<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund VI, Ltd. at March 31, 1996, and its statement of income
for the three months then ended and is qualified in its entirety by reference to
the Form 10-Q of CNL Income Fund VI, Ltd. for the three months ended March 31,
1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 982,966
<SECURITIES> 0
<RECEIVABLES> 189,748
<ALLOWANCES> 109,451
<INVENTORY> 0
<CURRENT-ASSETS> 1,067,292
<PP&E> 25,328,432
<DEPRECIATION> 2,838,404
<TOTAL-ASSETS> 30,351,481
<CURRENT-LIABILITIES> 832,283
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,360,899
<TOTAL-LIABILITY-AND-EQUITY> 30,351,481
<SALES> 0
<TOTAL-REVENUES> 855,079
<CGS> 0
<TOTAL-COSTS> 184,447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 687,633
<INCOME-TAX> 0
<INCOME-CONTINUING> 687,633
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 687,633
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
-----------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number
0-19144
----------------------
CNL Income Fund VI, Ltd.
- ---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2922954
- ---------------------------- ----------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street, #500
Orlando, Florida 32801
- ---------------------------- ----------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--------- ---------
CONTENTS
--------
Part I Page
----
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8-11
Part II
Other Information 12
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1996 1995
----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation of $2,838,404
and $2,717,746 $22,490,028 $22,610,686
Net investment in direct
financing leases 4,710,901 4,727,201
Investment in joint ventures 1,040,033 867,708
Mortgage note receivable - 3,056
Cash and cash equivalents 982,966 1,120,999
Receivables, less allowance for
doubtful accounts of $109,451
and $194,409 80,297 85,339
Prepaid expenses 4,029 5,250
Lease costs, less accumulated
amortization of $2,274 and $1,801 15,426 15,899
Accrued rental income, less
allowance for doubtful accounts
of $9,428 and $9,160 1,001,070 979,445
Other assets 26,731 26,731
----------- -----------
$30,351,481 $30,442,314
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 29,450 $ 19,846
Accrued and escrowed real estate
taxes payable 2,669 10,424
Due to related parties 8,246 6,024
Distributions payable 787,500 787,500
Rents paid in advance 4,417 4,417
----------- -----------
Total liabilities 832,282 828,211
Minority interest 158,300 153,337
Partners' capital 29,360,899 29,460,766
----------- -----------
$30,351,481 $30,442,314
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1996 1995
-------- --------
Revenues:
Rental income from operating leases $694,047 $683,734
Earned income from direct financing
leases 142,601 111,196
Contingent rental income 6,329 4,825
Interest and other income 12,102 11,114
-------- --------
855,079 810,869
-------- --------
Expenses:
General operating and administrative 44,233 28,503
Professional services 11,069 5,598
Real estate taxes - 2,763
State and other taxes 8,014 6,530
Depreciation and amortization 121,131 123,642
-------- --------
184,447 167,036
-------- --------
Income Before Minority Interest in Income
of Consolidated Joint Venture and Equity
in Earnings of Unconsolidated Joint
Ventures 670,632 643,833
Minority Interest in Income of Consolidated
Joint Venture (5,604) (4,546)
Equity in Earnings of Unconsolidated
Joint Ventures 22,605 19,759
-------- --------
Net Income $687,633 $659,046
======== ========
Allocation of Net Income:
General partners $ 6,876 $ 6,590
Limited partners 680,757 652,456
-------- --------
$687,633 $659,046
======== ========
Net Income Per Limited Partner Unit $ 9.73 $ 9.32
======== ========
Weighted Average Number of Limited Partner
Units Outstanding 70,000 70,000
======== ========
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1996 1995
------------- ------------
General partners:
Beginning balance $ 175,673 $ 147,262
Net income 6,876 28,411
----------- -----------
182,549 175,673
----------- -----------
Limited partners:
Beginning balance 29,285,093 29,602,123
Net income 680,757 2,832,970
Distributions ($11.25 and
$45.00 per limited partner
unit, respectively) (787,500) (3,150,000)
----------- -----------
29,178,350 29,285,093
----------- -----------
Total partners' capital $29,360,899 $29,460,766
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1996 1995
---------- ----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 820,725 $ 841,008
---------- ----------
Cash Flows from Investing
Activities:
Investment in joint ventures (173,650) -
Collections on mortgage note
receivable 3,033 -
---------- ----------
Net cash used in investing
activities (170,617) -
---------- ----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (787,500) (787,500)
Distributions to holder of
minority interest (641) (4,526)
---------- ----------
Net cash used in financing
activities (788,141) (792,026)
---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents (138,033) 48,982
Cash and Cash Equivalents at Beginning
of Quarter 1,120,999 926,481
---------- ----------
Cash and Cash Equivalents at End of
Quarter $ 982,966 $ 975,463
========== ==========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of quarter $ 787,500 $ 787,500
========== ==========
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1996 and 1995
1. Basis of Presentation:
---------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter ended March 31, 1996, may not be indicative of the results
that may be expected for the year ending December 31, 1996. Amounts as
of December 31, 1995, included in the financial statements, have been
derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund VI, Ltd. (the "Partnership") for the year ended December 31,
1995.
