other than offers to purchase, including
this Offer and the Apollo Tender Offer) because the Units are not
listed or traded on any exchange or quoted on any NASDAQ list or
system.
The Purchaser is an affiliate of the General Partner and
other entities that do business with the Partnership. The
Purchaser intends that the Partnership continue these
relationships.
IMPORTANT
Any (i) owner of record of Units (a "Limited Partner"), (ii)
beneficial owner, in the case of Units owned by Individual
Retirement Accounts or qualified plans (a "Beneficial Owner"), or
(iii) person who has purchased Units but has not yet been
reflected on the Partnership's books as the record owner of such
Units (an "Assignee"), desiring to tender any or all of such
person's Units should either (1) complete and sign the Letter of
Transmittal, or a facsimile copy thereof, in accordance with the
instructions in the Letter of Transmittal and mail or deliver the
Letter of Transmittal, or a facsimile copy thereof, and any other
required documents as described below, or (2) request his or her
broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for him or her. Unless the context
requires otherwise, references to Limited Partners in this Offer
to Purchase shall be deemed to also refer to Beneficial Owners
and Assignees.
SEND COMPLETED LETTER OF TRANSMITTAL TO:
IBJ SCHRODER BANK & TRUST COMPANY
Telephone: (212) 858-2103
Facsimile: (212) 858-2611
BY MAIL:
Bowling Green Station
New York, New York 10274-0084
ATTN: Reorganization Operations Department
BY HAND DELIVERY OR OVERNIGHT
One State Street
New York, New York 10004
ATTN: Securities Processing Window, Sub-Cellular One
Questions or requests for assistance in connection with this
Offer, and requests for additional copies of this Offer to
Purchase, the Letter of Transmittal and other related documents,
may be directed as follows:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York, 10005
Telephone: (800) 223-2064
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION OR
ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR TO PROVIDE ANY
INFORMATION OTHER THAN AS CONTAINED HEREIN OR IN THE LETTER OF
TRANSMITTAL. NO SUCH RECOMMENDATION, INFORMATION OR
REPRESENTATION MAY BE RELIED UPON AS HAVING BEEN AUTHORIZED.
EACH LIMITED PARTNER IS URGED TO READ CAREFULLY THE ENTIRE
OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND RELATED
DOCUMENTS.
TABLE OF CONTENTS
Page
INTRODUCTION 1
1. Terms of the Offer 3
2. Proration; Acceptance for Payment and Payment
for Units 4
3. Procedures for Tendering Units 6
4. Withdrawal Rights 8
5. Extension of Tender Period; Termination; Amendment 9
6. Certain Federal Income Tax Consequences 10
7. Effects of the Offer 15
8. Purpose of the Offer; Future Plans 20
9. Certain Information Concerning the Partnership 21
10. Certain Information Concerning the Purchaser 30
11. Background of the Offer 33
12. Source of Funds 35
13. Purchase Price Considerations 36
14. Conditions of the Offer 37
15. Certain Legal Matters 39
16. Certain Fees and Expenses 41
17. Miscellaneous 41
Appendix A. Glossary A-1
Schedule I. Information with respect to the executive officer
and director of the Manager of PIP Partners -
General, LLC S-1
TO THE HOLDERS OF UNITS OF LIMITED PARTNERSHIP
INTEREST OF PROMETHEUS INCOME PARTNERS:
INTRODUCTION
PIP PARTNERS - GENERAL, LLC, a California limited liability
company (the "Purchaser"), hereby offers to purchase up to 9,000
of the issued and outstanding units of limited partnership
interest (the "Units") of Prometheus Income Partners, a
California limited partnership (the "Partnership"), at a purchase
price of $450 per Unit, net to the seller in cash (the "Purchase
Price"), without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase (the "Offer to
Purchase") and in the related Letter of Transmittal, as each may
be supplemented, modified or amended from time to time (which
together constitute the "Offer"). The Purchase Price will be
automatically reduced by the aggregate amount of distributions
per Unit, if any, made or declared by the Partnership after
November 8, 1996 and on or prior to the Expiration Date (as
defined in Section 1 ("Terms of the Offer")). In addition, if a
distribution is made or declared after the Expiration Date but
prior to the date on which the Purchaser pays the Purchase Price
for the tendered Units, the Purchaser will offset the amount
otherwise due a Limited Partner pursuant to the Offer in respect
of the tendered Units which have been accepted for payment but
not yet paid for by the amount of any such distribution. Limited
Partners who tender their Units will not be obligated to pay any
commissions or partnership transfer fees, which commissions and
fees will be borne by the Purchaser. The 9,000 Units sought
pursuant to this Offer represent, to the best knowledge of the
Purchaser, approximately 47.4% of the Units issued and
outstanding as of the date of this Offer.
THE BENEFICIAL OWNER OF THE PURCHASER IS THE BENEFICIAL
OWNER OF THE GENERAL PARTNER. ACCORDINGLY, THE PURCHASER IS
AFFILIATED WITH THE GENERAL PARTNER OF THE PARTNERSHIP.
IF, AS OF THE EXPIRATION DATE, MORE THAN 9,000 UNITS ARE
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN, THE PURCHASER WILL
ONLY ACCEPT FOR PURCHASE ON A PRO-RATA BASIS 9,000 UNITS, SUBJECT
TO THE TERMS AND CONDITIONS HEREIN. SEE SECTION 14 ("CONDITIONS
OF THE OFFER"). A LIMITED PARTNER MAY TENDER ANY OR ALL UNITS
OWNED BY SUCH LIMITED PARTNER; HOWEVER, TENDERS OF FRACTIONAL
UNITS WILL ONLY BE ACCEPTED IF ALL OF THE UNITS HELD BY SUCH
LIMITED PARTNER ARE TENDERED.
The Purchaser is making this Offer pursuant to the PIP
General Tender Offer Agreement entered into with the Partnership
because it believes that it is in the best interests of the
Partnership and the Limited Partners that the General Partner
continue to manage the business and affairs of the Partnership,
and the Units represent an attractive investment at the price
offered. There can be no assurance, however, that the
Purchaser's judgment is correct, and, as a result, ownership of
Units (either by the Purchaser or Limited Partners who retain
their Units) will remain a speculative investment. The Purchaser
is acquiring the Units for investment purposes and has no current
plan to change current management or the operations of the
Partnership or effectuate any extraordinary transaction involving
the Partnership.
In considering the Offer, Limited Partners are urged to
consider the following factors:
The Offer will provide Limited Partners with an immediate
opportunity to liquidate their investment in the Partnership
without the usual transaction costs associated with market sales
or partnership transfer fees.
Although there are some limited resale mechanisms available
to the Limited Partners wishing to sell their Units, including
certain limited rights of a Limited Partner to sell his Units
under the Limited Partnership Agreement, there is no formal
trading market for the Units. The Partnership's Annual Report on
Form 10-K for the year ended December 31, 1995 (the "Form 10-K")
states: "No public trading market exists or is expected to be
established for the . . . Units." Accordingly, Limited Partners
who desire liquidity may wish to consider this Offer. This Offer
affords a significant number of Limited Partners an opportunity
to dispose of their Units for cash, which alternative otherwise
might not be available to them. However, the Purchase Price is
not intended to represent either the fair market value of a Unit
or the fair market value of the Partnership's assets on a per
Unit basis. In addition, since the Purchaser is seeking to
purchase only a maximum of up to approximately 47.4% of the
Units, more than 50% of the Units will continue to be owned by
the existing Limited Partners regardless of the response of the
Limited Partners to this Offer. Therefore, it is possible that a
Limited Partner who desires to accept this Offer may not be
entitled to sell 100% of the Units such Limited Partner desires
to sell.
Following the completion of this Offer, the Purchaser and
its affiliates may acquire additional Units. Any such
acquisitions may be made through private purchases, through one
or more future tender offers or by any other means deemed
advisable, and may be at prices higher or lower than the price to
be paid for the Units purchased pursuant to this Offer. See
Section 8 ("Purpose of the Offer; Future Plans").
The Purchaser expressly reserves the right, subject to the
reasonable consent of the Partnership, to terminate this Offer at
any time and to waive any or all of the conditions of this Offer,
although the Purchaser does not presently intend to waive any
such conditions. See Section 7 ("Effects of the Offer"). A
Limited Partner may tender any or all of his or her Units;
however, tenders of fractional Units will only be accepted if all
the Units held by such Limited Partner are tendered.
According to the Partnership's Form 10-K for the year ended
December 31, 1995, there were 18,995 Units issued and outstanding
as of such date which were held of record by approximately 1,300
Limited Partners.
Except as otherwise indicated, information contained in this
Offer is based upon documents and reports publicly filed by the
Partnership with the SEC. Although the Purchaser has no
information that any statements contained in this Offer are
untrue, the Purchaser does not take responsibility for the
accuracy or completeness of any information contained in this
Offer which is derived from such public documents, or for any
failure, if any, by the Partnership to disclose events which may
have occurred and may affect the significance or accuracy of any
such information but which are unknown to the Purchaser.
This Offer may be attractive to certain Limited Partners who
wish in the future to avoid the expenses, delays and
complications in filing complex income tax returns which result
from an ownership of Units. In addition, certain Limited
Partners who sell 100% of their Units pursuant to this Offer will
no longer be subject to the passive activity loss limitation with
respect to "suspended" losses attributable to those Units and,
therefore, will be able to utilize fully any such losses.
This Offer provides Limited Partners with the opportunity to
liquidate their Units and to reinvest the proceeds in other
investments should they desire to do so. The Purchaser believes
that the Units represent an attractive investment at the Purchase
Price. There can be no assurance, however, that this judgment is
correct. Ownership of Units will remain a speculative
investment.
Each Limited Partner must make his or her own decision based
on his or her particular circumstances. Limited Partners should
consult with their respective advisors about the financial, tax,
legal and other implications to them of accepting this Offer.
LIMITED PARTNERS ARE URGED CAREFULLY TO READ THIS OFFER, THE
RELATED LETTER OF TRANSMITTAL AND THE OTHER ACCOMPANYING
MATERIALS BEFORE DECIDING WHETHER TO TENDER THEIR UNITS.
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms of this Offer (including the terms and
conditions of any extension or amendment of this Offer), the
Purchaser will accept for payment and pay for up to 9,000 Units
that are validly tendered on or prior to the Expiration Date (as
hereinafter defined) and not withdrawn in accordance with Section
4 ("Withdrawal Rights"). The term "Expiration Date" shall mean
12:00 midnight, New York, New York time, on December 9, 1996,
unless the Purchaser, in its discretion (subject to the
reasonable consent of the Partnership), shall have extended the
period of time during which this Offer is open, in which event
the term "Expiration Date" shall refer to the latest time and
date at which the Offer, as so extended by the Purchaser, will
expire.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL
INCREASE THE PURCHASE PRICE OFFERED TO LIMITED PARTNERS, SUCH
INCREASED PURCHASE PRICE SHALL BE PAID FOR ALL UNITS ACCEPTED FOR
PAYMENT PURSUANT TO THIS OFFER, WHETHER OR NOT SUCH UNITS WERE
TENDERED PRIOR TO THE INCREASE IN CONSIDERATION.
See Section 14, which sets forth in full the conditions of
this Offer. The Purchaser reserves the right (but shall not be
obligated), in its discretion, to waive any or all of such
conditions. If, on or prior to the Expiration Date, any or all
of such conditions have not been satisfied or waived, the
Purchaser may (i) decline to purchase any of the Units tendered,
terminate this Offer and return all tendered units to tendering
Limited Partners, (ii) waive all the then unsatisfied conditions
and, subject to complying with applicable rules and regulations
of the Commission, purchase all Units validly tendered, (iii)
extend the Offer and, subject to the right of Limited Partners to
withdraw Units until the Expiration Date, retain the Units that
have been tendered during the period or periods for which the
Offer is extended, or (iv) amend the Offer. The rights reserved
by the Purchaser in this paragraph are in addition to the
Purchaser's right to terminate, extend or modify this Offer at
any time prior to acceptance of tendered Units for payment,
subject to the reasonable consent of the Partnership.
Pursuant to the PIP General Tender Offer Agreement, this
Offer to Purchase, the related Letter of Transmittal and, if
required, any other relevant materials are being mailed by the
Partnership to Limited Partners, beneficial owners and assignees
who hold Units of record. See Section 11 ("Background of the
Offer").
2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT FOR
UNITS.
If more than 9,000 Units are validly tendered on or prior to
the Expiration Date and not properly withdrawn on or prior to the
Expiration Date, the Purchaser will only accept for payment, upon
the terms and subject to the conditions of this Offer, and pay
for an aggregate of a maximum of 9,000 Units so tendered, pro-
rata according to the number of Units validly tendered and not
properly withdrawn on or prior to the Expiration Date, with
appropriate adjustments to minimize purchases of fractional
Units. If the number of Units validly tendered and not properly
withdrawn on or prior to the Expiration Date is less than or
equal to 9,000 Units, the Purchaser will purchase all Units so
tendered and not properly withdrawn, upon the terms and subject
to the conditions of this Offer.
In the event that proration of tendered Units is required,
and because of the difficulty of determining the proration
results, the Purchaser may not be able to announce the final
results of such proration until at least approximately seven
business days after the Expiration Date. Subject to the
Purchaser's obligation under Rule 14e-1(c) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to pay
Limited Partners the Purchase Price in respect of Units tendered
or return those Units promptly after the termination or
withdrawal of this Offer, the Purchaser does not intend to pay
for any Units accepted for payment pursuant to this Offer until
the final proration results are known.
Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser
will purchase, by accepting for payment, and will pay for, all
Units validly tendered and not withdrawn in accordance with
Section 4 on or prior to the Expiration Date as promptly as
practicable following the Expiration Date. In addition, subject
to applicable rules of the SEC, the Purchaser expressly reserves
the right to delay acceptance for payment of, or payment for,
Units pending receipt any regulatory or governmental approvals
specified in Section 15 ("Certain Legal Matters") or pending
receipt of any additional documentation required by the Letter of
Transmittal. In all cases, payment for Units accepted for
payment pursuant to this Offer will be made only after timely
receipt by the Depositary of (a) the Letter of Transmittal (or a
facsimile copy thereof) properly completed and duly executed,
with any required signature guarantees, if applicable, and (b)
any other documents required by the Letter of Transmittal.
For purposes of this Offer, the Purchaser shall be deemed to
have accepted for payment tendered Units when, as and if the
Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance for payment of such Units pursuant to this
Offer. No tender of Units will be deemed to have been validly
made until all defects and irregularities with respect to such
tender have been cured or waived. Upon the terms and subject to
the conditions of this Offer, payment for Units tendered and
accepted for payment pursuant to this Offer will in all cases be
made by deposit of the Purchase Price with the Depositary, which
will act as agent for the tendering Limited Partners for the
purpose of receiving payment from the Purchaser and transmitting
payment to tendering Limited Partners.
