<PAGE> 1
SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
/ / Preliminary Information Statement / / Confidential,
for Use of the Commission Only
/X/ Definitive Information Statement (as permitted by Rule 14c-5(d)(2))
FMG RITA RANCH LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
$450,000
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$450,000
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
FMG RITA RANCH LIMITED PARTNERSHIP
250 KING OF PRUSSIA ROAD
RADNOR, PENNSYLVANIA 19087-5297
November 9, 1999
Dear Limited Partner:
FMG Western Region Acquisitions, Inc., general partner (the "General
Partner") of FMG Rita Ranch Limited Partnership, a Delaware limited partnership
(the "Partnership"), wishes to give you notice that a special meeting of the
limited partners of the Partnership (the "Limited Partners") will be held on
November 30, 1999 at 10:00 a.m. Eastern Standard Time, at the offices of the
General Partner at 250 King of Prussia Road, Radnor, PA 19087-5297 to:
- Approve the sale of substantially all of the property of the Partnership
- Authorize the dissolution and liquidation of the Partnership
Only a majority of the outstanding units of limited partnership (the
"Units") is required to approve these proposals. Seventy-five percent (75%) of
the Units are owned by Equity Products Corporation, an affiliate of the General
Partner ("EPC"). EPC has indicated its intention to vote in favor of the sale of
the Partnership's property and the subsequent dissolution and liquidation of the
Partnership. AS A RESULT, ASSUMING EPC VOTES IN FAVOR OF THE SALE AND SUBSEQUENT
LIQUIDATION AND DISSOLUTION OF THE PARTNERSHIP, NO VOTE ON THE PART OF ANY OTHER
LIMITED PARTNER WILL BE NECESSARY TO EFFECTUATE THE SALE AND SUBSEQUENT
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP.
Very truly yours,
FMG WESTERN REGION ACQUISITIONS, INC.
General Partner
FMG Rita Ranch Limited Partnership
Arthur W. Mullin
President
<PAGE> 3
FMG RITA RANCH LIMITED PARTNERSHIP
------------------------
NOTICE OF SPECIAL MEETING OF
THE LIMITED PARTNERS
------------------------
TO BE HELD ON NOVEMBER 30, 1999
To the Limited Partners of FMG Rita Ranch Limited Partnership:
NOTICE IS HEREBY GIVEN by FMG Western Region Acquisitions, Inc., general
partner (the "General Partner") of FMG Rita Ranch Limited Partnership, a
Delaware limited partnership (the "Partnership") that a special meeting of the
limited partners of the Partnership (the "Limited Partners") will be held on
November 30, 1999 at 10:00 a.m. Eastern Standard Time, at the offices of the
General Partner at 250 King of Prussia Road, Radnor, PA 19087-5297 (the "Special
Meeting"), for the following purposes:
- To consider and vote upon a proposal to approve an Agreement of Sale (as
amended by a First Amendment to Agreement of Sale, a Second Amendment to
Agreement of Sale and a Third Amendment to Agreement of Sale) (as
amended, the "Agreement of Sale") under which substantially all of the
property of the Partnership will be sold to Diamond Ventures, Inc., an
Arizona corporation (or its assignee) for a consideration of $450,000;
- To consider and vote upon the dissolution and liquidation of the
Partnership; and
- To consider and transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
A copy of the Agreement of Sale appears as Attachment A to, and is
described in, the accompanying Information Statement.
A complete list of Limited Partners entitled to notice of and to vote at
the Special Meeting will be available for inspection by Limited Partners at the
General Partner's offices, at the address referenced above, during the ten days
prior to the Special Meeting.
Under the Amended and Restated Limited Partnership Agreement of FMG Rita
Ranch Limited Partnership dated as of December 7, 1987 (the "Partnership
Agreement"), approval of the sale of all or substantially all of the
Partnership's property resulting in the subsequent dissolution and liquidation
of the Partnership requires the affirmative vote or consent of holders of at
least a majority of the units of limited partnership (the "Units") in the
Partnership. Only holders of record as of November 5, 1999, the record date
established by the General Partner, are entitled to notice of and to vote on the
proposals to be presented at the meeting. As of November 5, 1999, 75% of the
Units were owned of record by Equity Products Corporation, an affiliate of the
General Partner ("EPC"). EPC has indicated its intention to vote in favor of the
sale of the Partnership's property pursuant to the Agreement of Sale and the
subsequent dissolution and liquidation of the Partnership. AS A RESULT, ASSUMING
EPC VOTES IN FAVOR OF THE SALE AND SUBSEQUENT DISSOLUTION AND LIQUIDATION OF THE
PARTNERSHIP, NO VOTE ON THE PART OF ANY OTHER LIMITED PARTNER WILL BE NECESSARY
TO EFFECTUATE THE SALE AND SUBSEQUENT DISSOLUTION AND LIQUIDATION OF THE
PARTNERSHIP.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUIRED NOT TO SEND US A
PROXY.
Very truly yours,
FMG WESTERN REGION ACQUISITIONS, INC.
General Partner
FMG Rita Ranch Limited Partnership
<PAGE> 4
FMG RITA RANCH LIMITED PARTNERSHIP
------------------------
INFORMATION STATEMENT
------------------------
SPECIAL MEETING OF THE LIMITED PARTNERS
TO BE HELD ON NOVEMBER 30, 1999
This Information Statement (the "Information Statement") is being furnished
by FMG Western Region Acquisitions, Inc., a Delaware corporation, the general
partner (the "General Partner") of FMG Rita Ranch Limited Partnership, a
Delaware limited partnership (the "Partnership") in connection with a special
meeting of the limited partners of the Partnership (the "Limited Partners") to
be held on November 30, 1999 at 10:00 a.m. Eastern Standard Time, at the offices
of the General Partner at 250 King of Prussia Road, Radnor, PA 19087-5297 to
consider and approve the sale of substantially all of the Partnership's property
to Diamond Ventures, Inc., an Arizona corporation (or its assignee) resulting in
the subsequent dissolution and liquidation of the Partnership. The sale will be
effected pursuant to an Agreement of Sale dated August 10, 1999, as amended by a
First Amendment to Agreement of Sale, a Second Amendment to Agreement of Sale
and a Third Amendment to Agreement of Sale, all of which are annexed hereto as
Attachment A (as so amended, the "Agreement of Sale"). This Information
Statement is being sent by certified mail to Limited Partners beginning on or
about November 9, 1999.
Under the Amended and Restated Limited Partnership Agreement of FMG Rita
Ranch Limited Partnership, dated as of December 7, 1987, which is annexed hereto
as Attachment B (the "Partnership Agreement"), approval of the sale of all or
substantially all of the Partnership's property resulting in the subsequent
dissolution and liquidation of the Partnership requires the affirmative vote or
consent of holders of at least a majority of the units of limited partnership
(the "Units"). Only holders of record of Units as of November 5, 1999, the
record date established by the General Partner, are entitled to notice of and to
vote on the proposals to be presented at the meeting. As of November 5, 1999,
approximately 75% of the Units were owned of record by Equity Products
Corporation, an affiliate of the General Partner ("EPC"). EPC has indicated its
intention to vote in favor of the sale of the Partnership's property pursuant to
the Agreement of Sale and the subsequent dissolution and liquidation of the
Partnership. AS A RESULT, ASSUMING EPC VOTES IN FAVOR OF THE SALE RESULTING IN
THE SUBSEQUENT DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP, NO VOTE ON THE
PART OF ANY OTHER LIMITED PARTNER WILL BE NECESSARY TO EFFECTUATE THE SALE AND
SUBSEQUENT DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUIRED NOT TO SEND US A
PROXY.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Information Statement is November 9, 1999.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION
The Special Meeting....................................... 1
HISTORY OF THE PARTNERSHIP.................................. 1
Public Offering........................................... 1
Purchase of Property...................................... 1
Investment Objectives..................................... 1
Distributions/Cumulative Annual Return.................... 1
THE GENERAL PARTNER......................................... 3
General................................................... 3
General Partner's Powers and Right to Sell the Property... 3
Relationship with Affiliates.............................. 3
Directors and Officers of the General Partner............. 4
Executive Compensation.................................... 5
Certain Relationships and Related Transactions............ 5
THE PROPERTY................................................ 6
Background................................................ 6
Market Conditions......................................... 6
Valuation/Appraisal....................................... 6
Marketing of the Property................................. 7
TERMS AND CONDITIONS OF THE PROPOSED SALE................... 7
Agreement of Sale......................................... 7
Consideration............................................. 7
Material Terms and Conditions............................. 7
Accounting Treatment...................................... 8
Fairness of the Sale...................................... 8
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP.............. 8
Dissolution............................................... 8
Liquidation............................................... 8
PRIORITY OF DISPOSITION OF PROCEEDS ON LIQUIDATION.......... 9
APPRAISAL RIGHTS............................................ 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 9
FEDERAL INCOME TAX CONSEQUENCES............................. 9
VOTING...................................................... 10
Record Date............................................... 10
No Vote Required by Other Than EPC........................ 10
AVAILABLE INFORMATION....................................... 10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 10
APPENDIX I: GLOSSARY OF DEFINED TERMS....................... I-1
ATTACHMENT A Agreement of Sale
ATTACHMENT B Partnership Agreement
ATTACHMENT C Resolutions
</TABLE>
i
<PAGE> 6
INTRODUCTION
THE SPECIAL MEETING
The Special Meeting will be held on November 30, 1999 at 10:00 a.m. Eastern
Standard Time, at the offices of the General Partner at 250 King of Prussia
Road, Radnor, PA 19087-5297.
The purpose of the Special Meeting is:
- To consider and vote upon a proposal to approve the Agreement of Sale
under which substantially all of the property of the Partnership will be
sold to Diamond Ventures, Inc. (or its assignee) for a consideration of
$450,000 (the "Sale");
- To consider and vote upon the dissolution and liquidation of the
Partnership; and
- To consider and transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
A copy of the full text of the resolutions to be considered and voted upon
at the Special Meeting is set forth in Attachment C to this Information
Statement. As a result of these actions substantially all of the Partnership's
property will be sold pursuant to the Agreement of Sale, and the Partnership
will subsequently be dissolved and liquidated.
HISTORY OF THE PARTNERSHIP
The Partnership was formed on January 30, 1987, as a Delaware limited
partnership. The term of the Partnership expires on December 31, 2026, or
earlier, on the occurrence of certain events, including the sale of all or
substantially all of its property.
PUBLIC OFFERING
The Partnership's public offering of 6,707 units of limited partnership
interest (the "Units") commenced on October 29, 1987 and terminated on December
18, 1987. As of the close of the offering, the Partnership had raised $6,281,294
through the sale of 6,707 Units.
PURCHASE OF PROPERTY
On March 19, 1987, the Partnership acquired approximately 118 acres of
unimproved land near Tucson, Arizona for a purchase price of $6,737,970 (the
"Property"). This was the only property acquired by the Partnership.
INVESTMENT OBJECTIVES
The Partnership's primary business objective has been to realize
appreciation in the value of the Property by holding the Property for investment
and eventual sale to return to the Limited Partners their capital contributions
and a 9% Cumulative Annual Return, although there has never been any assurance
that this will be attained within the term of the Partnership.
DISTRIBUTIONS/CUMULATIVE ANNUAL RETURN
As of the date of this Information Statement, there have been no
distributions made to Unit holders although distributions would have been made
during the Partnership term if all or a portion of the Property had been sold.
<PAGE> 7
The following table compares the Adjusted Capital Contributions with the
original investment objective of achieving a Cumulative Annual Return of 9% per
annum.
FMG RITA RANCH LIMITED PARTNERSHIP
ADJUSTED CAPITAL CONTRIBUTIONS/CUMULATIVE ANNUAL RETURN
<TABLE>
<CAPTION>
1987 1988 1989
----------- ----------- -----------
<S> <C> <C> <C>
Beginning Adjusted Capital Contributions............ $ 0 $ 3,286,000 $ 6,281,294
Distributions Applied to Capital.................... 0 0 0
----------- ----------- -----------
Ending Adjusted Capital Contributions............... 3,286,000 6,281,294 6,281,294
Beginning Cumulative Annual Return.................. 0 0 495,712
Annual Return (9%).................................. 0 495,712 565,316
Distributions Against Cumulative Annual Return...... 0 0 0
----------- ----------- -----------
Ending Cumulative Annual Return..................... 0 495,712 1,061,028
Adjusted Capital Contributions and Cumulative Annual
Return............................................ 3,286,000 6,777,006 7,342,322
</TABLE>
<TABLE>
<CAPTION>
1990 1991 1992
----------- ----------- -----------
<S> <C> <C> <C>
Beginning Adjusted Capital Contributions............ $ 6,281,294 $ 6,281,294 $ 6,281,294
Distributions Applied to Capital.................... 0 0 0
----------- ----------- -----------
Ending Adjusted Capital Contributions............... 6,281,294 6,281,294 6,281,294
Beginning Cumulative Annual Return.................. 1,061,028 1,626,344 2,191,660
Annual Return (9%).................................. 565,316 565,316 565,316
Distributions Against Cumulative Return............. 0 0 0
----------- ----------- -----------
Ending Cumulative Annual Return..................... 1,626,344 2,191,660 2,756,976
Adjusted Capital Contributions and Cumulative Annual
Return............................................ 7,907,638 8,472,954 9,038,270
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Beginning Adjusted Capital Contributions............ $ 6,281,294 $ 6,281,294 $ 6,281,294
Distributions Applied to Capital.................... 0 0 0
----------- ----------- -----------
Ending Adjusted Capital Contributions............... 6,281,294 6,281,294 6,281,294
Beginning Cumulative Annual Return.................. 2,756,976 3,322,292 3,887,608
Annual Return (9%).................................. 565,316 565,316 565,316
Distributions Against Cumulative Annual Return...... 0 0 0
----------- ----------- -----------
Ending Cumulative Annual Return..................... 3,322,292 3,887,608 4,452,924
Adjusted Capital Contributions and Cumulative Annual
Return............................................ 9,603,586 10,168,902 10,734,218
</TABLE>
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Beginning Adjusted Capital Contributions............ $ 6,281,294 $ 6,281,294 $ 6,281,294
Distributions Applied to Capital.................... 0 0 0
----------- ----------- -----------
Ending Adjusted Capital Contributions............... 6,281,294 6,281,294 6,281,294
Beginning Cumulative Annual Return.................. 4,452,924 5,018,240 5,583,556
Annual Return (9%).................................. 565,316 565,316 565,316
Distributions Against Cumulative Annual Return...... 0 0 0
----------- ----------- -----------
Ending Cumulative Annual Return..................... 5,018,240 5,583,556 6,148,872
Adjusted Capital Contributions and Cumulative Annual
Return............................................ 11,299,534 11,864,850 12,430,166
</TABLE>
2
<PAGE> 8
<TABLE>
<CAPTION>
9/30/99
-----------
(UNAUDITED)
<S> <C>
Beginning Adjusted Capital Contributions.................... 6,281,294
Distributions Applied to Capital............................ 0
-----------
Ending Adjusted Capital Contributions....................... 6,281,294
Beginning Cumulative Annual Return.......................... 6,148,872
Annual Return (9%).......................................... 423,987
Distributions Against Cumulative Annual Return.............. 0
-----------
Ending Cumulative Annual Return............................. 6,572,859
Adjusted Capital Contributions and Cumulative Annual
Return.................................................... 12,854,153
</TABLE>
THE GENERAL PARTNER
GENERAL
The General Partner is a Delaware corporation formed for the purpose of
acting as the General Partner for the Partnership.
GENERAL PARTNER'S POWERS AND RIGHT TO SELL THE PROPERTY
The General Partner has broad powers to manage the business and affairs of
the Partnership and to sell the Property consistent with its fiduciary duties
under the Partnership Agreement. However, pursuant to Section 5.3 (b) of the
Partnership Agreement, the General Partner may not sell or dispose of all or
substantially all the assets of the Partnership in a single transaction or under
a single plan without the consent of a majority in interest of the Limited
Partners unless in connection with a liquidation of the Partnership or in the
event that the net proceeds of the sale will be sufficient to return the Limited
Partners' Adjusted Capital Contributions plus their Unpaid Cumulative Return.
RELATIONSHIP WITH AFFILIATES
The General Partner is an affiliate of EPC, the holder of record of
approximately 75% of the Units. Both the General Partner and EPC are indirect
subsidiaries of The Fidelity Mutual Life Insurance Company (In Rehabilitation)
("Fidelity Mutual").
The following organization chart shows the relationship between Fidelity
Mutual, EPC and the General Partner.
THE FIDELITY MUTUAL LIFE INSURANCE COMPANY
(IN REHABILITATION)
owns 100%
FML HOLDINGS COMPANY, INC.
owns 100%
FIDELITY ENTERPRISES, INC.
<TABLE>
<S> <C>
owns 100% owns 100%
FMG WESTERN REGION ACQUISITIONS, INC. EQUITY PRODUCTS CORPORATION
(GENERAL PARTNER OF FMG RITA RANCH (75% OWNER OF FMG RITA RANCH
LIMITED PARTNERSHIP) LIMITED PARTNERSHIP)
</TABLE>
3
<PAGE> 9
On November 6, 1992, Fidelity Mutual's Board of Directors entered into a
voluntary agreement with the Commonwealth of Pennsylvania's Department of
Insurance to place Fidelity Mutual into a state-directed rehabilitation (the
"Rehabilitation"). The General Partner was immediately advised of the
Rehabilitation. The Rehabilitation is still in progress. The Partnership is a
separate entity from Fidelity Mutual, with all of its reserve funds and assets
held in completely segregated accounts. Management of the General Partner has
been kept advised of the status of the Rehabilitation and the potential
consequences that might result from the approval of Rehabilitation plans
submitted to the court with jurisdiction over the Rehabilitation.
Fidelity Mutual filed a revised Rehabilitation plan on June 30, 1998 (the
"Plan") and the Plan will affect all of Fidelity Mutual's assets, including its
ownership of the General Partner and EPC. Although the capital stock of the
General Partner and EPC will be subject to the Plan, none of the assets of the
Partnership will be subject to the Plan.
Under the Plan, all of Fidelity Mutual's assets are to be transferred to a
stock life insurance company Fidelity Mutual currently owns. The Plan envisions
that this company will be 100% owned by another Fidelity Mutual subsidiary. This
subsidiary will sell in excess of 50% of its common stock to a non-affiliated
investor, with the balance of the ownership interest in the company remaining
with the policy holders of Fidelity Mutual. Following the sale of stock, the
investor will have management control over such company. If the proposed sale
and subsequent dissolution and liquidation of the Partnership does not occur
prior to the implementation of the Plan, the General Partner and EPC will be
indirect wholly owned subsidiaries of the company controlled by the new
investor.
DIRECTORS AND OFFICERS OF THE GENERAL PARTNER
The Partnership does not have any directors or officers. The General
Partner manages and controls the affairs of the Partnership and has
responsibility for all aspects of the Partnership's operations. The current
executive officers and directors of the General Partner are identified and
described below. Officers and directors serve until their successors have been
elected.
Robert R. Harris is a Vice President of the General Partner. Mr. Harris is
also an officer and director of various other subsidiaries of Fidelity Mutual.
Mr. Harris is Senior Vice President and Chief Financial Officer of Fidelity
Mutual. Mr. Harris is also a certified public accountant.
Arthur W. Mullin is a Director, President and Treasurer of the General
Partner. Mr. Mullin is also an officer and director of various other
subsidiaries of Fidelity Mutual. Mr. Mullin was appointed Senior Vice President
and Director of Real Estate for Fidelity Mutual in June 1993 and served in that
capacity until January 31, 1995. He is currently President of KMR Management,
Inc., a management advisory firm which provides advice to corporations and
institutions regarding corporate, financial and real estate matters. Before
joining Fidelity Mutual, Mr. Mullin served as President of KMR Management, Inc.
Mr. Mullin received a B.S. in Political Science and a M.S. in Education from St.
Joseph's University, Philadelphia, Pennsylvania.
Robert L. Robinson is a Vice President of the General Partner. Mr. Robinson
is also an officer and director of various other subsidiaries of Fidelity
Mutual. Mr. Robinson is Senior Vice President -- Operations of Fidelity Mutual.
Mr. Robinson received his B.A. in Mathematics from Millersville University and a
M.B.A. from Drexel University, Philadelphia, Pennsylvania.
William S. Taylor is Director and Vice President of the General Partner.
Mr. Taylor is also an officer and director of various other subsidiaries of
Fidelity Mutual. Mr. Taylor is the Deputy Insurance Commissioner for
Liquidations, Rehabilitations and Special Funds for the Commonwealth of
Pennsylvania. Mr. Taylor has a bachelor's degree in Economics from Elizabethtown
college and a masters degree in Governmental Administration from the University
of Pennsylvania.
Robert Bixler is Secretary of the General Partner. Mr. Bixler is also the
Secretary of various other subsidiaries of Fidelity Mutual. Mr. Bixler is Vice
President and Investment Counsel of Fidelity Mutual. Mr. Bixler received his
A.B. degree in Economics from Temple University, and his J.D. degree from Temple
University Law School, Philadelphia, PA. He is a member of the American Bar
Association and the Philadelphia Bar Association.
4
<PAGE> 10
Margaret Tamasitis is Assistant Secretary of the General Partner. Ms.
Tamasitis is also Assistant Secretary of various other subsidiaries. Ms.
Tamasitis is a Second Vice President of Fidelity Mutual in the Controller's
office and has been with Fidelity Mutual for 28 years. Ms. Tamasitis received
her B.S. degree in Accounting from Temple University, Philadelphia, PA.
EXECUTIVE COMPENSATION
As of the date of this Information Statement, the Partnership did not pay
remuneration to any officers of the General Partner. Fees which have been paid
or are payable to the General Partner are described under "Certain Relationships
and Related Transactions" below.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the Partnership Agreement, the General Partner is entitled to a
management fee. This fee is computed as .2% of the cost of the Property. In
1998, 1997 and 1996, the Partnership was charged an annual management fee of
$15,000 by the General Partner. The General Partner anticipates that management
fees in 1999 will amount to $8,000. The cumulative amount of such fee may not
exceed $128,000, and cumulative fees charged since the inception of the
Partnership have amounted to $120,000 as of December 31, 1998. However, if the
Partnership's reserves are exhausted by the time of the Sale, any unpaid portion
of this fee will be paid, without interest, from the proceeds of the Sale of the
Property after the Limited Partners have received distributions equal to their
Capital Contributions and Unpaid Cumulative Return.
Under section 4.2(b) of the Partnership Agreement, the Partners would be
entitled to receive distributions in accordance with positive balances in their
Capital Accounts, after taking into account all of the Profit and Loss of the
Partnership (including from the Sale and subsequent dissolution).
5
<PAGE> 11
THE PROPERTY
BACKGROUND
On March 19, 1987, the Partnership acquired the Property for a
consideration of $6,737,970. The Partnership still owns the entire Property. The
Property consists of approximately 118 acres of unimproved land situated at the
southwest corner of Old Vail and Houghton Roads in the Rita Ranch subdivision
located in Tucson, Arizona's southeastern outskirts. It is comprised of two
contiguous parcels, one of which is approximately 110 acres and is zoned
industrial (the "Industrial Parcel") and the other of which is approximately 8
acres and is zoned commercial (the "Commercial Parcel").
Rita Ranch is a 2,700 acre master planned development of which
approximately 1,200 acres are designated for industrial use. Properties within
Rita Ranch are subject to conditions, covenants, restrictions and a
master-planned layout which affect zoning and land use patterns.
To date, there are only four improved industrial properties utilizing
approximately 50 acres situated within the Rita Ranch community. While Rita
Ranch contains predominately residential land uses with areas designated for
commercial and industrial development, the majority of the neighborhood is
either in use or designated for industrial related purposes and is largely
unoccupied.
MARKET CONDITIONS
Limited commercial growth in the vicinity of the Property to serve
residents' staple needs is anticipated for the Rita Ranch area. Significant
retail or office demand will likely continue to be served from east side
commerce centers until the residential population reaches levels to support
pre-leased development. Additionally, the remote location of Rita Ranch,
restrictive conditions, covenants, and considerable amounts of available and
affordable industrially zoned land throughout metropolitan Tucson has dampened
demand for industrial property in the area for many years. Current market
conditions indicate that there is still an abundance of land available. This
area has plentiful supply of affordable, zoned land ready for development.