The Partnership accounts for its 66 percent interest in the accounts of
Caro Joint Venture using the consolidation method. Minority interest
represents the minority joint venture partner's proportionate share of
the equity in the Partnership's consolidated joint venture. All
significant intercompany accounts and transactions have been eliminated.
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement requires that an entity review long-lived assets and certain
identifiable intangibles, to be held and used, for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Adoption of this standard had no
material effect on the Partnership's financial position or results of
operations.
2. Investment in Joint Ventures:
----------------------------
In January 1996, the Partnership acquired an approximate 18 percent
interest in a Golden Corral property in Clinton, North Carolina, as
tenants-in-common with affiliates of the general partners. The
Partnership accounts for its investment in this property using the
equity method since the Partnership shares control with affiliates, and
amounts relating to its investment are included in investment in joint
ventures.
The following presents the combined, condensed financial information for
all of the Partnership's investments in joint ventures at:
March 31, December 31,
1996 1995
---------- ------------
Land and buildings on
operating leases,
less accumulated
depreciation $3,675,454 $2,726,011
Net investment in
direct financing
lease 407,217 408,936
Cash 12,839 1,950
Receivables 24,909 18,298
Accrued rental income 177,484 170,695
Other assets 46,528 47,283
Liabilities 6,633 2,208
Partners' capital 4,337,798 3,370,965
Revenues 121,951 432,218
Net income 98,365 363,865
The Partnership recognized income totalling $22,605 and $19,759 for the
quarters ended March 31, 1996 and 1995, respectively, from these joint
ventures.
3. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental and earned income from
individual restaurant chains, each representing more than ten percent of
the Partnership's total rental and earned income (including the
Partnership's share of total rental and earned income from joint
ventures and the properties held as tenants-in-common with affiliates),
for at least one of the quarters ended March 31:
1996 1995
-------- --------
Golden Corral Family
Steakhouse Restaurants $169,934 $166,303
Burger King 113,899 113,955
Hardee's 103,029 113,198
Denny's 92,437 59,003
Although the Partnership's properties are geographically diverse and the
Partnership's lessees operate a variety of restaurant concepts, failure
of any one of these restaurant chains or any lessee that contributes
more than ten percent of the Partnership's rental income could
significantly impact the results of operations of the Partnership.
However, the general partners believe that the risk of such a default is
reduced due to the essential or important nature of these properties for
the on-going operations of the lessees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CNL Income Fund VI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 17, 1988, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants were to
be constructed, which are leased primarily to operators of selected national
and regional fast-food and family-style restaurant chains (collectively, the
"Properties"). The leases are triple-net leases, with the lessees generally
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of March 31, 1996, the Partnership owned 43 Properties,
including four Properties owned by joint ventures in which the Partnership is
a co-venturer and two Properties owned with affiliates as tenants-in-common.