The Purchase Price will automatically be reduced by the
aggregate amount of distributions per Unit, if any, made or
declared by the Partnership after November 8, 1996 and on or
prior to the Expiration Date. In addition, if a distribution is
made or declared after the Expiration Date but prior to the date
on which the Purchaser pays for tendered Units, the Purchaser
will offset the amount otherwise due to a Limited Partner
pursuant to the Offer in respect of tendered Units which have
been accepted for payment but not yet paid for by the amount of
an such distribution. UNDER NO CIRCUMSTANCES WILL THE PURCHASER
PAY INTEREST ON THE PURCHASE PRICE FOR UNITS.
If any tendered Units are not purchased pursuant to this
Offer for any reason, the Letter of Transmittal with respect to
such Units will be destroyed by the Depositary. If, for any
reason whatsoever, acceptance for payment of or payment for any
Units tendered pursuant to the Offer is delayed or the Purchaser
is unable to accept for payment, purchase or pay for Units
tendered pursuant to the Offer, then, without prejudice to the
Purchaser's rights under Section 14 ("Conditions of the Offer"),
the Depositary may, nevertheless, on behalf of the Purchaser and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered
Units, and such Units may not be withdrawn except to the extent
that the tendering Limited Partner is entitled to withdrawal
rights as described in Section 4 ("Withdrawal Rights").
3. PROCEDURES FOR TENDERING UNITS.
VALID TENDER. For Units to be validly tendered pursuant to
this Offer, a Letter of Transmittal (or a facsimile copy
thereof), properly completed and duly executed, together with any
other documents required by the Letter of Transmittal, must be
received by the Depositary at its address on the back cover page
of the Offer to Purchase on or prior to the Expiration Date. A
Limited Partner may tender any or all Units owned by such Limited
Partner; however, tenders of fractional Units will only be
accepted if all of the Units held by such Limited Partner are
tendered. See Instruction 1 to the Letter of Transmittal.
IN ORDER FOR A TENDERING LIMITED PARTNER TO PARTICIPATE IN
THE OFFER, UNITS MUST BE VALIDLY TENDERED AND NOT WITHDRAWN ON OR
PRIOR TO THE EXPIRATION DATE, WHICH IS 12:00 MIDNIGHT, NEW YORK,
NEW YORK TIME, ON DECEMBER 9, 1996, UNLESS EXTENDED.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE
TENDERING LIMITED PARTNER AND DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY. SEE INSTRUCTION 1 TO THE LETTER OF
TRANSMITTAL.
SIGNATURE GUARANTEES. If the Letter of Transmittal is
signed by the registered holder of the Units and payment is to be
made directly to that holder, then no signature guarantees are
required. However, if the Units are registered in the name of a
person other than the signer of the Letter of Transmittal, or if
payment is to be made to a person other than the registered
holder, then the signature on the Letter of Transmittal must be
guaranteed by a member firm of a registered national securities
exchange, a member of the National Association of Securities
Dealers, Inc. (the "NASD") or a commercial bank, savings bank,
credit union, savings and loan association or trust company
having an office, branch or agency in the United States as
provided in the Letter of Transmittal. See Instruction 2 of the
Letter of Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent the
possible application of backup federal income tax withholding
with respect to payment of the Purchase Price pursuant to the
offer, a tendering Limited Partner must provide the Purchaser
with such Limited Partner's correct taxpayer identification
number or social security number by completing the Substitute
Form W-9 included in the Letter of Transmittal. See Instruction
3 to the Letter of Transmittal.
FIRPTA WITHHOLDING. To prevent the withholding of federal
income tax in an amount equal to 10% of the sum of the Purchase
Price plus the amount of Partnership liabilities allocable to
each Unit purchased, each Limited Partner must complete the
FIRPTA Affidavit included in the Letter of Transmittal certifying
such Limited Partner's taxpayer identification number and address
and that the Limited Partner is not a foreign person. See
Instruction 3 to the Letter of Transmittal.
APPOINTMENT AS PROXY; POWER OF ATTORNEY. By executing and
delivering the Letter of Transmittal, a tendering Limited Partner
irrevocably appoints the Purchaser and the designees of the
Purchaser and each of them as such Limited Partner's proxies,
with full power of substitution, in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to
the full extent of such Limited Partner's rights with respect to
the Units tendered by such Limited Partner and accepted for
payment by the Purchaser (and with respect to any and all other
Units or other securities issued or issuable in respect of such
Units on or after the date hereof). All such proxies shall be
considered irrevocable and coupled with an interest in the
tendered Units. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts such Units for
payment. Upon such acceptance for payment, all prior proxies
given by such Limited Partner with respect to such Units (and
such other Units and securities) will be revoked without further
action, and no subsequent proxies may be given nor any subsequent
written consents executed (and, if given or executed, will not be
deemed effective). The Purchaser and its designees will, with
respect to the Units (and such other Units and securities) for
which such appointment is effective, be empowered to exercise all
voting and other rights of such Limited Partner as they in their
sole discretion may deem proper at any meeting of Limited
Partners or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise. The Purchaser
reserves the right to require that, in order for Units to be
deemed validly tendered, immediately upon the Purchaser's payment
for such Units, the Purchaser must be able to exercise full
voting rights with respect to such Units and other securities,
including voting at any meeting of Limited Partners.
In addition, pursuant to such appointment as attorneys-in-
fact, the Purchaser and its designees each will have the power,
among other things, (i) to seek to transfer ownership of such
Units on the Partnership's books (and execute and deliver any
accompanying evidences of transfer and authenticity any of them
may deem necessary or appropriate in connection therewith,
including without limitation, any documents or instruments
required to be executed under a "Transferor's (Seller's)
Application for Transfer" created by the NASD, if required, and
an Application for Consent to Transfer Securities Pursuant to
Section 25151 of the California Corporate Securities Law of 1968,
if required), (ii) upon receipt by the Depositary (as the
tendering Limited Partner's agent) of the Purchase Price, to
become a record holder of the purchased Unit to receive any and
all distributions made by the Partnership after the Expiration
Date, and to receive all benefits and otherwise exercise all
rights of beneficial ownership of such Units in accordance with
the terms of the Offer, (iii) to execute and deliver to the
Partnership and/or the General Partner (as the case may be) a
change of address form instructing the Partnership to send any
and all future distributions to which the Purchaser is entitled
pursuant to the terms of the Offer in respect of tendered Units
to the address specified in such form, and (iv) to endorse any
check payable to or upon the order of such Limited Partner
representing a distribution to which the Purchaser is entitled
pursuant to the terms of the Offer, in each case on behalf of the
tendering Limited Partner.
ASSIGNMENT OF ENTIRE INTEREST IN THE PARTNERSHIP. By
executing and delivering the Letter of Transmittal, a tendering
Limited Partner irrevocably assigns to the Purchaser and its
assigns all of the right, title and interest of such Limited
Partner in the Partnership with respect to the Units tendered and
purchased pursuant to the Offer, including, without limitation,
such Limited Partner's right, title and interest in and to any
and all distributions made by the Partnership after the
Expiration Date in respect of the Units tendered by such Limited
Partner and accepted for payment by the Purchaser, regardless of
the fact that the record date for any such distribution may be a
date prior to the Expiration Date. The Purchaser will seek to
become a Substituted Limited Partner in accordance with the
Partnership Agreement upon consummation of the Offer.
DETERMINATION OF VALIDITY. All questions as to the form of
documents and validity, eligibility (including time of receipt)
and acceptance for payment of any tender of Units will be
determined by the Purchaser, in its sole discretion, whose
determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all
tenders determined by it not to be in proper form, or the
acceptance of or payment for which may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any of the conditions of this Offer
or any defect or irregularity in any tender of Units of any
particular Limited Partner whether or not similar defects or
irregularities are waived in the case of other Limited Partners.
ASSIGNEE STATUS. Tendering persons who are assignees of
Units must provide documentation to the Depositary which
demonstrates, to the satisfaction of the Purchaser, such persons'
status as assignees of Units.
The Purchaser's interpretation of the terms and conditions
of this Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of
Units will be deemed to have been validly made until all defects
and irregularities with respect to such tender have been cured or
waived. None of the Purchaser, any of its affiliates or assigns,
if any, the Information Agent, the Depositary or any other person
will be under any duty to give any notification of any defects or
irregularities in tenders or incur any liability for failure to
give any such notification.
The Purchaser's acceptance for payment of Units tendered
pursuant to the procedures described above will constitute a
binding agreement between the tendering Limited Partner and the
Purchaser upon the terms and subject to the conditions of this
Offer.
4. WITHDRAWAL RIGHTS.
Tenders of Units made pursuant to this Offer are
irrevocable, except that Units tendered pursuant to this Offer
may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment as provided in this Offer
to Purchase, may also be withdrawn at any time after January 7,
1997.
For a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the
Depositary at the address set forth on the back cover of this
Offer to Purchase. Any such notice of withdrawal must specify
the name(s) of the person(s) who tendered the Units to be
withdrawn, the number of Units to be withdrawn and the name(s) of
the registered holder(s) of the Units, if different from that of
the person(s) who tendered such Units. Such notice of withdrawal
must also be signed by the same person(s) who signed the Letter
of Transmittal in the same manner as the Letter of Transmittal
was signed (including any signature guarantees, if applicable).
If the Units are held in the name of two or more persons, all
such persons must sign the notice of withdrawal. Any Units
properly withdrawn will be deemed not validly tendered for
purposes of this Offer, but may be re-tendered at any subsequent
time prior to the Expiration Date by following the procedures
described in Section 3 ("Procedures for Tendering Units").
If, for any reason whatsoever, acceptance for payment of any
Units tendered pursuant to this Offer is delayed, or the
Purchaser is unable to accept for payment or pay for Units
tendered pursuant to the Offer, then, without prejudice to the
Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Units
and such Units may not be withdrawn except to the extent that the
tendering Limited Partner is entitled to and duly exercises
withdrawal rights as described herein. The reservation by the
Purchaser of the right to delay the acceptance or purchase of or
payment for Units is subject to the provisions of Rule 14e-1(c)
under the Exchange Act which requires the Purchaser to pay the
consideration offered or return Units tendered by or on behalf of
Limited Partners promptly after the termination or withdrawal of
this Offer.
All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by the
Purchaser, in its sole discretion, whose determination shall be
final and binding. None of the Purchaser, any of its affiliates,
the Information Agent, the Depositary or any other person will be
under any duty to give any notification of any defects or
irregularities in any notice of withdrawal or incur any liability
for failure to give any such notification.
5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
The Purchaser reserves the right, subject to the reasonable
consent of the Partnership, and regardless of whether any of the
conditions set forth in Section 14 ("Conditions of the Offer")
shall have been satisfied, at any time and from time to time, (i)
to extend the period of time during which this Offer is open and
thereby delay acceptance for payment of, and the payment for, any
Units, (ii) to terminate the Offer and not accept for payment any
Units not already accepted for payment or paid for, and (iii) to
amend the Offer in any respect by giving oral or written notice
of such amendment to the Information Agent and the Depositary.
If the Purchaser increases or decreases either the number of
the Units being sought or the consideration to be paid for any
Units pursuant to the Offer and the Offer is scheduled to expire
at any time before the expiration of a period of 10 business days
from, and including, the date that notice of such increase or
decrease is first published, sent or given in the manner
specified below, the Offer will be extended until, at a minimum,
the expiration of such period of 10 business days. If the
Purchaser makes a material change in the terms of the Offer
(other than a change in price or percentage of securities sought)
or in the information concerning the Offer, or waives a material
condition of the Offer, the Purchaser will extend this Offer, if
required by applicable law, for a period sufficient to allow
Limited Partners to consider the amended terms of this Offer.
The Purchaser also reserves the right, in its discretion
(subject to the reasonable consent of the Partnership), in the
event any of the conditions specified under Section 14
("Conditions of the Offer") shall not have been satisfied and so
long as Units have not theretofore been accepted for payment, to
delay (except as otherwise required by applicable law) acceptance
for payment of or payment for Units or to terminate this Offer
and not accept for payment or pay or Units.
If the Purchaser extends the period of time during which
this Offer is open, delays acceptance for payment of or payment
for Units or is unable to accept for payment or pay for Units
pursuant to this Offer for any reason, then, without prejudice to
the Purchaser's rights under this Offer, the Depositary may, on
behalf of the Purchaser, retain all Units tendered, and such
Units may not be withdrawn except as otherwise provided under
Section 4 ("Withdrawal Rights"). The reservation by the
Purchaser of the right to delay acceptance for payment of or
payment for Units is subject to applicable law, which requires
that the Purchaser pay the consideration offered or return the
Units deposited by or on behalf of Limited Partners promptly
after the termination or withdrawal of this Offer.
Any extension, termination or amendment of the Offer will be
followed as promptly as practicable by a public announcement
thereof. Without limiting the manner in which the Purchaser may
choose to make any public announcement, the Purchaser will have
no obligation (except as otherwise required by applicable law) to
publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News
Service. In the case of an extension of this Offer, the
Purchaser will make a public announcement of such extension no
later than 9:00 a.m., New York, New York time, on the next
business day after the previously scheduled Expiration Date.
6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary is a general discussion of certain
federal income tax consequences of a sale of Units pursuant to
the Offer assuming that the Partnership is a partnership for
federal income tax purposes and that it is not a "publicly traded
partnership" as defined in Section 7704 of the Internal Revenue
Code of 1986, as amended (the "Code"). This summary is based on
the Code, applicable Treasury Regulations thereunder,
administrative rulings, practice and procedures and judicial
authority as of the date of the Offer. All of the foregoing are
subject to change, and any such change could affect the
continuing accuracy of this summary. This summary does not
discuss all aspects of federal income taxation that may be
relevant to a particular Limited Partner in light of such Limited
Partner's specific circumstances or to certain types of Limited
Partners subject to special treatment under the federal income
tax laws (for example, foreign persons, dealers in securities,
banks, insurance companies and tax-exempt organizations), nor
does it discuss any aspect of state, local, foreign or other tax
laws. Sales of Units pursuant to the Offer will be taxable
transactions for federal income tax purposes, and may also be
taxable transactions under applicable state, local, foreign and
other tax laws.
EACH LIMITED PARTNER SHOULD CONSULT HIS, HER OR ITS TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF
SELLING UNITS PURSUANT TO THE OFFER.
CONSEQUENCES TO TENDERING LIMITED PARTNER. A Limited
Partner will recognize gain or loss on a sale of Units pursuant
to this Offer equal to the difference between (i) the Limited
Partner's "amount realized" on the sale and (ii) the Limited
Partner's adjusted tax basis in the Units sold. The "amount
realized" with respect to a Unit sold pursuant to the Offer will
be a sum equal to the amount of cash received by the Limited
Partner for the Unit plus the amount of Partnership liabilities
allocable to the Unit (as determined under Code Section 752).
The amount of a Limited Partner's adjusted tax basis in Units
sold pursuant to the Offer will vary depending upon the Limited
Partner's particular circumstances, and will be affected by both
allocations of Partnership income, gain or loss, and any cash
distributions made by the Partnership to a Limited Partner with
respect to such Units. In this regard, tendering Limited
Partners will be allocated a pro rata share of the Partnership's
taxable income or loss with respect to Units sold pursuant to the
Offer through the effective date of the sale.