VALUATION/APPRAISAL
The value of the Property was written down both in 1990 and 1992. An
appraisal of the Property performed in 1990 indicated a value of $10,000 per
acre. As a result, the Partnership wrote down the value of the Property to
$1,180,000.
During 1992, it was the General Partner's view that the absence of sales in
the land markets southeast of Tucson during the period 1989-1991 would continue
for the following few years, especially since the supply of industrial land
greatly exceeded demand. In light of these conditions, management believed that
the Property could not be marketed at its previously appraised value of $10,000
per acre and wrote its value down to approximately $3,000 per acre.
In October 1996, an appraisal was performed on the Property. The appraisal
was performed by S.M. Corbett & Associates who has no affiliation with the
General Partner or EPC. The methodology of the appraisal was to value the
Property by reference to recent sales of comparable properties in the vicinity.
Seven comparable sales were selected and analyzed. The appraisal concluded that
the visibility of the site from Houghton Road and the location near an entrance
to Rita Ranch were both positive features. In addition, the fact that eight
acres are zoned commercial at the corner of Old Vail and Houghton Road was
advantageous. The Property also provides rail access, but this positive feature
was diminished by the topography of the site which would require an estimated 15
foot ballast height and substantial engineering/grading to make rail access
feasible.
The appraisal cited various negative aspects of the Property. Among these
were the presence of a gas pipeline easement and the below-grade nature along
Houghton Road. Also, site development is subject to restrictions which could
lead to significant screening and landscaping costs relevant to most industrial
and commercial use.
6
<PAGE> 12
The appraiser estimated the "As Is" value of the Property to be $475,000 or
approximately $4,000 per acre.
MARKETING OF THE PROPERTY
In the summer of 1997, the General Partner contacted three real estate
brokerage firms and requested marketing proposals for the Property. Two of the
three firms responded.
The first realtor who responded, Grubb & Ellis, recommended an asking price
of $1.5 million with an expected sale price of $900,000 to $1.25 million. In
valuing the Property, Grubb & Ellis placed a value of $8,500 per acre or
$935,000 for the Industrial Parcel. Due to the fact that the Commercial Parcel
is zoned for commercial/retail, Grubb & Ellis placed a value on the Commercial
Parcel of $1 PSF or $300,000.
Grubb & Ellis advised that a marketing time of six to nine months should
generate interest in the Property.
The second realtor, CB Commercial, did not recommend an asking price but
estimated a sale price in the vicinity of $3000 per acre or $354,000 for both
the Industrial Parcel and Commercial Parcel.
Beginning in 1998, the General Partner listed the Property with Grubb &
Ellis. In the event of a sale pursuant to the listing, a commission of 5% will
be payable to Grubb & Ellis.
Through early 1999, three offers were received, ranging from $500,000 to
$560,000. The General Partner, on behalf of the Partnership entered into an
agreement of sale on December 23, 1998 for $560,000, subject to the buyer's due
diligence review. The buyer terminated the agreement because of various Property
factors unacceptable to the buyer. After reviewing the Property and after
extensive discussions with local real estate brokers, the General Partner
believes that the prospects for increases in the market value of the Property
continue to be dim. On August 10, 1999, the General Partner, on behalf of the
Partnership, entered into the Agreement (hereafter defined) reflecting an
original sale price of $500,000.
TERMS AND CONDITIONS OF THE PROPOSED SALE
AGREEMENT OF SALE
The Agreement of Sale regarding the sale of the Property between the
Partnership and Diamond Ventures, Inc., an Arizona Corporation ("Diamond") was
entered into on August 10, 1999 and was subsequently amended by a First
Amendment to Agreement of Sale dated as of September 3, 1999, a Second Amendment
to Agreement of Sale dated as of October 4, 1999 and a Third Amendment to
Agreement of Sale dated October 12, 1999 (the Agreement of Sale, as so amended,
is referred to herein as the "Agreement").
CONSIDERATION
The Agreement sets forth a sale price for the Property of $450,000. Of that
amount, $150,000 is in escrow with the title company handling the transaction.
The remaining sale price is due in cash at closing. The original sale price of
$500,000 was reduced by $50,000 due to certain factors discovered by Diamond
during its due diligence review of the Property and the fact that Diamond could
terminate the Agreement as a result of the existence of these factors. Taxes are
to be prorated as of closing and the Partnership is to pay the premium for
standard coverage for the issuance of a title insurance policy for Diamond.
MATERIAL TERMS AND CONDITIONS
Diamond had a "due diligence" period under the Agreement whereby it was
afforded the opportunity to review, inspect and analyze the Property. This
period expired on October 14, 1999. As a result, other than the Partnership's
obligations to deliver certain instruments at the closing of the sale, Diamond
has no other contingencies under the Agreement to its obligation to purchase the
Property. Other than representations expressly made by the Partnership in the
Agreement, which representations do not survive after closing, the Partnership
is released by Diamond from any claims regarding the Property pursuant to the
Agreement.
7
<PAGE> 13
The Partnership's obligations under the Agreement are contingent upon
approval of the sale of the Property by the Commonwealth Court of Pennsylvania
by virtue of the Rehabilitation. The closing under the Agreement is to occur on
or before thirty days from the end of the due diligence period. Should the
Partnership default under the Agreement, Diamond may terminate the Agreement or
enforce the Partnership's obligations by specific performance. Should Diamond
default under the Agreement, the Partnership's sole remedy is to retain the
$150,000 escrow deposit made by Diamond.
Grubb & Ellis is to be paid a 5% commission at the closing of the sale.
ACCOUNTING TREATMENT
The Partnership maintains its accounting records on the accrual basis of
accounting. The Property, as land held for sale, is carried on the Partnership's
books at the lower of cost or fair value, $350,000 as of December 31, 1998 based
upon fair value. A loss will be realized for tax purposes as described below
under Federal Income Tax Consequences.
FAIRNESS OF THE SALE
As discussed above, the Property was appraised at various times since its
acquisition. The last appraisal of the Property was conducted in October 1996
and set forth a $475,000 "as is" market value. Of the two real estate brokerage
firms responding to the Partnership's request for proposal, one estimated a
selling price for the Property of $900,000 to $1,250,000 with a six to nine
month marketing period while the other estimated a selling price of $354,000. In
1998, the Property was listed for sale with Grubb & Ellis, the broker estimating
the higher selling price. Since that time, three offers were received by the
Partnership ranging from $500,000 to $560,000. After entering into an agreement
of sale for $560,000 with the buyer, the agreement was terminated by the buyer
due to certain unfavorable conditions of the Property. The General Partner, on
behalf of the Partnership, subsequently entered into the Agreement with Diamond
for an original sale price of $500,000. While subsequently reduced to $450,000,
the sale price is consistent with the appraised value of the Property and the
only other offers to purchase received by the Partnership.
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
Upon the closing of the sale of the Property, and the receipt by the
Partnership of the proceeds of sale, the General Partner will proceed to
dissolve and liquidate the Partnership.
DISSOLUTION
Partnership Agreement provides in Section 6.1 that the Partnership shall be
dissolved upon the sale, condemnation or other disposition of all or
substantially all of the assets of the Partnership and the collection or the
disposition of any purchase money obligations received by the Partnership in
connection with the disposition of its assets. As the Property constitutes the
Partnership's only material asset, the sale will result in the dissolution and
liquidation of the Partnership.
LIQUIDATION
The Partnership Agreement also provides in Section 6.4 that upon a
dissolution of the Partnership, the Partnership shall be terminated and
liquidated within the meaning of Treasury Section 1.704-1(b)(2)(ii)(g), and its
affairs shall be wound up as soon as practicable by the General Partner, or, if
there is no General Partner then remaining, by a person designated by the
consent of a majority in interest of the Limited Partners. The General Partner
intends to dissolve and liquidate the Partnership following the Sale of the
Property.
In winding up the affairs of the Partnership, the General Partner shall
liquidate the assets of the Partnership in such manner as the General Partner
determines, allowing a reasonable time in order to minimize losses attendant on
liquidation. Any Partner may purchase any of the assets at any public or private
liquidation sale.
8
<PAGE> 14
PRIORITY OF DISPOSITION OF PROCEEDS ON LIQUIDATION
On dissolution of the Partnership, the Partnership will be liquidated and
the proceeds of liquidation will be applied first to the payment of obligations
of the Partnership and the expenses of liquidation and to the setting up of any
reserves for contingencies which the General Partner may consider necessary. Any
remaining proceeds of liquidation and any other funds will then be distributed
to the Partners. After such distributions and all allocations of Profit and Loss
have been made, the General Partner will be obligated to make a Capital
Contribution to the Partnership in an amount equal to the negative amount, if
any, of its Capital Account to a maximum of $45,000. Any amount so contributed
by the General Partner will be distributed to the Limited Partners in proportion
to the then positive balances in their Capital Accounts.
APPRAISAL RIGHTS
Section 17-212 of the Delaware Revised Uniform Limited Partnership Act
provides that a partnership agreement may provide for contractual appraisal
rights for a partnership interest in a limited partnership held by any class,
group of partners, or partnership interests in connection with the amendment of
a partnership agreement. Dissenters' rights granted to holders of corporate
securities by state statute are not provided to limited partners under the
Delaware Revised Uniform Limited Partnership Act. The Partnership Agreement does
not provide for contractual appraisal rights in connection with the sale of all
or substantially all of the Partnership's property or in the subsequent
dissolution and liquidation of the Partnership. Therefore, in the event the
proposals for the sale of the Partnership's property and dissolution and
liquidation of the Partnership are adopted, Limited Partners who oppose the
adoption of such proposals will not have the right to dissent and demand payment
in cash for the fair value of their Units.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
No individual director or officer of the General Partner nor such directors
or officers as a group, owns any Units. The General Partner owns a general
partnership interest which enables it to receive 1% of cash distributions until
the Limited Partners have received a return of their Capital Contributions plus
cumulative distributions equal to 9% non-compounded Cumulative Annual Return of
their Adjusted Capital Contributions as those terms are defined in the
Partnership Agreement. Thereafter, the General Partner is entitled to receive a
9% return on any portion of its $600,000 capital contribution and the balance,
80% to the Limited Partners and 20% to the General Partner. To September 30,
1999, the General Partner has made capital contributions of $373,100. The
General Partner will share in taxable income to reflect cash distributions, or
to the extent there are losses, 1% of such losses.
In the original public offering of the Units, EPC purchased 5,008.3 Units
for $915 per Unit, which amount is net of selling commissions, for an aggregate
purchase price of $4,582,560. Units owned by EPC are designated in the
Partnership Agreement as General Partnership Units. The General Partnership
Units are more fully described in the Partnership Agreement.
As of the date of this Information Statement, no other person or "group"
(as that term is used in Section 13(d)(3) of the Securities Exchange Act of
1934) was known by the Partnership to beneficially own more than five percent of
the Units of the Partnership.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER UNITS PERCENT
- ------------------------------------ ------ -------
<S> <C> <C>
Equity Products Corporation................................ 5008.3 75%
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
Upon sale of the Property, the Partnership will realize a long-term capital
loss which will be allocated to the Partners in accordance with Article IV of
the Partnership Agreement.
9
<PAGE> 15
VOTING
RECORD DATE
The General Partner has established the close of business on November 5,
1999 as the Record Date for determining the Limited Partners entitled to notice
of, and to vote at, the Special Meeting. On that date, the Partnership had
issued and outstanding 6,707 Units. No matters other than the proposed sale of
substantially all the Partnership's property, the resulting dissolution and
liquidation of the Partnership and certain procedural matters may be discussed
or voted upon at the Special Meeting. Limited Partners will possess one vote for
each Unit eligible to be voted that they hold.
NO VOTE REQUIRED BY OTHER THAN EPC
Under the Partnership Agreement, approval of the sale of all or
substantially all of the Partnership's property resulting in the dissolution and
liquidation of the Partnership requires the affirmative vote or consent of
holders of at least a majority of the Units. As of November 5, 1999,
approximately 75% of the Units were owned of record by EPC. EPC has indicated
its intention to vote in favor of the sale of the Partnership's property and the
subsequent dissolution and liquidation of the Partnership. AS A RESULT, ASSUMING
EPC VOTES IN FAVOR OF THE SALE AND SUBSEQUENT DISSOLUTION AND LIQUIDATION OF THE
PARTNERSHIP, NO VOTE ON THE PART OF ANY OTHER LIMITED PARTNER WILL BE NECESSARY
TO EFFECTUATE THE SALE AND SUBSEQUENT DISSOLUTION AND LIQUIDATION OF THE
PARTNERSHIP.
AVAILABLE INFORMATION
The Partnership is subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements, and other information that the Partnership has filed with the
Commission may be inspected and copied at the public reference facilities that
the Commission maintains at 450 Fifth Street, N.W., Room 1024, Washington, DC
20549 and at the Commission's regional offices located at Room 3190, Northwest
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor, New York, New York 10048. In addition, such reports,
proxy statements, and other information concerning the Partnership may be
obtained from the Public Reference Section of the Commission, Washington, DC
20549 at prescribed rates. The Partnership's reports, proxy statements, and
other information filed with the Commission may also be inspected at the offices
of the New York Stock Exchange at 20 Broad Street, New York, New York 10005.
They are also available through the Commission's Web site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Partnership hereby incorporates herein by reference the Financial
Information (as hereinafter defined) appearing in: (i) the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1998, Commission File No.
0-16601, (ii) the Partnership's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1999 and June 30, 1999 and (iii) the Partnership's periodic
reports, and amendments, if any, filed with the Commission under the Exchange
Act after the date hereof but on or before the date of Special meeting. The
Partnership also hereby incorporates herein by reference any current reports
filed with the Commission after the date hereof but on or before the Special
Meeting. Any statement contained herein or in a document incorporated by
reference herein, however, shall be deemed to be modified or superseded for the
purposes of this Information Statement to the extent that a statement contained
in a subsequently dated document that is considered part of this Information
Statement is inconsistent therewith. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement. The term "Financial Information"
shall mean any financial statements, supplementary financial information, and
management discussion and analysis of financial condition and results of
operations.
10
<PAGE> 16
Upon request and without charge, the Partnership will send to any Limited
Partner a copy of any document incorporated herein by reference, excluding any
exhibits to such document. Any such request should be made to the General
Partner at the address or telephone number set forth on the back cover page of
this Information Statement. The General Partner will fulfill each such request
by mailing the requested document to the requesting Limited Partner by first
class mail within one business day after receiving the request. Requests should
be made to Margaret M. Tamasitis, Assistant Secretary, FMG Western Region
Acquisitions, Inc., 250 King of Prussia Road, Radnor, PA 19087 (610) 964-7234.
11
<PAGE> 17
APPENDIX I
GLOSSARY OF DEFINED TERMS
"Agreement" or "Agreement of Sale" means the Agreement of Sale between the
Partnership and Diamond Ventures, Inc., dated August 10, 1999, as amended by a
First Amendment to Agreement of Sale dated as of September 3, 1999, a Second
Amendment to Agreement of Sale dated as of October 4, 1999 and a Third Amendment
to Agreement of Sale dated as of October 12, 1999.
"Commission" means the Securities and Exchange Commission.
"Commercial Parcel" means that portion of the Property of approximately 8
acres which is zoned commercial.
"Diamond" means Diamond Ventures, Inc., an Arizona corporation.
"EPC" means Equity Products Corporation, an affiliate of the General
Partner.
"Exchange Act" means of the Securities and Exchange Act of 1934, as
amended.
"Fidelity Mutual" means The Fidelity Mutual Life Insurance Company (In
Rehabilitation).
"Financial Information" means any financial statements, supplementary
financial information, and management discussion and analysis of financial
condition and results of operations.
"General Partner" means FMG Western Region Acquisitions, Inc., a Delaware
corporation.
"Industrial Parcel" means that portion of the Property of approximately 110
acres which is zoned industrial.
"Information Statement" means this Information Statement.
"Limited Partners" means the limited partners of the Partnership.
"Partnership" means FMG Rita Ranch Limited Partnership, a Delaware limited
partnership.
"Partnership Agreement" means the Amended and Restated Limited Partnership
Agreement of FMG Rita Ranch Limited Partnership, dated as of December 7, 1987.
"Plan" means the Rehabilitation plan of Fidelity Mutual.
"Property" means two contiguous parcels of unimproved land of approximately
118 acres, located at the southwest corner of Old Vail and Houghton Roads in the
Rita Ranch subdivision near Tucson, Arizona.
"Rehabilitation" means the state-directed rehabilitation of Fidelity
Mutual.
"Sale" means the proposed sale of the Property under the Agreement of Sale
to Diamond Ventures, Inc. (or its assignee) for a consideration of $450,000.
"Units" means the outstanding units of limited partnership interest in the
Partnership.
I-1
<PAGE> 18
ATTACHMENT A
AGREEMENT OF SALE, AS AMENDED BY
FIRST AMENDMENT TO AGREEMENT OF SALE,
SECOND AMENDMENT TO AGREEMENT OF SALE
AND THIRD AMENDMENT TO AGREEMENT OF SALE
<PAGE> 19
AGREEMENT OF SALE
BETWEEN
FMG RITA RANCH LIMITED PARTNERSHIP
(AS SELLER)
AND
DIAMOND VENTURES, INC.
(AS PURCHASER)
EFFECTIVE DATE: AUGUST 10, 1999
RELATING TO:
SALE AND ACQUISITION OF APPROXIMATELY 118 ACRES,
LOCATED IN THE RITA RANCH SUBDIVISION OF TUCSON, ARIZONA,
COMMONLY KNOWN AS "RITA RANCH"
<PAGE> 20
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "AGREEMENT") is made and entered into by and
between FMG RITA RANCH LIMITED PARTNERSHIP, a Delaware limited partnership
("SELLER"), and DIAMOND VENTURES, INC., an Arizona corporation ("PURCHASER").
W I T N E S S E T H:
ARTICLE I
GENERAL
1.1 Agreement to Sell and Purchase. Seller hereby agrees to sell and
convey to Purchaser, and Purchaser hereby agrees to purchase and accept from
Seller, for the Purchase Price (hereinafter defined) and upon and subject to the
terms and conditions hereinafter set forth, all of the following described
property (hereinafter referred to collectively as the "PROPERTY"):
(a) Those certain tracts of land (the "LAND") containing approximately
118 acres, located at the southwest corner of Old Vail and Houghton Roads
in the Rita Ranch Subdivision of Tucson, Arizona and more particularly
described on Exhibit "A" attached hereto; and
(b) All of the rights and appurtenances pertaining to the Land,
including all right, title and interest of Seller in and to adjacent
streets, alleys, easements and rights-of-way.
1.2 Purchase Price. The purchase price (the "PURCHASE PRICE") to be paid
for the Property shall be Five Hundred Thousand and No/100 Dollars
($500,000.00), payable in cash at the Closing (hereinafter defined).
1.3 Escrow Deposit.
Concurrently with Purchaser's execution and delivery of this Agreement to
Seller, and as a condition to Seller's obligations hereunder, Purchaser shall
deposit with Stewart Title & Trust of Phoenix, Inc., whose address is 2398 East
Camelback Road, Suite 130, Phoenix, Arizona 85016 (Attn: Derek J. Sivley) (the
"TITLE COMPANY"), the principal sum of Twenty-Five Thousand and no/100 Dollars
($25,000.00) (the "INITIAL DEPOSIT") as an earnest money deposit to be invested
by the Title Company in an interest-bearing account approved by Seller and
Purchaser and to be held and disbursed by the Title Company strictly in
accordance with the terms and provisions of this Agreement. Unless Purchaser has
previously terminated this Agreement pursuant to Section 2.2(c) below before
expiration of the Inspection Period, Purchaser shall deposit with the Title
Company an additional sum of One Hundred Twenty-Five Thousand and no/100 Dollars
($125,000.00) (the "ADDITIONAL DEPOSIT") as an additional earnest money deposit
to be invested by the Title Company in the interest-bearing earnest money
account and to be held and disbursed by the Title Company strictly in accordance
with the terms and conditions of this Agreement. Seller and Purchaser agree that
$10.00 of the Initial Deposit shall immediately become the property of Seller
and be considered independent consideration paid by Purchaser to Seller for the
rights granted to Purchaser in this Agreement. In the event Purchaser fails to
make the Initial Deposit with the Title Company concurrently with the execution
and delivery of this Agreement to Seller, or to make the Additional Deposit
before expiration of the Inspection Period, Seller shall have the right to
terminate this Agreement by written notice to Purchaser. The amount(s) of the
Initial Deposit, the Additional Deposit, and all accrued interest thereon, less
the $10.00 independent consideration to Seller, are hereinafter referred to as
the "ESCROW DEPOSIT." At the end of the Inspection Period, the Escrow Deposit
shall be nonrefundable to Purchaser except as otherwise provided in this
Agreement. At the Closing (hereinafter defined), the Escrow Deposit shall be
applied to the payment of the Purchase Price.
<PAGE> 21
ARTICLE II
TITLE COMMITMENT; INSPECTION BY PURCHASER
2.1 Title Commitment and Survey.
(a) Within fifteen (15) days after the date of this Agreement, Seller
shall cause to be issued and delivered to Purchaser a commitment for title
insurance (the "TITLE COMMITMENT") issued by Stewart Title Guaranty Company
(the "TITLE INSURER"), accompanied by copies of all recorded documents
affecting the Property which are listed as title exceptions in Schedule B
of the Title Commitment.
(b) Within twenty (20) days after its receipt of the Title Commitment
and copies of all recorded exceptions to title noted in Schedule B thereof,
Purchaser shall give Seller written notice of any objections it may have to
the condition of title as set forth in the Title Commitment. If Purchaser
fails to give a written notice to Seller of any objections to title within
the 20-day period, Purchaser shall be deemed to have waived all objections
to title and to have accepted the condition of title as shown in the Title
Commitment. In the event Purchaser gives a written notice to Seller of any
objections to title within the 20-day period, Seller shall have the right,
but not the obligation, to cure Purchaser's objections; provided, however,
Seller shall satisfy, at Closing, any liens for a fixed sum which were
created by Seller including, without limitation, deed of trust and mortgage
liens. In the event Seller is unwilling or unable to cure Purchaser's
objections (other than the liens described in the immediately preceding
sentence), Seller shall promptly notify Purchaser. Within ten (10) days
after receipt of Seller's notice, Purchaser shall either (i) accept title
in its current condition, without any adjustment in the Purchase Price, in
which event Purchaser's objections shall be deemed to have been waived for
all purposes, or (ii) terminate this Agreement by written notice to Seller
and the Title Company, in which event the Escrow Deposit shall be
immediately paid to Purchaser. If Purchaser fails to terminate this
Agreement by written notice to Seller and the Title Company within such
10-day period, Purchaser shall be deemed to have elected to have accepted
title in its current condition without any adjustment in the Purchase
Price, and Purchaser's objections shall be deemed to have been waived for
all purposes. Provided that Purchaser shall have delivered to Seller and to
the Title Company within forty-five (45) days of the date of this Agreement
an ALTA survey certified by a licensed surveyor acceptable to the Title
Company (the "SURVEY"), Purchaser shall have an additional seven (7) days
after receipt of any amended Title Commitment, and any documents listed in
Schedule B thereto, to give Seller written notice of any title exception(s)
not previously listed to which Purchaser objects (including, without
limitation, any survey exception added to the Title Commitment by reason of
the results of the Survey), and in such event the foregoing provisions of
this subparagraph (b) shall govern the treatment of such objection(s). Any
items or exceptions to title that are accepted or waived by Purchaser or
deemed to have been accepted or waived by Purchaser are hereinafter
referred to as the "PERMITTED EXCEPTIONS."
2.2 Review and Inspection by Purchaser.
(a) Purchaser shall have the right to inspect the Property for a
period of sixty (60) days from the date of this Agreement (this 60-day
period being called the "INSPECTION PERIOD"). The costs and expenses of
such inspection shall be borne solely by Purchaser, subject to Purchaser's
rights under Section 2.3 below.
(b) Within ten (10) days after the date of this Agreement, Seller
shall furnish to Purchaser copies of such information related to the
Property as is identified generally by Purchaser in a written request to
Seller and as is currently in Seller's possession (the "PROPERTY
DOCUMENTS"). To the extent available in Seller's files, the Property
Documents shall include all:
(i) environmental reports;
(ii) surveys;
(iii) flood zone maps; and
2
<PAGE> 22
(iv) ad valoreum tax statements or assessments for the current year
and the preceding two calendar (2) years.