Liquidity and Capital Resources
- -------------------------------
The Partnership's primary source of capital for the quarters ended March
31, 1996 and 1995, was cash from operations (which includes cash received from
tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). Cash from operations was $820,725 and
$841,008 for the quarters ended March 31, 1996 and 1995, respectively. The
decrease in cash from operations for the quarter ended March 31, 1996, is
primarily a result of changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
quarters ended March 31, 1996 and 1995.
In January 1996, the Partnership reinvested the remaining net sales
proceeds from the 1995 sale of the Property in Little Canada, Minnesota, in a
Golden Corral Property located in Clinton, North Carolina, with affiliates of
the general partners as tenants-in-common. In connection therewith, the
Partnership and its affiliates entered into an agreement whereby each co-
venturer will share in the profits and losses of the Property in proportion to
its applicable percentage interest. The Partnership owns an approximate 18
percent interest in this Property.
In connection with the 1995 sale of a small parcel of vacant land
adjacent to the Partnership's Property in Orlando, Florida, the Partnership
accepted a promissory note for $6,000. The note was collateralized by a
mortgage on the Property, bore interest at a rate of nine percent per annum
and was collected in six monthly installments of $1,026. The note was
collected in full in February 1996.
In March 1996, the Partnership entered into an agreement with the tenant
of the Properties in Chester, Pennsylvania, and Orlando, Florida, for payment
of certain rental payment deferrals the Partnership had granted to the tenant
through March 31, 1996. Under the agreement, the Partnership agreed to abate
approximately $42,700 of the rental payment deferral amounts. The tenant made
the first payment of approximately $18,600 in April 1996 in accordance with
the terms of the agreement, and has agreed to pay the Partnership the
remaining balance due of approximately $109,500 in six remaining annual
installments through 2002.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments
pending the Partnership's use of such funds to pay Partnership expenses or to
make distributions to the partners. At March 31, 1996, the Partnership had
$982,966 invested in such short-term investments as compared to $1,120,999 at
December 31, 1995. The decrease in cash and cash equivalents during the
quarter ended March 31, 1996, is primarily the result of the Partnership
investing approximately $173,700 in a Golden Corral Property, as described
above. The funds remaining at March 31, 1996, after payment of distributions
and other liabilities, will be used to meet the Partnership's working capital
and other needs.
Total liabilities of the Partnership, including distributions payable,
increased to $832,282 at March 31, 1996, from $828,211 at December 31, 1995.
The general partners believe the Partnership has sufficient cash on hand to
meet the Partnership's current working capital needs.
Based on cash from operations, the Partnership declared distributions to
the limited partners of $787,500 for each of the quarters ended March 31, 1996
and 1995. This represents distributions for each applicable quarter of $11.25
per unit. No distributions were made to the general partners for the quarters
ended March 31, 1996 and 1995. No amounts distributed or to be distributed to
the limited partners for the quarters ended March 31, 1996 and 1995, are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the limited partners' return on their adjusted
capital contributions. The Partnership intends to continue to make
distributions of cash available to the limited partners on a quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash
flow in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection
with the operations of the Partnership.
Results of Operations
- ---------------------
During the quarter ended March 31, 1995, the Partnership and its
consolidated joint venture, Caro Joint Venture, owned and leased 38 wholly
owned Properties (including one Property in Little Canada, Minnesota, which
was sold in June 1995) and during the quarter ended March 31, 1996, the
Partnership and Caro Joint Venture owned and leased 37 wholly owned
Properties, to operators of fast-food and family-style restaurant chains. In
connection therewith, the Partnership and Caro Joint Venture earned $836,648
and $794,930, during the quarters ended March 31, 1996 and 1995, respectively,
in rental income from operating leases and earned income from direct financing
leases from these Properties. Rental and earned income for the quarter ended
March 31, 1996, as compared to the quarter ended March 31, 1995, increased
approximately $21,500 during the quarter ended March 31, 1996, as a result of
the fact that in April 1995 the Partnership entered into a new lease for the
Property in Hermitage, Tennessee, for which rent commenced in June 1995. No
rental income was earned during the quarter ended March 31, 1995, relating to
this Property as a result of the fact that the tenant exercised its option to
terminate the lease in August 1994.