A Limited Partner has a single basis for his Units. Basis
calculations are made for all of a Limited Partner's Units in the
aggregate and not on a Unit by Unit basis. If a Limited Partner
bought Units at different times and prices, the purchase prices
will be added together, resulting in an average basis per Unit
for calculating gain or loss on the sale of a Unit in the event
that a Limited Partner sells only some of his Units pursuant to
the Offer. It is not clear whether a Limited Partner has one
holding period with respect to all of his Units, which would
begin on the earliest date that he acquired Units, or whether a
Limited Partner has a separate holding period for each block of
Units that he acquires; this issue is important, as discussed
below, because a Limited Partner must have at least a one year
holding period to have his gain treated as long term capital
gain.
As stated in Item 8 ("Additional Information to be
Furnished") of the Partnership's Schedule 14D-9, the average
adjusted tax basis in each Unit as of September 30, 1996 is
approximately $145, and accordingly, a Limited Partner with such
average tax basis is expected to recognize a tax gain on a sale
of Units pursuant to this Offer of $305 per Unit sold. 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.
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.
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
The foregoing amounts do not take into account any state or
local income tax consequences which may be applicable.
In general, the character (as capital or ordinary) of
Limited Partner's gain or loss on a sale of a Unit pursuant to
the Offer will be determined by allocating the Limited Partner's
amount realized on the sale and his adjusted tax basis in the
Units sold between "Section 751 items," which are "substantially
appreciated inventory" and "unrealized receivables" (including
depreciation recapture) as defined in Code Section 751, and non-
Section 751 items. The difference between the portion of the
Limited Partner's amount realized that is allocable to Section
751 items and the portion of the Limited Partner's adjusted tax
basis in the Units sold that is so allocable will be treated as
ordinary income or loss, and the difference between the Limited
Partner's remaining amount realized and adjusted tax basis will
be treated as capital gain or loss assuming the Units were held
by the Limited Partner as a capital asset. The Purchaser
believes that substantially all of any tax gain realized on a
sale of Units pursuant to the Offer will be treated as a capital
gain under these rules.
A Limited Partner's capital gain (if any) or loss on a sale
of Units pursuant to this Offer will be treated as long-term
capital gain or loss if the Limited Partner's holding period for
the Units exceeds one year. Under current law (which is subject
to change) long-term capital gains of individuals and other non-
corporate taxpayers are taxed at a maximum marginal federal
income tax rate of 28%, whereas the maximum marginal federal
income tax rate for other income of such persons is 39.6%.
Capital losses are deductible only to the extent of capital
gains, except that non-corporate taxpayers may deduct up to
$3,000 of capital losses in excess of the amount of their capital
gains against ordinary income. Excess capital losses generally
can be carried forward to succeeding years (a corporation's carry
forward period is five years and a non-corporate taxpayer can
carry forward such losses indefinitely); in addition,
corporations, but not non-corporate taxpayers, are allowed to
carry back excess capital losses to the three preceding taxable
years.
Under Code Section 469, a non-corporate taxpayer or personal
service corporation can deduct passive activity losses in any
year only to the extent of such person's passive activity income
for such year, and closely held corporations may not offset such
losses against so called "portfolio" income. A Limited Partner
with "suspended" passive activity losses (i.e., net tax losses in
excess of statutorily provided "phase-in" amounts) from the
Partnership generally will be entitled to offset such losses
against any income or gain recognized by the Limited Partner on a
sale of his Units pursuant to the Offer. If a Limited Partner is
unable to sell all his Units, the deductibility of any unused
losses would continue to be subject to the passive activity loss
limitation until the Limited Partner sells his remaining Units.
A Limited Partner (other than corporations and certain
foreign individuals) who tenders Units may be subject to 31%
backup withholding unless the Limited Partner provides a taxpayer
identification number ("TIN") and certifies that the TIN is
correct or properly certifies that he is awaiting a TIN. A
Limited Partner may avoid backup withholding by properly
completing and signing the Substitute Form W-9 included as part
of the Letter of Transmittal. IF A LIMITED PARTNER WHO IS
SUBJECT TO BACKUP WITHHOLDING DOES NOT PROPERLY COMPLETE AND SIGN
THE SUBSTITUTE FORM W-9, THE PURCHASER WILL WITHHOLD 31% FROM
PAYMENTS TO SUCH LIMITED PARTNER.
Gain realized by a foreign Limited Partner on a sale of a
Unit pursuant to this Offer will be subject to federal income
tax. Under Section 1445 of the Code, the transferee of a
partnership interest held by a foreign person is generally
required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. The Purchaser will withhold 10% of
the amount realized by a tendering Limited Partner from the
Purchase Price payable to such Limited Partner unless the Limited
Partner properly completes and signs the FIRPTA Affidavit
included as part of the Letter of Transmittal certifying the
Limited Partner's TIN, that such Limited Partner is not a foreign
person and the Limited Partner's address. Amounts withheld would
be creditable against a foreign Limited Partner's federal income
tax liability and, if in excess thereof, a refund could be
obtained from the Internal Revenue Service by filing a U.S.
income tax return.
CONSEQUENCES TO A NON-TENDERING LIMITED PARTNER. The
Purchaser does not anticipate that a Limited Partner who does not
tender his or its Units will realize any material tax
consequences as a result of the election not to tender. However,
if as a result of the Offer there is a sale or exchange of 50% or
more of the total Units in Partnership capital and profits within
a 12-month period, a termination of the Partnership for federal
income tax purposes would occur, and the taxable year of the
Partnership would close. In the case of such a sale or exchange,
the Properties (subject to related debt) of the Partnership would
be treated as distributed to the partners, and following the
deemed distribution, contribution of the same properties would be
deemed to be made to a new partnership or to an association
taxable as a corporation. The Purchaser believes that the
Partnership will not terminate for tax purposes as a result of
sales pursuant to this Offer, but there is no assurance that a
termination will not occur. The consequences of a termination of
the Partnership could include changes in the methods of
depreciation available to the Partnership for tax purposes,
changes in the tax basis of the Partnership's assets, and
possible recognition of taxable gain resulting from any deemed
cash distribution in excess of the non-tendering Limited
Partner's tax basis in his or her Units. In addition, a
termination of the Partnership could cause the Partnership or its
assets to become subject to unfavorable statutory or regulatory
changes enacted or issued prior to the termination but previously
not applicable to the Partnership or its assets because of
protective "transitional" rules. The Purchaser has reserved the
right not to purchase Units to the extent such purchase would
cause a termination of the Partnership for federal income tax
purposes.
CONSEQUENCES TO A TAX-EXEMPT LIMITED PARTNER. Although
certain entities are generally exempt from federal income
taxation, such tax-exempt entities (including individual
retirement accounts (an "IRA")) are subject to federal income tax
on any "unrelated business taxable income" ("UBTI"). UBTI
generally includes, among other things, income (other than, in
the case of property which is not "debt-financed property",
interest, dividends, real property rents not dependent upon
income or profits, and gain from disposition of non-inventory
property) derived by certain trusts (including IRAs) from a trade
or business or by certain other tax-exempt organizations from a
trade or business, the conduct of which is not substantially
related to the exercise of such organization's charitable,
educational or other exempt purpose and income to the extent
derived from debt-financed property. Subject to certain
exceptions, "debt-financed property" is generally any property
which is held to produce income and with respect to which there
is an "acquisition indebtedness" at any time during the taxable
year. Acquisition indebtedness is generally indebtedness
incurred by a tax-exempt entity directly or through a partnership
(i) in acquiring or improving a property; (ii) before acquiring
or improving a property if the indebtedness would not have been
incurred but for such acquisition or improvement; or (iii) after
acquiring or improving a property if the indebtedness would not
have been incurred but for such acquisition or improvement and
the incurrence of such indebtedness was reasonably foreseeable at
the time of the acquisition or improvement.
To the extent the Partnership holds debt financed property
or inventory or other assets as a dealer, a tax-exempt Limited
Partner (including an IRA) could realize UBTI on the sale of a
Partnership interest. In addition, a tax-exempt Limited Partner
will realize UBTI upon the sale of a Unit, if such Limited
Partner held its Units as inventory or otherwise as dealer
property, or acquired its Units with acquisition indebtedness.
However, any UBTI recognized by a tax-exempt Limited Partner as a
result of a sale of a Unit, in general, may be offset by such
Limited Partner's net operating loss carryover (determined
without taking into account any amount of income or deduction
which is excluded in computing UBTI), subject to applicable
limitations.
____________________
EACH LIMITED PARTNER SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH LIMITED PARTNER OF SELLING OR
NOT SELLING UNITS PURSUANT TO THE OFFER.
7. EFFECTS OF THE OFFER.
MINIMUM TENDER. There is no minimum number of Units
required to be tendered as part of this Offer. However, 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. (See Item 4 "Threat to Corporate Policy Posed by
Apollo Tender Offer" of the Partnership's Schedule 14D-9.)
CERTAIN RESTRICTIONS ON TRANSFER OF INTERESTS. The
Partnership Agreement restricts transfers of Units if, among
other things, a transfer would cause a termination of the
Partnership for federal income tax purposes (which termination
will occur when Units representing 50% or more of the total
Partnership capital and profits are transferred within a twelve-
month period). Consequently, sales of Units in the secondary
market and in private transactions during the twelve-month period
following completion of the Offer may be restricted, and the
Partnership may not process any requests for recognition of
transfers or Units during such twelve-month period which the
General Partner believes may cause a tax termination. The
Purchaser has, however, taken this restriction, as well as the
number of Units historically transferred, into account in
determining the number of Units for which the Offer is made
(representing approximately 47.4% of the issued and outstanding
Units) in order to permit normal historical levels of transfers
to occur following the transfers of Units pursuant to the Offer
without violating this prohibition. Based on information
provided by the Partnership, for the period from December 1, 1995
to November 7, 1996, 461.5 (approximately 2.4%) of the Units were
transferred. The Purchaser does not intend to purchase Units to
the extent such purchase would cause a termination of the
Partnership. However, because of the tax-related transfer
restrictions, the Purchaser has been informed by the Partnership
that in no event will an aggregate of 47.6% or more of the Units
be acquired pursuant to both of 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).
Since the Purchaser is seeking to purchase only a maximum of
up to approximately 47.4% of the Units, more than 50% of the
Units will remain owned by the existing Limited Partners
regardless of the response of the Limited Partners to this Offer.
The same will be true under the Apollo Tender Offer.
Accordingly, in light of the hardboard siding problem described
under Section 9 "Certain Information Concerning the Partnership -
- - Hardboard Siding Problem", it is critical to the Partnership
and the Limited Partners that management of the Partnership,
after either this Offer or the Apollo Tender Offer, have the
necessary experience to handle the hardboard siding problem as
described below in Section 9 "Certain Information Concerning the
Partnership" of this Offer.
Non-tendering Limited Partners should consult their own tax
advisors regarding the tax consequences of the Partnership's
termination in their particular situations. See Section 6
("Federal Income Tax Considerations--Consequences to a Non-
Tendering Limited Partner").
EFFECT ON TRADING MARKET; REGISTRATION UNDER SECTION 12(g)
OF THE EXCHANGE ACT. If a substantial number of Units are
purchased pursuant to the Offer, the result will be a reduction
in the number of Limited Partners. In the case of certain kinds
of equity securities like the Units, a reduction in the number of
security holders might be expected to result in a reduction in
the liquidity and volume of activity in the trading market for
the security. The Partnership's Annual Report on Form 10-K for
the year ended December 31, 1995 states: "No public trading
market exists or is expected to be established for the . . .
Units." Therefore, the Purchaser does not believe a reduction in
the number of Limited Partners will materially further restrict
the Limited Partners' ability to find purchasers for their Units
through secondary market transactions.
Except as described below, privately negotiated sales and
sales through intermediaries currently are the only means
available to a Limited Partner to liquidate an investment in
Units (other than offers to purchase, including this Offer and
the Apollo Tender Offer) 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 most recent data reported by
Partnership Profiles, Inc. (an independent third party source
which reports sale information) indicates that 64 Units traded in
the period from August 1, 1996 through September 30, 1996 at per
Unit prices between $308.97 and $406.30 with a weighted average
price of $334.72 per Unit.
The table below sets forth the high and low sales prices
from August 1, 1994 through September 30, 1996 for the Units as
reported by Partnership Profiles, Inc. on a bi-monthly basis
(periods in which no trades of Units occurred are omitted):
Trading Prices
Period High Low
Aug. 1, 1996 thru Sep. 30, 1996 $406.30 $308.97
June 1, 1996 thru July 31, 1996 $271.31 $255.00
Feb. 1, 1996 thru March 31, 1996 $220.00 $212.00
Dec. 1, 1995 thru Jan. 31, 1996 $205.00 $205.00
Oct. 1, 1995 thru Nov. 30, 1995 $200.00 $200.00
Apr. 1, 1995 thru May 31, 1995 $300.00 $300.00
Aug. 1, 1994 thru Sep. 30, 1994 $300.00 $300.00
Pursuant to the Partnership Agreement and subject to certain
limitations, the Partnership is obligated (at the option of each
Limited Partner) to purchase up to 5% of the outstanding Units at
a price equal to approximately 80% of value (provided, however,
the General Partner, at its discretion, may increase the
percentage of Units eligible for repurchase) (the "Limited
Liquidity Plan"). Repurchases are required to be made on a first
come, first served basis and are generally limited to 10% of
distributable cash from operations (as such term is defined in
the Partnership Agreement). The repurchase price is equal to 80%
of the value of the Units repurchased, as determined by the
General Partner, utilizing a sales/liquidation analysis that is
based on independent appraisals. According to the Form 10-K,
effective January 1, 1994, the Partnership acquired five Units
from a Limited Partner for a total of $1,545 ($309 per Unit).
The valuation method used for this repurchase did not follow the
provisions of the Limited Liquidity Plan as set forth in the
Partnership Agreement. The Form 10-K reports that instead, the
Partnership and the Limited Partner agreed to a valuation method,
which is used by local real estate brokers, based upon an
estimated market value of the Properties, less debt prepayment
penalties and a discount as provided in the Partnership
Agreement.
The Units currently are registered under Section 12(g) of
the Exchange Act, which means, among other things, that the
Partnership is required to file periodic reports with the
Commission and to comply with the Commission's proxy rules. The
Purchaser does not expect or intend that consummation of the
Offer will cause the Units to cease to be registered under
Section 12(g) of the Exchange Act. If the Units were to be held
by fewer than 300 persons, the Partnership could apply to de-
register the Units under the Exchange Act. Because the Units are
widely held, however, the Purchaser expects that even if it
purchases the maximum number of Units in the Offer, the Units
will continue to be held of record by more than 300 persons.