Subject to the qualification in Section 10.15 below, all information which
may be provided by Seller to Purchaser or obtained by Purchaser relating to
the Property in the course of its review shall be treated as confidential
information by Purchaser. Except as specifically set forth in Section 7.5,
Seller makes and shall make no representations or warranties whatsoever
regarding the accuracy of any information prepared by or on behalf of
Seller or delivered to Purchaser by Seller or, upon Seller's request, any
third party, in connection with this Agreement or the Property. Purchaser
shall defend, indemnify and hold Seller harmless from and against any and
all liabilities, claims, causes of action, demands, actions, losses,
damages, costs or expenses (including, without limitation, attorneys' fees
and court costs) incident to, resulting from, or in any way arising out of
any entry upon or inspection of the Property by or on behalf of Purchaser.
(c) If Purchaser is not satisfied with the results of such inspections
for any reason whatsoever, in Purchaser's sole and absolute discretion,
Purchaser shall have the right to terminate this Agreement by written
notice to Seller given prior to 5:00 p.m., Arizona time ("LOCAL TIME") on
the final day of the Inspection Period, whereupon the Escrow Deposit shall
be immediately paid to Purchaser. If Purchaser fails to terminate this
Agreement pursuant to this sec.2.2 prior to 5:00 p.m. Local Time on the
final day of the Inspection Period, Purchaser shall be deemed to have
waived its right under this Section 2.2 to terminate the Agreement during
the Inspection Period, and the Escrow Deposit shall be nonrefundable to
Purchaser, except as elsewhere specifically set forth herein.
2.3 Environmental Studies and Soil Tests. Purchaser acknowledges that,
prior to the expiration of the Inspection Period, Purchaser will conduct any
environmental and soils tests with respect to the Property which Purchaser may
deem necessary or advisable and Purchaser shall rely upon such tests in electing
whether or not to purchase the Property. In the event any such test performed,
or caused to be performed by Purchaser, discloses the presence of any hazardous
materials, hazardous wastes or other environmental contamination in violation of
applicable environmental laws and in the event the reasonable cost of
remediation of such violation(s) would exceed Fifty Thousand Dollars ($50,000),
then Seller or Purchaser shall have the right to terminate this Agreement by
written notice given to the other party at any time prior to 5:00 p.m., Local
Time on the final day of the Inspection Period, whereupon the Escrow Deposit
shall be promptly refunded to Purchaser and all obligations hereunder shall
terminate, except as otherwise provided herein. As between Seller and Purchaser,
Purchaser's acquisition of the Property shall constitute a conclusive
presumption that the Property was free and clear of any and all hazardous
materials and wastes or other environmental contamination on the Closing Date.
Purchaser hereby releases Seller now and forever from any and all causes of
action, claims, demands, or liabilities, whether direct or indirect, relating to
or arising from the existence of toxic or hazardous wastes or materials of any
kind on the Property; arising from any use of the Property; or arising from the
violation of any environmental or similar laws with respect to the Property
including, without limitation, The Comprehensive Environmental Response,
Compensation and Liability Act, as amended by The Superfund Amendments and
Reauthorization Act, The Resource Conservation and Recovery Act, and the
environmental laws of the State of Arizona; provided, however, that Purchaser
does not release Seller from suits or other proceedings brought against
Purchaser by third parties or entities unrelated to Purchaser for claims arising
out of matters existing prior to Closing or, except as stated in the immediately
succeeding sentence, agree to indemnify or hold harmless Seller from any claims,
damages or liabilities to any third parties. In addition, Purchaser hereby
agrees to indemnify Seller and to hold and defend Seller harmless from and
against any and all claims, causes of action, costs, expenses, damages,
liabilities or losses asserted against, suffered or incurred by Seller as a
result of the use, spill, disposal, manufacture, storage or release of any
hazardous or toxic wastes, substances, chemicals or materials by Purchaser or by
any of Purchaser's agents or employees on or about the Property. The foregoing
indemnification shall include, without limitation, (i) Seller's attorneys' fees
and court costs incurred by Seller in connection with any of the foregoing which
are awarded by the court and (ii) any costs or expenses assessed against or
incurred by Seller in connection with any of the foregoing as a result of any
removal or remedial obligations imposed upon Seller with respect to the Property
under any environmental laws. The indemnifications contained in this Section 2.3
shall survive the
3
<PAGE> 23
Closing or the termination of this Agreement, as applicable. If Seller
terminates this Agreement pursuant to this Section 2.3, upon Purchaser's
delivery to Seller of all appraisals, engineering, environmental and property
reports, the Survey and all other due diligence information obtained by
Purchaser from unrelated third parties, Seller shall reimburse Purchaser for its
verified out-of-pocket expenses to obtain these items up to Five Thousand
Dollars ($5,000).
ARTICLE III
NO REPRESENTATIONS OR WARRANTIES BY SELLER
PURCHASER IS ACQUIRING THE PROPERTY "AS IS" WITH ALL FAULTS AND DEFECTS,
AND PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS SPECIFICALLY SET FORTH IN
ARTICLE VII, AND SUBJECT TO THE LIMITATIONS OF SECTION 6.2 BELOW, SELLER HAS NOT
MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES,
PROMISES, COVENANTS, AGREEMENTS, OR GUARANTIES OF ANY KIND OR CHARACTER
WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR
FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE NATURE, QUALITY OR
CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL, AND
GEOLOGY, OR THE PRESENCE OR ABSENCE OF ANY POLLUTANT, HAZARDOUS WASTE, GAS OR
SUBSTANCE OR SOLID WASTE ON OR ABOUT THE PROPERTY, (B) THE INCOME TO BE DERIVED
FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL
ACTIVITIES AND USES WHICH PURCHASER MAY INTEND TO CONDUCT THEREON, (D) THE
COMPLIANCE OF THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR
REGULATIONS OF ANY GOVERNMENTAL AUTHORITY OR BODY HAVING JURISDICTION INCLUDING,
WITHOUT LIMITATION, ALL APPLICABLE ZONING LAWS, (E) THE HABITABILITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY, OR (F) ANY
OTHER MATTER RELATED TO OR CONCERNING THE PROPERTY; AND EXCEPT AS SPECIFICALLY
SET FORTH IN ARTICLE VII, AND SUBJECT TO THE LIMITATIONS OF SECTION 6.2 BELOW,
PURCHASER SHALL NOT SEEK RECOURSE AGAINST SELLER ON ACCOUNT OF ANY LOSS, COST OR
EXPENSE SUFFERED OR INCURRED BY PURCHASER WITH REGARD TO ANY OF THE MATTERS
DESCRIBED IN CLAUSES (A) THROUGH (F) ABOVE. EXCEPT AS SPECIFICALLY SET FORTH IN
ARTICLE VII, PURCHASER ACKNOWLEDGES THAT PURCHASER, HAVING BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, IS RELYING SOLELY ON ITS OWN INVESTIGATION
OF THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY OR ON
BEHALF OF SELLER. PURCHASER FURTHER ACKNOWLEDGES THAT NO INDEPENDENT
INVESTIGATION OR VERIFICATION HAS BEEN OR WILL BE MADE BY SELLER WITH RESPECT TO
ANY INFORMATION SUPPLIED BY OR ON BEHALF OF SELLER CONCERNING THE PROPERTY, AND
EXCEPT AS SPECIFICALLY SET FORTH IN ARTICLE VII, SELLER MAKES NO REPRESENTATION
AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION, IT BEING INTENDED BY THE
PARTIES THAT PURCHASER SHALL VERIFY THE ACCURACY AND COMPLETENESS OF SUCH
INFORMATION. PURCHASER ACKNOWLEDGES THAT THE DISCLAIMERS, AGREEMENTS AND OTHER
STATEMENTS SET FORTH IN THIS ARTICLE III ARE AN INTEGRAL PORTION OF THIS
AGREEMENT AND THAT SELLER WOULD NOT AGREE TO SELL THE PROPERTY TO PURCHASER FOR
THE PURCHASE PRICE WITHOUT THE DISCLAIMERS, AGREEMENTS AND OTHER STATEMENTS SET
FORTH IN THIS ARTICLE III.
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<PAGE> 24
ARTICLE IV
THE CLOSING
4.1 The Closing Date. Subject to the provisions of Section 8.1 and 8.2
below, the consummation of the transactions contemplated by this Agreement (the
"CLOSING") shall take place in the offices of the Title Company, at or before
1:00 p.m., Local Time on or before thirty (30) days after the last day of the
Inspection Period (the "CLOSING DATE").
4.2 Seller's Obligations at the Closing. Subject to the terms and
conditions hereof and contemporaneously with the performance by Purchaser of its
obligations set forth in sec.4.3 below, Seller shall deliver or cause to be
delivered to the Title Company for the benefit of Purchaser the following items
at the Closing:
(a) A special warranty deed (the "Deed") executed by Seller, conveying
the Property to Purchaser subject to the Permitted Exceptions, in the form
of the Deed attached hereto as Exhibit "B", together with an Affidavit of
Property Value as required by Arizona law (the "AFFIDAVIT OF VALUE");
(b) A certificate of nonforeign status (the "Certificate of Nonforeign
Status"), executed by Seller, in the form of the Certificate of Nonforeign
Status attached hereto as Exhibit "C";
(c) An ALTA Extended Coverage Owner's Policy of Title Insurance (the
"Owner's Title Policy") issued by the Title Insurer, insuring good and
indefeasible fee simple title to the Property in Purchaser in a face amount
equal to the Purchase Price, including an endorsement deleting the
so-called "creditor's rights exclusion", and containing no exceptions other
than standard printed exceptions and the Permitted Exceptions. Purchaser
shall be solely responsible for the cost of the Survey and for satisfying
any survey requirements of the Title Insurer in connection with the
issuance of the Owner's Title Policy and shall bear any expenses for the
Owner's Title Policy in excess of the charges for a standard owner's
policy, provided that Purchaser's failure to do so shall not be deemed a
default hereunder, but shall instead be deemed Purchaser's election to
accept a standard coverage owner's title policy instead of an ALTA extended
coverage policy.); and
(d) Such other documents, instruments and matters that may be
reasonably requested by the Title Company in connection with the Closing.
The Title Company's delivery of an ALTA extended coverage policy or a
standard coverage policy, as described in Section 4.2(c), shall be a
condition precedent to Purchaser's obligation to close escrow hereunder.
4.3 Purchaser's Obligations at the Closing. Purchaser shall deliver or
cause to be delivered to the Title Company for the benefit of Seller the
following items at the Closing:
(a) The Purchase Price (less the amount of the Escrow Deposit) by wire
transfer of immediately available U.S. funds;
(b) The Affidavit of Value; and
(c) Such other documents, instruments and matters that may be
reasonably requested by the Title Company in connection with the Closing.
4.4 Closing Costs. Seller shall pay that portion of the premium
attributable to standard coverage for the issuance of the Owner's Title Policy,
the cost of recording the Deed and one-half of the escrow fees of the Title
Company. The Purchaser shall pay any incremental cost of any extended coverage
policy of owner's title insurance, one-half of the escrow fees and, except as
provided in Section 2.3, all costs of any appraisal and any engineering,
environmental or property inspections, tests or reports which Purchaser orders.
Attorneys' fees incurred by Seller and Purchaser in connection with this
transaction shall be paid by the party incurring the same.
4.5 Prorations. Ad valorem taxes relating to the Property for the calendar
year in which the Closing Date occurs shall be prorated between Seller and
Purchaser as of the Closing Date. If the ad valorem taxes for such calendar year
have not been determined on the Closing Date, the proration thereof shall be
based upon
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<PAGE> 25
the ad valorem taxes assessed against the Property for the calendar year
immediately preceding the calendar year in which the Closing Date occurs, but
such proration thereof shall be final on the Closing Date. Any assessments that
become payable after the Closing Date (other than owner's association
assessments, which shall be prorated as of the Closing Date), including any
assessments for prior years due to a change in land usage or ownership
("roll-back taxes"), shall be paid solely by Purchaser. The provisions of this
sec.4.5 shall survive the Closing.
ARTICLE V
CONDEMNATION PRIOR TO THE CLOSING
Seller agrees to give Purchaser prompt notice of any actual or threatened
taking or condemnation of all or any portion of the Property. If, prior to the
Closing, there shall occur the taking or condemnation of all or any portion of
the Property as would materially interfere with the use thereof; then, and in
any such event, Purchaser may at its option terminate this Agreement by written
notice delivered to Seller within 10 days after it has received the notice
referred to above or at the Closing, whichever is earlier. If Purchaser fails to
terminate this Agreement within the required period, then the Closing shall take
place as provided herein without abatement of the Purchase Price, and all
interest of Seller in and to the condemnation awards which may have been paid to
Seller, or that may be payable or due to Seller on account of such occurrence,
shall be assigned to Purchaser at the Closing.
ARTICLE VI
PROVISIONS WITH RESPECT TO FAILURE OF TITLE AND DEFAULT
6.1 Failure of Title. In the event Seller is unable to convey title to the
Property on the Closing Date in accordance with the provisions of this
Agreement, and such inability is not due to the rights of persons claiming by,
through or under Seller, Seller shall, on or before the Closing Date, give
notice of such inability (and the nature thereof) to Purchaser, and Purchaser
may either (i) accept such title as Seller can convey, without any reduction of
the Purchase Price, or (ii) terminate this Agreement by written notice given to
Seller and the Title Company on or before the Closing Date, in which event the
Escrow Deposit shall be immediately paid to Purchaser and neither party shall
have any further rights or obligations hereunder except as otherwise provided in
this Agreement.
6.2 Default by Seller. In the event Seller shall default in any of its
material obligations under this Agreement, Purchaser may, as its sole and
exclusive remedies, either (i) terminate this Agreement by written notice to
Seller and the Title Company, in which event the Escrow Deposit shall be
immediately paid to Purchaser or (ii) enforce specific performance of this
Agreement, as long as any such suit is commenced within sixty (60) days after
Seller's default. In no event shall Seller be liable to Purchaser for any
actual, punitive, speculative, consequential or other damages or to perform any
act with respect to the Property other than as specifically provided in this
Agreement.
6.3 Default by Purchaser. In the event Purchaser shall default in any of
its material obligations under this Agreement, Seller may, as its sole and
exclusive remedy for such breach, terminate this Agreement by written notice to
Purchaser and the Title Company and, upon any such termination, the Title
Company shall immediately deliver the Escrow Deposit (or so much thereof as has
then been deposited into escrow) to Seller, such sum being agreed upon as the
parties' best estimate of Seller's damages resulting from Purchaser's default,
but not as a penalty. In the event Purchaser takes any action to interfere with
Seller's right to receive and retain the Escrow Deposit following any default by
Purchaser hereunder and Seller is not then in default, then Purchaser shall be
liable for all attorneys' fees and other costs and expenses which Seller may
incur in connection therewith and which are awarded by the court.
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<PAGE> 26
ARTICLE VII
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Purchaser as of the date of this
Agreement, and on the Closing Date shall be deemed to represent and warrant, as
follows:
7.1 Full Power and Authority. Seller is a limited partnership duly
authorized and validly existing under the laws of the State of Delaware,
Seller has the full power and authority to execute and deliver this
Agreement and, subject to any terms, conditions or limitations otherwise
contained in this Agreement, at the Closing, shall have the full power to
perform and carry out all covenants and obligations to be performed and
carried out by Seller hereunder.
7.2 No Approval by Governmental Authority. Except as set forth in
Article VIII, no consent, approval, authorization, registration,
qualification, designation, declaration or filing with any governmental
authority is required in connection with the execution, delivery and
performance of this Agreement by Seller.
7.3 No Lawsuits. Except for the rehabilitation proceedings described
in Section 8.1 below, there are no actions, suits, proceedings or
investigations pending, or to Seller's actual knowledge, threatened, by any
person or entity with respect to or in any manner affecting Seller's
ownership of the Property or otherwise affecting any portion thereof which
could become a cloud on the title to the Property or question the validity
or enforceability of the transaction contemplated herein.
7.4 No Leases. There will be no tenancies or other rights of parties
in possession (other than those of Seller) affecting all or any portion of
the Property on the Closing Date.
7.5 Property Documents. To Seller's actual knowledge, none of the
Property Documents made available, or to be made available, to Purchaser
are incorrect or misleading in any material respect. Seller shall not, with
actual knowledge, withhold any of the information or documentation
described in Section 2.2(b) as the Property Documents. Seller shall
disclose to Purchaser as soon as reasonably possible any and all errors,
omissions or other inaccuracies contained within the Property Documents, to
the extent Seller gains actual knowledge of the same.
7.6 Notices of Violation. To Seller's actual knowledge, Seller has
not received notice that the Property or any operation conducted thereon is
or was at any time in violation of any law, rule, ordinance or regulation,
and Seller has no actual knowledge of any such violation.
At anytime the phrase "Seller's actual knowledge" or its reasonable
equivalent is used in this Article VII or elsewhere in this Agreement , such
knowledge shall mean the personal knowledge of Valerie A. Ferry, who the Seller
covenants is, and has been for the past approximately six (6) years, the
Seller's asset manager having direct responsibility for the Property, without
any investigation of the matter having been made by Ms. Ferry.
The Seller's representations and warranties contained in this Article VII
shall be a condition precedent to Purchaser's performance of its obligations
under this Agreement, however, Seller's representations and warranties shall NOT
survive the Closing or Seller's delivery of any deed to the Property.
ARTICLE VIII
REQUIRED APPROVALS
8.1 Insurance Rehabilitation Court Approval. Seller's obligations under
this Agreement are conditioned upon receipt of an order approving this Agreement
and the sale of the Property from the Commonwealth Court of Pennsylvania (the
"COURT") in the matter of M. Diane Koken, Insurance Commissioner of the
Commonwealth of Pennsylvania v. Fidelity Mutual Life Insurance Company, Cause
No.389 MD 1992, in which the Court issued its Order placing The Fidelity Mutual
Life Insurance Company (an indirect parent of
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<PAGE> 27
the Seller's general partner and of its majority limited partner) in
Rehabilitation under the Insurance Department Act of 1921, as amended.
If such an order of approval has not been obtained within five (5) days
prior to the Closing Date, Seller shall have the right, by written notice given
to the Title Company and Purchaser, to extend the Closing Date for an additional
period not to exceed fifteen (15) days. If, at the expiration of such extension
period, the approval order has not been issued, Seller or Purchaser may cancel
this transaction by written notice to the other party and the Title Company, in
which case Title Company shall immediately deliver the Escrow Deposit to
Purchaser, and neither party shall have any liability to the other except as set
forth in this Agreement. Following the date of this Agreement, Seller shall use
reasonably diligent efforts to obtain the approval order Seller shall notify
Purchaser within three (3) days following issuance of the approval order (or any
order disapproving this Agreement and the sale of the Property) and shall
provide Purchaser and the Title Company with a copy of the same.
8.2 Approval of Seller's Limited Partners. Seller's obligations under this
Agreement are conditioned upon its receipt of the written approval of this
Agreement and the sale of the Property by a majority in interest of the Seller's
limited partners. Seller represents and warrants to Purchaser that Seller has
obtained the written approval of this Agreement and the sale of the Property
from Equity Products Corp., a Delaware corporation, which is an affiliate of
Seller's general partner and which Seller covenants owns the majority in
interest of the units of limited partnership issued by Seller and required for
such approvals. Seller agrees to advise its unaffiliated limited partners of
this Agreement and the proposed sale of the Property.
8.3 Securities and Exchange Commission ("SECA") Filing. Purchaser
acknowledges that Seller is a registered, reporting entity under the Securities
and Exchange Act of 1934 (the "34 ACT") and the proxy rules issued thereunder.
Seller is obligated by the proxy rules of the Securities and Exchange Commission
(the "SEC") to file an Information Statement with the SEC and, after expiration
of a ten (10) day waiting period, to furnish a copy of the Information Statement
to Seller's limited partners. Seller agrees to file an Information Statement
with the SEC within five (5) days following expiration of the Inspection Period
and to furnish a copy of it to Seller's limited partners, Purchaser and the
Title Company. Seller's obligations under this Agreement are conditioned upon
expiration of the SEC's ten (10) day waiting period, without any objection to
the Information Statement being filed with SEC. In the event an objection to the
Information Statement is filed within such ten (10) day waiting period, Seller
shall immediately notify Purchaser and the Title Company, in which case
Purchaser shall have the right at anytime prior to the Closing to terminate this
Agreement by written notice to Seller and the Title Company and receive
immediate payment of the Escrow Deposit.
ARTICLE IX
INDEMNIFICATION BY PURCHASER
Purchaser hereby agrees to indemnify, protect, defend, and hold Seller
harmless from and against any and all debts, duties, obligations, liabilities,
suits, claims, demands, causes of action, damages, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses and
court costs) in any way relating to, connected with or arising out of the
Property or the ownership, construction, leasing, use, operation, maintenance
and management thereof, if attributable to the tortious or unlawful conduct of
Purchaser or any of Purchaser's agents or employees, whether arising from an
occurrence before or after the Closing Date. The indemnifications contained in
this Article IX shall survive the Closing.
ARTICLE X
MISCELLANEOUS
10.1 Notices. Any notice to be given or to be served upon any party hereto
in connection with this Agreement must be in writing, and shall be given by
certified or registered mail, facsimile transmission ("fax") or express courier
and shall be deemed to have been given and received 24 hours after a certified
or
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<PAGE> 28
registered letter or express courier package containing such notice, properly
addressed, with postage prepaid, is deposited in the United States mail or
deposited with the express courier. Any notice served by fax shall be deemed to
have been given and received only when a facsimile machine confirmation of the
delivery of such fax has been received by the sender. Any party hereto may, at
any time by giving ten (10) days' written notice to the other party hereto,
designate any other address in substitution of the foregoing address to which
such notice shall be given. All notices shall be given to the parties hereto at
the following addresses:
<TABLE>
<S> <C>
If to Seller, to: James W. Kelican, Jr.
FMG Rita Ranch Limited Partnership
250 King of Prussia Road
Radnor, Pennsylvania 19087
Telephone: (610) 964-7273
Fax: (610) 964-7269
with a copy to: Robert Bixler, Esquire
250 King of Prussia Road
Radnor, Pennsylvania 19087
Telephone: (610) 964-7146
Fax: (610) 964-7407
If to Purchaser, to: David Goldstein, President
Diamond Ventures, Inc.
2200 East River Road, Suite 115
Tucson, AZ 85718-6586
Telephone: (520) 577-0200
Fax: (520) 299-5602
with a copy to: Lewis D. Schorr, Esquire
Lewis and Roca LLP
One South Church Avenue
Suite 700
Tucson, Arizona 85701-1621
Telephone: (520) 629-4417
Fax: (520) 622-3088
If to Title Co.: Stewart Title & Trust of Phoenix, Inc.
2398 East Camelback Road, Suite 130
Phoenix, AZ 85016
Telephone: (602) 508-8370
Fax: (602) 508-8375
Attn: Derek J. Sivley
</TABLE>
10.2 Brokerage Fees and Commissions. Neither Seller nor Purchaser has
contacted any real estate broker, agent, finder or similar person in connection
with the negotiation and execution of this Agreement, the transactions
contemplated hereby or the sale and purchase of the Property, except Grubb &
Ellis ("Broker"). If, but only if, the Closing occurs, Seller agrees to pay
Broker a real estate sales commission pursuant to an agreement between Seller
and Broker; provided, however, that no brokerage fee shall be due if the Closing
fails to occur for any reason, including, without limitation, the termination of
this Agreement by Seller or Purchaser, the default by Seller or Purchaser or the
failure of title. To the actual knowledge of Seller and Purchaser, no other
Acquisition Fees (as hereinafter defined) have been paid or are due and owing to
any other person or entity, other than to Broker. As used herein "Acquisition
Fees" shall mean all fees paid to any person or entity in connection with the
selection and purchase of the Property, including real estate commissions,
selection fees, nonrecurring management and start-up fees, development fees, and
any other fees of a similar nature. It is agreed that if any claims for
Acquisition Fees are ever made against Seller or Purchaser in connection with
the transactions contemplated by this Agreement, all such claims shall be the
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<PAGE> 29
responsibility of the party whose commitments form the basis of such claims.