Rental and earned income also increased during the quarter ended March
31, 1996, as compared to the quarter ended March 31, 1995, as a result of the
fact that the Partnership recorded as income approximately $18,600 in rental
payment deferrals for the two Properties leased by the same tenant in Chester,
Pennsylvania, and Orlando, Florida. Previously, the Partnership had
established an allowance for doubtful accounts for these amounts. In March
1996, the Partnership entered into an agreement with the tenant to collect the
remaining balance as discussed above in "Liquidity and Capital Resources." If
such amounts are collected, the Partnership will reverse the remaining related
allowance for doubtful accounts and record such amounts as income.
In addition, rental and earned income increased approximately $16,300,
due to the acquisition of a Property located in Broken Arrow, Oklahoma, in
August 1995 with the net sales proceeds from the sale of the Property in
Little Canada, Minnesota, in June 1995. The increase in rental income during
the quarter ended March 31, 1995, was partially offset by a decrease of
approximately $8,200 due to the sale of the Property in Little Canada,
Minnesota, in June 1995.
During the quarters ended March 31, 1996 and 1995, the Partnership also
owned and leased three Properties indirectly through joint venture
arrangements and one Property with an affiliate as tenants-in-common, and for
the quarter ended March 31, 1996, owned and leased one additional Property as
tenants-in-common with affiliates of the general partners. In connection
therewith, during the quarters ended March 31, 1996 and 1995, the Partnership
earned $22,605 and $19,759, respectively, attributable to the net income
earned by these unconsolidated joint ventures. The increase in net income
earned by unconsolidated joint ventures during the quarter ended March 31,
1996, as compared to the quarter ended March 31, 1995, is primarily
attributable to the Partnership investing in a Golden Corral Property in
Clinton, North Carolina, with affiliates as tenants-in-common in January 1996.
During the quarter ended March 31, 1996, four restaurant chains,
Hardee's, Burger King, Denny's, and Golden Corral Family Steakhouse
Restaurants, each accounted for more than ten percent of the Partnership's
total rental income during the quarter ended March 31, 1996 (including the
Partnership's share of rental income from three Properties owned by a joint
venture and two Properties owned with affiliates as tenants-in-common).
During the remainder of 1996 and subsequent years, it is anticipated that
these four restaurant chains each will continue to account for more than ten
percent of the total rental income to which the Partnership is entitled under
the terms of the leases. Any failure of these restaurant chains could
materially affect the Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $184,447 and $167,036 for the quarters ended March 31, 1996 and 1995,
respectively. The increase in operating expenses during the quarter ended
March 31, 1996, as compared to the quarter ended March 31, 1995, is primarily
the result of an increase in (i) accounting and administrative expenses
associated with operating the Partnership and its Properties and (ii)
insurance expense as a result of the general partners obtaining contingent
liability and property coverage for the Partnership, effective May 1995. This
insurance policy is intended to reduce the Partnership's exposure in the
unlikely event a tenant's insurance policy lapses or is insufficient to cover
a claim relating to the Property. Operating expenses also increased due to
the fact that during the quarter ended March 31, 1996, the Partnership
incurred professional services as a result of appraisal updates obtained to
prepare an annual statement of unit valuation to qualified plans in accordance
with the Partnership's partnership agreement. During 1995, these professional
services were incurred during the quarter ended June 30, 1995.
The increase in operating expenses during the quarter ended March 31,
1996, was partially offset by a decrease in real estate tax expense due to the
fact that during the quarter ended March 31, 1995, the Partnership incurred
$2,763 in real estate taxes relating to the Property in Hermitage, Tennessee
as a result of the former tenant exercising its option to terminate its lease
in August 1994. No real estate taxes were incurred during the quarter ended
March 31, 1996, as a result of the Partnership entering into a new lease for
this Property in April 1995, under which the tenant is responsible for real
estate taxes in accordance with the terms of the lease.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
-----------------
Item 2. Changes in Securities. Inapplicable.