CONTROL OF ALL LIMITED PARTNER VOTING DECISIONS BY THE
PURCHASER. The Purchaser will have the right to vote each Unit
purchased pursuant to this Offer. Although the Purchaser is not
requiring that it acquire any minimum number of Units pursuant to
the terms of this Offer, as a result of the Offer, Purchaser may
be in a position to significantly influence all Partnership
decisions on which Limited Partners may vote. If the maximum
number of Units sought by the Purchaser are tendered and accepted
for payment pursuant to the Offer, the Purchaser will own
approximately 47.4% of the outstanding Units. This would
effectively (i) prevent non-tendering Limited Partners from
taking action they desire but that the Purchaser opposes and (ii)
enable the Purchaser to take action desired by it but opposed by
non-tendering Limited Partners. Under the Partnership Agreement,
a meeting of the Limited Partners may be called by Limited
Partners holding more than 10% in interest of the then
outstanding Units for any matters on which the Limited Partners
may vote. Under the Partnership Agreement, Limited Partners
holding a majority of the Units are entitled to take action with
respect to a variety of matters, including: removal of the
General Partner; dissolution of the Partnership; approval or
disapproval of the sale of either or both of the Partnership
Properties, except in the orderly liquidation and winding up of
the Partnership upon its liquidation; and most types of
amendments to the Partnership Agreement. Although the Purchaser
has no current intentions with regard to any of these matters, it
will vote the Units acquired pursuant to the Offer in its
interest, which may or may not, be in the best interest of non-
tendering Limited Partners. In addition, since the Purchaser is
affiliated with the General Partner, if the Purchaser acquires a
significant number of Units pursuant to this Offer, Purchaser may
have a conflict of interest with respect to the goals and desires
of the Limited Partners, subject to Purchaser's and General
Partner's fiduciary duties to the Partnership. It should be
expected that the Purchaser, which affiliated with the General
Partner, will vote all of its Units to continue the General
Partner as the general partner of the Partnership and in a manner
that is otherwise consistent with the decisions and
recommendations of the General Partner, including as they relate
to matters involving transactions between the Partnership and
affiliates of the Purchaser. (See Section 8 "Purpose of the
Offer; Future Plans").
EFFECT OF APOLLO TENDER OFFER. In connection with Apollo's
intentions regarding the ongoing management of the Partnership
and the Partnership Properties, the Partnership's Schedule 14D-9
states that:
The Special Committee has been formed to consider the
Offers. The members of the Special Committee are also officers
and employees of the General Partner. They are also employees
and officers 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 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. (See Item 3 "Relationship of
Special Committee Members to PIP General" and Item 4 "Alleged
Misstatements in Apollo Tender Offer" of the Partnership's
Schedule 14D-9.)
A more complete description of the 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, and 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 SEC. The
consequences of such litigation and the affect on the Apollo
Tender Offer are unknown.
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. (See Item 4 "Threat to Corporate Policy Posed
by Apollo Tender Offer" of the Partnership's Schedule 14D-9.)
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. 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, as Apollo did; and accordingly, the Special Committee
believes that Apollo has undisclosed plans regarding the
Partnership, including a management change. (See Item 4 "Threat
to Corporate Policy Posed by Apollo Tender Offer" of the
Partnership's Schedule 14D-9.)
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." (See Item 4 "Threat
to Corporate Policy Posed by Apollo Tender Offer" of the
Partnership's Schedule 14D-9.)
8. PURPOSE OF THE OFFER; FUTURE PLANS.
PURPOSE OF THE OFFER. The purpose of this Offer is, in
response to the Apollo Tender Offer and pursuant to the PIP
General Tender Offer Agreement, to allow the Limited Partners who
have a current or anticipated need or desire for liquidity to
sell all or a portion of their Units to an affiliate of the
General Partner at a higher price than the Apollo Tender Offer.
This will also allow the General Partner to continue as the
general partner of the Partnership in the best interests of the
Limited Partners who continue as such after consummation of the
Offer. This will also allow the General Partner to continue to
manage the Partnership's business and affairs in order to, among
other things, operate the Partnership Properties to the maximum
advantage of the Partnership while dealing with the hardboard
siding problem, restoring the Partnership Properties to a good
and marketable condition free of the hardboard siding problem,
resuming distributions of available cash to the Limited Partners
as soon as reasonably prudent, and maximizing the value of the
Partnership Properties and hence the value of the Units. The
Purchaser is affiliated with the General Partner and other
entities which have business relationships with the Partnership,
and does not 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,
these plans could change at any time in the future.
If the Purchaser's plans with respect to the Partnership
change in the future, the ability of the Purchaser to influence
actions on which Limited Partners have a right to vote will
depend on the Limited Partner's response to the Offer (i.e., the
number of Units tendered). If the Purchaser acquires only a few
Units pursuant to the Offer, it would not be in a position to
influence matters over which Limited Partners have a right to
vote. Conversely, if the maximum number of Units sought are
tendered and accepted for payment pursuant to the Offer, the
Purchaser will own approximately 47.4% of the issued and
outstanding Units and, as a result, will be in a position to
exert significant control over matters on which Limited Partners
have a right to vote. The purchase of the Units will allow the
Purchaser to benefit from any of the following: (a) any cash
distributions from Partnership operations in the ordinary course
of business; (b) any distributions of net proceeds from the sale
of any Properties; and (c) any distributions of net proceeds from
the liquidation of the Partnership.
FUTURE PLANS. Following the completion of this Offer, the
Purchaser and its affiliates may acquire additional Units. Any
such acquisition may be made through private purchases, through
one or more future tender offers or by any other means deemed
advisable, and may be at prices higher or lower than the price to
be paid for the Units purchased to the Offer. The Purchaser is
affiliated with the General Partner and other entities which have
business relationships with the Partnership, and does not 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, these plans could change at
any time in the future.
9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.
Information included herein concerning the Partnership is
derived from the Partnership's publicly-filed reports.
Additional financial and other information concerning the
Partnership is contained in the Partnership's Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and other filings with
the SEC. Such reports and other documents may be examined and
copies may be obtained from the offices of the SEC at 45O Fifth
Street, N W., Washington, D.C. 20549, and at the SEC's Web site
at http://www.sec.gov. Copies should be available by mail upon
payment of the SEC's customary charges by writing to the SEC's
principal offices at 450 Fifth Street, N.W., Washington, D.C.
20549. The Purchaser disclaims any responsibility for the
information included in such reports and extracted in this Offer
to Purchase.
THE PARTNERSHIP'S ASSETS AND BUSINESS. The Partnership is a
limited partnership formed in 1985, under the laws of the State
of California. Its principal executive offices are located at
350 Bridge Parkway, Redwood City, California 94065. Its
telephone number is (415) 596-5300.
The principal business of the Partnership is investing in,
constructing, holding, operating, and ultimately selling two
multi-family rental apartment projects, Alderwood Apartments and
Timberleaf Apartments, located in Santa Clara, California.
Alderwood Apartments and Timberleaf Apartments are the sole
assets of the Partnership.
The City of Santa Clara, with a population of approximately
100,000, is the third largest city in Santa Clara County. Santa
Clara County, commonly referred to as Silicon Valley, is
approximately 47 miles south of San Francisco, encompasses 1,300
square miles and has a population of approximately 1.6 million
people, making it the most populous of the nine counties in the
greater San Francisco Bay Area.
The Alderwood luxury garden apartment complex is located at
900 Pepper Tree Lane in Santa Clara, California. Construction
began in November 1985 and was fully completed by December 31,
1986. The complex contains 234 apartment units housed in 19 two-
story buildings on a 9.4-acre site. Covered and uncovered
parking for 468 cars is provided.
The Timberleaf luxury garden apartment complex is located at
2147 Newhall Street in Santa Clara, California. Construction
began in November 1985 and was fully completed by December 31,
1986. The complex contains 124 apartment units housed in 9
buildings of two or three stories on a five-acre site. Covered
and uncovered parking for 248 cars is provided.
The Properties are encumbered by first mortgage liens which
secure promissory notes payable to Prudential Insurance Company
in the original amount of $10,200,000 and $5,600,000,
respectively. The outstanding balances under these notes were
approximately $16,055,000 and $8,815,000, respectively, as of
September 30, 1996. Both notes (collectively, the "Notes") bear
interest at the rate of 10.375% per annum for the entire term of
10 years. The Notes provide for the deferral of a portion of the
interest. The portion of interest which is payable monthly is
based on a rate of 6.25%. The unpaid interest on the Notes, as
it accrues on a monthly basis, is added to the outstanding
principal balance and bears interest at 4.125% thereafter.
Payments of principal on the Notes began in December 1992 and
equals $4,928 per month on the Alderwood Note and $2,706 per
month on the Timberleaf Note. The Notes may be prepaid subject
to certain prepayment penalties.
HARDBOARD SIDING PROBLEM. 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 (including other properties owned by affiliated
partnerships) in various parts of the United States, including in
a 370 unit apartment project that is managed by Prom Management
Group, Inc., a California corporation, dba Maxim Property
Management (the majority of which is beneficially owned by Mr.
Diller) ("Maxim"), 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.
The General Partner has been investigating these hardboard
siding problems as reported in the Form 10-Q for the Partnership
for the quarter ended June 30, 1996 as filed with the SEC, and
that certain letter from General Partner to the Limited Partners
dated August 15, 1996 regarding the Second Quarter Report-1996.
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.
Accordingly, the General Partner is extremely concerned
about the hardboard siding used on and the extent of damage
caused to the Partnership Properties (the 'hardboard siding
problem"). 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.
According to the Partnership's Schedule 14D-9, 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.
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.
As such, this is a circumstance that presents a major impact
on the value and marketability of the Partnership Properties and
the Units. The Purchaser believes that the current General
Partner, which is beneficially owned and controlled by Mr.
Sanford N. Diller, an affiliate of the Purchaser, has the best
knowledge and experience for dealing with all aspects of the
hardboard siding problem, and as such it is the intent of the
Purchaser that the General Partner remain as general partner of
the Partnership and pursue all matters on behalf of the
Partnership in resolving the hardboard siding problem to the
maximum advantage of the Partnership and hence the owners of the
Units. The persons who control the General Partner (including,
but not limited to, Mr. Sanford N. Diller, an attorney who is the
beneficial owner, President, Secretary and a director of the
General Partner) have vast experience in developing, managing,
operating, repairing, financing, renting, marketing, and
otherwise dealing with large scale apartment projects in the
Northern California markets, including the market in which the
Partnership Properties are located. This experience includes
handling of numerous associated issues involving contractors,
tenants, partners, state and federal regulatory agencies, and
lenders.
As of October 31, 1996, such persons' experience includes,
since the mid-1960s, involvement in the development and/or
acquisition of more than 70 properties totaling approximately
13,000 residential units, and over 2 million square feet of
commercial space, the majority of which is located in the
Northern California markets. The experience of such persons also
includes extensive hands-on dealings with hardboard siding
problems which are substantially similar to those involving the
Partnership Properties. These dealings include the review of
technical, engineering, chemical and other studies concerning the
hardboard siding problem; management of litigation on behalf of
limited partnerships and others against manufacturers,
subcontractors, insurers, and others as a result of the hardboard
siding problem; and dealings with issues created with, among
others, lenders, tenants, partners, insurers, attorneys, and
others as a result of the hardboard siding problem. As explained
the Partnership's Schedule 14D-9 under "Resolution of Hardboard
Siding Problem," the Partnership has already instituted
litigation against various parties as a result of the hardboard
siding problem.
RESTRICTION UNDER LOAN DOCUMENTS. 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 Apollo Tender Offer or this Offer,
when combined with previous sales, transfers or other
dispositions of Units, may result in a violation of such
limitation and allow such lender to accelerate such loans unless
consent or waiver of the lender is obtained. Accordingly, the
Purchaser is requiring, as a condition to this Offer, that the
lender under such loan agreements either consent to the
transactions contemplated under this Offer or waive the
limitations on sales, transfers or other disposition of
Partnership interests contained in the loan agreements to the
extent such apply to the transfers contemplated by this Offer.
(See Section 14 ("Conditions of the Offer") and Item 4 "Threat to
Corporate Policy Posed by Apollo Tender Offer" of the
Partnership's Schedule 14D-9.)
SELECTED RENTAL DATA. For the years ended December 31,
1995, 1994, and 1993, the average rents obtained from leased
units and the average occupancy at the Properties were as
follows:
Average Rental Rates
1995 1994 1993
One Bedroom Units $ 982 $ 874 $ 856
Two Bedroom Units $1,193 $1,098 $1,078
Average Occupancy
1995 1994 1993
Alderwood 97% 95% 96%
Timberleaf 98% 96% 95%
SELECTED FINANCIAL DATA. Set forth below is a summary of
certain financial data for the Partnership which has been
excerpted from the Form 10-K and the Form 10-Q. More
comprehensive financial and other information is included in such
reports and other documents filed by the Partnership with the
Commission, and the following summary is qualified in its
entirety by reference to such reports and other documents and all
the financial information and related notes contained therein.
Statements of Operations
For the Six Months Ended June 30, 1996 and 1995
(in thousands, except for Unit data)
(unaudited)
Six Months Ended
June 30,
1996 1995
REVENUES:
Rental revenues (including revenues from
Affiliates of $114 and $0, respectively) $ 2,384 $ 2,048
Other income 57 53
Interest income 17 11
2,458 2,112
EXPENSES:
Interest 1,249 1,180
Operating and administrative 644 591
Payment to General Partner and Affiliates:
Management fee 122 103
Operating and administrative expenses 91 51
Depreciation and amortization 316 307
Total expenses 2,422 2,232
NET INCOME (LOSS) $ 36 $ (120)
Net income (loss) per $1,000 limited
partnership unit $ 2 $ (6)
Number of limited partnership
units used in computation 18,995 18,995
Summary Selected Financial Data
For the Years Ended December 31,
1995 1994 1993 1992 1991
(Amounts in thousands except per unit data)
Rental revenues $4,188 $ 3,899 $ 3,864 $ 3,912 3,873
Net loss $ (192) $ (382) $ (275) $ (100) $ (123)
Net loss per
$1,000 unit $ (10) $ (20) $ (14) $ (5) $ (6)
Net cash per
$1,000 unit
subsequent to
partner
distributions $ 32 $ 27 $ 39 $ 40 $ 25
Number of units
used in computation 18,995 18,995 19,000 19,000 19,000
Total assets $24,172 $24,553 $25,385 $26,034 $26,473
Notes payable $23,791 $22,477 $21,292 $20,223 $19,179
Cash distributions
per $1,000 unit,
representing a
return of capital $ 82 $ 88 $ 79 $ 69 $ 64
THE PARTNERSHIP AGREEMENT. Pursuant to the Partnership's
Second Amended and Restated Agreement of Limited Partnership,
(filed as Exhibit (g) 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. Mr.
Diller is also the beneficial owner of the Purchaser; thus, the
Purchaser and the Partnership are affiliates. 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 Partnership Agreement 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 beneficially owns the
Purchaser, which has agreed to make this Offer. As disclosed in
the Schedule 14D-9, 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 further
disclosed in the Schedule 14D-9, as previously reported by the
Partnership, 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, it was in the best interest of the
Partnership to temporarily suspend cash distributions. The
Schedule 14D-9 states that the General Partner did not receive
any distributions of Distributable Cash from Operations since
commencement of the Partnership.
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.
The Partnership Agreement also provides that,
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 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. The Schedule 14D-9 states that, 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 (g) 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.
10. CERTAIN INFORMATION CONCERNING THE PURCHASER.
The Purchaser was organized as a California limited
liability company for the purpose of acquiring the Units pursuant
to this Offer. The principal executive offices of the Purchaser
is at 350 Bridge Parkway, Redwood City, California 94065-1517.