Seller and Purchaser each agree to indemnify and hold harmless the other from
and against any and all liabilities, claims, demands or actions for or with
respect to Acquisition Fees asserted by any person, firm or corporation in
connection with this Agreement or the transactions contemplated hereby, and any
court costs, attorneys' fees or other costs and expenses arising therefrom,
insofar as any such liabilities, claims, demands or actions are based upon a
contract or commitment of the indemnifying party. This indemnification provision
shall survive the Closing or the termination of this Agreement, as applicable.
Purchaser represents and warrants to Seller that no portion of the commission
described herein will be paid to Purchaser or any person or entity affiliated
with or related to Purchaser. Purchaser hereby discloses to Seller that certain
of Purchaser's principals, officers, employees and/or affiliates may be Arizona
licensed real estate salespersons or brokers.
10.3 Entire Agreement. This Agreement embodies and constitutes the entire
understanding between the parties hereto with respect to the transactions
contemplated herein, and all prior or contemporaneous agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement.
10.4 Modification. Neither this Agreement nor any provision hereof may be
waived, modified, amended, discharged or terminated except as provided herein or
by an instrument in writing signed by the party against which the enforcement of
such waiver, modification, amendment, discharge or termination is sought, and
then only to the extent set forth in such instrument.
10.5 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Arizona.
10.6 Headings. Descriptive headings are used in this Agreement for
convenience only and shall not control, limit, amplify or otherwise modify or
affect the meaning or construction of any provision of this Agreement.
10.7 Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective permitted successors
and assigns.
10.8 Assignment of Agreement and Conveyance of Land. This Agreement shall
be binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assign. Purchaser may assign all of its rights under
this Agreement to a single assignee without the prior written consent of Seller,
provided that: (i) Purchaser gives written notice of the assignment to Seller
not less than ten (10) days prior to the Closing Date; (ii) that Purchaser's
rights in this Agreement may not be further assigned; and (iii) no assignment
shall relieve Purchaser of its obligations under this Agreement.
10.9 Survival of Indemnification Provisions. All indemnification
provisions contained herein by Purchaser for the benefit of Seller shall survive
the Closing or any termination of this Agreement by Seller or Purchaser.
10.10 Time of Essence. Time is of the essence of this Agreement and of
each covenant and agreement that is to be performed at a particular time or
within a particular period of time. However, if the final date of any period or
the Closing Date falls on a Saturday, Sunday or legal holiday under the laws of
the United States or the State of Arizona, then the time of such period or the
Closing Date, as the case may be, shall be extended to the next date which is
not a Saturday, Sunday or legal holiday.
10.11 Invalid Provision. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable, this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part of
this Agreement, and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by such illegal, invalid or
unenforceable provision or by its severance from this Agreement.
10.12 Attorneys' Fees. If either party defaults in its obligations
hereunder and an action is brought to enforce the same, the prevailing party
shall pay the reasonable attorneys' fees incurred by the other party in order to
enforce its rights hereunder, as awarded by the court.
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10.13 Multiple Counterparts. This Agreement may be executed in a number of
identical counterparts, each of which for all purposes is deemed an original,
and all of which constitute collectively one agreement, but in making proof of
this Agreement, it shall not be necessary to produce or account for more than
one such counterpart.
10.14 Exhibits. The following exhibits are attached to this Agreement, are
incorporated into this Agreement and are made a part hereof for all purposes:
(a) Exhibit "A" -- The Land
(b) Exhibit "B" -- The Deed
(c) Exhibit "C" -- The Certificate of Nonforeign Status
10.15 Confidentiality. Unless and until the Closing occurs, Purchaser
shall not disclose the terms, provisions and conditions of this Agreement to any
person or entity without the prior written consent of Seller, unless compelled
to do so by an order of a court or governmental authority with jurisdiction.
10.16 Zoning, Etc. Purchaser shall not attempt to obtain any zoning
change, modification or variance for the Property or any part thereof at any
time prior to Closing without Seller's prior written consent.
10.17 Construction. All of the terms and provisions of this Agreement have
been negotiated by Seller and Purchaser with the assistance of their respective
legal counsel. Therefore, it is the intent of Seller and Purchaser that this
Agreement not be construed for or against either of the parties hereto, and that
neither of the parties hereto be deemed the draftsmen of this Agreement.
10.18 Additional Acts. In addition to the acts to be performed by Seller
and Purchaser as provided in this Agreement, Seller and Purchaser shall perform,
execute and deliver or cause to be performed, executed and delivered at the
Closing or thereafter any and all further acts, deeds and assurances as the
other party or the Title Company may reasonably request to consummate or
evidence the consummation of the transactions contemplated herein.
10.19 Termination for Failure of Purchaser to Sign. This Agreement shall
be null and void, and Seller shall have no liability thereunder, unless
Purchaser shall have indicated its assent to the terms hereof by execution and
delivery of this Agreement to Seller and delivery of the Initial Deposit to
Title Company on or before 5:00 p.m., Local Time, on August 10, 1999.
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<PAGE> 31
IN WITNESS WHEREOF, Seller and Purchaser have executed this Agreement on
the dates set forth below their signatures, with the intent that their execution
shall be effective as of the date set forth on the cover page hereof.
SELLER:
FMG RITA RANCH LIMITED PARTNERSHIP,
a Delaware limited partnership
By: FMG Western Region Acquisitions,
Inc.,
General Partner
By:
Its:
Date of Execution:
PURCHASER:
DIAMOND VENTURES, INC.,
an Arizona Corporation
By:
Its:
Date of Execution:
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<PAGE> 32
ACKNOWLEDGMENT AND AGREEMENT BY THE TITLE COMPANY
The Title Company hereby acknowledges receipt of a fully executed copy of
this Agreement (or individual counterparts thereof executed by Seller and
Purchaser) and the principal sum of $25,000 referred to in sec.1.3 of this
Agreement on August 10, 1999, and agrees to accept, hold, deliver and disburse
the Escrow Deposit strictly in accordance with the terms and provisions of this
Agreement and without the necessity of any further consent or instruction by
Seller or Purchaser. The Title Company hereby accepts the responsibilities of a
"Reporting Person" pursuant to Section 6045 of the Internal Revenue Code and the
regulations thereunder.
STEWART TITLE & TRUST OF PHOENIX, INC.
By:
Name:
Title:
<TABLE>
<S> <C>
Address: 2398 East Camelback Road, Suite 130, Phoenix, AZ 85016-9010
Telephone: (602) 508-8370
Telecopy: (602) 508-8375
Escrow#: 99180279
</TABLE>
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<PAGE> 33
EXHIBIT "A"
PROPERTY DESCRIPTION
PARCEL 1 (KK EAST -- RITA RANCH)
All that portion of land situated in Sections 26 and 35, Township 15 South,
Range 15 East, Gila and Salt River Meridian, Pima County, Arizona, more
particularly described as follows:
BEGINNING at a point on the North line of said Section 35, from which the
Northeast corner of said section bears South 89 degrees 40' 59" East, a distance
of 1942.31 feet; said point being the "point of beginning";
Thence South 67 degrees 06' 18" East along the Southerly right-of-way line
of Old Vail Road as recorded in Book 40 on Page 45 of Maps and Plats, a distance
of 1118.00 feet;
Thence South 00 degrees 04' 33" West, a distance of 578.73 feet;
Thence South 89 degrees 55' 27" East, a distance of 836.90 feet to a point
on the west right-of-way line of Houghton Road as recorded in Book 7, at Page 76
of Road Maps Records of Pima County;
Thence South 00 degrees 04' 12" West along said right-of-way line a
distance of 1637.51 feet to a point being 75.00 feet west of the east
one-quarter corner of said Section 35;
Thence South 00 degrees 04' 12" West along said Houghton Road right-of-way
line a distance of 245.81 feet to a point on the Northerly right-of-way line of
the Southern Pacific Railroad right-of-way line as shown on BLM Railroad
Right-of-Way Map (Phoenix 015584);
Thence North 56 degrees 27' 43" West along said railroad right-of-way line
a distance of 3791.37 feet;
Thence departing said right-of-way line North 22 degrees 52' 44" East a
distance of 876.30 feet to a point on the South line of said Section 26 from
which the South one-quarter corner bears South 89 degrees 58' 11" East a
distance of 252.38 feet;
Thence continue North 22 degrees 52' 44" East a distance of 368.36 feet to
a point on the Southerly right-of-way line of said Old Vail Road;
Thence South 67 degrees 06' 18" East a distance of 882.00 feet to the POINT
OF BEGINNING.
Said parcel contains 110.413 acres.
PARCEL 2 (NN -- RITA RANCH):
All that certain real portion of land situated in the Northeast quarter of
Section 35, Township 15 South, Ranch 15 East, Gila and Salt River Meridian, Pima
County, Arizona, more particularly described as follows:
Beginning at the Northeast corner of said Section 35,
Thence South 00 degrees 04' 12" West along the East line of said section, a
distance of 713.79 feet, said East line also being the centerline of Houghton
Road as recorded in Book 7 of Road Maps at Page 76;
Thence departing said East line North 89 degrees 55' 48" West, a distance
of 75.00 feet to a point on the west right-of-way line of said Houghton Road,
said point also being the POINT OF BEGINNING;
Thence South 00 degrees 04' 12" West along said right-of-way line a
distance of 290.35 feet;
Thence departing said right-of-way line North 89 degrees 55' 27" West, a
distance of 836.90 feet;
Thence North 00 degrees 04' 33" East a distance of 578.73 feet to a point
on the Southerly right-of-way line of Old Vail Road as recorded in Book 40 on
Page 45 of Maps and Plats;
Thence South 67 degrees 06' 18" East along said right-of-way line a
distance of 545.52 feet to a point of tangent curvature to the left having a
radius of 999.93 feet;
14
<PAGE> 34
Thence Southeasterly along the arc of said curved right-of-way line a
distance of 344.47 feet through a central angle of 19 degrees 44' 17" to the
POINT OF BEGINNING.
Said parcel contains 7.903 acres.
15
<PAGE> 35
EXHIBIT "B"
GRANTEE'S ADDRESS:
Diamond Ventures, Inc.
Attn: David Goldstein, President
2200 East River Road
Tucson, AZ 85718-6586
SPECIAL WARRANTY DEED
<TABLE>
<S> <C>
THE STATE OF ARIZONA D
COUNTY OF PIMA C KNOW ALL MEN BY THESE PRESENTS:
</TABLE>
FMG RITA RANCH LIMITED PARTNERSHIP, a Delaware limited partnership,
("GRANTOR"), in consideration of the sum of TEN AND NO/100 ($10.00) DOLLARS and
other good and valuable consideration in hand paid by DIAMOND VENTURES, INC., an
Arizona corporation ("GRANTEE"), the receipt and sufficiency of which are hereby
acknowledged and confessed, has GRANTED, BARGAINED, SOLD AND CONVEYED, and by
these presents does hereby GRANT, BARGAIN, SELL and CONVEY unto Grantee, all of
Grantor's right, title and interest in and to the real property located in
Tucson, Arizona which is more particularly described on Exhibit "A" attached
hereto and made a part hereof for all purposes, together with all and singular,
all of Grantor's right, title and interest in and to all rights, benefits,
privileges, easements, and appurtenances thereon and pertaining thereto,
including all of Grantor's right, title and interest in and to any adjacent
streets, roads, alleys, easements and rights-of-way ("PROPERTY"), subject to,
however, those exceptions and encumbrances set forth on Exhibit "B" attached
hereto and made a part hereof for all purposes (the "PERMITTED EXCEPTIONS").
TO HAVE AND TO HOLD the Property unto Grantee, its successors and assigns
FOREVER, and Grantor does hereby bind itself and its successors and assigns to
WARRANT AND FOREVER DEFEND all and singular the Property, subject to the
Permitted Exceptions, unto Grantee, its successors and assigns, against every
person whomsoever lawfully claiming or to claim the same or any part thereof by,
through or under Grantor, but not otherwise.
GRANTEE IS ACQUIRING THE PROPERTY "AS IS" WITH ALL FAULTS AND DEFECTS.
GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS, OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO (A) THE
NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE
WATER, SOIL, AND GEOLOGY, OR THE PRESENCE OR ABSENCE OF ANY POLLUTANT, HAZARDOUS
WASTE, GAS OR SUBSTANCE OR SOLID WASTE ON OR ABOUT THE PROPERTY, (B) THE INCOME
TO BE DERIVED FROM THE PROPERTY, (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND
ALL ACTIVITIES AND USES WHICH GRANTEE MAY INTEND TO CONDUCT THEREON, (D) THE
COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES,
ORDINANCES OR REGULATIONS OF ANY GOVERNMENTAL AUTHORITY OR BODY HAVING
JURISDICTION INCLUDING, WITHOUT LIMITATION, ALL APPLICABLE ZONING LAWS, (E) THE
HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OF THE
PROPERTY, OR (F) ANY OTHER MATTER RELATED TO OR CONCERNING THE PROPERTY. GRANTEE
HAS BEEN GIVEN AN OPPORTUNITY TO INSPECT THE PROPERTY AND IS RELYING SOLELY ON
ITS OWN INSPECTIONS AND INVESTIGATIONS OF THE PROPERTY AND NOT ON ANY
INFORMATION PROVIDED BY GRANTOR.
16
<PAGE> 36
Real property ad valorem taxes and assessments having been prorated to the
date hereof, Grantee hereby assumes and agrees to pay when due all unpaid ad
valorem property taxes and assessments for the year 1999 and subsequent years.
GRANTOR:
FMG RITA RANCH LIMITED PARTNERSHIP,
a Delaware limited partnership
By: FMG WESTERN REGION ACQUISITIONS,
INC., General Partner
By:
------------------------------------
Its:
------------------------------------
Date of Execution: 1999
<TABLE>
<S> <C>
COMMONWEALTH OF PENNSYLVANIA D
COUNTY OF DELAWARE C
</TABLE>
This instrument was acknowledged before me on the day of
1999, by , of FMG RITA RANCH LIMITED PARTNERSHIP,
a Delaware limited partnership, on behalf of said corporation.
--------------------------------------
Notary Public in and for the
State of Pennsylvania
My Commission Expires:
--------------------------------------
Printed Name
My Commission Expires:
- ---------------------------------------------------------
This instrument was acknowledged before me on the day of ,
1999, by , who acknowledged himself to be the President of
FMG Western Region Acquisitions, Inc., the General Partner of FMG Rita Ranch
Limited Partnership (the "PARTNERSHIP"), and that as such President,
being authorized to do so, he executed this instrument on behalf of FMG Western
Region Acquisitions, Inc., in its capacity as General Partner of the
Partnership.
17
<PAGE> 37
EXHIBIT "C"
CERTIFICATE OF NONFOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a "foreign
person". To inform the transferee that withholding of tax is not required upon
the disposition of a U.S. real property interest by FMG RITA RANCH LIMITED
PARTNERSHIP (the "TRANSFEROR"), the undersigned hereby certifies the following
on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership or
foreign trust, (as those terms are defined in the Internal Revenue Code and
Income Tax Regulations);
2. The Transferor's U.S. employer identification number is 23-2436596;
and
3. The Transferor's office address is:
250 King of Prussia Road
Radnor, Pennsylvania 19087
TRANSFEROR:
FMG RITA RANCH LIMITED PARTNERSHIP,
a Delaware limited partnership
By: FMG WESTERN REGION ACQUISITIONS,
INC., General Partner
By: ------------------------------
Its: ------------------------------
Dated: ------------------------ 1999
18
<PAGE> 38
FIRST AMENDMENT TO AGREEMENT OF SALE
THIS FIRST AMENDMENT TO AGREEMENT OF SALE (the "First Amendment") is made
and entered into by and between FMG RITA RANCH LIMITED PARTNERSHIP, a Delaware
limited partnership ("Seller"), and DIAMOND VENTURES, INC., an Arizona
corporation ("Purchaser").
R E C I T A L S
A. Seller and Purchaser have entered into that certain Agreement of Sale
dated August 10, 1999 relating to certain land located in Tucson, Arizona (the
"Agreement").
B. The parties desire to amend the Agreement in accordance with the terms
and conditions set forth below.
A G R E E M E N T
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Survey. The second-to-last sentence of Section 2.1(b) of the
Agreement is hereby deleted in its entirety and replaced with the following
sentence:
Provided that Purchaser shall have delivered to Seller and to the Title
Company on or before October 4, 1999 an ALTA survey certified by a
licensed surveyor acceptable to the Title Company (the "Survey"),
Purchaser shall have an additional seven (7) days after receipt of any
amended Title Commitment, and any documents listed in Schedule B
thereto, to give Seller written notice of any title exception(s) not
previously listed to which Purchaser objects (including, without
limitation, any survey exception added to the Title Commitment by reason
of the results of the Survey), and in such event the foregoing
provisions of this subparagraph (b) shall govern the treatment of such
objection(s).
2. Full Force and Effect. Except as amended hereby, the Agreement
remains in full force and effect. All capitalized terms used herein which
are not defined herein shall have the same meanings ascribed to them in the
Agreement.
3. Counterparts. This First Amendment may be executed in more than
one identical counterparts and through an exchange of faxed signatures on
identical counterparts hereof.
<PAGE> 39
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
September 3, 1999.
SELLER:
FMG RITA RANCH LIMITED PARTNERSHIP,
a Delaware limited partnership
By: FMG Western Region Acquisitions,
Inc.
Its: General Partner
By:
Its:
Date:
PURCHASER:
DIAMOND VENTURES, INC.,
an Arizona corporation
By:
Its:
Date:
2
<PAGE> 40
SECOND AMENDMENT TO AGREEMENT OF SALE
THIS SECOND AMENDMENT TO AGREEMENT OF SALE (the "Second Amendment") is made
and entered into by and between FMG RITA RANCH LIMITED PARTNERSHIP, a Delaware
limited partnership ("Seller"), and DIAMOND VENTURES, INC., an Arizona
corporation ("Purchaser").
R E C I T A L S
A. Seller and Purchaser have entered into that certain Agreement of Sale
dated August 10, 1999 (the "Original Contract"), as amended by that certain
First Amendment to Agreement of Sale dated as of September 3, 1999 (the "First
Amendment"), both relating to certain land located in Tucson, Arizona. The
Original Contract and the First Amendment are collectively referred to herein as
the "Agreement."
B. The parties desire to amend the Agreement in accordance with the terms
and conditions set forth below.
A G R E E M E N T
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Purchase Price. The Purchase Price is hereby reduced from
$500,000.00 to Four Hundred Fifty Thousand and no/100 Dollars
($450,000.00).
2. Assignment of Declarant's Rights. Subject to the terms and
conditions of the Agreement and contemporaneously with the performance of
Purchaser of its obligations set forth in Section 4.3 of the Original
Contract, Seller shall deliver or cause to be delivered to the Title
Company for the benefit of Purchaser a duly executed and acknowledged
Declarant's Assignment in the form attached hereto as EXHIBIT A and
incorporated herein by this reference, which document shall be recorded in
the Official Records of Pima County, Arizona immediately following
recordation of the Deed.
3. Full Force and Effect. Except as amended hereby, the Agreement
remains in full force and effect. Capitalized terms used herein which are
not defined herein shall have the same meanings ascribed to them in the
Agreement.
4. Counterparts. This Second Amendment may be executed in more than
one identical counterpart and through an exchange of faxed signatures on
identical counterparts hereof.
<PAGE> 41
IN WITNESS WHEREOF, the parties have executed this Second Amendment as of
October 4, 1999.
SELLER:
FMG RITA RANCH LIMITED PARTNERSHIP,
a Delaware limited partnership
By: FMG Western Region Acquisitions,
Inc.
Its: General Partner
By:
Its:
Date:
PURCHASER:
DIAMOND VENTURES, INC.,
an Arizona corporation
By:
Its:
Date:
2
<PAGE> 42
WHEN RECORDED, RETURN TO:
Lewis D. Schorr, Esq.
Lewis and Roca LLP
One South Church Avenue
Suite 700
Tucson, Arizona 85701-1611
DECLARANT'S ASSIGNMENT
THIS DECLARANT'S ASSIGNMENT (the "Assignment") is made as of this
____________ [INSERT CLOSING DATE], by FMG RITA RANCH LIMITED PARTNERSHIP, a
Delaware limited partnership ("Assignor"), formerly known as FMG Acquisitions
Limited Partnership III, a Delaware limited partnership, to ____________ [INSERT
NAME OF PURCHASER] ("Assignee").
R E C I T A L S
A. Pursuant to that certain Declarant's Assignment dated as of March 16,
1987, recorded at Docket 7995, commencing at page 1394, Official Records of Pima
County, Arizona (the "1987 Assignment"), Pima Service Corporation ("Pima")
assigned to Assignor all of their rights and authority of Pima as Declarant with
respect to the real property legally described on EXHIBIT A attached hereto and
incorporated herein by this reference (the "Property") under and pursuant to
that certain Declaration of Protective Restrictions for Rita Ranch dated
December 21, 1984, recorded December 21, 1984, in Docket 7435, commencing at
page 674, Official Records of Pima County, Arizona, as amended by that certain
First Amendment thereto recorded December 31, 1986, in Docket 7942, commencing
at page 1672, Official Records of Pima County, Arizona (collectively, the
"Declaration").
B. Simultaneously with the recordation of this Assignment, Assignor is
conveying the Property to Assignee and therefore desires to assign to Assignee
all of Assignor's rights and authority as Declarant under and pursuant to the
Declaration, as it has been subsequently amended since the time of the 1987
Assignment, with respect to the Property and to declare and make Assignee the
"Declarant" (as such term is defined in the Declaration) over and with respect
to the Property.
NOW, THEREFORE, in consideration of the sum of Ten Dollars and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Assignor hereby does and agrees as follows:
1. Assignor hereby represents and warrants to Assignee that Assignor
has not previously assigned any of its right, power and authority as
Declarant under the Declaration with respect to the Property.
2. Assignor hereby grants, assigns, transfers and conveys to Assignee,
its successors and assigns, all of Assignor's rights and authority as
Declarant under and pursuant to the Declaration (as such has subsequently
been amended since the time of the 1987 Assignment) with respect to the
Property, and hereby declares and makes Assignee the Declarant over and
with respect to the Property.
<PAGE> 43
IN WITNESS WHEREOF, Assignor has executed this Declarant's Assignment as of
the date first written above.
FMG RITA RANCH LIMITED PARTNERSHIP, a
Delaware limited partnership, formerly
known as FMG Acquisitions Limited
Partnership III, a Delaware limited
partnership
By:
------------------------------------
Its:
------------------------------------
<TABLE>
<S> <C>
STATE OF ________________ D ss.
COUNTY OF _______________ C
</TABLE>
On ____________, before me, ____________ personally appeared ____________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
Witness my hand and official seal.
--------------------------------------
Notary Public
[SEAL]
2
<PAGE> 44
EXHIBIT "A"
TO DECLARANT'S ASSIGNMENT
[ATTACH LEGAL DESCRIPTION OF PROPERTY]
3
<PAGE> 45
THIRD AMENDMENT TO AGREEMENT OF SALE
THIS THIRD AMENDMENT TO AGREEMENT OF SALE (the "Third Amendment") is made
and entered into by and between FMG RITA RANCH LIMITED PARTNERSHIP, a Delaware
limited partnership ("Seller"), and DIAMOND VENTURES, INC., an Arizona
corporation ("Purchaser").
R E C I T A L S
A. Seller and Purchaser have entered into that certain Agreement of Sale
dated August 10, 1999 (the "Original Contract"), as amended by that certain
First Amendment to Agreement of Sale dated as of September 3, 1999 (the "First
Amendment") and that certain Second Amendment to Agreement of Sale dated as of
October 4, 1999 (the "Second Amendment"), relating to certain land located in
Tucson, Arizona. The Original Contract, the First Amendment and the Second
Amendment are collectively referred to herein as the "Agreement."
B. The parties desire to amend the Agreement in accordance with the terms
and conditions set forth below.
A G R E E M E N T
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Inspection Period. The Inspection Period shall expire at 5:00 p.m.
Local Time on October 14, 1999.
2. Information Statement. Section 8.3 of the Original Contract is
hereby amended such that the five (5) day period referred to in line 7
thereof is changed to eight (8) days.
3. Full Force and Effect. Except as amended hereby, the Agreement
remains in full force and effect. Capitalized terms used herein which are
not defined herein shall have the same meanings ascribed to them in the
Agreement.
4. Counterparts. This Third Amendment may be executed in more than
one identical counterpart and through an exchange of faxed signatures on
identical counterparts hereof.