---------------------
Item 3. Defaults upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information. Inapplicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) The following exhibit is filed as a part of this report.
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund VI, Ltd. (Filed herewith.)
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 10th day of May, 1996.
CNL INCOME FUND VI, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-----------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-----------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
EXHIBIT 4.2
Agreement and Certificate of
Limited Partnership of CNL Income Fund VI, Ltd.
AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
OF
CNL INCOME FUND VI, LTD.
THIS AMENDED AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED
PARTNERSHIP is made and entered into effective this 22nd day of June, 1989, by
and among Robert A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation,
as General Partners, Jeanne A. Wall, as the Initial Limited Partner, and those
persons and entities admitted to the Partnership as Limited Partners.
WHEREAS, on August 17, 1988, a Certificate of Limited Partnership (the
"Original Agreement") was filed with the Secretary of State of the State of
Florida, whereby Robert A. Bourne, James M. Seneff, Jr. and CNL Realty
Corporation, as General Partners, and Jeanne A. Wall, as the Initial Limited
Partner, formed the Partnership under the Florida Uniform Limited Partnership
Act;
WHEREAS, pursuant to Section 620.109 of the Florida Revised Uniform
Limited Partnership Act (1986), the parties hereto desire to amend, restate,
and supersede in its entirety the Original Agreement and to enter into this
Agreement for the purposes of admitting the Limited Partners into the
Partnership, and permitting the withdrawal of the Initial Limited Partner;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree to continue the Partnership as follows.
ARTICLE ONE
CERTAIN DEFINITIONS
When used in this Agreement, the following terms (used in plural where
the context indicates) shall have the meanings designated below.
1.1 "10% Preferred Return" as of any date means (i) in the case of
distributions of Net Cash Flow, an amount equal to a 10% cumulative,
noncompounded annual return on a Limited Partner's Adjusted Capital
Contribution, to the extent sufficient cash is available to make such
distributions, and (ii) in all other cases, an amount equal to a 10%
cumulative, noncompounded annual return on a Limited Partner's Adjusted
Capital Contribution, reduced by all prior distributions of Net Cash Flow and
Net Sales Proceeds from a Nonliquidating Sale, other than those prior cash
distributions applied in payment of such Limited Partner's Adjusted Capital
Contribution pursuant to Article 9.3(b)(ii).
1.2 "Act" means the Florida Revised Uniform Limited Partnership Act
(1986), as amended.
1.3 "Acquisition Expenses" mean any and all expenses incurred by the
Partnership, any General Partner or any Affiliate of any General Partner in
connection with the selection or acquisition of any Property, including,
without limitation, legal fees and expenses, travel and communication
expenses, costs of appraisals, nonrefundable option payments on property not
acquired, accounting fees and expenses, and title insurance.
1.4 "Acquisition Fees" mean any and all fees and commissions, exclusive
of Acquisition Expenses, paid by any person or entity to any other person or
entity, including any fees or commissions paid by or to any General Partner or
any Affiliate of any General Partner, in connection with the selection or
acquisition of any Property, including, without limitation, real estate
commissions, acquisition fees, finder's fees, selection fees, development
fees, nonrecurring management fees, consulting fees, or any other fees of a
similar nature, however designated and however treated for tax or accounting
purposes.
1.5 "Additional Closing Date" means any date, other than the Initial
Closing Date, on which subscribers for Units are admitted to the Partnership
as Limited Partners.
1.6 "Adjusted Capital Contribution" as of any date means the Capital
Contribution of a Limited Partner reduced by all prior cash distributions to
such Limited Partner of Net Sales Proceeds from a Nonliquidating Sale, other
than those prior cash distributions applied in payment of such Limited
Partner's 10% Preferred Return pursuant to Article 9.3(b)(i). Adjusted Capital
Contributions may differ from Capital Accounts, but may not be less than zero.
1.7 "Affiliate" means any person or entity directly or indirectly
through one or more intermediaries controlling, controlled by or under common
control with another person or entity. For the purposes of this definition,
the following shall be presumed to be Affiliates: (i) any person or entity
owning or controlling ten percent (10%) or more of the outstanding voting
securities of another person or entity; (ii) any officer, director, partner,
or trustee of such person or entity; and (iii) if such other person or entity
is an officer, director, partner, or trustee of a person or entity, the person
or entity for which such person or entity acts in any such capacity.