The manager of the Purchaser (the "Manager") is PromHill, Inc., a
California corporation which is beneficially owned by Sanford N.
Diller ("Diller"). Mr. Diller also beneficially owns
substantially all of the interests in the Purchaser. The sole
officer and director of the Manager is Sanford N. Diller, who is
also the beneficial owner, President, Secretary and a director of
the General Partner. The business address for Mr. Diller is 350
Bridge Parkway, Redwood City, California 94065-1517.
For certain information concerning the executive officer and
director of the Purchaser/Manager, see Schedule I to this Offer
to Purchase.
Except as otherwise set forth in this Offer to Purchase or
Schedule I hereto, (1) neither the Purchaser, the Manager,
Diller, and to the best of Purchaser's knowledge, the persons
listed on Schedule I, nor any affiliate of the foregoing
beneficially owns or has a right to acquire any Units, (2)
neither the Purchaser, the Manager, Diller, and to the best of
Purchaser's knowledge, the persons limited on Schedule I, nor any
affiliate thereof or director, executive officer or subsidiary of
the Manager has effected any transaction in the Units within the
past 60 days, (3) neither the Purchaser, the Manager, Diller and
to the best of Purchaser's knowledge, any of the persons listed
on Schedule I, nor any director or executive officer of the
Manager has any contract, arrangement, understanding or
relationship with any other person with respect to any securities
of the Partnership, including, but not limited to, contracts,
arrangements, understandings or relationships concerning the
transfer or voting thereof, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees
against loss or the giving or withholding of proxies, (4) there
have been no transactions or business relationships which would
be required to be disclosed under the rules and regulations of
the Commission between any of the Purchaser, the Manager, Diller,
or, to the best of Purchaser's knowledge, the persons listed on
Schedule I, on the one hand, and the Partnership or its
affiliates, on the other hand, and (5) there have been no
contracts, negotiations or transactions between the Purchaser,
the Manager, Diller, or, to the best of Purchaser's knowledge,
the persons listed on Schedule I, on the one hand, and the
Partnership or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other
acquisition of securities, an election of directors or a sale or
other transfer of a material amount of assets.
THE MANAGEMENT AGREEMENT. The Partnership does not have any
employees. Instead, Prom Management Group, Inc., a California
corporation, dba Maxim Property Management ("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 (h) 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 1993, 1994, and 1995, the
fixed management fees paid by the Partnership to Maxim were
approximately $201,000, $206,000, and $219,000, respectively, and
Maxim was reimbursed approximately $85,000, $50,000, and $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 $1,301,000,
$1,402,000, and $1,165,000 of operating expenses in 1993, 1994,
and 1995, respectively, of which approximately $228,000,
$231,000, and $246,000, respectively, 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 (the
payments on account of this fee are included in the fixed
management fees described above); (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 (no amounts
were paid on account of this item from 1993 to the present); (c)
A data processing fee equal to $2.40 per apartment ($10,000
annually for each of 1993, 1994, and 1995, and $4,000 through
June 30, 1996); and (d) An administrative fee equal to 5% of the
gross payroll attributable to the Partnership Properties ($8,000
for each of 1993 and 1994, $9,000 for 1995, and $5,000 through
June 30,1996).
For further information regarding the Management Agreement,
reference is hereby made to the Management Agreement, filed as
Exhibit (h) 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 the PIP General Tender Offer Agreement with the
Purchaser. (See Section 11 "Background of the Offer").
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 (i) 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. For the six month ended June 30,
1996, payments under the Master Rent Agreement amounted to
$114,000. There were no payments for any prior years.
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 (j)(1) and (j)(2) 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. Payments under the Paint
Agreement amounted to $42,000 in 1995 and $47,000 through June
30, 1996. There were no payments for prior years.
Under the terms of the Partnership Agreement, any contract
between the Partnership, on the one hand, and the General Partner
or an affiliate thereof, on the other hand, may be terminated on
60 days notice by the Partnership. It is the intention of the
Purchaser that the above-described contracts not be terminated.
See Section 7 "Effects of the Offer -- Effect on Trading Market;
Registration Under Section 12(g) of the Exchange Act" for a
tabular presentation of trading prices in the Units since August
1994.
11. BACKGROUND OF THE OFFER.
The purpose of the Offer is to allow the Limited Partners
who have a current or anticipated need or desire for liquidity to
sell their Units to an affiliate of the General Partner at a
higher price than the Apollo Tender Offer. This will allow the
General Partner to continue as the general partner (including,
but not limited to, keep in place the Management Agreement and
the Paint Agreements) in order to manage the Partnership's
business and affairs in order to, among other things, continue
operating the Partnership Properties to the maximum advantage of
the Partnership while dealing with the hardboard siding problem,
restoring the Partnership Properties to a good and marketable
condition free of the hardboard siding problem, resuming
distributions of available cash to the Limited Partners as soon
as reasonably prudent, and maximizing the value of the
Partnership Properties and hence the value of the Units. The
Purchaser is affiliated with the General Partner and does not
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, these plans
could change at any time in the future.
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, the Purchaser and
the Partnership executed the PIP General Tender Offer Agreement
memorialized the understanding of the parties (filed as Exhibit
(c) hereto).
As an inducement to the Purchaser to make this Offer, the
Partnership has agreed, among other things, to disseminate, at
the Partnership's expense, the Offer materials to the Limited
Partners and others in accordance with the rules and regulations
of the SEC. In addition, the Partnership has agreed to reimburse
the Purchaser for all of its legal, accounting, printing, filing,
copying, mailing, solicitation and all other costs, fees and
expenses incurred in connection with this Offer. The Partnership
has also agreed to indemnify, defend, save and hold harmless the
Purchaser, 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 this Offer, the Apollo Tender
Offer, and any related proceedings.
For further information regarding the PIP General Tender
Offer Agreement, reference is hereby made to the PIP General
Tender Offer Agreement, filed as Exhibit (c) 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.
SPECIAL COMMITTEE RECOMMENDATION. According to the
Partnership's Schedule 14D-9, 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
Schedule 14D-9 states that, based on its analysis and its
consultation with its advisors, the Special Committee has
determined that while the Purchaser's 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 The Purchaser 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 the Purchaser in accordance with the terms
of this 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 the Purchaser in accordance with the terms of this
Offer. (See Item 2 "Tender Offer of the Bidder" and Item 4
"Recommendations of the General Partner" of the Partnership's
Schedule 14D-9.)
12. SOURCE OF FUNDS.
The Purchaser expects that approximately $4,050,000
(exclusive of fees and expenses) would be required to purchase
the Units sought pursuant to the Offer, if tendered. The source
of the Purchaser's Purchase Price would be a contribution of
funds therefor from Mr. Sanford N. Diller (an affiliate of the
Purchaser) or an entity controlled by Mr. Diller, and the source
of that capital contribution will be a loan from the Bank of
America, unless Mr. Diller utilizes other sources. The Purchaser
provided the Special Committee with letters from Bank of America
to Mr. Diller, dated November 1, 1996 and November 7, 1996, which
state that Bank of America believes it could issue a line of
credit to Mr. Diller in an amount substantially in excess of the
amount required to consummate the Offer at Bank of America's
reference rate plus 1.0%, an origination fee of 1.0% of the
commitment amount, and with the loan renewable annually. No
plans or arrangements have yet been made to repay the above
referenced loans.
13. PURCHASE PRICE CONSIDERATIONS.
The Purchaser has set the Purchase Price at $450 net per
Unit (subject to adjustment as set forth in this Offer to
Purchase) in order to exceed the purchase price offered under the
Apollo Tender Offer, and as required under the PIP General Tender
Offer Agreement. The Purchase price is not intended to be
indicative of any fair market value of the Units because it is
difficult ascertain a fair market valuation. The Purchaser
established the Purchase Price by analyzing a number of
quantitative and qualitative factors including: (i) the absence
of a significant number of recent secondary market resales of the
Units; (ii) the lack of liquidity of an investment in the
Partnership; (iii) the costs to the Purchaser associated with
acquiring the Units; (iv) the administrative costs of continuing
to own the Partnership's assets through a publicly registered
limited partnership; (v) the possibility that Limited Partners
may realize taxable income in excess of tax distributions from
the Partnership in future years; (vi) the inability of Limited
Partners to exercise effective control over the management of the
Partnership through the annual election of the General Partner;
(vii) estimated transaction costs of completing the Offer; (viii)
the real estate market generally; and (ix) the hardboard siding
problem.
Form 10-K states that "No public trading market 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
most recent data reported by Partnership Profiles, Inc. (an
independent third party source which reports sale information)
indicates that 64 Units traded in the period from August 1, 1996
through September 30, 1996 at per Unit prices between $308.97 and
$406.30 with a weighted average price of $334.72 per Unit.
Although not necessarily an indication of value, the $450
Purchase Price is approximately a 34% premium over the $334.72
weighted average selling price for Units reported for the limited
secondary market during the two month period ended September 30,
1996. In any case, the value of a Unit is difficult to
determine, especially in light of the hardboard siding problem.
A table showing the high and low sale prices of the Units since
August 1994 appears under Section 7 "Effects of the Offer --
Effect on Trading Market; Registration Under Section 12(g) of the
Exchange Act."
Although the Purchaser cannot predict the future value of
the Partnership's assets on a per Unit basis, the Purchase Price
could differ significantly from the net proceeds that would be
realized on a per Unit basis from a current sale of the
Partnership's Properties or that may be realized upon a future
liquidation of the Partnership. As stated in the Partnership's
Schedule 14D-9, E&Y Kenneth Leventhal Real Estate Group (Ernst &
Young, LLP) ("EYKL") was 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 based on numerous factors and 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 take into account any potential impact
of the hardboard siding problem.
Purchaser is making this Offer pursuant to the PIP General
Tender Offer Agreement, but the Purchaser is also making the
Offer with a view to making a profit. Accordingly, there may be
a conflict between the desire of the Purchaser to acquire the
Units at a low price and the desire of Limited Partners to sell
their Units at a high price. Upon the liquidation of the
Partnership, the Purchaser will benefit to the extent the amount
per Unit it receives in the liquidation exceeds the Purchase
Price, if any. Therefore, Limited Partners might receive more
value if they hold their Units, rather than tender, and receive
proceeds from the liquidation of the Partnership. Alternatively,
Limited Partners may prefer to receive the Purchase Price now
rather than wait for uncertain future net liquidation proceeds.
When the assets of the Partnership are ultimately sold, the
return to Limited Partners could be higher or lower than the
Purchase Price. Limited Partners are urged to consider carefully
all of the information contained herein before accepting the
Offer.
Limited Partners are urged to consider carefully all of the
information contained herein and consult with their own advisors,
tax, financial or otherwise, in evaluating the terms of the Offer
before deciding whether to tender Units.
14. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of this Offer and in
addition to (and not in limitation of) the Purchaser's rights to
extend and amend the Offer at any time in its discretion (subject
to the reasonable consent of the Partnership), the Purchaser
shall not be required to accept for payment purchase or pay for,
subject to Rule 14e-1(c) under the Exchange Act, any tendered
Units (whether or not any Units have theretofore been accepted
for payment or paid for pursuant to the Offer), and may terminate
this Offer as to any Units not then paid for, if (i) the
Purchaser shall not have confirmed to its reasonable satisfaction
that, upon purchase of the Units pursuant to the Offer, the
Purchaser will have full rights to ownership as to all such Units
and the Purchaser will be admitted as a Substituted Limited
Partner, (ii) all authorizations, consents, orders or approvals
of, or declarations or filings with, or expirations of waiting
periods imposed by, any court, administrative agency or
commission or other governmental authority or instrumentality,
domestic or foreign (including, if applicable, any consent
required from the California Commissioner of Corporations
pursuant to Section 25151 of the California Corporate Securities
Law of 1968) necessary for the consummation of the transactions
contemplated by the Offer shall not have been filed, occurred or
been obtained or (iii) the Partnership shall not have obtained
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 Offer. Furthermore, notwithstanding any other term of
the Offer, the Purchaser will not be required to accept for
payment or payment or pay for any Units not theretofore accepted
for payment or paid for and may terminate or amend this Offer as
to such Units if, at any time on or after the date of this Offer
and before the acceptance of such Units for payment or the
payment therefore, any of the following conditions exist:
(a) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any
national securities exchange or the over-the-counter market in
the United States, (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) the commencement or
escalation of a war, armed hostilities or other national or
international crisis involving the United States, (iv) any
limitation (whether or not mandatory) imposed by any governmental
authority on, or any other event that might have material adverse
significance with respect to, the nature or extension of credit
by banks or other lending institutions in the United States, or
(v) in the case of any of the foregoing, a material acceleration
or worsening thereof; or
(b) any material adverse change (or any condition, event or
development involving a prospective material adverse change)
shall have occurred or be likely to occur in the business,
prospects, financial condition, results of operations,
properties, assets, liabilities, capitalization, partners'
equity, licenses, franchises or businesses of the Partnership and
its subsidiaries taken as a whole; or
(c) there shall have been threatened, instituted or pending
any action, proceeding, application, audit, claim or counterclaim
by any government or governmental authority or agency, domestic
or foreign, or by or before any court or governmental, regulatory
or administrative agency, authority or tribunal, domestic,
foreign or supranational, which (1) challenges the acquisition by
the Purchaser of the Units or seeks to obtain any material
damages as a result thereof, (ii) makes or seeks to make illegal,
the acceptance for payment, purchase or payment for any Units or
the consummation of this Offer, (iii) imposes or seeks to impose
limitations on the ability of the Purchaser or any affiliate of
the Purchaser to acquire or hold or to exercise full rights of
ownership of the Units, including, but not limited to, the right
to vote any Units purchased by them on all matters properly
presented to the Limited Partners, (iv) may result in a material
diminution in the benefits expected to be derived by the
Purchaser or any of its affiliates as a result of the Offer, (v)
requires divestiture by the Purchaser of any Units, (vi) might
materially adversely affect the business, properties, assets,
liabilities, financial condition operations, results of
operations or prospects of the Partnership or the Purchaser or
(vii) challenges or adversely affects the Offer; or
(d) there shall be any action taken, or any statute, rule,
regulation, order or injunction shall have been enacted,
promulgated, entered, enforced or deemed applicable to the Offer,
or any other action shall have been taken, by any government,
governmental authority or court, domestic or foreign, other than
the routine application to the Offer of waiting periods that has
resulted, or in the reasonable good faith judgment of the
Purchaser could be expected to result, in any of the consequences
referred to in clauses (i) through (vii) of paragraph (c) above;
or
(e) the Partnership or any of its subsidiaries shall have
authorized, recommended, proposed or announced an agreement or
intention to enter into an agreement, with respect to a merger,
consolidation, liquidation or business consolidation, any
acquisition or disposition of a material amount of assets or
securities, or any comparable event, not in the ordinary course
of business consistent with past practices; or
(f) the failure to occur of any necessary approval or
authorization by any federal or state authorities necessary to
the consummation of the purchase of all or any part of the Units
to be acquired hereby, which in the reasonable judgment of the
Purchaser in any such case, and regardless of the circumstances
(including any action of the Purchaser) giving rise thereto,
makes it inadvisable to proceed with such purchase or payment; or
(g) the Purchaser shall become aware that any material
right of the Partnership or any of its subsidiaries under any
governmental license, permit or authorization relating to any
environmental law or regulation is reasonably likely to be
impaired or otherwise adversely affected as a result of, or in
connection with, the Offer.