<PAGE> 46
IN WITNESS WHEREOF, the parties have executed this Third Amendment as of
October 12, 1999.
SELLER:
FMG RITA RANCH LIMITED PARTNERSHIP,
a Delaware limited partnership
By: FMG Western Region Acquisitions,
Inc.
Its: General Partner
By:
Its:
Date:
PURCHASER:
DIAMOND VENTURES, INC.,
an Arizona corporation
By:
Its:
Date:
2
<PAGE> 47
ATTACHMENT B
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
FMG RITA RANCH LIMITED PARTNERSHIP
<PAGE> 48
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
F M G RITA RANCH LIMITED PARTNERSHIP
<PAGE> 49
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
F M G RITA RANCH LIMITED PARTNERSHIP
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
- ------- ----- ----
<S> <C> <C>
INTRODUCTION.............................................................. A-1
ARTICLE I ORGANIZATION................................................ A-1
1.1 Continuation................................................ A-1
1.2 Name........................................................ A-1
1.3 Admission into Partnership.................................. A-1
1.4 Term........................................................ A-1
1.5 Place of Business........................................... A-1
1.6 Business.................................................... A-2
1.7 Limitations on Business..................................... A-2
ARTICLE II DEFINITIONS................................................. A-2
2.1 Defined Terms............................................... A-2
ARTICLE III CAPITAL..................................................... A-8
3.1 General Partner............................................. A-8
3.2 Units....................................................... A-8
3.3 Limited Partners............................................ A-8
3.4 General..................................................... A-8
3.5 General Partnership Units................................... A-9
ARTICLE IV DISTRIBUTIONS, PROFITS AND LOSSES........................... A-9
4.1 Cash Flow from Operations................................... A-9
4.2 Proceeds from Capital Transactions and Refinancings......... A-9
4.3 Profit and Loss from Operations............................. A-10
4.4 Allocation of Profit or Loss Arising from a Disposition or A-11
Upon Dissolution............................................
4.5 Allocations and Distributions Among Partners................ A-13
4.6 Minimum Allocation to the General Partner................... A-13
4.7 Allocations and Distributions in the Event of Transfer...... A-13
4.8 Withholding Requirements.................................... A-13
4.9 Tax Adjustments............................................. A-13
4.10 Unpaid Second Capital Contribution.......................... A-14
ARTICLE V MANAGEMENT.................................................. A-14
5.1 Exclusive Management Rights of General Partner.............. A-14
5.2 Authority and Duties of General Partner..................... A-14
5.3 Limitations on Authority and Powers of General Partner...... A-15
5.4 Duties and Obligations of the General Partner............... A-17
5.5 Consent of Limited Partners................................. A-18
5.6 Compensation of General Partner and Reimbursement of A-18
Expenses....................................................
5.7 Other Compensation, Commissions and Fees.................... A-19
5.8 Limitation of Responsibility of General Partner: A-19
Indemnification.............................................
5.9 Removal and Replacement of General Partner.................. A-20
ARTICLE VI DISSOLUTION, CONTINUATION AND TERMINATION................... A-20
6.1 Dissolution................................................. A-20
6.2 Continuation................................................ A-21
6.3 Purchase of General Partner's Interest...................... A-21
6.4 Liquidation................................................. A-21
6.5 Reasonable Time for Winding Up.............................. A-22
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
SECTION TITLE PAGE
- ------- ----- ----
<S> <C> <C>
ARTICLE VII TRANSFER OF UNITS........................................... A-22
7.1 Transfer by Limited Partners................................ A-22
7.2 Substitute Limited Partners................................. A-22
7.3 Transfer on Death or Incapacity............................. A-23
7.4 Additional Limited Partners................................. A-23
7.5 Indemnification and Terms of Admission...................... A-23
7.6 Recognition of Assignments and Substituted Partners......... A-23
ARTICLE VIII FINANCIAL MATTERS AND REPORTS............................... A-23
8.1 Financing................................................... A-23
8.2 Books and Records........................................... A-23
8.3 Accounting.................................................. A-24
8.4 Reports..................................................... A-24
8.5 Tax Information............................................. A-25
8.6 Bank Accounts............................................... A-25
ARTICLE IX POWER OF ATTORNEY........................................... A-25
9.1 Power of Attorney........................................... A-25
ARTICLE X AMENDMENT................................................... A-25
10.1 By General Partner.......................................... A-25
10.2 By the Partners............................................. A-26
10.3 Limitations................................................. A-26
10.4 Amendment of Certificate.................................... A-26
ARTICLE XI MEETINGS.................................................... A-26
11.1 Calling of Meetings; Location............................... A-26
11.2 Voting...................................................... A-26
11.3 Notice of Meetings.......................................... A-27
11.4 Record Date................................................. A-27
11.5 Adjournment or Postponement................................. A-27
11.6 Attendance at Meetings; Waiver of Notice.................... A-27
11.7 Quorum...................................................... A-27
11.8 Conduct of Meetings by General Partner...................... A-28
11.9 Actions by Consent in Writing............................... A-28
ARTICLE XII MISCELLANEOUS............................................... A-28
12.1 Other Activities of Partners................................ A-28
12.2 Waiver of Partition......................................... A-28
12.3 Further Assurances.......................................... A-28
12.4 Notices..................................................... A-28
12.5 Counterparts................................................ A-28
12.6 Parties Bound............................................... A-29
12.7 Governing Law; Construction................................. A-29
12.8 Indulgences................................................. A-29
12.9 Controversies with Internal Revenue Service................. A-29
</TABLE>
<PAGE> 51
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
F M G RITA RANCH LIMITED PARTNERSHIP
This Amended and Restated Limited Partnership Agreement (this "Agreement")
of F M G RITA RANCH LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Partnership"), is made as of the day of , 1987, by F M G Western
Region Acquisitions, Inc., a Delaware corporation, as general partner (the
"General Partner"), FM Initial, Inc. (the "Withdrawing Limited Partner"), and
the Persons who on or after the execution of this Agreement are admitted as
limited partners of the Partnership and whose names and addresses are listed on
Schedule "A" hereto.
INTRODUCTION
On January 30, 1987, the Partnership was formed as a limited partnership
under the Delaware Revised Uniform Limited Partnership Act, by the filing of a
limited partnership certificate in the office of the Secretary of State of
Delaware. The sole general partner of the Partnership is the General Partner,
and the sole limited partner is the Withdrawing Limited Partner. The parties
hereto desire to effect the withdrawal of the Withdrawing Limited Partner from
the Partnership, the admission of the Persons listed on Schedule "A" hereto as
limited partners of the Partnership and the amendment of the agreement among the
Partners to read in its entirety as set forth in Articles I through XII hereof.
To accomplish this, the parties hereto agree that:
1. The Withdrawing Limited Partner hereby withdraws as limited partner
of the Partnership and is released from all obligations to the Partnership,
and unless its name is listed on Schedule "A" hereto, as it may hereafter
be amended, it shall have no further rights as a limited partner.
2. The Persons whose names and addresses are listed on Schedule "A"
hereto are hereby admitted as limited partners of the Partnership.
3. The agreement among the Partners is hereby amended to read in its
entirety as set forth in Articles I through XII hereof.
ARTICLE I
ORGANIZATION
1.1 Continuation. The Partners hereby agree to continue the Partnership as
a limited partnership under the Delaware Revised Uniform Limited Partnership
Act.
1.2 Name. The name of the Partnership shall be F M G Rita Ranch Limited
Partnership or such other name (not including the surname of any Limited
Partner) as may be selected by the General Partner on prior notice to the
Limited Partners.
1.3 Admission into Partnership. Purchasers of the Units shall be admitted
as limited partners not later than 15 days after the release of their funds from
escrow, if the purchasers' funds are held in escrow. Otherwise, purchasers of
the Units of limited partnership interest shall be admitted as limited partners
at least once a month. All subscriptions shall be accepted or rejected by the
Partnership within 30 days of their receipt; if rejected, all subscription
monies shall be promptly returned to the subscriber within ten business days.
1.4 Term. The Partnership shall exist for a term ending December 31, 2026,
at which time it shall be dissolved, unless sooner dissolved or terminated as
provided in this Agreement.
1.5 Place of Business. The principal place of business of the Partnership
shall be at 15303 Ventura Boulevard, Suite 1400, Sherman Oaks, California 91403
or at another location selected by the General Partner on prior notice to the
Limited Partners. The Partnership may have such additional offices or places of
business as the General Partner may determine.
A-1
<PAGE> 52
1.6 Business. The business of the Partnership shall be to acquire, own,
hold for investment, improve, operate, lease, maintain and ultimately sell the
Property. The Partnership shall be authorized to do anything necessary or
appropriate in connection therewith, and generally to carry out the transactions
described in the Prospectus including, without limitation, to:
(a) enter into and perform contracts of any kind necessary to, in
connection with or incidental to the business of the Partnership;
(b) borrow money from any source, including, without limitation, any
Partner and any affiliate of any Partner, and to issue evidences of
indebtedness and secure the same by mortgages, deeds of trust, pledges,
security interests or other liens in furtherance of the purposes of the
Partnership;
(c) negotiate for and conclude agreements for the acquisition of
property and for the sale, exchange or other disposition of any or all of
the Partnership's property;
(d) hire and compensate employees, agents, independent contractors,
attorneys and accountants; and
(e) carry on any other activities necessary to, in connection with or
incidental to the foregoing.
1.7 Limitations on Business. Notwithstanding any other provision in this
Agreement, the Partnership shall not:
(a) acquire any property in exchange for Units;
(b) acquire property from any Person in which the General Partner has
an interest and which has as a primary purpose the investment in, operation
of, or receipt of gain from an interest in real property; or
(c) invest in limited partnership interests, in general partnerships
or in joint ventures of or with any Person.
ARTICLE II
DEFINITIONS
2.1 Defined Terms. As used herein, except as otherwise expressly provided
or unless the context otherwise requires:
Acquisition Expenses means expenses including but not limited to legal
fees and expenses, travel and communications expenses, costs of appraisals,
non-refundable option payments on property not acquired, accounting fees
and expenses, title insurance, and miscellaneous expenses related to
selection and acquisition of properties, whether or not acquired.
Acquisition Fee means the total of all fees and commissions paid by
any party in connection with the purchase of property by the Partnership.
Included in the computation of such fees or commissions shall be any real
estate commission, selection fee, nonrecurring management fee, or any fee
of a similar nature, however designated.
Act means the Delaware Revised Uniform Limited Partnership Act.
Adjusted Capital Contributions means the amount of the Limited
Partners' Capital Contributions, less the amount of their respective shares
of Distributions under Section 4.2 (whether pursuant to said Section 4.2 or
Section 6.4(a)(iv)) previously made, but in no event less than zero. In the
event that all or any portion of a Unit is transferred in accordance with
Article VII, the transferee shall succeed to the Adjusted Capital
Contribution of the transferor to the extent it relates to the transferred
interest.
Adjusted Third Capital Contribution means the amount of the General
Partner's Third Capital Contribution, less the amount of Distributions
under Section 4.2 (whether pursuant to said Section 4.2 or Section
6.4(a)(iv)) previously made with respect to the Third Capital Contribution,
but in no event less than zero.
A-2
<PAGE> 53
Affiliate of a specified Person means (i) any Person directly or
indirectly controlling, controlled by or under common control with another
Person; (ii) any Person owning or controlling 10% or more of the
outstanding voting securities of such other Person; (iii) any officer,
director or partner of such Person; and (iv) if such other Person is an
officer, director or partner, any company for which such Person acts in any
such capacity.
Agreement means this Amended and Restated Limited Partnership
Agreement, as amended from time to time.
Asset Value means, with respect to any asset of the Partnership, the
asset's adjusted basis for Federal income tax purposes, except as follows:
(a) (i) the initial Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
and (ii) the Asset Value of the Property at the time of the first
Closing shall be an amount equal to the excess of (A) the sum of the
amount paid by the Partnership in connection with its acquisition of the
Property plus all other amounts paid or incurred by the Partnership
prior to the first Closing, over (B) the Federal income tax basis at the
time of the first Closing of all assets of the Partnership other than
the Property and bank accounts;
(b) The Asset Values of all Partnership assets shall be adjusted to
equal their respective gross fair market value, as determined by the
General Partner, as of the following times: (i) the acquisition of other
than a deminimis additional interest in the Partnership by any new or
existing Partner which causes a change in the interest of any Partner in
the Partnership (except that this provision shall not apply with respect
to any Closing); (ii) the distribution by the Partnership to a Partner
of more than a de minimis amount of Partnership property as
consideration for an interest in the Partnership if the General Partner
determines that such adjustment is necessary or appropriate to reflect
the economic interests of the Partners in the Partnership; (iii) the
"termination" of the Partnership for Federal income tax purposes
pursuant to Code Section 708(b)(1)(B); (iv) such other times as may be
necessary in order to maintain Capital Accounts in accordance with
Treasury Regulation Section 1.704-1(b); and
(c) if the Asset Value of an asset has been determined or adjusted
as set forth above, such Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purpose
of computing Profit and Loss.
Bankruptcy of any Person means:
(a) the entry of an order for relief (or similar court order)
against such Person which authorizes a case, brought under Chapters 7,
11 or 13 of Title 11 of the United States Code, to proceed; or
(b) the commencement of a Federal, state or foreign bankruptcy,
insolvency, reorganization, arrangement or liquidation proceeding by
such Person; or
(c) the commencement of a Federal, state or foreign bankruptcy,
insolvency, reorganization, arrangement or liquidation proceeding
against such Person if such proceeding is not dismissed within 60 days
after the commencement thereof; or
(d) the entry of a court decree or court order which remains
unstayed and in effect for a period of 30 consecutive days and which:
(i) adjudicates such Person as insolvent under any Federal, state or
foreign law relating to bankruptcy, insolvency, reorganization, arrangement,
liquidation, receivership or the like; or
(ii) approves as properly filed of a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of such Person or his
property under any Federal, state or foreign law relating to insolvency,
reorganization, arrangement, liquidation, receivership or the like; or
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(iii) appoints a receiver, liquidator, assignee, trustee, conservator or
sequestrator (or other similar official) of such Person or of all or a
substantial part of his property or his interest in the Partnership; or
(iv) orders the winding up, dissolution or liquidation of the affairs of
such Person, or
(e) the written consent by such Person to the institution against
him of any proceeding, or to the entry of any order, of the type
described in paragraphs (a), (c) or (d); or
(f) the written consent by such Person to the appointment of a
receiver, liquidator, assignee, trustee, conservator or sequestrator (or
other similar official) of such Person or of all or a substantial part
of his property or his interest in the Partnership; or
(g) the making by such Person of an assignment for the benefit of
creditors; or
(h) the written admission by such Person of his inability to pay
his debts generally as they come due; or
(i) the taking of any corporate or other action by such Person in
furtherance of any of the foregoing.
Capital Account means the account established and maintained for each
Partner pursuant to Article III.
Capital Contributions means the total amount of money and Asset Value
of any property (other than money) contributed to the capital of the
Partnership (prior to the deduction of any selling commissions, fees or
expenses) by any Partner or all of the Partners (or the predecessor holders
of the Units of any Partner or Partners).
Capital Transactions means the sale, exchange or other disposition of
any property (including the grant of a long-term leasehold for all or
substantially all of the property of the Partnership) that is not in the
ordinary course of business, or casualty damage to, or condemnation of, any
property.
Cash Flow from Operations means, for any period, the Operating Revenue
of the Partnership for that period, less the following (but only to the
extent the same are not financed from Capital Contributions, Reserves,
proceeds from Capital Transactions, Refinancings or borrowings by the
Partnership): (i) the Operating Expenses of the Partnership for that
period; (ii) Reserves from Operating Revenue for that period; (iii) debt
service paid, or other payments, during that period (not included in
Operating Expenses) with respect to loans to the Partnership, whether or
not secured by a lien on the Property (except the principal amount of any
obligations discharged, or any prepayment penalty, in connection with any
Capital Transaction or Refinancing); and (iv) expenditures (but only to the
extent the same are not financed from borrowings) during that period for
acquisition of property or for capital improvements or replacements.
Certificate means the Partnership's limited partnership certificate,
filed in the Office of Secretary of the State of Delaware, as amended from
time to time.
Closing means any closing of the sale of Units by the Partnership.
Code means the Internal Revenue Code of 1986, as amended (or
corresponding provisions of succeeding law).
Consent of a Person means either the written consent of such Person or
the affirmative vote of such Person at a meeting held pursuant to Section
11.8, to do the act or thing for which the consent is solicited, or the act
of granting such consent, as the context may require. Reference to the
Consent of a majority or stated percentage in interest of the Limited
Partners means the Consent of so many of the Limited Partners whose
combined Units represent over 50%, or such stated percentage, of the Units
owned by all Limited Partners.
Cumulative Return means, on a per Unit basis from the date of the
issuance of Units to the date of any Distributions to the Limited partners,
the amount obtained for such period by computing 9% per
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annum (non-compounded) on the Adjusted Capital Contribution of a Limited
Partner with respect to a single Unit.
Depreciation means, for each fiscal year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except
that if the Asset Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such
beginning Asset Value as the Federal income tax depreciation, amortization,
or other cost recovery deduction for such year or other period bears to
such beginning adjusted basis for Federal income tax purposes.
Distributable Proceeds from Capital Transactions means all cash
receipts arising from a Capital Transaction or liquidation, less: (i) the
cash applied to the payment of obligations of the Partnership (including
non-recourse debts related to the particular Capital Transaction and
obligations of the Partnership to any Partner or Affiliate of any Partner);
(ii) the cash paid or to be paid by the Partnership for expenses in
connection with such Capital Transaction (which shall include with regard
to damage recoveries or insurance or condemnation proceeds, cash paid or to
be paid in connection with repairs, replacements or renewals, in the
discretion of the General Partner, relating to damage to or partial
condemnation of the Property); (iii) the Guaranteed Return; and (iv) the
amount considered appropriate by the General Partner for use by the
Partnership as capital expenditures or as Reserves (provided that at the
expiration of such period as the General Partner deems advisable, the
balance of such Reserves remaining after the payment of contingencies shall
be distributed in the manner provided in Section 4.2).
Distributable Proceeds from Refinancings means all cash receipts
arising from a Refinancing less: (i) the cash applied to the payment of
obligations of the Partnership (including non-recourse debts related to the
Refinancing and obligations of the Partnership to any Partner or Affiliate
of any Partner); (ii) the cash paid or to be paid by the Partnership for
expenses in connection with such Refinancing; (iii) the Guaranteed Return;
and (iv) the amount considered appropriate by the General Partner for use
by the Partnership as capital expenditures or as Reserves (provided that at
the expiration of such period as the General Partner deems advisable, the
balance of such Reserves remaining after the payment of contingencies shall
be distributed in the manner provided in Section 4.2).
Distribution means cash or assets distributed by the Partnership to
the Partners pursuant to Sections 4.1, 4.2, 4.10 and 6.4(a)(iv), regardless
of the source of the cash or asset being distributed.
First Capital Contribution means the Capital Contribution of the
General Partner which is described in Section 3.1(a).
Front-End Fees means fees and expenses paid by any party for any
services rendered during the Partnership's organizational or acquisition
phase including Organizational and Offering Expenses, Acquisition Fees,
Acquisition Expenses, and any other similar fees, however designated by the
General Partner.
General Partner means F M G Western Region Acquisitions, Inc., a
Delaware corporation, or any Person who becomes an additional or successor
general partner in accordance with this Agreement.
General Partner Cumulative Return means from the date that the General
Partner makes all or any portion of the Third Capital Contribution to the
date of any Distributions to the General Partner, the amount obtained for
such period by computing 9% per annum (non-compounded) on the balance from
time to time of the Adjusted Third Capital Contribution.
Guaranteed Return means from July 24, 1987 to the date hereof, the
amount obtained for such period by computing 9% per annum (non-compounded)
on the Second Capital Contribution but in no event more than the amount
which would have been paid had the return been calculated based upon the
prime rate charged by the Bank of Hawaii from time to time during that
period.
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Investment in Properties means the amount of Capital Contributions
actually paid or allocated to the purchase of properties acquired by the
Partnership (including the purchase of properties, working capital reserves
allocable thereto (except that working capital reserves in excess of 5%
shall not be included), and other cash payments such as interest and taxes
but excluding Front-End Fees).
Limited Partner means any Person listed as a Limited Partner on
Schedule "A" hereto, and any other Person who may be later admitted to the
Partnership as an additional or substituted Limited Partner.
Operating Expenses means, for any period, payments during that period
for current charges and expenses, including, without limitation, management
fees, rent, real estate and other taxes and other governmental levies, and
assessments and withholdings, costs of marketing and advertising, utility,
repair and maintenance, computer time-sharing, legal and accounting,
insurance, salaries, fuel and water, statistical or bookkeeping services or
accounting equipment use, printing and mailing of reports and
communications to the Partners or others, travel on Partnership business,
telephone, and other fees payable by the Partnership including those
payable to the Partners or their Affiliates. Operating Expenses shall not
include non-cash items such as Depreciation.
Operating Revenue means, for any period, all funds received from
operations during such period, including, but not limited to, rental
revenues and interest, but not including Capital Contributions or the
proceeds from Reserves, Capital Transactions, Refinancings or borrowings by
the Partnership.
Organizational and Offering Expenses means all expenses incurred by
the Partnership in connection with the formation of the Partnership, the
registration and qualification of the Units under Federal and state
securities laws, and the offer and sale of the Units, including selling
commissions and allowances payable in connection with such offer and sale.
Partners means the General Partner and the Limited Partners.
Partnership means F M G Rita Ranch Limited Partnership.
Partnership (Program) Management Fee means a fee paid to the General
Partner or other Persons for management and administration of the
Partnership.
Person means an individual, sole proprietorship, partnership, joint
venture, association, company, corporation, cooperative, trust, estate,
government (or any branch or agency thereof) or other entity.
Profit and Loss means, for each fiscal year or other period, an amount
equal to the Partnership's taxable income or loss for such year or period,
as determined by the Partnership's accountants in accordance with Code
Section 703(a) (for this purpose, ail items of income, gain, loss, or
deduction required to be stated separately pursuant to Code Section
703(a)(1) shall be included in taxable income or loss), with the following
adjustments:
(a) any income of the Partnership that is exempt from Federal
income tax and not otherwise taken into account in computing Profit or
Loss shall be added to such taxable income or loss;
(b) any expenditures (but in no event including amounts withheld
pursuant to Section 4.8) of the Partnership described in Section
705(a)(2)(B) of the Code or treated as such pursuant to Treasury
Regulations and not otherwise taken into account in computing Profit or
Loss, shall be subtracted from such taxable income or loss;
(c) gain or loss resulting from any Capital Transaction with
respect to which gain or loss is recognized for Federal income tax
purposes shall be computed by reference to Asset Value, notwithstanding
that the adjusted basis of the Partnership asset(s) for Federal income
tax purposes differs from the Asset Value;
(d) in lieu of the depreciation, amortization, or other cost
recovery deductions with respect to Partnership assets taken into
account in computing such taxable income or loss, there shall be taken
into account the amount of the Depreciation with respect to such
Partnership assets; and
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(e) notwithstanding any other provision, any items which are
specially allocated pursuant to (ii), (iii), (iv)(A), (iv)(B) and (v) of
Section 4.3(b) hereof shall not be taken into account in computing
Profit or Loss.
Property means the real property consisting of an aggregate of
approximately 118 acres of unimproved land located at Old Vail and Houghton
Roads in Tucson, Arizona, and improvements thereon.
Prospectus means the final Prospectus included as part of the
Registration Statement on Form S-18 filed by the Partnership under the
Securities Act of 1933 in connection with the offer and sale of the Units
as the same thereafter may be supplemented pursuant to Rule 424 under that
Act.
Purchase Price of Property means the price paid upon the purchase or
sale of a particular property, including the amount of Acquisition Fees and
all liens and mortgages on the property, but excluding points and prepaid
interest.
Refinancing means the borrowing of money, secured by property (or
interests therein).
Reserves means, for any period, the amount set aside for or amounts
allocated to reserves established by the General Partner, in amounts deemed
appropriate by the General Partner, for contingent liabilities and working
capital and to pay taxes, insurance, debt service, withholding or other
obligations, costs or expenses as determined to be necessary or appropriate
in the sole discretion of the General Partner. The General Partner shall be
permitted to reserve Distributable Proceeds from Capital Transactions and
Distributable Proceeds from Refinancings provided that sufficient cash
shall be distributed to the Partners to pay any resulting Federal income
tax and the amount to be distributed shall be determined upon an assumption
that all Partners are in the 28% tax bracket. This Section shall not apply
to placements of funds as reserves or short-term deposits (90 days or less)
to fund distributions to the Partners.