The foregoing conditions are for the sole benefit of the
Purchaser and its affiliates and may be asserted by the Purchaser
regardless of the circumstances (including, without limitation,
any action or inaction by the Purchaser or any of its affiliates)
giving rise to such condition, or may be waived by the Purchaser,
in whole or in part, from time to time in its sole discretion.
The failure by the Purchaser at any time to exercise the
foregoing rights will not be deemed a waiver of such rights,
which will be deemed to be ongoing and may be asserted at any
time and from time to time. Any determination by the Purchaser
concerning the events described in this Section 14 will be final
and binding upon all parties.
15. CERTAIN LEGAL MATTERS.
Except as set forth in this Offer to Purchase, based on its
knowledge of the Partnership Properties and the real estate
industry affecting the Partnership Properties and its review of
publicly available filings by the Partnership with the SEC and
other publicly, available information regarding the Partnership,
the Purchaser is not aware of any licenses or regulatory permits
that would be material to the business of the Partnership, taken
as a whole, and that might be adversely affected by the
Purchaser's acquisition of Units as contemplated herein, or any
filings, approvals or other actions by or with any domestic or
foreign governmental authority or administrative or regulatory
agency that would be retired prior to the acquisition of Units by
the Purchaser pursuant to this Offer as contemplated herein,
other than (i) the filing of a Tender Offer Statement on Schedule
14D-1 (which has been filed) and any required amendments thereto,
and (ii) obtaining the consent of the California Commissioner of
Corporations to the transfer of the Units to the Purchaser
pursuant to this Offer, including the filing of necessary forms
requesting such consent included as part of the Transmittal
Letter), if applicable. Should any such approval or other action
be required, there can be no assurance that any such additional
approval or action if needed, would be obtained without
substantial conditions or that adverse consequences might not
result to the Partnership's business, or that certain parts of
the Partnership's or the Purchaser's business might not have to
be disposed of or held separate or other substantial conditions
complied with in order to obtain such approval or action in the
event that such approvals were not obtained or such actions were
not taken.
APPRAISAL RIGHTS. Limited Partners will not have appraisal
rights as a result of this Offer.
STATE ANTI-TAKEOVER LAWS. A number of states have adopted
anti-takeover laws which purport, to varying degrees, to be
applicable to attempts to acquire securities of corporations or
other entities which are incorporated or organized in such states
or which have substantial assets, security holders, principal
executive officers or principal places of business therein.
Although the Purchaser has not attempted to comply with any state
anti-takeover statutes in connection with this Offer, the
Purchaser reserves the right to challenge the validity or
applicability or any state law allegedly applicable to this Offer
and nothing in this Offer to Purchase nor any action taken in
connection therewith is intended as a waiver of such right. If
any state anti-takeover statute is applicable to this Offer, the
Purchaser might be unable to accept for payment or purchase Units
tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer. In such case, the Purchaser may not be
obliged to accept for purchase or pay for any Units tendered.
ERISA. By executing and returning the Letter of
Transmittal, a Limited Partner will be representing that either
(a) the Limited Partner is not a plan subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code, or an entity deemed to
hold "plan assets" within the meaning of 29.C.F.R. Section
2510.3-101 of any such plan; or (b) the tender and acceptance of
Units pursuant to the Offer will not result in a nonexempt
prohibited transaction under Section 406 of ERISA or Section 4975
of the Code.
MARGIN REQUIREMENTS. The Units are not "margin securities"
under the regulations of the Board of Governors of the Federal
Reserve System and, accordingly, those regulations generally are
not applicable to this Offer.
ANTITRUST. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the
rules and regulations that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated until certain information and
documentary material has been furnished for review by the
Antitrust Division of the Department of Justice and the FTC and
certain waiting period requirements have been satisfied. The
Purchaser does not believe any filing is required under the HSR
Act with respect to its acquisition of Units contemplated by the
Offer.
16. CERTAIN FEES AND EXPENSES.
The Purchaser has retained Georgeson & Company Inc. to act
as the Information Agent and IBJ Schroder Bank & Trust Company to
act as Depositary in connection with this Offer. Pursuant to the
PIP General Tender Offer Agreement, the Partnership has agreed to
pay the Information Agent's and the Depositary's fees on behalf
of the Purchaser for their services and has agreed to indemnify
the Information Agent and the Depositary against certain
liabilities and fees and expenses in connection herewith,
including certain liabilities under the federal securities laws.
As an inducement to the Purchaser to make this Offer, the
Partnership has agreed, among other things, to disseminate, at
the Partnership's expense, the Offer materials to the Limited
Partners and others in accordance with the rules and regulations
of the SEC. In addition, the Partnership has agreed to reimburse
the Purchaser for all of its legal, accounting, printing, filing,
copying, mailing, solicitation and all other costs, fees and
expenses incurred in connection with this Offer. The Partnership
has also agreed to indemnify, defend, save and hold harmless the
Purchaser, 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 this Offer, the Apollo Tender
Offer, and any related proceedings.
17. MISCELLANEOUS.
This Offer is being made to all Limited Partners, beneficial
owners and assignees, all to the extent known by the Purchaser.
The Purchaser is not aware of any state in which the making of
the Offer is prohibited by administrative or judicial action
pursuant to a state statute. It the Purchaser becomes aware of
any state where the making of the Offer is so prohibited, the
Purchaser will make a good faith effort to comply with any such
statute or seek to have such statute declared inapplicable to
this Offer. If, after such good faith effort, the Purchaser
cannot comply with any applicable statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of)
Limited Partners in such state.
Pursuant to Rule 14d-3 of the General Rules and Regulations
under the Exchange Act, the Purchaser has filed with the SEC a
Tender Offer Statement on Schedule 14D-1, together with exhibits,
furnishing certain additional information with respect to the
offer. Such statement and any amendments thereto, including
exhibits, may be inspected and copies may be obtained at the same
places and in the same manner as set forth with respect to
information concerning the Partnership in Section 9 ("Certain
Information Concerning the Partnership").
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED
HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED.
Dated: November 8, 1996
PIP PARTNERS - GENERAL, LLC,
a California limited liability company
APPENDIX A
GLOSSARY OF DEFINED TERMS
"Diller" means Sanford N. Diller, an individual.
"Assignee" means a person who has purchased Units but has
not yet been reflected on the Partnership's books as the record
owner of such Units.
"Beneficial Owner" means a Limited Partner in the case of
Units owned by Individual Retirement Accounts or qualified plans.
"Business day" means any day other than a Saturday, Sunday
or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York, New York time, and any
time period of business days will be computed in accordance with
Rule 14d-l(c)(6) under the Exchange Act.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Depositary" means IBJ Schroder Bank & Trust Company.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expiration Date" has the meaning set forth in Section 1.
"Form 10-K" means the Partnership's Form 10-K for the year
ended December 31, 1995.
"Form 10-Q" means the Partnership's Form 10-Q for the
quarter ended June 30, 1996.
"FTC" means the Federal Trade Commission.
"General Partner" means Prometheus Development Co., Inc., a
California corporation and the general partner of the
Partnership.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Information Agent" means Georgeson & Company Inc.
"IRA" means an individual retirement account.
"Limited Liquidity Plan" means the provision in the
Partnership Agreement (11.7) pursuant to which the Partnership
is required to purchase up to 5% of the outstanding Units at 80%
of their value (determined pursuant to an appraisal process),
subject to certain availability restrictions based on the
Partnership's cash from operations.
"Limited Partner" means any owner of record of Unit(s).
"Manager" means PromHill, Inc., a California corporation,
and the manager of the Purchaser.
"NASD" means the National Association of Securities Dealers,
Inc.
"Offer" has the meaning set forth in the Introduction.
"Offer to Purchase" means this Offer to Purchase dated
November 8, 1996.
"Partnership" means Prometheus Income Partners, a California
limited partnership.
"Partnership Agreement" means the Second Amended and
Restated Limited Partnership Agreement of the Partnership.
"Partnership Properties" means both the Alderwood Apartments
and the Timberleaf Apartments.
"Purchase Price" has the meaning set forth in the
Introduction.
"Purchaser" means PIP PARTNERS - GENERAL, LLC, a California
limited liability company.
"Substituted Limited Partner" means an assignee of a Limited
Partner or a substituted Limited Partner who is admitted as a
Limited Partner pursuant to the terms of the Partnership
Agreement.
"TIN" means taxpayer identification number.
"UBTI" means unrelated business taxable income.
"Units" means units of limited partnership interest in the
Partnership.
SCHEDULE I
EXECUTIVE OFFICERS AND DIRECTORS OF PROMHILL, INC.
Set forth below is the name, current business address,
present principal occupation, and employment history for at least
the past five years of the sole executive officer and director of
PromHill, Inc., the Manager. Such person is a citizen of the
United States.
SANFORD N. DILLER. Mr. Diller beneficially owns the
Manager, and has been an officer and director of PromHill, Inc.
since September 24, 1985. Mr. Diller has also been the
President, Secretary and a director of the General Partner since
October 10, 1980, and Mr. Diller founded the General Partner and
beneficially owns the General Partner. Mr. Diller received his
undergraduate education at the University of California at
Berkeley and his Doctor of Jurisprudence from the University of
San Francisco. He has been an attorney since 1953. Since the
mid-1960's, Mr. Diller has been involved in the development
and/or acquisition of more than 70 properties, totaling
approximately 13,000 residential units and over two million
square feet of office space. Mr. Diller's business address is
350 Bridge Parkway, Redwood City, California, 94065-1517.
Facsimile copies of the Letter of Transmittal, properly
completed and duly executed, will be accepted. Questions and
requests for assistance may be directed to the Information Agent
at the address and telephone number listed below. Additional
copies of this Offer to Purchase, the Letter of Transmittal and
other tender offer materials may be obtained from the Information
Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. The Letter of Transmittal and any other
required documents should be sent or delivered by each Limited
Partner to the Depositary at its address set forth below. To be
effective, a duly completed and signed Letter of Transmittal (or
facsimile thereof) must be received by the Depositary at the
address (or facsimile number) set forth below before 12:00
midnight, New York, New York time, on Monday, December 9, 1996.
The Depositary
By Mail/Hand/Overnight Delivery:
IBJ Schroder Bank & Trust Company
Telephone: (212) 858-2103
Facsimile: (212)858-2611
BY MAIL:
Bowling Green Station
New York, New York 10274-0084
ATTN: Reorganization Operations Department
BY HAND DELIVERY OR OVERNIGHT
One State Street
New York, NY 10004
ATTN: Securities Processing Window, Sub-Cellular One
The Information Agent
For Additional Information Call:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
(800) 223-2064
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO
TENDER UNITS OF LIMITED PARTNERSHIP INTEREST
OF
PROMETHEUS INCOME PARTNERS
PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 8, 1996
BY
PIP PARTNERS - GENERAL, LLC
Number of (*) Purchase Price
Units Tendered Per Unit
$450
(*) If no indication is marked above, all Units
issued to you will be deemed to have been tendered.
Please indicate changes or corrections to the address printed
above.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
MIDNIGHT, NEW YORK, NEW YORK TIME, ON MONDAY, DECEMBER 9, 1996
(THE "EXPIRATION DATE") UNLESS SUCH OFFER IS EXTENDED.
The undersigned hereby tender(s) to PIP PARTNERS - GENERAL,
LLC, a California limited liability company (the "Purchaser"),
the number of units of limited partnership interest ("Units") of
Prometheus Income Partners, a California limited partnership (the
"Partnership") specified below, pursuant to the Purchaser's offer
to purchase up to 9,000 of the issued and outstanding Units at a
purchase price of $450 per Unit, net to the seller in cash (the
"Purchase Price"), without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase
dated November 8, 1996 (the "Offer to Purchase") and this Letter
of Transmittal (the "Letter of Transmittal," which, together with
the Offer to Purchase and any supplements, modifications or
amendments thereto, constitute the "Offer"), as more fully
described in the Offer to Purchase. The Purchase Price will be
automatically reduced by the aggregate amount of distributions
per Unit, if any, made or declared by the Partnership after
November 8, 1996 and on or prior to 12:00 midnight, Los Angeles,
California time, on December 9, 1996 (the "Expiration Date"). In
addition, if a distribution is made or declared after the
Expiration Date but prior to the date on which the Purchaser pays
the Purchase Price for the tendered Units, the Purchaser will
offset the amount otherwise due a holder of Units pursuant to the
Offer in respect of tendered Units which have been accepted for
payment but not yet paid for by the amount of any such
distribution. LIMITED PARTNERS WHO TENDER THEIR UNITS WILL NOT
BE OBLIGATED TO PAY ANY COMMISSIONS OR PARTNERSHIP TRANSFER FEES,
WHICH COMMISSIONS OR PARTNERSHIP TRANSFER FEES WILL BE BORNE BY
THE PURCHASER. Receipt of the Offer to Purchase is hereby
acknowledged. Capitalized terms used but not defined herein have
the respective meanings ascribed to them in the Offer to
Purchase.
By executing and delivering this Letter of Transmittal, a
tendering Limited Partner irrevocably appoints the Purchaser and
designees of the Purchaser and each of them as such Limited
Partner's proxies, with full power of substitution, in the manner
set forth in this Letter of Transmittal to the full extent of
such Limited Partner's rights with respect to the Units tendered
by such Limited Partner and accepted for payment by the Purchaser
(and with respect to any and all other Units or other securities
issued or issuable in respect of such Units on or after the date
hereof). All such proxies shall be considered irrevocable and
coupled with an interest in the tendered Units. Such appointment
will be effective when, and only to the extent that, the
Purchaser accepts such Units for payment. Upon such acceptance
for payment, all prior proxies given such Limited Partner with
respect to such Units (and such other Units and securities) will
be revoked without further action, and no subsequent proxies may
be given nor any subsequent written consent executed (and, if
given or executed will not be deemed effective). The Purchaser
and its designees will, with respect to the Units (and such other
Units and securities) for which such appointment is effective, be
empowered to exercise all voting and other rights of such Limited
Partner as they in their sole discretion may deem proper at any
meeting of Limited Partners or any adjournment or postponement
thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in
order for a Unit to be deemed validity tendered, immediately upon
the Purchaser's payment for such Unit, the Purchaser must be able
to exercise full voting rights with respect to such Unit and
other securities, including voting at any meeting of Limited
Partners.
By executing and delivering the Letter of Transmittal, a
tendering Limited Partner also irrevocably constitutes and
appoints the Purchaser and its designees as the Limited Partner's
attorneys-in-fact, each with full power of substitution to the
extent of the Limited Partner's rights with respect to the Units
tendered by the Limited Partner and accepted for payment by the
Purchaser. Such appointment will be effective when, and only to
the extent that, the Purchaser accepts the tendered Units for
payment. Upon such acceptance for payment, all prior powers of
attorney granted by the Limited Partner with respect to such Unit
will, without further action, be revoked, and no subsequent
powers of attorney may be granted (and if granted will not be
effective). Pursuant to such appointment as attorneys-in-fact,
the Purchaser and its designees each will have the power, among
other things, (i) to seek to transfer ownership of such Units on
the Partnership books maintained by the transfer agent and
registrar for the Partnership (and execute and deliver any
accompanying evidences of transfer and authenticity any of them
may deem necessary or appropriate in connection therewith), (ii)
upon receipt by the Depositary (as the tendering Limited
Partner's agent) of the Purchase Price, to become a substitute
Limited Partner, to receive any and all distributions made by the
Partnership after the Expiration Date, and to receive all
benefits and otherwise exercise all rights of beneficial
ownership of such Units in accordance with the terms of the
Offer, (iii) to execute and deliver to the general partner of the
Partnership (the "General Partner") a change of address form
instructing the General Partner to send any and all future
distributions to which the Purchaser is entitled pursuant to the
terms of the Offer in respect of tendered Units to the address
specified in such form, (iv) to endorse any check payable to or
upon the order of such Limited Partner representing a
distribution to which-the Purchaser is entitled pursuant to the
terms of the Offer, in each case on behalf of the tendering
Limited Partner, and (v) if legal title to the Units is held
through an IRA or KEOGH or similar account, the Limited Partner
understands that this Letter of Transmittal must be signed by the
custodian of such IRA or KEOGH account and the Limited Partner
hereby authorizes and directs the custodian of such IRA or KEOGH
to confirm this Letter of Transmittal. This Power of Attorney
shall not be affected by the subsequent mental disability of the
Limited Partner, and the Purchaser shall not be required to post
bond in any nature in connection with this Power of Attorney.
By executing and delivering the Letter of Transmittal, a
tendering Limited Partner irrevocably assigns to the Purchaser
and its assigns all of the right, title and interest of such
Limited Partner in the Partnership with respect to the Units
tendered and purchased pursuant to the Offer, including, without
limitation, such Limited Partner's right, title and interest in
and to any and all distributions made by the Partnership after
the Expiration Date in respect of the Units tendered by such
Limited Partner and accepted for payment by the Purchaser,
regardless of the fact that the record date for any such
distribution may be a date prior to the Expiration Date. The
Purchaser will seek to be admitted to the Partnership as a
substitute Limited Partner upon consummation of the Offer.
By executing this Letter of Transmittal, the undersigned
represents that either (a) the undersigned is not a plan subject
to Title I of the Employee Retirement Income Security Act of
1947, as amended ("ERISA") or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), or an entity
deemed to hold "plan assets" within the meaning of 29 C.F.R.
Section 2510.3-101 of any such plan; or (b) the tender and
acceptance of Units pursuant to the Offer will not result in a
nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
The undersigned recognizes that, if proration is required
pursuant to the terms of the Offer, the Purchaser will accept for
payment from among those Units validly tendered on or prior to
the Expiration Date and not properly withdrawn, the maximum
number of Units permitted pursuant to the Offer on a pro rata
basis, with adjustments to avoid purchases of certain fractional
Units, based upon the number of Units validly tendered prior to
the Expiration Date and not properly withdrawn.
The undersigned understands that a tender of Units to the
Purchaser will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the
conditions of the Offer. The undersigned recognizes that under
certain circumstances set forth in Section 2 ("Proration;
Acceptance for Payment and Payment for Units") and Section 14
("Conditions of the Offer") of the Offer to Purchase, the
Purchaser may not be required to accept for payment any of the
Units tendered hereby. In such event, the undersigned
understands that any Letter of Transmittal for Units not accepted
for payment will be destroyed by the Purchaser. Except as stated
in Section 4 ("Withdrawal Rights") of the Offer to Purchase, this
tender is irrevocable, provided Units tendered pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date.
IF YOU HAVE ALREADY TENDERED YOUR UNITS TO APOLLO PURSUANT TO THE
APOLLO TENDER OFFER, AND YOU NOW DESIRE TO WITHDRAW THAT TENDER,
WE HAVE INCLUDED WITH THE TRANSMITTAL LETTER, A FORM OF "NOTICE
OF WITHDRAWAL OF PREVIOUSLY TENDERED UNITS" LETTER (ALONG WITH
INSTRUCTIONS) TO BE SENT TO THE HERMAN GROUP, IN THE MANNER
INDICATED ON THE INSTRUCTIONS ATTACHED THERETO.
SIGNATURE BOX
Please sign exactly as your name is printed (or corrected)
above. For joint owners, each joint owner must sign. If signed
by the registered holder(s) of the units and payment is to be
made directly to that holder(s) or Eligible Institution, then no
signature guarantee is necessary. In all other cases, all
signatures must be guaranteed by an Eligible Institution. (See
Instruction 2.) The signatory hereto hereby certifies under
penalties of perjury the Taxpayer Identification Number furnished
in the blank provided in this Signature Box and the statements in
Box A, Box B and, if applicable, Box C. The undersigned hereby
represents and warrants for the benefit of the Partnership and
the Purchaser that the undersigned owns the Units tendered hereby
and has full power and authority to validly tender, sell, assign,
transfer, convey and deliver the Units tendered hereby and that
when the same are accepted for payment by the Purchaser, the
Purchaser will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges,
encumbrances, conditional sales agreements or other obligations
relating to the sale or transfer thereof, and such Units will not
be subject to any adverse claims and that the transfer and
assignment contemplated herein are in compliance with all
applicable laws and regulations. All authority herein conferred
or agreed to be conferred shall survive the death or incapacity
of the undersigned and any obligations of the undersigned shall
be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except an stated in Section 4
("Withdrawal Right") of the offer to Purchase, this tender is
irrevocable.
X
(Signature of Owner) (Date)
Taxpayer Identification Number of owner (other than IRA'S)
(Signature of Co-Owner) (Date)
___________________________
(Title)
Telephone (Day)(___)___________ Telephone (Eve) (___)________
Guarantee of Signature (If required. SEE INSTRUCTION 2).
Name of Firm:
Authorized Signature:
TAX CERTIFICATIONS
BOX A
SUBSTITUTE FORM W-9
(See Instruction 3)
The person signing this Letter of Transmittal hereby
certifies the following to the Purchaser under penalties of
perjury:
(i) The Taxpayer Identification Number ("TIN") furnished
in the space provided for that purpose in the Signature Box of
this Letter of Transmittal is the correct TIN of the Limited
Partner, unless the Units are held in an Individual Retirement
Account ("IRA"); or if this box [ ] is checked, the Limited
Partner has applied for a TIN. If the Limited Partner has
applied for a TIN, a TIN has not been issued to the Limited
Partner, and either: (a) the Limited Partner has mailed or
delivered an application to receive a TIN to the appropriate
Internal Revenue Service ("IRS") Center or Social Security
Administration Office, or (b) the Limited Partner intends to mail
or deliver an application in the near future, it is hereby
understood that if the Limited Partner does not provide a TIN to
the Purchaser within sixty (60) days 31% of all reportable
payments made to the Limited Partner thereafter will be withheld
until a TIN is provided to the Purchaser; and
(ii) Unless this box [ ] is checked, the Limited Partner
is not subject to backup withholding either because the Limited
Partner: (a) is exempt from backup withholding, (b) has not been
notified by the IRS that the Limited Partner is subject to backup
withholding as a result of a failure to report all interest or
dividends, or (c) has been notified by the IRS that such Limited
Partner is no longer subject to backup withholding.
Note: Place an "X" in the box in (ii) above, if you are unable to
certify that the Limited Partner is not subject to backup
withholding.
BOX B
FIRPTA AFFIDAVIT
(See Instruction 3)
Under Section 1445(c)(5) of the Code and Treas Reg. 1.1445-
IIT(d), a transferee must withhold tax equal to 10% of the amount
realized with respect to certain transfers of an interest in a
partnership if 50% or more of the value of its gross assets
consists of U.S. real property interests and 90% or more of the
value of its gross assets consists of U.S. real property interest
plus cash or cash equivalents, and the holder of the partnership
interest is a foreign person. To inform the Purchaser that no
withholding is required with respect to the Limited Partner's
interest in the Partnership, the person signing this Letter of
Transmittal hereby certifies the following under penalties of
perjury:
(i) Unless this box [ ] is checked, the Limited Partner,
if an individual, is a U.S. citizen or a resident alien for
purposes of U.S. income taxation, and if other than an
individual, is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in
the Code and Income Tax Regulations);
(ii) The Limited Partner's U.S. social security number (for
individuals) or employer identification number (for non-
individuals) is correct as furnished in the blank provided for
that purpose on the back of this Letter of Transmittal; and
(iii) The Limited Partner's home address (for individuals),
or office address (for non-individuals), is correctly printed (or
corrected) on the back of this Letter of Transmittal. If a
corporation, the jurisdiction of incorporation is
____________________________.
The person signing this Letter of Transmittal understands
that this certification may be disclosed to the IRS by the
Purchaser and that any false statements contained herein could be
punished by fine, imprisonment, or both.
BOX C
SUBSTITUTE FORM W-8
(See Instruction 3)
By checking this box [ ] the person signing this Letter of
Transmittal hereby certifies under penalties of perjury that the
Limited Partner is an "exempt foreign person" for purposes of the
backup withholding rules under U.S. federal income tax laws,
because the Limited Partner:
(i) Is a nonresident alien or a foreign corporation,
partnership, estate or trust;
(ii) If an individual, has not been and plans not be
present in the U.S. for a total of 183 days or more during the
calendar year; and
(iii) Neither engages, nor plans to engage, in a U.S. trade
or business that has effectively connected gains from
transactions with a broker or barter exchange.
For Units to be accepted for purchase, Limited Partners
should complete and sign this Letter of Transmittal in the
Signature Box and return it in the self-addressed, postage-paid
envelope enclosed, or by hand or overnight courier to: IBJ
SCHRODER BANK & TRUST COMPANY, Bowling Green Station, New York, New
York, 10274-0084, ATTN: Reorganization Operations Department or by
Facsimile to: (212) 858-2103. Delivery of this Letter
of Transmittal or any other required documents to an
address other than the one set forth above or transmission via
facsimile other than as set forth above does not constitute valid
delivery.
PLEASE CAREFULLY READ THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL AND BOXES A, B AND C ABOVE.
(Department of Corporations Use Only)
Fee Paid $
Receipt No.
Department of Corporations File No.
504 8254
(Insert file no. of previous filings before the Dept., if any)
FEE: $ 20.00
(To be completed by applicant. The required fee is $20 per
transferor (Sec. 25608(m)., Corp. Code).)
Date of Application:
DEPARTMENT OF CORPORATIONS
STATE OF CALIFORNIA
APPLICATION FOR CONSENT TO TRANSFER SECURITIES PURSUANT TO
SECTION 25151 OF THE CORPORATE SECURITIES LAW OF 1968
This represents (check appropriate box):
[ X ] The initial filing. [ ] An amendment to
application dated ________________
THE SECURITIES PROPOSED TO BE TRANSFERRED ARE SUBJECT TO (CHECK
APPROPRIATE BOX)
[ X ] LEGEND CONDITION. [ ] ESCROW CONDITION.
1. (a) Name of Issuer: PROMETHEUS INCOME PARTNERS
(b) Former Name, if any:
2. Description of securities proposed to be transferred:
(State title of each class of securities (e.g., Class A Common
Stock). If rights, warrants and options are listed, also specify
the securities to be transferred upon exercise thereof. If
securities are to be pledged, so state.)
UNITS OF LIMITED PARTNERSHIP INTEREST
3. Name and address of each transferor (if space is
insufficient, incorporate and attach additional sheets):
Aggregate number or amount
of securities proposed to
Name Address transferred by each transferor:
Total:
4. Name and address of each proposed transferee (if space is
insufficient, incorporate and attach additional sheets):
Aggregate number or amount
of securities proposed to
be transferred to each transferee:
Name Address
PIP PARTNERS-GENERAL,LLC 350 BRIDGE PARKWAY,
REDWOOD CITY, CA 94065-1517
Total:
260.151(a) (1/93)
5. Address of principal executive office of Issuer:
350 BRIDGE PARKWAY REDWOOD CITY CA 94065-1517
(Number and Street) (City) (State) (Zip Code)
6. Name and address of person to whom correspondence regarding
this application should be directed:
SAMUEL H. GRUENBAUM, ESQ., COX, CASTLE & NICHOLSON, LLP,
2049 CENTURY PARK EAST, #2800, LOS ANGELES, CA 90067
7. There are attached hereto as exhibits statements by each of
the proposed transferees in the form required by Section 260.151
of Title 10 of the California Code of Regulations. (Note: Upon
request, such statements will be treated as confidential by the
Commissioner, subject to the provisions of Section 250.10, Title
10, California Code of Regulations.)
8. (Check appropriate box)
[ X ](a) There are no restrictions upon the transfer of
the securities proposed to be transferred other than the legend
or escrow condition imposed by the Commissioner of Corporations.
[ ](b) There are restrictions upon the transfer of the
securities proposed to be transferred other than the legend or
escrow condition imposed by the Commissioner of Corporations
which are described in an exhibit attached hereto and
incorporated herein by reference. Such restrictions have been
complied with so as to make the transfer to the proposed
transferees valid and are known to the proposed transferees.
9. No portion of the consideration to be given by the
transferees of the securities will be for the direct or indirect
benefit of the Issuer identified in Item 1. (If the Issuer is to
benefit from proposed transfer, See Section 25011 of the
Corporate Securities Law of 1968 and Section 260.011 of Title 10
of the California Code of Regulations. Qualification of the
transaction may be required.)
10. Execution Instructions:
If a transferor is other than an individual, the name of the
entity should be typed or printed above the signature line
exactly as shown in Item 3. The signature should show the name
and title of the person authorized to sign for such transferor.
I/We certify (or declare) under penalty of perjury under the
laws of the State of California that I/we have read this
application and know the contents thereof, and that the
statements therein are true and correct.
Executed at
(Place) (Date)
(If the transferor is other than an individual, give the
name of the entity and the name and title of the person executing
the application on behalf of such entity.)
(Signature of Transferor) (Signature of Transferor)
(Signature of Transferor) (Signature of Transferor)
(Signature of Transferor) (Signature of Transferor)
INSTRUCTIONS FOR COMPLETING LETTER OF TRANSMITTAL
Forming Part of the Terms and Conditions of the Offer
ASSISTANCE IN COMPLETING THE LETTER OF TRANSMITTAL,
CALL: GEORGESON & COMPANY INC. at (800) 223-2064
1. DELIVERY OF LETTER OF TRANSMITTAL. For convenience in
responding to the Offer, a self-addressed, postage-paid envelope
had been enclosed with the Offer to Purchase. However, to ensure
receipt of the Letter of Transmittal, it is suggested that you
use an overnight courier or, if the Letter of Transmittal is to
be delivered by United States mail, that you use certified or
registered mail, return receipt requested.