Second Capital Contribution means the Capital Contribution of the
General Partner which is described in Section 3.1(b).
Specified Property Partnership means that the Partnership, at the time
its securities registration is ordered effective, has allocated more than
75% of the net proceeds from the sale of Units to the purchase of the
Property. Reserves shall be included in the non-specified portion.
Termination of a Partner means the death, insanity, disability,
incapacity, bankruptcy liquidation, dissolution (excluding dissolution of a
solvent partnership which is reconstituted to continue the same business),
withdrawal, removal, retirement or resignation of such Partner, and when
used with reference to the General Partner, also includes the General
Partner's breach of Section 5.3(c) and the removal of such General Partner
in accordance with Section 5.9. Such Partner is referred to as a
"Terminated Partner."
Third Capital Contribution means the Capital Contribution of the
General Partner which is described in Section 3.1(c).
Treasury Regulations means the income tax regulations promulgated
under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
Unit means one of the 6,707 units of limited partnership interest in
the Partnership attributable to a Capital Contribution of $1,000.
Unpaid Cumulative Return means the Cumulative Return, less any
Distributions to the Limited Partners to the extent such Distributions do
not reduce the Limited Partners' Adjusted Capital Contributions.
Unpaid Second Capital Contribution means the Second Capital
Contribution, less any Distributions to the General Partner.
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ARTICLE III
CAPITAL
3.1 General Partner.
(a) The General Partner contributed $25,000 to the capital of the
Partnership on June 15, 1987.
(b) The General Partner contributed $3,553,517 to the capital of the
Partnership on July 24, 1987.
(c) If the General Partner determines that the amounts needed in the
activities for which the Reserves are established will exceed the actual
balance of the Reserves, the General Partner shall make a Capital
Contribution in an amount equal to such excess. Any Capital Contribution
required pursuant to this Section 3.1(c) shall be made no later than the
time, as determined by the General Partner, when such Capital Contribution
is needed to enable the Partnership to satisfy its cash obligations, but in
no event shall the cumulative amount required to be contributed pursuant to
this Section 3.1(c) exceed $600,000.
(d) The General Partner shall not be obligated to make any additional
Capital Contributions except as may be required under Section 6.4(b).
3.2 Units. The entire limited partnership interest in the Partnership
generally shall be divided into 6,707 Units, and the General Partner may
authorize the division of Units into fractional Units. The Partnership will
issue no more than 6,707 Units.
3.3 Limited Partners.
(a) Upon his execution of this Agreement, each Limited Partner has
contributed to the capital of the Partnership the amount shown opposite his
name on Schedule "A" hereto. No Limited Partner shall be required to
contribute any additional funds to the capital of the Partnership and no
Limited Partner shall be liable for any assessment.
(b) The Capital Contributions of the Partners shall only be reduced by
cash distributions to Partners of the proceeds from Capital Transactions
and Refinancings.
3.4 General.
(a) A separate Capital Account shall be established and maintained for
each Partner. The Capital Account of each Partner shall be credited with
the cash and the Asset Value of any property (net of liabilities assumed by
the Partnership and liabilities to which such property is subject)
contributed to the Partnership by such Partner pursuant to Article III,
plus all income, gain and Profit of the Partnership allocated to such
Partner pursuant to Article IV, and shall be debited with all Loss and
items of deduction and loss of the Partnership allocated to such Partner
pursuant to Article IV, plus the cash and the Asset Value of any property
(net of liabilities assumed by such Partner and the liabilities to which
such property is subject) distributed by the Partnership to such Partner
pursuant to Article IV The Capital Account balance with respect to any
Partner shall be maintained in accordance with the following rules: (i) in
the event of any transfer of any interest in the Partnership in accordance
with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the
transferred interest; (ii) in the event the Asset Values of Partnership
assets are adjusted, the Capital Accounts of all Partners shall be adjusted
simultaneously to reflect the aggregate net adjustment as if the
Partnership recognized gain or loss equal to the amount of such aggregate
net adjustment; and (iii) the provisions of this Agreement relating to the
proper maintenance of Capital Accounts are intended to comply with Treasury
Regulation Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent therewith. A Partner's Capital Account may indicate a
negative balance resulting from Distributions and allocations. Except as
otherwise expressly provided in this Agreement, no Partner shall have any
obligation to the Partnership arising solely from the existence of a
negative balance in his or any other Partner's Capital Account.
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(b) No interest shall be paid by the Partnership on the Capital
Contribution, Adjusted Capital Contribution or Capital Account of any
Partner. Loans to the Partnership by any Partner shall not be considered
contributions to the capital of the Partnership. A Partner shall not be
entitled to demand the return of, or to withdraw any part of, his Capital
Contribution, Adjusted Capital Contribution or his Capital Account, or to
receive any Distribution from the Partnership, except as provided in this
Agreement. No Partner shall be liable for the return of the Capital
Contribution, Adjusted Capital Contribution or Capital Account of any other
Partner.
3.5 General Partnership Units. In the event that the General Partner or
any of its Affiliates (who are not natural persons) purchases interests in the
Partnership (directly from the Partnership or from Limited Partners) other than
pursuant to the General Partner's contribution as set forth in Section 3.1, such
interests shall be General Partnership Units ("GPU's"). The price per GPU, if
purchased from the Partnership pursuant to the Prospectus, shall be 91.5% of the
offering price of the Units. With respect to GPU's purchased directly from the
Partnership, Capital Contributions per GPU shall be deemed to be the same as
those made per Unit, and Organizational Expenses per GPU shall be deemed to be
the same as those per Unit. Unless specifically provided to the contrary in
Article IV, Partnership allocations and Distributions shall be determined for
each GPU as if such GPU were a Unit, and references in Article IV (i) to Limited
Partners shall include holders of GPU's and (ii) to Capital Contributions shall
not, as to GPU's, include the Second Capital Contribution. The holder of record
of such GPU's, shall have the same right to vote as do the Limited Partners,
treating each GPU as one Unit for purposes of voting; provided that the holder
of a GPU, in its capacity as such, shall have no other voting and no
decision-making rights and shall have no authority to sign for or bind the
Partnership. The holders of GPU's, shall be generally liable for the debts and
obligations of the Partnership to the same extent as the General Partner so long
as they hold GPU's. Upon transfer of a GPU by the holder thereof to a Person who
is not an Affiliate of the General Partner, such GPU shall cease being a GPU and
shall, in all respects, be a Unit. Each holder of GPU's must execute the same
power-of-attorney as specified in Article IX.
ARTICLE IV
DISTRIBUTIONS, PROFITS AND LOSSES
4.1 Cash Flow from Operations. Cash Flow from Operations shall be
determined for each calendar quarter and shall be distributed within 45 days
after the end of the calendar quarter, 99% to the Limited Partners, as a class,
and 1% to the General Partner. In no event shall Cash Flow from Operations be
used to make any Investment in properties.
4.2 Proceeds from Capital Transactions and Refinancings. Except as
otherwise provided in Section 6.5, Distributable Proceeds from Capital
Transactions and Distributable Proceeds from Refinancings shall be distributed
within 75 days after the end of the calendar quarter in which such proceeds are
received as follows:
(a) In a case of a Refinancing, or of a Capital Transaction involving
less than all or substantially all of the Partnership assets, to the
Partners in accordance with the following order and priorities (the
cumulative Distributions pursuant to Section 4.10 and this Section 4.2
being treated for purposes of this Agreement as having been made in the
amounts and sequence set forth in clauses (i)-(iii) of Section 4.4(b)):
(i) First, to those Limited Partners having positive balances in
their Capital Accounts in proportion to, and to the extent of, such
positive Capital Account balances (determined after taking into account
all Profit or Loss of the Partnership, including any Profit or Loss
arising out of a Capital Transaction giving rise to the instant
Distribution), but in no event more than that required to enable the
Limited Partners to pay any Federal income tax arising in connection
with the Capital Transaction giving rise to the instant Distribution
(the amount to be distributed shall be determined upon an assumption
that all Partners are in the 28% tax bracket);
(ii) Second, to those Partners having positive balances in their
Capital Accounts in proportion to, and to the extent of, such positive
Capital Account balances (determined after taking into
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account all Profit or Loss of the Partnership, including any Profit or
Loss arising out of a Capital Transaction giving rise to the instant
Distribution, and all Distributions); and
(iii) Third, the remaining proceeds, if any, among the Partners in
such a manner that the cumulative Distributions to the Partners pursuant
to this Section 4.2 shall be as nearly as possible in the amounts and
with the priorities set forth in clauses (i)-(iii) of Section 4.4(b).
(b) In a case of a Capital Transaction involving all or substantially
all of the Partnership's assets, or upon the dissolution of the
Partnership, to the Partners in accordance with the positive balances in
their Capital Accounts (determined after taking into account all of the
Profit or Loss of the Partnership, including any Profit or Loss arising out
of any Capital Transaction or dissolution giving rise to the Distribution
then being made).
(c) For purposes of determining the Capital Accounts of the Partners
under this Section 4.2, if upon dissolution and liquidation of the
Partnership any of the assets of the Partnership are to be distributed in
kind, such Distribution shall be in accordance with Asset Value at the time
of the Distribution. There shall be allocated among the Partners, in
accordance with Section 4.4, and the Capital Accounts shall be adjusted
accordingly, the amount of Profit or Loss, if any, which would have been
realized by the Partnership if such asset had been sold by the Partnership
for its Asset Value.
4.3 Profit and Loss from Operations.
(a) Profit or Loss of the Partnership (other than a Profit or Loss
attributable to a Capital Transaction or upon the dissolution of the
Partnership) for each fiscal year (or part thereof) shall be allocated as
follows:
<TABLE>
<CAPTION>
PARTNERS PERCENTAGE
- -------- ----------
<S> <C>
General Partner........................................... 1%
Limited Partners (as a class)............................. 99%
</TABLE>
(b) Notwithstanding Section 4.3(a):
(i) Other than as provided in clauses (ii)-(v) of this Section
4.3(b), for any period (or portion thereof) in which the Partnership has
a Profit and with respect to which Partners have received distributions
of Cash Flow from Operations, an amount of Profit for such period, up to
the amount of Cash Flow from Operations distributed, shall be allocated
among the Partners in the same proportions as the Cash Flow from
Operations for such period is distributed. Any remaining Profit shall be
allocated among the Partners in the same manner as Profit allocable
pursuant to Section 4.4(c);
(ii) If the Capital Account balance of any Partner is less than
zero, Loss shall be allocated to such Partner only so long as (A) the
sum of (I) the unpaid portion of the amount that the Partner is
obligated to contribute to the capital of the Partnership, plus (II) the
amount of such Partner's share of the Partnership minimum gain (as
determined pursuant to Treasury Regulation Section 1.704-1(b)(4)(iv)(f))
(such sum being hereinafter referred to as the "Loss Limit"), exceeds
(B) the deficit balance in such Partner's Capital Account determined as
of the close of the Partnership fiscal year or other period to which
such allocation relates. Additionally, if during any fiscal year or
other period such deficit balance in the Partner's Capital Account
exceeds the Loss Limit, items of Partnership income and gain for such
fiscal year or other period (and, if necessary, subsequent periods)
shall be allocated to the Partner to the extent of any such excess in
accordance with Treasury Regulation Section 1.704-1(b)(4)(iv)(e). It is
the intention of the parties hereto that allocations of items of
Partnership income and gain shall be made pursuant to this subsection in
the amounts and proportions necessary to constitute a "minimum gain
chargeback" within the meaning of Treasury Regulation Section
1.704-1(b)(4)(iv)(e);
(iii) If a Partner unexpectedly receives an adjustment, allocation,
or Distribution described in (4), (5), or (6) of Treasury Regulation
Section 1.704-1(b)(2)(ii)(d) which results in a negative
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balance in excess of any deficit balance which the Partner is required
by this Agreement to restore or is deemed to be obligated to restore
pursuant to Treasury Regulation Section 1.704-1(b)(4)(iv)(f), items of
Partnership income and gain, without regard to their nature, shall be
allocated to such Partner in an amount and manner sufficient to
eliminate such excess deficit balance as quickly as possible. It is the
intention of the parties hereto that any allocation made pursuant to
this subsection shall constitute a "qualified income offset" within the
meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d);
(iv) Except as otherwise provided in clauses (ii) and (iii) of this
Section 4.3(b):
(A) Organizational Expenses allocable to the Limited Partners
shall be allocated among such Partners on the basis of their
respective number of Units. For purposes of allocating selling
commissions and allowances pursuant to this Section 4.3(b)(iv)(A),
GPU's, purchased directly from the Partnership shall not be treated
as Units.
(B) If the Partnership is deemed for Federal income tax purposes
to have interest expense in connection with any indebtedness owing to
an Affiliate of the General Partner in excess of the actual interest
owed with respect to such indebtedness, such excess interest expense
shall be allocated entirely to the General Partner or, in the event
that such Affiliate is, or is deemed to be, a Partner for Federal
income tax purposes, to such Affiliate.
(C) In the event that Profit is or has been allocated among the
Partners pursuant to Section 4.4(c) in such a manner that the
cumulative Distributions pursuant to Sections 4.2 and 4.10, if all
such Distributions were then made on the assumptions set forth in the
last sentence of Section 4.4(a), would include any Distributions
described in Section 4.4(b)(iii), thereafter Loss shall be allocated
among the Partners in the same manner as Loss is allocable pursuant
to Section 4.4(c) to the extent of any such Distributions made (or
that would be made) as described in Section 4.4(b)(iii).
(v) (A) In accordance with Code Section 704(c) and the applicable
Treasury Regulations thereunder, items of income, gain, loss and
deduction (and any item thereof) with respect to any property
contributed to the Partnership shall, solely for tax purposes, be
allocated among the Partners so as to take into account any variation at
the time of contribution between the adjusted basis of such property to
the Partnership for Federal income tax purposes and the Asset Value of
the contributed property.
(B) In the event the Asset Value of any Partnership property is
adjusted so as to differ from its adjusted basis, subsequent allocations
of income, gain, loss and deduction (and any item thereof) with respect
to such asset shall, in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(g), take account of any variation between the adjusted
basis of such asset for Federal income tax purposes and the Asset Value
in the same manner as under Code Section 704(c) and the applicable
Treasury Regulations thereunder.
(C) Any elections or other decisions relating to allocations
pursuant to this Section 4.3(b)(v) shall be made by the General Partner
in a manner that reasonably reflects the purposes and intention of this
Agreement. Allocations pursuant to this Section 4.3(b)(v) are solely for
tax purposes and shall not affect, or in any way be taken into account
in computing, any Partner's Capital Account or share of Profit, Loss or
other items, or Distributions pursuant to any provision of this
Agreement.
(vi) Any Federal, state or local income tax credits arising from
the Partnership's operations shall be allocated among the Partners in
accordance with Treasury Regulation Section 1.46-3(f).
4.4 Allocation of Profit or Loss Arising from a Disposition or Upon
Dissolution.
(a) Profit recognized upon a Capital Transaction involving
substantially all of the Partnership's assets, or upon dissolution of the
Partnership, shall be allocated to the Partners having deficit balances in
their Capital Accounts (computed after taking into account any other Profit
or Loss for the fiscal year in which such event occurred) in proportion to,
and to the extent of, such deficits. Any remaining such
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Profit and all such Loss shall be allocated among the Partners so as to
produce, as nearly as possible, Capital Accounts for the Partners which
will result in the cumulative Distributions pursuant to Section 4.2
(whether pursuant to said Section 4.2 or Section 6.4(a)(iv)) and 4.10 being
in the amounts and sequence set forth in Section 4.4(b), and as if the
remaining amount available for Distributions was equal to the aggregate
positive balances in the Capital Accounts of the Partners (determined after
taking into account all allocations of Profit or Loss, including the Profit
or Loss arising from the Capital Transaction or dissolution).
(b) Solely for purposes of computing the Capital Account balances of
the Partners referred to in Section 4.4(a), the order of Distributions
(determined after payment of all expenses and debts of the Partnership
according to their terms) would be:
(i) first, to the Partners in proportion to, and to the extent of,
their respective Capital Contributions (and, with respect to Capital
Contributions by the General Partner, in the same order and to the
extent that such Capital Contributions were made);
(ii) second, to the Partners in proportion to, and to the extent
of, the respective amounts of (A) Cumulative Return in the case of the
Limited Partners and (B) General Partner Cumulative Return in the case
of the General Partner.
(iii) third, (A) the remaining balance (if any) would be
distributed to the Partners as follows:
<TABLE>
<CAPTION>
PARTNERS PERCENTAGE
-------- ----------
<S> <C>
General Partner........................................... 20%
Limited Partners (as a class)............................. 80%
</TABLE>
(B) Notwithstanding Section 4.4(b)(iii)(A), if the cumulative
amount previously allocated to the Limited Partners or the General
Partner pursuant to Section 4.4(b)(ii) has exceeded the Cumulative
Return of the Limited Partners or the General Partner Cumulative Return
determined as of 45 days after the end of the calendar year in which the
Capital Transaction occurred, the amount otherwise allocable pursuant to
Section 4.4(b)(iii)(A) to the Limited Partners and/or the General
Partner, as applicable, shall be increased or decreased as necessary to
cause the amount allocable to each Limited Partner and to the General
Partner pursuant to Section 4.4(b)(ii) effectively to equal,
respectively, the Cumulative Return of the Limited Partners and the
General Partner Cumulative Return as determined at the time of the
allocation with respect to the Capital Transaction;
(c) Profit or Loss recognized upon a Capital Transaction involving
less than all or substantially all of the Partnership assets shall be
allocated to the Partners in the same manner that Profit and Loss is
allocated in Section 4.4(a), and as if such Capital Transaction involved
all or substantially all of the Partnership assets. Solely for purposes of
this Section 4.4(c), the Cumulative Return and the General Partner
Cumulative Return referred to in Section 4.4(b)(ii) shall be redetermined
each time that an allocation is made pursuant to this Section 4.4(c); each
determination shall be made on the basis of Distributions made as of 45
days after the end of the calendar year in which the Capital Transaction
occurred, as well as the assumptions described in the next sentence. Any
time that the Cumulative Return or the General Partner Cumulative Return is
to be computed for purposes of this Section 4.4(c), it shall be computed as
the amount that would accrue through the fifth anniversary of the initial
Closing or, if the Capital Transaction occurs after such anniversary,
through 45 days after the end of the calendar year in which the Capital
Transaction occurred; it shall be assumed that no Distributions other than
those described in the preceding sentence are made to the Partners during
this period.
(d) The Partners recognize that part of the Profit recognized by the
Partnership in the case of a Capital Transaction may be treated for Federal
income tax purposes (as a result of the application of Sections 1245 or
1250 of the Code) as gain from the sale, exchange or other disposition of
an asset which is neither a capital asset nor property described in Section
1231 of the Code ("Depreciation Recapture"). It is the Partners'
understanding and agreement that, to the extent possible, without
increasing the total
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Profit on such disposition allocated to a Partner in any period pursuant to
Section 4.4, the Depreciation Recapture will be considered to be allocated
among the Partners in proportion to the depreciation deductions, with
respect to Section 1245 property, and the "additional depreciation" (as
defined in subsection 1250(b)(1)) with respect to Section 1250 property,
previously allocated to the Partners.
4.5 Allocations and Distributions Among Partners. Except as otherwise
provided in this Agreement:
(a) Each item of Profit, Loss or credit allocable to the Limited
Partners, as a class, and all Distributions to the Limited Partners, as a
class, shall be allocated or distributed, as the case may be, among the
Limited Partners, pro rata, in accordance with their respective number of
Units.
(b) For purposes of determining the Profit or Loss, or any items
thereof, allocable to a period, such determination shall be made on the
basis selected by the General Partner, using any permissible method under
Code Section 706 and the Treasury Regulations thereunder. The Profit or
Loss allocated among the Partners for any fiscal year, or part thereof,
shall be allocated among the Partners in accordance with Code Section 706
and the Treasury Regulations thereunder, using any conventions permitted by
law and selected by the General Partner. Following the initial Closing and
each Closing (if any) thereafter, items of Profit or Loss allocable
pursuant to Section 4.3 to the Limited Partners shall be ratably
apportioned to and among each day for the period such items are being
apportioned; the Limited Partners' Profit or Loss for each day shall be
apportioned among the Limited Partners in accordance with their respective
number of Units on such day.
4.6 Minimum Allocation to the General Partner. Any other provision in
Article IV to the contrary notwithstanding, the General Partner shall be
allocated at least 1% of each item of Partnership income, gain, loss, deduction
and credit allocated pursuant to Article IV hereof.
4.7 Allocations and Distributions in the Event of Transfer. If all or any
portion of a Unit is transferred in accordance with Article VII hereof, there
shall be allocated to each Partner who held the transferred Partnership interest
during the fiscal year of transfer the product of (a) each item of Partnership
income, gain, Profit, deduction or Loss allocable to such transferred
Partnership interest for such fiscal year, and (b) a fraction, the numerator of
which is the number of days such Partner held the transferred Partnership
interest during such fiscal year and the denominator of which is the total
number of days in such fiscal year; provided, however, that the General Partner
may allocate the Profit or Loss by closing the Partnership's books immediately
after the transfer of any Partnership interest. Either allocation shall be made
without regard to the date, amount or recipient of any Distributions which may
have been made with respect to such transferred Unit. All Distributions on or
before the date of transfer shall be made to the transferor, and all
Distributions thereafter shall be made to the transferee.
4.8 Withholding Requirements.
(a) Notwithstanding any other provision of this Agreement, the General
Partner is authorized to take any action that it determines to be necessary
or appropriate to cause the Partnership to comply with any withholding
requirements under the Code, Treasury Regulations or treaty, or under state
or local law. In its sole discretion and as provided for in the Code,
Treasury Regulations or treaty, or in state or local law, the General
Partner may elect to withhold and pay over to the appropriate governmental
agency a portion of any Distribution made to Partners.
(b) Any amounts withheld by the Partnership pursuant to this Section
4.8 shall be treated for all purposes of this Agreement as a Distribution
by the Partnership to the Partners with respect to whom amounts are so
withheld. In the event that amounts are withheld pursuant to this Section
4.8, the other provisions of this Agreement shall be adjusted as the
General Partner deems necessary and appropriate in order to reflect such
withholding.
4.9 Tax Adjustments. In the event of any adjustment to the tax returns of
the Partnership (resulting from an amended return, claim for refund, or an audit
by the Internal Revenue Service or other taxing authority), the allocations
under this Article IV shall be redetermined to take into account such adjustment
as if it had been made at the time of the original allocations.
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4.10 Unpaid Second Capital Contribution. Proceeds from the Capital
Contributions in respect of the purchase of Units, net of selling commissions
and allowances, shall on and after the date hereof be distributed to the General
Partner until the General Partner has received an amount equal to the lesser of
(a) the positive balance in its Capital Account and (b) the amount by which the
Unpaid Second Capital Contribution exceeds the product of (i) proceeds from the
Capital Contribution attributable to the issuance of one Unit pursuant to
Article III, net of selling commissions and allowances, and (ii) the number of
Units described in Section 3.2 which remain unissued.
ARTICLE V
MANAGEMENT
5.1 Exclusive Management Rights of General Partner. Subject to this
Agreement, the General Partner shall have complete authority over and exclusive
control and management of the business and affairs of the Partnership. The
Limited Partners, as such, shall not take part in, or at any time interfere in
any manner with, the management, conduct or control of the Partnership's
business or operations and shall have no right or authority to act for or bind
the Partnership. Notwithstanding the foregoing, a majority in interest of the
Limited Partners may vote to approve or disapprove the sale of all or
substantially all of the assets of the Partnership without the necessity for
concurrence by the General Partner. Except as expressly provided elsewhere in
this Agreement, the Limited Partners have no right to remove the General
Partner, to compel the General Partner's withdrawal from the Partnership or to
elect other General Partners.
5.2 Authority and Duties of General Partner.
(a) The General Partner shall devote such time and effort to the
Partnership as may be reasonably necessary for the achievement of its
purposes.