To be effective, a duly completed and signed Letter of
Transmittal (or facsimile thereof) must be received by the
Depositary at the address (or facsimile number) set forth below
before the Expiration Date, 12:00 Midnight, Los Angeles,
California time on Monday, December 9, 1996, unless extended.
LETTERS OF TRANSMITTAL WHICH HAVE BEEN DULY EXECUTED, BUT WHERE
NO INDICATION IS MARKED IN THE "NUMBER OF UNITS TENDERED" COLUMN,
SHALL BE DEEMED TO HAVE TENDERED ALL UNITS PURSUANT TO THE OFFER.
Tenders of fractional Units will only be accepted if all of the
Units held by such Limited Partner are tendered.
BY MAIL: IBJ Schroder Bank & Trust Company
Bowling Green Station
New York, NY 10274-0084
ATTN: Reorganization Operations Department
Telephone: (212) 858-2103
BY HAND DELIVERY OR
OVERNIGHT COURIER: IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
ATTN: Securities Processing Window, Sub-Cellular One
Telephone: (212) 858-2103
Facsimile (212) 858-2611
FOR ADDITIONAL
INFORMATION CALL: GEORGESON & COMPANY INC.
Wall Street Plaza
New York, NY 10005
Telephone: (800) 223-2064
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE
TENDERING LIMITED PARTNER, AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. IF
TENDERING BY FACSIMILE, PLEASE TRANSMIT BOTH THE FRONT AND BACK
OF THE LETTER OF TRANSMITTAL AND THE TAX CERTIFICATION PAGE AND
MAIL THE ORIGINAL COPIES OF SUCH PAGES TO THE DEPOSITARY AT THE
ADDRESS LISTED ABOVE.
All tendering holders of Units, by execution of this
Letter of Transmittal or facsimile hereof, waive any right to
receive any notice of the acceptance of their Units for payment.
IF YOU HAVE ALREADY TENDERED YOUR UNITS TO APOLLO PURSUANT TO THE
APOLLO TENDER OFFER, AND YOU NOW DESIRE TO WITHDRAW THAT TENDER,
WE HAVE INCLUDED WITH THE TRANSMITTAL LETTER, A FORM OF "NOTICE
OF WITHDRAWAL OF PREVIOUSLY TENDERED UNITS" LETTER (ALONG WITH
INSTRUCTIONS) TO BE SENT TO THE HERMAN GROUP, IN THE MANNER
INDICATED ON THE INSTRUCTIONS ATTACHED THERETO.
2. SIGNATURES. All Limited Partners must sign in the
Signature Box on the back of the Letter of Transmittal. If the
Units are held in the names of two or more persons, all such
persons must sign the Letter of Transmittal. When signing as a
general partner, corporate officer, attorney-in-fact, executor,
custodian, administrator or guardian, please give full title and
send proper evidence of authority satisfactory to the Purchaser
with this Letter of Transmittal. With respect to most trusts,
the Partnership will generally require only the named trustee to
sign the Letter of Transmittal. For Units held in a custodial
account for minors, only the signature of the custodian will be
required.
For IRA custodial accounts, the beneficial owner should
return the executed Letter of Transmittal to the Depositary as
specified in Instruction 1 herein. Such Letter of Transmittal
will then be forwarded by the Depositary to the custodian for
additional execution. Such Letter of Transmittal will not be
considered duly completed until after it has been executed by the
custodian.
If any tendered Units are registered in different names, it
will be necessary to complete, sign and submit as many separate
letters of Transmittal as there are different registrations of
certificates.
If the Letter of Transmittal is signed by the registered
holder of the Units tendered herewith and payment is to be made
directly to that holder, then no signature guarantee is required
on the Letter of Transmittal. Similarly, if the Units are
tendered for the account of a member firm of a registered
national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank,
savings bank, credit union, savings and loan association or trust
company having an office, branch or agency in the United States
(each an "Eligible Institution"), no signature guarantee is
required on the Letter of Transmittal. However, in all other
cases, all signatures on the Letter of Transmittal must be
guaranteed by an Eligible Institution.
3. U.S. PERSONS. A Limited Partner who or which is a
United States citizen OR a resident alien individual, a domestic
corporation, a domestic partnership, a domestic trust or a
domestic estate (collectively, "United States Persons") as those
terms are defined in the Code and Income Tax Regulations, should
follow the instructions below with respect to certifying Boxes A
and B (on the reverse side of the Letter of Transmittal).
TAXPAYER IDENTIFICATION NUMBER. To avoid 31% federal income
tax backup withholding, the Limited Partner must furnish his,
her or its TIN in the blank provided for that purpose on the back
of the Letter of Transmittal and certify under penalties of
perjury Box A, B and, if applicable, Box C.
WHEN DETERMINING THE TIN TO BE FURNISHED, PLEASE REFER TO THE
FOLLOWING NOTE AS A GUIDELINE:
NOTE: INDIVIDUAL ACCOUNTS should reflect their own
TIN. JOINT ACCOUNTS should reflect the TIN of the person whose
name appears first. TRUST ACCOUNTS should reflect the TIN
assigned to the Trust. IRA CUSTODIAL ACCOUNTS should reflect the
TIN of the custodian. CUSTODIAL ACCOUNTS FOR THE BENEFIT OF
MINORS should reflect the TIN of the minor. CORPORATIONS OR
OTHER BUSINESS ENTITIES should reflect the TIN assigned to that
entity. If you need additional information, please see the
enclosed copy of the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
SUBSTITUTE FORM W-9 - BOX A.
(i) In order to avoid 31% federal income tax backup withholding,
the Limited Partner must provide to the Purchaser in the blank
provided for that purpose on the back of the Letter of
Transmittal the Limited Partner's correct TIN and certify, under
penalties of that such Limited Partner is not subject to such
backup withholding. The TIN being provided on the Substitute
Form W-9 is that of the registered Limited Partner as indicated
on the back of the Letter of Transmittal. If a correct TIN is
not provided, penalties may be imposed by the IRS, in addition to
the Limited Partner being subject to backup withholding. Certain
Limited Partners (including, among others, all corporations) are
not subject to backup withholding. Backup withholding is not an
additional tax. If withholding results in an overpayment of
taxes, a refund may be obtained from the IRS.
(ii) DO NOT CHECK THE BOX IN BOX A, PART (ii), UNLESS YOU HAVE
BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING.
FIRPTA AFFIDAVIT - BOX. B. To avoid withholding of tax pursuant
to Section 1445 of the Code, each Limited Partner who or which is
a United States Person (as defined in Instruction 3 above) must
certify, under penalties of perjury, the Limited Partner's TIN
and address, and that the Limited Partner is not a foreign
person. Tax withheld under Section 1445 of the Internal Revenue
Code is not an additional tax. If withholding results in an
overpayment of tax, a refund may be obtained from the IRS. CHECK
THE BOX IN BOX B, PART (ii) ONLY IF YOU ARE NOT A U.S. PERSON, AS
DESCRIBED THEREIN.
4. FOREIGN PERSONS - BOX C. In order for a Limited
Partner who is a foreign person (i.e., not a United States Person
as defined in Instruction 3 above) to qualify as exempt from 31%
backup withholding, such foreign Limited Partner must certify,
under penalties of perjury, the statement in Box C of this Letter
of Transmittal attesting to that foreign person's status by
checking the box in such statement. UNLESS SUCH BOX IS CHECKED,
SUCH FOREIGN PERSON WILL BE SUBJECT TO 31% WITHHOLDING OF TAX
UNDER SECTION 1445 OF THE CODE.
5. APPLICATION FOR CONSENT TO TRANSFER SECURITIES
PURSUANT TO SECTION 25151 OF THE CORPORATE SECURITIES LAW OF
1968. All Limited Partners must complete Item 3 and the sign the
Application on the back. If the Units are held in the names of
two or more persons, all such persons must sign the Application.
When signing on behalf of an entity, please give the name of the
entity and the name and full title of the person executing the
Application on behalf of such entity.
6. CONDITIONAL TENDERS. No alternative, conditional or
contingent tenders will be accepted.
7. VALIDITY OF LETTER OF TRANSMITTAL. All questions as
to the validity, form, eligibility (including time of receipt)
and acceptance of a Letter of Transmittal will be determined by
the Purchaser and such determination will be final and binding.
The Purchaser's interpretation of the terms and conditions of the
Offer (including these instructions for the Letter of
Transmittal) also will be final and binding. The Purchaser will
have the right to waive any irregularities or conditions as to
the manner of tendering. Any irregularities in connection with
tenders must be cured within such time as the Purchaser shall
determine unless waived by it.
The Letter of Transmittal will not be valid unless and until
any irregularities have been cured or waived. Neither the
Purchaser nor the Information Agent or the Depositary is under
any duty to give notification of defects in a Letter of
Transmittal and will incur no liability for failure to give such
notification.
8. ASSIGNEE STATUS. Assignees must provide documentation
to the Depositary which demonstrates, to the satisfaction of the
Purchaser, such person's status as an assignee.
9. INADEQUATE SPACE. If the space provided herein is
inadequate, the numbers of Units and any other information should
be listed on a separate schedule attached hereto and separately
signed on each page thereof in the same manner as this Letter of
Transmittal is signed.
Questions and requests for assistance may be directed to the
Information Agent at its address and telephone number listed
below. Additional copies of the Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from
the Information Agent as set forth below, and will be furnished
promptly at the Purchaser's expense. You may also contact your
broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer.
The Information Agent for the Offer is:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
(800) 223-2064
EXHIBIT (a)(3)
PIP PARTNERS - GENERAL, LLC
350 Bridge Parkway
Redwood City, California 94065-1517
November 8, 1996
$450 PER UNIT OFFER TO PURCHASE
To Limited Partners in Prometheus Income Partners:
PURSUANT TO THE PIP GENERAL TENDER OFFER AGREEMENT, PIP
PARTNERS - GENERAL, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY,
AND AN AFFILIATE OF THE GENERAL PARTNER OF THE PARTNERSHIP (THE
"PURCHASER"), IS OFFERING TO PURCHASE UP TO 9,000 OF THE
OUTSTANDING UNITS OF LIMITED PARTNERSHIP INTEREST (THE "UNITS")
IN PROMETHEUS INCOME PARTNERS (THE "PARTNERSHIP") FOR A CASH
PURCHASE PRICE OF $450 PER UNIT, NET TO THE SELLER, UPON THE
TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE ATTACHED
OFFER TO PURCHASE DATED NOVEMBER 8, 1996 AND THE RELATED LETTER
OF TRANSMITTAL (WHICH TOGETHER CONSTITUTE THE "OFFER").
As an inducement to the Purchaser to make this Offer, the
Partnership has agreed, among other things, to disseminate, at
the Partnership's expense, the Offer materials to the Limited
Partners and others; to reimburse the Purchaser for all of its
costs, fees and expenses incurred in connection with this Offer;
and to indemnify the Purchaser, 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, among other
things, this Offer, a competing offer made by an affiliate of
Apollo Realty Advisers ("Apollo Tender Offer"), and any related
proceedings.
Unless extended by the Purchaser, the Offer is effective
until midnight, New York, New York time, on December 9, 1996.
Tenders of fractional Units will only be accepted if all of the
Units held by such Limited Partner are tendered. The materials
included in this package include important information concerning
the Purchaser, the terms and conditions to the Offer, tax
implications and instructions for tendering your Units. It is
important that you take some time to read carefully the enclosed
Offer to Purchase, the Letter of Transmittal and other
accompanying materials in order to evaluate the Offer being made
by the Purchaser.
In reviewing the Offer, please note:
- - The purpose of the Offer is to allow Limited Partners who
have a current or anticipated need or desire for liquidity to
tender all or a portion of their Units to the Purchaser, an
affiliate of the General Partner, at a higher price than the
Apollo Tender Offer. This will also allow the General Partner to
continue as the general partner of the Partnership and, in the
best interests of the Limited Partners who continue as such after
consummation of this Offer, manage the Partnership's business and
affairs in order for the Partnership to obtain the benefit of the
General Partner's vast experience and knowledge in dealing with
apartment projects such as those owned by the Partnership,
including dealing with the hardboard siding problem currently
effecting the Partnership Properties. The aim of the foregoing
is to protect the Partnership Properties, maximize their value,
and maximize the value of the Units. The Purchaser is an
affiliate of the General Partner and other entities that do
business with the Partnership. The Purchaser intends that the
Partnership continue these relationships. The Purchaser does not
have current plans for any extraordinary transaction involving
the Partnership.
- No Commissions and No Transfer Fees. The Purchaser
will pay any transfer fees charged by the Partnership in
connection with transferring the ownership of your Units pursuant
to the Offer and you will not incur any commissions in connection
with tendering your Units pursuant to the Offer.
- No More K-1 Reporting Costs if You Sell All of Your
Units. If you sell all of your Units you will avoid the expense,
delay, and complications in filing complex tax returns which
result from an ownership of Units.
You must decide whether to tender your Units based on your
own particular circumstances, including your judgment of the
value of your Units taken into account their upside potential and
risks. You should consult with your advisors about the
financial, tax, legal and other implications to you of accepting
the Offer. if you desire additional information regarding the
Offer or need assistance in tendering your Units, you may call
GEORGESON & COMPANY INC., which is acting as Information Agent
for the Offer, at (800) 223-2064. Informed and courteous agents
are available to assist you.
PIP PARTNERS - GENERAL, LLC, a California limited
liability company
EXHIBIT (b)(1)
Bank of America
November 1, 1996
Mr. Sanford N. Diller
ATTN: John E. Ghio
350 Bridge Parkway
Redwood City, CA 94065-1517
Dear Mr. Diller:
Thank you for the opportunity to consider your recent application
for credit. We have carefully reviewed your request and based on
our long relationship and your financial capacity believe we
could issue a line of credit in the amount of $10,000,000.00.
The terms and conditions would be typical for this type of
facility.
Bank of America values your business and I look forward to
working with you on this credit. I will be contacting you
shortly to discuss the structure of this loan in more detail.
However, please feel free to contact me should you have any
questions.
Sincerely,
Bank of America NT & SA
Bill Herrera
Regional Vice President
EXHIBIT (b)(2)
Bank of America
November 7, 1996
VIA FACSIMILE
Mr. Sanford N. Diller
ATTN: John E. Ghio
350 Bridge Parkway
Redwood City, CA 94065-1517
Dear Mr. Diller:
Thank you for the opportunity to consider your recent application
for credit. We have carefully reviewed your request and based on
our long relationship and your financial capacity believe we
could issue a line of credit in the amount of $10,000,000.00
under the following terms. The line of credit will be annually
renewable, at Bank of America's Reference Rate plus 1.0%,
origination fee of 1.0% of commitment amount, and other
applicable fees customary for this type of credit facility.
Bank of America values your business and I look forward to
working with you on this credit. I will be contacting you
shortly to discuss the structure of this loan in more detail.
However, please feel free to contact me should you have any
questions.
Sincerely,
Bank of America NT & SA
Michael Gallagher
Vice President
EXHIBIT (c)
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 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 (g)
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
underwriting 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 Partnership 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. Notwithstanding 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, repurchases 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 Subscription 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 (h)
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 (i)
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 (j)(1)
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 (j)(2)
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