(b) Subject only to the Act and the provisions of this Agreement, in
connection with the management of the Partnership, the General Partner
shall have and may exercise all of the rights, powers and privileges of a
general partner of a partnership without limited partners, including,
without limitation, the right, if, as and when the General Partner may deem
necessary or appropriate on behalf of, and at the expense of, the
Partnership:
(i) to employ or engage other Persons to perform services for the
Partnership and to compensate such Persons for their performance of such
services, including, without limitation, the engagement of agents for
the leasing of the Property and/or for its management under arrangements
that provide for fees or commissions and for reimbursement of costs and
expenses incurred in the performance of their services;
(ii) to mortgage, encumber, lease (for periods which may exceed the
term of the Partnership), sell, assign, transfer, grant options on (for
periods which may exceed the term of the Partnership), exchange or
otherwise dispose of the Partnership's property and assets and any
interests therein;
(iii) to borrow money from any Person, including any Partner, or
any Affiliate of any Partner, on terms and conditions then prevailing in
the financial markets, including, where appropriate, participations by
the lender in Cash Flow from Operations, Distributable Proceeds from
Capital Transactions or Distributable Proceeds from Refinancings; and to
issue evidences of indebtedness therefor and to secure the same by
mortgage, deed of trust, pledge or other lien or security interest; and
in connection with any borrowing, to confess, or authorize the
confession of, judgment against the Partnership provided, however, that
any loan from the General Partner or any of its Affiliates will be
subject to the provisions of Section 5.3(d)(viii) and (ix);
(iv) to enter into and perform contracts and agreements of any
kind, necessary or desirable to the development and operation of the
Partnership's property or business and in connection with any matters
incidental or related thereto provided, however, that except as
permitted under Section 5.6(b), no such contracts or agreements shall be
entered into on behalf of the Partnership with the General Partner or
any of its Affiliates;
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(v) to acquire any property, real or personal, in fee or under
lease, or any rights therein or appurtenant thereto; provided, however,
that all real property acquisitions shall be supported by an appraisal
prepared by a competent independent appraiser, which appraisal shall be
maintained in the General Partner's records for five years and shall be
available for inspection and duplication by any Limited Partner;
(vi) to establish reasonable reserves from funds derived from
Operating Revenue, Capital Transactions or Refinancings or from other
sources, provided, however, that such reserves shall initially not be
less than 3% of the proceeds from the sale of Units;
(vii) to do anything which the General Partner may deem necessary
or appropriate for the protection and preservation of the Partnership's
assets; to carry insurance for public liability and other coverage
appropriate to the business of the Partnership in such amounts and of
such types as the General Partner may determine;
(viii) to make and revoke any election permitted to the Partnership
by any taxing authority in such manner as the General Partner, in its
sole discretion, may decide;
(ix) to admit substitute Limited Partners on transfer of the Units;
(x) to compromise, settle or submit to arbitration and to
institute, prosecute and defend any actions or claims in favor of or
against the Partnership or relating to its business;
(xi) to carry out the transactions described in or contemplated by
the Prospectus.
(c) The General Partner shall commit a percentage of the Capital
Contributions to Investment in Properties which is equal to the greater of:
(i) 80% of the Capital Contributions reduced by .1625% for each 1% of
financing of Partnership properties; or (ii) 67% of the Capital
Contributions.
(d) The General Partner is hereby designated as the "tax matters
partner", within the meaning of Section 6231(a)(7) of the Code and any
comparable provisions of state and local law. Accordingly, the General
Partner may exercise all rights, powers and privileges of the Partnership
(at the expense of the Partnership) that the General Partner reasonably
deems to be necessary or appropriate in connection with matters involving
the Partnership's Federal, state and local tax returns, including all
examinations of affairs of the Partnership, and any resulting
administrative and judicial proceedings. Each Partner agrees reasonably to
cooperate with the General Partner in the conduct of all such examinations
and proceedings.
5.3 Limitations on Authority and Powers of General
Partner. Notwithstanding any other provision in this Agreement:
(a) without the prior Consent of all of the Limited Partners, the
General Partner shall not alter the business of the Partnership as set
forth in Section 1.6;
(b) without the prior Consent of a majority in interest of the Limited
Partners, the General Partner shall not:
(i) except as provided in Section 8.6, invest in the securities of
other issuers, except for short-term money-market investments;
(ii) knowingly perform any act which would cause the Partnership to
be deemed an investment company as defined in the Investment Company Act
of 1940;
(iii) except as permitted by Section 5.3(c) or Section 6.1,
voluntarily take any action that will cause the dissolution of the
Partnership;
(iv) sell, assign, transfer, exchange, lease or otherwise dispose
of all or substantially all of the assets of the Partnership in a single
transaction or pursuant to a single plan.
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(c) The General Partner shall not voluntarily withdraw, retire or
resign as general partner of the Partnership (and shall be liable to the
Partnership for any resultant damage if it so does), or assign, transfer or
otherwise dispose of all or any part of its general partnership interest
unless:
(i) the General Partner obtains the Consent of a majority in
interest of the Limited Partners;
(ii) in the case of withdrawal, retirement or resignation of a sole
remaining general partner, the General Partner provides an additional or
successor general partner approved by the Consent of a majority in
interest of the Limited Partners; and
(iii) the Partnership receives an opinion of its counsel to the
effect that such withdrawal, retirement, resignation, assignment,
transfer or other disposition would not subject the Partnership to
Federal income taxation as an association taxable as a corporation
rather than as a partnership and would not result in a termination of
the Partnership for Federal income tax purposes.
(d) Other than as authorized in this Agreement or the Prospectus,
neither the General Partner nor any Affiliate of the General Partner shall:
(i) enter into any agreements, contracts, or arrangements with the
Partnership or with the General Partner acting on behalf of the
Partnership;
(ii) be given an exclusive right to sell or exclusive employment to
sell the Property for the Partnership;
(iii) enter into an agreement or contract with the Partnership for
the development of the Property or the construction of improvements on
the Property;
(iv) sell or lease to the Partnership any property in which the
General Partner or any such Affiliate has an interest; except that the
General Partner or any such Affiliate may purchase property in its own
name (and assume loans in connection therewith) and temporarily hold
title thereto for the purpose of facilitating the acquisition of such
property or the borrowing of money or obtaining of financing for the
Partnership, or completion of construction of the property, or any other
purpose related to the business of the Partnership, provided that such
property is purchased by the Partnership for a price no greater than the
cost of such property to the General Partner or such Affiliate, and
provided there is no difference in interest rates of the loans secured
by the property at the time acquired by the General Partner or such
Affiliate and at the time acquired by the Partnership, and provided that
there is no other benefit arising out of such transaction to the General
Partner or such Affiliate apart from compensation otherwise permitted by
this Agreement or the Prospectus;
(v) purchase or lease property from the Partnership;
(vi) sell goods or materials to the Partnership;
(vii) borrow money from the Partnership;
(viii) lend money to the Partnership if interest rates and other
finance charges and fees in connection with such loan are in excess of
the amounts charged by unrelated banks on comparable loans for the same
purpose in the locality of the Property or if such loan requires a
prepayment charge or penalty;
(ix) lend money to the Partnership on a permanent basis unless such
lending is through use of an "all-inclusive" or "wrap-around" note and
all of the following conditions are met:
(A) the General Partner or its Affiliate under the all-inclusive
note shall not receive interest on the amount of the underlying
encumbrance included in the all-inclusive note in excess of that
payable to the lender on that underlying encumbrance;
(B) the Partnership shall receive credit on its obligation under
the all-inclusive note for payments made directly on the underlying
encumbrance; and
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(C) a paying agent (a bank, escrow company, or savings and loan)
shall collect payments (other than any initial payment of prepaid
interest or loan points not to be applied to the underlying
encumbrance) on the all-inclusive note and make disbursements
therefrom to the holder of the underlying encumbrance prior to making
any disbursement to the holder of the all-inclusive note, subject to
the requirements of subsection (A) above, or, in the alternative, all
payments on the all-inclusive and underlying note shall be made
directly by the Partnership;
(x) receive any rebates or give-ups or participate in any
reciprocal business arrangements which would have the effect of
circumventing any of the provisions of this Agreement;
(xi) acquire any property on behalf of the Partnership in exchange
for Units.
(xii) make any in-kind distributions.
(e) Any agreement, contract or arrangement between the Partnership and
the General Partner or any Affiliate of the General Partner shall: (i) be
fully and promptly disclosed to all Partners, if not previously disclosed,
in one of the reports provided for in Section 8.4, stating the compensation
to be paid by the Partnership; and (ii) be terminable by either party,
without penalty, on 60 day's prior written notice.
5.4 Duties and Obligations of the General Partner.
(a) The General Partner shall take all actions which may be necessary
or appropriate for the continuation of the Partnership's valid existence as
a limited partnership under the laws of the State of Delaware.
(b) The General Partner shall devote to the Partnership such time as
may be necessary for the proper performance of its duties hereunder, but
the officers and directors of the General Partner shall not be required to
devote their full time to the performance of such duties.
(c) The General Partner shall use its best efforts to maintain at all
times a net worth (which may be aggregated with the net worth of additional
General Partners, if any) at a level sufficient to assure that the
Partnership will be classified for Federal income tax purposes as a
partnership and not as an association taxable as a corporation.
(d) The General Partner shall at all times conduct its affairs and the
affairs of the Partnership and all of its Affiliates in such a manner that
neither the Partnership nor any Partner or any Affiliate of any Partner
will have any personal liability under any mortgage on any of the Property,
except that the General Partner or an Affiliate thereof may (but shall not
be required to) incur such personal liability if in the opinion of the
General Partner it would be in the best interests of the Limited Partners
to incur such personal liability.
(e) The General Partner shall prepare or have prepared and shall file
on or before the due date (or any extension thereof) any Federal, state or
local tax returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by the
Partnership.
(f) The General Partner shall obtain and keep in force during the term
such public liability insurance in favor of the Partnership with such
insurers and in such amounts as the General Partner deems advisable, but in
amounts not less (and with deductible amounts not greater) than those
customarily maintained with respect to properties comparable to the
Property.
(g) The General Partner shall be under a fiduciary duty to conduct the
affairs of the Partnership in the best interests of the Partnership and of
the Limited Partners, including the safekeeping and use of all Partnership
funds of the Partnership whether or not in the General Partner's possession
or control. The General Partner shall not employ, or permit another Person
to employ Partnership funds or assets in any manner except for the
exclusive benefit of the Partnership. Neither the General Partner nor any
Affiliate of the General Partner shall enter into any transaction with the
Partnership unless the transaction is permitted hereunder or is entered
into principally for the benefit of the Partnership in the ordinary course
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of Partnership business. The Partnership shall not permit any Limited
Partner to contract away the fiduciary duty owed to the Limited Partners by
the General Partner under common law.
(h) The General Partner shall use its best efforts to assure that the
Partnership will not be deemed an investment company as such term is
defined in the Investment Company Act of 1940.
(i) The General Partner shall submit, upon request, to the official or
agency administering the securities law of any state in which the Units are
registered for sale, any report or statement required to be distributed to
the Limited Partners pursuant to this Agreement.
(j) The General Partner shall maintain in its records and shall
require any broker-dealer engaged to sell Units to maintain in their
records a copy of the Subscription Agreement and Power of Attorney executed
by each subscriber as a record of the representation of each subscriber
that he meets the minimum suitability standards for investment in the
Partnership and that he is purchasing for his own account or that the
person or entity for whose account the purchase is being made meets such
suitability standards.
5.5 Consent of Limited Partners. If the General Partner, on behalf of the
Partnership, intends to accomplish any act requiring the Consent of some or all
of the Limited Partners, it shall give prior notice to the Limited Partners of
such intention (or opportunity) and the proposed terms thereof.
5.6 Compensation of General Partner and Reimbursement of Expenses.
(a) In addition to the distributions the General Partner is entitled
to receive pursuant to Article IV, the Partnership shall pay to the General
Partner and its Affiliates the fees set forth in the Prospectus; provided,
however, that in no event shall the amount paid by the Partnership to the
General Partner for its services to the Partnership in any year exceed the
lesser of 1/4 of 1% of the cost of the Property or $15,000 and in no event
shall the amount paid in all years exceed $128,021 (2% of the cost of the
Property).
(b) The Partnership shall pay or reimburse the General Partner for all
expenses and costs incurred in connection with the formation, organization,
administration, operation and termination of the Partnership and those
incurred in connection with the issuance, distribution, transfer and
registration of Units including, without limitation: (i) costs of borrowed
money; (ii) taxes and assessments; (iii) costs of personnel employed by the
Partnership (including costs of employees of the General Partner or its
Affiliates to the extent that such costs are directly attributable to the
rendering of services which may be charged to the Partnership); and (iv)
legal, audit, accounting, appraisal and other professional fees. The amount
reimbursed shall in no event exceed the lesser of the cost of such services
or 90% of the competitive price which would be charged by non-affiliated
persons. No other services shall be performed by the General Partner or any
of its Affiliates for the Partnership except in extraordinary circumstances
and except as specifically authorized herein.
(c) The Partnership shall pay or reimburse the General Partner for the
cost of all goods or materials purchased from an independent third party
which are used by the Partnership.
(d) All expenses shall be billed directly to and paid by the
Partnership. No payment shall be permitted for services for which the
General Partner or any of its Affiliates are entitled to compensation by
way of a separate fee. The following shall be excluded from allowable
reimbursements: (i) rent or depreciation, utilities, capital equipment and
other similar administrative overhead items; (ii) salaries, fringe
benefits, travel expenses and other similar administrative items of the
General Partner (or any controlling persons of the General Partner) or any
of its Affiliates. In the Partnership's annual report to the Limited
Partners, there shall be provided a breakdown of reimbursements made to the
General Partner and its Affiliates, including all information set forth in
Section 8.4(b) hereof.
(e) For purposes of this Section 5.6, a controlling person includes
but is not limited to, any person, whatever their title, who performs
functions for the General Partner similar to those of (i) Chairman or
member of the Board of Directors; (ii) Executive Management, such as the
President, Vice President or Senior Vice President, Corporate Secretary or
Treasurer; (iii) Senior Management, such as the Vice
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President of an operating division who reports directly to Executive
Management; or (iv) those holding 5% or more equity interest in the General
Partner or a person having the power to direct or cause the direction of
the General Partner, whether through the ownership of voting securities, by
contract, or otherwise.
5.7 Other Compensation, Commissions and Fees.
(a) Any Acquisition Fee or Acquisition Expense paid shall be
reasonable and shall be payable only for services actually rendered and to
be rendered directly or indirectly. The total of all such compensation paid
by the Partnership to all Persons involved in the acquisition of the
Property shall not exceed the lesser of such compensation customarily
charged in arms'-length transactions by others rendering similar services
as an ongoing public activity in the same geographical location and for
comparable property or an amount equal to 8.9% of the gross proceeds from
the sale of the Units.
(b) The total compensation paid to all Persons for the resale of the
Property shall be limited to a competitive real estate commission, not to
exceed 6% of the contract price for the sale of the Property. If the
General Partner or an Affiliate of the General Partner provides a
substantial amount of the services in the sales effort, the General Partner
or such Affiliate may receive up to one-half of the competitive real estate
commission, not to exceed 3%; provided, the Limited Partners have received
Distributions from Distributable Proceeds from Capital Transactions equal
to their Capital Contributions plus their Unpaid Cumulative Returns.
(c) The Partnership shall not pay a commission or fee to the General
Partner or any of its Affiliates in connection with any reinvestment.
(d) Neither the General Partner, nor any of its Affiliates, or any
underwriter, dealer or salesman of interests in the Partnership shall
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 of
interests in the Partnership; provided, however, that this subsection shall
not prohibit the normal sales commissions (not to exceed, together with
allowances, an aggregate of $570,000) payable to a registered broker-dealer
or other properly licensed Person for selling Units.
(e) The Partnership shall, at such times as the General Partner deems
appropriate, pay to the General Partner all or any portion of the
Guaranteed Return from the Capital Contributions made in respect of the
purchase of Units and the cash receipts arising from Capital Transactions
and Refinancings, net of the amount which the Partnership is required to
distribute to the Limited Partners as set forth in Section 4.2(a)(i).
5.8 Limitation of Responsibility of General Partner; Indemnification.
(a) The General Partner shall have no liability to the Partnership or
to any Partner for any loss suffered by the Partnership (including any
disallowance by any taxing authority of any deduction taken on any
Partnership tax return) which arises out of any action or inaction of the
General Partner if the General Partner, in good faith, determined that such
course of conduct was in the best interests of the Partnership and such
course of conduct did not constitute negligence or misconduct of the
General Partner. The General Partner shall be indemnified by the
Partnership against any losses, judgments, liabilities, expenses and
amounts paid in settlement of any claims sustained by it and arising out of
any action or inaction of the General Partner if the General Partner, in
good faith, determined that such course of conduct was in the best
interests of the Partnership and such course of conduct did not constitute
negligence or misconduct of the General Partner. This indemnification shall
be made from the assets of the Partnership and no Partner shall be
personally liable therefor.
(b) Notwithstanding Section 5.8(a), the General Partner shall not be
indemnified for any losses, liabilities or expenses or litigation costs
arising from or out of any 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
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with prejudice on the merits by a court of competent jurisdiction as to the
particular indemnitee; or (iii) a court of competent jurisdiction approves
a settlement of the claims against a particular indemnitee; and finds that
indemnification of the settlement and related costs should be made. In any
claim for indemnification for Federal or state securities law violations,
the party seeking indemnification shall place before the court the position
of the Securities and Exchange Commission and state securities commissions
(including the securities commission of Massachusetts) with respect to the
issue of indemnification for securities law violations.
(c) Notwithstanding Section 5.8(a), 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 or negligence unless (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations or negligence as to the particular indemnitee; and the court
approves indemnification of the litigation costs, or (ii) such claims have
been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee; and the court approves
indemnification of the litigation costs or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular
indemnitee; and finds that indemnification of the settlement and related
costs should be made. Each such indemnitee undertakes to inform any court
approving such indemnification of the position of the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc.
and other state or independent regulatory bodies (if applicable) concerning
such indemnification.
(d) 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 the indemnification of which is herein prohibited.
(e) The provision of advances from Partnership funds to the General
Partner for legal expenses and other costs incurred as a result of any
legal action initiated against the General Partner by a Limited Partner, as
such, of the Partnership is prohibited. The provision of advances from
Partnership funds to a General Partner for legal expenses and other costs
incurred as a result of a legal action is permissible if the following
three conditions are satisfied: (i) the legal action relates to the
performance of duties or services by the General Partner on behalf of the
Partnership; and (ii) the legal action is initiated by a third party who is
not a Limited Partner of the Partnership; and (iii) the General Partner
evidences its obligation to repay the advanced funds to the Partnership in
cases in which it would not be entitled to indemnification under this
Section 5.8 by delivering a full recourse promissory note to the
Partnership.
(f) For the purposes of this Section 5.8, the term General Partner
shall also include Affiliates of the General Partner for acts which were
within the scope of the General Partner's authority in performing services
on behalf of the Partnership.
5.9 Removal and Replacement of General Partner. The General Partner may be
removed and a new General Partner elected by the Consent of a majority in
interest of the Limited Partners,
ARTICLE VI
DISSOLUTION, CONTINUATION AND TERMINATION
6.1 Dissolution. The Partnership shall be dissolved on the happening of
any of the following events:
(a) the Termination of any General Partner, unless the business of the
Partnership is continued as provided in Section 6.2;
(b) the sale, condemnation or other disposition of all or
substantially all the assets of the Partnership and the collection or the
disposition of any purchase money obligations received by the Partnership
in connection with the disposition of its assets;
(c) the expiration of the term set forth in Section 1.4;
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(d) the Consent of a majority in interest of the Limited Partners that
the Partnership should be dissolved.
6.2 Continuation.
(a) On the Termination of a General Partner, if the Partnership
receives an opinion of counsel to the effect that the continuation of the
Partnership would not subject the Partnership to Federal income taxation as
an association taxable as a corporation: (i) then, if there is one or more
remaining General Partner, the remaining General Partner(s) shall have the
right, within 45 days of such event, to continue the Partnership and its
business in accordance with this Agreement; or (ii) then, if there is no
remaining General Partner, the Limited Partners shall have the right, by
the Consent of all of the remaining Partners, within 180 days after
receiving notice of such Termination, to reconstitute the Partnership and
continue its business in accordance with this Agreement by selecting one or
more new General Partners who agree in writing to be bound by this
Agreement.
(b) On the Termination of any General Partner, if the business of the
Partnership is continued under this Section 6.2, the Terminated General
Partner shall forthwith cease to have any rights or powers of a general
partner under this Agreement.
6.3 Purchase of General Partner's Interest.
(a) On any continuation of the Partnership under Section 6.2 (other
than a continuation following a transaction in compliance with Section
5.3(c)), the Partnership may terminate the Terminated General Partner's
interest in Partnership income, losses, Distributions, and capital by
payment of an amount equal to the then present fair market value of the
Terminated General Partner's interest in such items determined by agreement
of the Terminated General Partner and the Partnership, or, if they cannot
agree, by arbitration in accordance with the then current rules of the
American Arbitration Association. The expense of arbitration shall be borne
equally by the Terminated General Partner and the Partnership. The fair
market value of the Terminated General Partner's interest shall be the
amount the Terminated General Partner would receive upon dissolution and
Termination of the Partnership assuming that such dissolution or
Termination occurred on the date of the terminating event and the assets of
the Partnership were sold for their then fair market value without any
compulsion on the part of the Partnership to sell such assets.
(b) The method of payment to the Terminated General Partner shall
protect the solvency and liquidity of the Partnership. Where the
Termination is voluntary, the method of payment shall provide for a non
interest bearing unsecured promissory note with principal payable, if at
all, from Distributions which the Terminated General Partner otherwise
would have received under the Partnership Agreement had the General Partner
not terminated. Where the Termination is involuntary, the method of payment
shall provide for an interest bearing promissory note coming due in no less
than 5 years with equal installments each year.
6.4 Liquidation.
(a) On any dissolution of the Partnership, absent continuation under
Section 6.2, the Partnership shall be terminated and liquidated within the
meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g), and its
affairs shall be wound up as soon as practicable by the General Partner,
or, if there is no General Partner then remaining, by a Person designated
by the Consent of a majority in interest of the Limited Partners. In
winding up the affairs of the Partnership, such General Partner or Person
(the "Liquidator") shall liquidate the assets of the Partnership in such
manner as he determines, allowing a reasonable time in order to minimize
losses attendant on liquidation. Any Partner may purchase any of the assets
at any public or private liquidation sale. Profits and Losses arising from
the liquidation shall be allocated in accordance with Section 4.4. The
proceeds from the liquidation shall be applied and distributed in the
following order of priority:
(i) to the payment of all debts and liabilities, other than
non-recourse debt, of the Partnership in the order of priority provided
by their terms and provided by law, other than those to Partners;
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(ii) to the payment of all debts and liabilities of the Partnership
to Partners, in accordance with their terms;
(iii) to the establishment, for such period as the Liquidator deems
reasonably necessary, of such Reserves as the Liquidator deems
reasonably necessary to provide for contingent and unforeseen
liabilities or obligations of the Partnership; and
(iv) to the Partners in the manner provided in Section 4.2(b).
(b) On liquidation, the General Partner shall, in compliance with
Treasury Regulation Section 1.704-1(b)(2)(ii)(b), contribute to the capital
of the Partnership (and the amount so contributed to be treated as proceeds
from the liquidation) the lesser of:
(i) the amount necessary to restore any deficit balance in its
Capital Account to zero; and
(ii) the excess of 1.01% of the total Capital Contributions of the
Limited Partners over the previous Capital Contributions by the General
Partner
(c) The debts and liabilities of the Partnership shall not include
obligations of the Partnership to Partners on account of their
contributions or in respect to Profits (or other compensation by way of
income) or capital.
6.5 Reasonable Time for Winding Up. A reasonable time shall be allowed for
the orderly winding up of the business and affairs of the Partnership and the
liquidation of its assets pursuant to Section 6.4 in order to minimize any
losses otherwise attendant upon such winding up, provided that the liquidation
is carried out in conformity with the timing requirements of Treasury Regulation
Section 1.704-1(b)(2)(ii)(b).
ARTICLE VII
TRANSFER OF UNITS
7.1 Transfer by Limited Partners. No Limited Partner may sell, transfer or
assign his Units or any interest therein unless:
(a) such Limited Partner ("Assignor") and the purchaser, transferee or
assignee ("Transferee") execute, acknowledge and deliver to the Partnership
such instruments of transfer and assignment and other documents as are
required by the General Partner;
(b) the interest being sold, transferred or assigned is one Unit or
more or the entire limited partnership interest of the Assignor and unless:
(i) if the transferor or transferee is other than an individual retirement
account, either the transferor or transferee would own at least five Units;
and (ii) if the transferor or transferee is an individual retirement
account, either the transferor or transferee would own at least two Units
(except that, in its discretion, the General Partner may waive this
requirement for transfers by gift, inheritance or family dissolutions or
transfers to Affiliates of the transferor);
(c) such sale, transfer or assignment would not violate any applicable
Federal or state securities (including any investment suitability
standards), real estate syndication or comparable law;
(d) such sale, transfer or assignment would not cause a termination of
the Partnership for Federal income tax purposes (however, the General
Partner may waive the requirement that there be no such termination if, in
the opinion of the General Partner, such termination would not have a
material adverse effect on the Partners); and
(e) the Assignor or the Transferee pays or reimburses the Partnership
for its actual, reasonable and necessary expenses in connection therewith,
provided that such expenses shall not exceed $100.
7.2 Substitute Limited Partners. No Transferee of an interest in the
Partnership shall have any right to become a substitute Limited Partner if in
the opinion of counsel to the Partnership as a result of such
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substitution the Partnership would be subject to Federal income taxation as an
association taxable as a corporation and unless:
(a) the Assignor gives the Transferee such right; and
(b) the Transferee executes a counterpart of this Agreement and such
other documents as the General Partner may require to confirm the
Transferee's undertaking to be bound by this Agreement; and
(c) the Assignor or the Transferee pays or reimburses the Partnership
for its actual, reasonable and necessary expenses in connection therewith,
provided that such expenses shall not exceed $100.
7.3 Transfer on Death or Incapacity. On the death or incapacity of a
Limited Partner, his successor-in-interest shall have the right to become a
substitute Limited Partner on written notice to the Partnership within 90 days
after the appointment of such Limited Partner's legal representative, but not
later than 180 days after the death or certified incapacity of such Limited
Partner.
7.4 Additional Limited Partners. Once all the Units have been issued, no
additional Limited Partners shall be admitted to the Partnership except as a
substitute Limited Partner upon a transfer by a Limited Partner of all or a
portion of his Units in accordance with this Article VII.
7.5 Indemnification and Terms of Admission. Each Limited Partner shall
indemnify and hold harmless the Partnership and the General Partner (and its
directors, officers, shareholders, employees, agents and Affiliates) and every
other Limited Partner (collectively, the "Indemnitees") who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of or arising from any actual misrepresentation or misstatement of facts
or omission to state facts by such Limited Partner in connection with any
assignment, transfer, encumbrance or other disposition of all or any part of an
interest as a Limited Partner in the Partnership, against expenses for which the
Indemnitee has not otherwise been reimbursed (including attorneys' fees,
judgments, fines and amounts paid in settlement), actually and reasonably
incurred by him in connection with such action, suit or proceeding.
7.6 Recognition of Assignments and Substituted Partners. The Partnership
shall recognize an assignment of an interest in the Partnership not later than
the last day of the calendar month following the date the notice of assignment
and other required documentation is received and accepted by the General
Partner. The Partnership shall amend the certificate of limited partnership on
the first day of each fiscal quarter to effect substitutions.
ARTICLE VIII
FINANCIAL MATTERS AND REPORTS
8.1 Financing. All mortgage financing obtained by the Partnership upon the
Property shall be fully amortized in equal payments over not more than 30 years.
All financing (including financing to which the Property was subject when
purchased by the Partnership) including all-inclusive and wrap-around loans and
interest-only loans shall provide that no balloon payment will become due sooner
than the earlier of: (1) ten years from the date the Partnership acquired the
Property, or (2) two years beyond the anticipated holding period of the
Property, but in no event sooner than seven years from the date the Partnership
acquired the Property. The foregoing balloon payment limitation shall not apply
to financing representing, in the aggregate, 25% or less of the total purchase
price of the Property acquired, or to interim financing, including construction
financing, with a full take-out commitment.
8.2 Books and Records. The Partnership shall keep complete and accurate
books of account and records of its transactions. The books of account and other
records of the Partnership shall be kept at the principal office of the
Partnership. On reasonable notice to the General Partner, each Partner or his
designated representative shall have access to such books and records during
reasonable business hours and may inspect and make copies of them. As part of
its books and records, the Partnership shall maintain a list of the names and
addresses of and number of Units owned by each Limited Partner; upon paying the
costs of assembly
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duplication and mailing such list which will be made available, on request, to
any Limited Partner or his designated representative.
8.3 Accounting. The Partnership shall adopt the accrual method of
accounting for Federal income tax purposes. Its fiscal year shall be the
calendar year.
8.4 Reports.
(a) Within 60 days after the end of each of the first three calendar
quarters of each fiscal year, the General Partner shall send to each Person
who was a Limited Partner during such quarter certain unaudited reports,
including: (i) a balance sheet; (ii) a profit and loss statement; (iii) a
cash flow statement; (iv) a statement describing any new agreement,
contract or arrangement required to be reported by Section 5.3 and the
amount of all fees and other compensation and distributions and reimbursed
expenses paid by the Partnership for such quarter to the General Partner or
any Affiliate of the General Partner; and (v) a report of the significant
activities of the Partnership during such quarter. The various reports
required pursuant to this Section 8.4(a) may be sent earlier than or
separately from any of the other reports required pursuant to this Section
8.4(a), and the information required to be contained in any of the reports
required pursuant to this Section 8.4(a) may be contained in more than one
report.
(b) Within 120 days after the end of each calendar year, the General
Partner shall deliver to each Limited Partner an annual report containing
the following:
(i) a balance sheet as of the end of such year and statements of
income, partners: equity and changes in financial condition, for such
year, all of which shall be prepared in accordance with generally
accepted accounting principles and shall be accompanied by an auditor's
report containing an opinion of an independent public accountant; (ii)
an audited statement of cash flow; (iii) a report of the activities of
the Partnership during such year; (iv) a report summarizing the fees and
other remuneration and reimbursed expenses (including a breakdown of
such expenses) from the Partnership for such year to the General Partner
or any Affiliate of the General Partner and services performed, which
shall be verified by the independent public accountants, along with a
verification of the allocation of such costs to the Partnership, in
accordance with generally accepted auditing standards; and (v) a
statement (which need not be audited) showing the distributions made to
the Limited Partners and the distributions made to the General Partner
and identifying the source of each such distribution for such year. The
method of verification provided under subsection (iv) shall include at a
minimum: (A) a review of the time records of individual employees, the
cost of whose services were reimbursed, and (B) a review of the specific
nature of the work performed by each such employee. The additional cost
of the verification provided under subsection (iv) shall be reimbursed
to the General Partner by the Partnership only to the extent that, when
added to the reimbursement for administrative services rendered, such
reimbursement does not exceed the lesser of the cost of such services to
the General Partner or 90% of the competitive price which would be
charged by nonaffiliated persons rendering similar services in the same
or comparable geographic location.
(c) Commencing not later than the start of the second full calendar
year after the issuance of the Units, the Partnership will provide the
Limited Partners with a report of the value of each Unit at the end of each
year. Such report may be based on a valuation provided by an Affiliate of
the General Partner Such report shall be sent to the Limited Partners
within 120 days following the close of each year.
(d) Within 60 days after the end of each calendar quarter in which a
Capital Transaction or Refinancing occurs, the General Partner shall send
to each Person who was a Limited Partner at the time of such Capital
Transaction or Refinancing a report as to the nature of such Capital
Transaction or Refinancing and as to the Profit or Loss and Distributable
Proceeds from the Capital Transaction and Distributable Proceeds from the
Refinancing arising from such Capital Transaction or Refinancing.
(e) Within 60 days of the end of each fiscal period for which Form
10-Q under the Securities Exchange Act of 1934 is filed with the Securities
and Exchange Commission, the General Partner shall
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send the financial information required by such Form 10-Q to any Person who
was a Limited Partner during such period.
(f) If the Securities and Exchange Commission promulgates rules which
allow a reduction in reporting requirements, the Partnership may cease
preparing and filing certain of the aforementioned reports if the General
Partner determines such action to be in the best interests of the
Partnership.
8.5 Tax Information. Within 75 days after the end of each calendar year,
the General Partner shall deliver to each Person who was a Partner at any time
during the year all information concerning the Partnership necessary for the
preparation of such Partner's Federal income tax returns and, on request of a
Limited Partner, necessary to prepare such Partner's state income tax return.
The General Partner shall cause income tax returns for the Partnership to be
prepared and timely filed with appropriate authorities.
8.6 Bank Accounts. All moneys received by the Partnership from the
Partners shall be deposited in a Partnership account or accounts which shall be
in such bank or banks as are selected by the General Partner and which shall be
maintained in the name of and for the benefit of the Partnership. Thereafter,
all revenues, bank loan proceeds and other receipts will be deposited and
maintained in such account or accounts and all expenses, costs and similar items
will be paid from such accounts by the General Partner for Partnership purposes.
Until required in the conduct of the Partnership's business, Partnership funds,
including, without limitation, Partners' Capital Contributions, Partnership
revenues and proceeds of borrowings by the Partnership, will be maintained on
deposit (including time deposits) in such account or accounts, with or without
interest, or invested in United States government securities, certificates of
deposit of United States banks having assets of at least $100,000,000, money
market funds having assets of at least $100,000,000 or commercial paper rated
"A" or better by Moody's Investor Service, Inc. as the General Partner, in its
sole discretion, deems advisable. Any investments will be for the Partnership
account. Partnership funds from any of the various sources mentioned above may
be commingled with other Partnership funds, but not with the separate funds of
the General Partner, or any other Person, and may be withdrawn, expended and
distributed as authorized by this Agreement. All withdrawals from such accounts
shall be made on the signature of such Person or Persons as the General Partner
designates.
ARTICLE IX
POWER OF ATTORNEY
9.1 Power of Attorney. By executing the Counterpart Signature Page hereto,
each Limited Partner has appointed the General Partner (and its successors as
General Partners) as the Limited Partner's agent and attorney-in-fact as
provided therein. Each Limited Partner shall execute and deliver to the General
Partner, within five days after receipt of a request therefor, such
designations, additional powers of attorney and other instruments as the General
Partner may deem necessary to confirm the power and authority granted in the
power of attorney.
ARTICLE X
AMENDMENT
10.1 By General Partner. This Agreement may be amended by the General
Partner, without the approval of any other Partner:
(a) if such amendment is solely for the purpose of clarification and
does not change the substance hereof;
(b) if such amendment is for the purpose of admitting substitute or
additional Limited Partners, or changing the name of the Partnership in the
manner permitted by this Agreement;
(c) if such amendment is necessary or appropriate to maintain the
limited liability of the Limited Partners, to satisfy the requirements of
any Federal or state securities or real estate syndication law or
regulations or to assure that the Partnership will not be treated as an
association taxable as a corporation
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for Federal income tax purposes. Any amendment under this Section 10.1 (c)
may be made effective as of the date of this Agreement; and
(d) if such amendment is: (i) of an inconsequential nature and does
not adversely affect the Limited Partners in any material respect; (ii)
necessary or desirable to cure any ambiguity, to correct or supplement any
provision hereof that would be inconsistent with any other provision hereof
or to make any other provision with respect to matters or questions arising
under this Agreement that would not be inconsistent with the provisions of
this Agreement; (iii) necessary or desirable to satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order, ruling
or regulation of any Federal or state agency or contained in any Federal or
state statute; or (iv) required, permitted or contemplated by this
Agreement.
10.2 By the Partners. This Agreement may be amended with or without the
consent of the General Partner with the Consent of a majority in interest of the
Limited Partners.
10.3 Limitations.
(a) No amendment under Section 10.2 which has not been adopted with
the Consent of all Partners shall:
(i) reduce the obligations of the General Partner;
(ii) modify the term of the Partnership;
(iii) amend this Article X;
(iv) cause the Partnership to be classified for Federal income tax
purposes as an association taxable as a corporation rather than as a
partnership; or
(v) decrease the vote of the Limited Partners required to exercise
any rights or take any action under this Agreement.
(b) Without the Consent of each Partner who would be adversely
affected, no amendment under Section 10.2 shall (i) alter the interest of
the Partners in Profits, Losses or Distributions; (ii) adversely affect the
vested rights of any Partner; (iii) reduce the rights or enlarge the
obligations or liabilities of any Partner; (iv) convert a Limited Partner
into a General Partner or otherwise adversely affect the limited liability
of a Limited Partner; or (v) cause the Partnership to be classified for
Federal income tax purposes as an association taxable as a corporation
rather than a partnership.
10.4 Amendment of Certificate. If this Agreement is amended pursuant to
this Article X, the Certificate shall be amended to reflect such change if the
General Partner deems such amendment to be necessary or advisable.
ARTICLE XI
MEETINGS
11.1 Calling of Meetings; Location. Meetings of the Limited Partners for
any purpose with respect to which the Limited Partners are entitled to vote may
be called by the General Partner at any time (there being no obligation to hold
annual or other meetings of the Limited Partners) or by one or more Limited
Partners holding not less than 10% of the outstanding interests of the Limited
Partners. Meetings shall be held at the principal office of the Partnership or
at such other place as may be designated by the General Partner or, if the
meeting is called by Limited Partners, as designated by such Limited Partners.
In addition, the General Partner may, but shall not be obligated to, submit any
matter upon which the Limited Partners are entitled to act to the Limited
Partners for a vote by written consent without a meeting pursuant to subsection
(ii) of this Section 11.2.
11.2 Voting. A Limited Partner shall be entitled to cast one vote for each
Unit which he owns: (i) at a meeting, in person, by written proxy or by a signed
writing directing the manner in which he desires that his
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vote be cast which writing must be received by the General Partner prior to such
meeting; or (ii) without a meeting, by a signed writing directing the manner in
which he desires that his vote be cast, which writing must be received by the
General Partner prior to the date upon which the votes of Limited Partners are
to be counted. Every proxy shall be revocable at the pleasure of the Limited
Partner executing it.
11.3 Notice of Meetings. Upon request in writing to the General Partner by
any Limited Partner(s) entitled to request a meeting, the General Partner shall
cause notice to be given to the Limited Partners that a meeting will be held at
a time requested by the Limited Partner(s) requesting the meeting, not less than
15 nor more than 60 days after receipt of the request. Written notice of the
meeting shall be given either personally or by certified mail not less than 10
nor more than 60 days before the date of the meeting to the Limited Partners.
Included with the notice shall be a detailed statement of the action proposed,
including a verbatim statement of the wording of any resolution proposed for
adoption by the Limited Partners and of any proposed amendment to the
Partnership Agreement. An affidavit or certificate of mailing of any notice in
accordance with the provisions of this Section executed by the General Partner,
shall constitute conclusive (but not exclusive) evidence of the giving of
notice.
11.4 Record Date. For purposes of determining the Limited Partners
entitled to notice or to vote at a meeting of the Limited Partners or to give
consents without a meeting as provided in this Section 11.1, the General Partner
may set a Record Date, which Record Date shall not be less than 10 days nor more
than 60 days prior to the date of such meeting or which Record Date shall be the
date of the earliest consent in the event of such consents without a meeting,
subject to the provisions of the last sentence of subsection (ii) of this
Section 11.2.
11.5 Adjournment or Postponement. When a meeting is adjourned or postponed
to another time or place, notice need not be given of the adjourned or postponed
meeting and a new Record Date need not be fixed if the time and place of such
adjourned or postponed meeting are announced at the meeting at which such
adjournment or postponement is taken, unless such adjournment or postponement
shall be for more than 45 days. At the adjourned or postponed meeting, the
Partnership may transact any business that would have been permitted to be
transacted at the original meeting. If the adjournment or postponement is for
more than 45 days, or if a new Record Date is fixed for the adjourned or
postponed meeting, a new notice of the adjourned or postponed meeting shall be
given in accordance with this Section 11.1.
11.6 Attendance at Meetings; Waiver of Notice. The transactions of any
meeting of Limited Partners however called and noticed, and wherever held, are
as valid as though they had been approved 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 Limited Partners 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 such waivers, consents and approvals shall be filed with the Partnership
records or made a part of the minutes of such meeting. Attendance of a Limited
Partner at a meeting shall constitute a waiver of notice of the meeting;
provided, however, that no such waiver shall occur when the Limited Partner
objects, at the beginning of the meeting, to the transaction of any business at
such meeting because the meeting is not lawfully called or convened; and
provided further, that attendance at a meeting is not a waiver of any right to
object to the consideration of any matters required to be included in the notice
of the meeting, but not so included, if the objection is expressly made at the
meeting.
11.7 Quorum. Limited Partners of Record who are Limited Partners with
respect to more than 50% of the total number of all outstanding Units, whether
represented in person or by proxy, shall constitute a quorum at a meeting of
Limited Partners. The Limited Partners present at a duly called or held meeting
at which a quorum is present may continue to transact business until adjournment
of such meeting, notwithstanding the withdrawal of enough Limited Partners to
leave less than a quorum, if any action taken (other than adjournment) is
approved by the requisite vote of Limited Partners specified in this Agreement.
In the absence of a quorum, any meeting of Limited Partners may be adjourned or
postponed from time to time by the affirmative vote of a majority of the Limited
Partnership Units represented either in person or by proxy at such meeting, but
no other business may be transacted.
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11.8 Conduct of Meetings by General Partner. The General Partner shall be
solely responsible for conducting any meeting of Limited Partners, including
without limitation the determination of Limited Partners entitled to vote at
such meeting, the existence of a quorum for such meeting, the conduct of voting
at such meeting, the validity and effect of any proxies represented at such
meeting and the determination of any controversies, votes or challenges arising
in connection with or during such meeting or voting. The General Partner shall
designate a Person to serve as chairman of any meeting and further shall
designate a Person to take the minutes of any meeting, which Person, in either
case, may be, without limitation, a Partner or any employee or agent of the
General Partner. The General Partner may make all such other regulations,
consistent with applicable law and this Agreement, as it may deem advisable
concerning the conduct of any meeting of the Limited Partners, including
regulations in regard to the appointment of proxies, the appointment and duties
of inspectors of votes and the submission and examination of proxies and other
evidence of the right to vote.
11.9 Actions by Consent in Writing. Any action that may be taken at a
meeting of the Limited Partners may be taken without a meeting if a consent in
writing setting forth the action so taken is signed by Limited Partners owning
not less than the minimum number of Units that would be necessary to authorize
or take such action at a meeting at which all of the Limited Partners were
present and voted. The General Partner shall give prompt notice of the taking of
action without a meeting to the Limited Partners who have not consented thereto
in writing. If consent to the taking of any action by the Limited Partners is
solicited by any person other than by or on behalf of the General Partner, the
written consents shall have no force and effect unless and until: (a) they are
deposited with the Partnership in care of the General Partner; and (b) consents
sufficient to take the action proposed are dated as of a date not more than 90
days prior to the date sufficient consents are deposited with the Partnership.
ARTICLE XII
MISCELLANEOUS
12.1 Other Activities of Partners. Nothing herein shall prevent any of the
Partners from engaging in or possessing, independently of the Partnership, an
interest in any real estate or any other partnerships, ventures, businesses or
activities; provided, however, that nothing herein shall diminish or waive the
General Partner's overriding fiduciary obligation to the Partnership or to the
Limited Partners. No Partner shall, by virtue of his interest in the
Partnership, have any interest in the other activities of any other partner or
in the income, profits or other benefits derived from such activities.
12.2 Waiver of Partition. The Partners hereby waive any right of partition
as to the Partnership's property and any right to take any other action which
otherwise might be available to them for the purpose of severing their
relationship in connection with the Partnership's property.
12.3 Further Assurances. The 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 purpose of this Agreement.
12.4 Notices. Any notice or other communication required or permitted to
be given under this Agreement shall be in writing and shall be deemed to have
been sufficiently given when: (i) delivered personally; (ii) deposited in the
U.S. mail and sent postage prepaid by certified or registered mail, return
receipt requested; or (iii) sent by prepaid telegram or mailgram, in each case
to the parties at the addresses indicated below or at such other addresses as
the respective parties designate by written notice to the Partnership:
(a) if to the Partnership or the General Partner, at the principal
office of the Partnership;
(b) if to a Limited Partner, at that Limited Partner's address set
forth on Schedule "A".
12.5 Counterparts. This Agreement may be executed in counterparts and all
so executed shall constitute one agreement, binding on all the parties hereto
notwithstanding that all the parties hereto are not signatories to the same
counterpart.
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<PAGE> 79
12.6 Parties Bound. Except as otherwise expressly provided in this
Agreement, all provisions of this Agreement shall bind, benefit, and be
enforceable by or against, the heirs, executors, administrators, legal
representatives, successors and permitted assigns of the parties hereto. None of
the provisions of this Agreement shall be for the benefit of or enforceable by
any Person not a party to this Agreement, including any creditor of the
Partnership or any creditor (other than the Partnership) of any Partner.
12.7 Governing Law; Construction. This Agreement and the rights and
obligations of the Partners shall be governed by and construed in accordance
with the laws of Delaware applicable to contracts made and to be performed
therein, without application of the conflict of laws of such state. Captions in
this Agreement have been inserted only as a matter of convenience and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provision hereof. The invalidity of any portion of this Agreement shall not
affect the validity of the remainder. As required by the context, the use of the
singular shall be construed to include the plural and vice versa, and the use of
any gender shall be construed to include all genders.
12.8 Indulgences. Neither the failure nor any delay on the part of any
party hereto to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power or privilege with respect to any
occurrence nor be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
12.9 Controversies With Internal Revenue Service. In the event of any
controversy with the Internal Revenue Service or any other taxing authority
involving the Partnership or any Partner or Partners, the outcome of which may
adversely affect the Partnership, directly or indirectly, or the amount of
allocation of Profits or Losses of the Partnership to one or more Partners, the
Partnership may, at its option, incur expenses it deems necessary or advisable
in the interest of the Partnership in connection with any such controversy,
including, without limitation, attorneys' and accountants: fees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
intending to be legally bound.
GENERAL PARTNER
F M G Western Region Acquisitions,
Inc.
By:
--------------------------------------
WITHDRAWING LIMITED PARTNER:
F M Initial, Inc.
By:
--------------------------------------
LIMITED PARTNERS:
By:
--------------------------------------
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<PAGE> 80
SCHEDULE "A"
TO
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
F M G RITA RANCH LIMITED PARTNERSHIP
LIMITED PARTNERS
<TABLE>
<CAPTION>
NUMBER OF
UNITS CAPITAL DATE
NAME AND ADDRESS PURCHASED CONTRIBUTION ADMITTED
- ---------------- --------- ------------ --------
<S> <C> <C> <C>
</TABLE>
A-30
<PAGE> 81
ATTACHMENT C
RESOLUTIONS
RESOLVED, that the sale of those certain parcels of land owned by FMG Rita
Ranch Limited Partnership (the "Partnership") situated, lying and being located
in Pima County, Arizona and more particularly described on "Exhibit A" attached
to and pursuant to that certain Agreement of Sale ("Agreement") dated as of
August 10, 1999, as amended, by and between the Partnership and Diamond
Ventures, Inc., an Arizona corporation is hereby approved and FMG Western Region
Acquisitions, Inc. (the "General Partner") is authorized and directed to take
all necessary and appropriate actions as general partner of the Partnership to
implement the sale pursuant to the Agreement, including without limitation,
execution and implementation of such Agreement, all amendments thereto and of
the pertinent documents defined therein or necessary to effectuate the intent
thereof, including, without limitation, a Special Warranty Deed.
FURTHER RESOLVED, that upon the consummation of the sale pursuant to the
foregoing resolution, the liquidation and dissolution of the Partnership is
hereby approved and the General Partner is authorized and directed to take all
necessary and appropriate actions as general partner of the Partnership to
implement the liquidation and dissolution of the Partnership in accordance with
the Amended and Restated Limited Partnership Agreement of the Partnership.
FURTHER RESOLVED, that the General Partner is authorized to execute and
deliver on behalf of the Partnership any and all documents pertinent to the
foregoing resolutions and to effect or cause to be effected any and all actions
necessary or appropriate to implement the foregoing resolutions.