1.8 "Agreement" means this Amended and Restated Agreement and
Certificate of Limited Partnership, as amended from time to time. including
all exhibits thereto.
1.9 "Capital Account" means the book account, established and maintained
for each Partner in a manner which complies with Treasury Regulation Section
1.704-1(b)(2)(iv), as may be amended from time to time. Each Capital Account
shall reflect, among other items, (i) all cash and the fair market value of
property (net of liabilities securing such property that the Partnership is
considered to assume or take subject to under Code section 752) contributed by
the Partner to the Partnership, (ii) all allocations to the Partner of Partner-
ship Net Income, Net Loss, Gain and Loss, and (iii) all cash and the fair market
value of property (net of liabilities securing such property that the Partner
is considered to assume or take subject to under Code section 752) distributed
to the Partner by the Partnership. Any and all amounts distributed to a
Partner as a fee and/or as compensation or reimbursement for services shall
not reduce such Partner's Capital Account.
1.10 "Capital Contribution" means the amount actually paid to the
Partnership by a Partner. For purposes of computing a Limited Partner's
Capital Contribution, any Limited Partner who pays less than the per Unit
offering price due to a decrease in the commissions otherwise payable to CNL
Investment Company or a broker-dealer (where net proceeds to the Partnership
are not reduced), nevertheless shall be deemed to have contributed to the
Partnership the full offering price of $500 per Unit. The Capital Contribution
of a Substituted Limited Partner shall be that attributable to the interest in
the Partnership assigned to him.
1.11 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.12 "Competitive Real Estate Commission" means a real estate or
brokerage commission for the purchase or sale of property which is reasonable,
customary, and competitive in light of the size, type, and location of the
property.
1.13 "Effective Date" means the date on which this Agreement is accepted
for filing by the Secretary of State of the State of Florida.
1.14 "Final Closing Date" means the last date on which subscribers for
Units are admitted to the Partnership as Limited Partners.
1.15 "Front-End Fees" mean fees and expenses paid by any person or
entity to any person or entity for any services rendered in connection with
the organization of the Partnership and the acquisition of Properties,
including Selling Commissions, Organizational and Offering Expenses,
Acquisition Expenses, Acquisition Fees, and any other similar fees, however
designated.
1.16 "Gain" means the income or gain of the Partnership for federal
income tax purposes arising from any Sale, and includes the Partnership's
distributive share for federal income tax purposes of the income or gain
arising from the sale or other disposition of all or a substantial portion of
the assets of any joint venture or partnership in which the Partnership is a
co-venturer or partner.
1.17 "General Partners" mean Robert A. Bourne, James M. Seneff, Jr., and
CNL Realty Corporation, or any other person or entity which is substituted for
or succeeds to the interest of all or any of such persons as a general partner
pursuant to this Agreement.
1.18 "General Partners' Capital Contribution" means the total cash and
adjusted basis of property (including contract rights) contributed to the
Partnership by the General Partners.
1.19 "Initial Closing Date" means the first date on which subscribers
for Units are admitted to the Partnership as Limited Partners.
1.20 "Initial Limited Partner" means Jeanne A. Wall, who will withdraw
from the Partnership on or immediately prior to the Effective Date.
1.21 "Investment in Properties" means the amount of the Limited
Partners' Capital actually paid or allocated by the Partnership, either
directly or through joint venture arrangements or other partnerships, to the
purchase, development, construction, or improvement (including working capital
reserves of up to five percent [5%] of the Limited Partners' Capital) of
Properties, and other cash payments such as interest and taxes, but excluding
Front-End Fees.
1.22 "Limited Partner" means any person or entity admitted to the
Partnership as a limited partner, including any person or entity admitted to
the Partnership as a Substituted Limited Partner in accordance herewith.
1.23 "Limited Partners' Capital" as of any date means the aggregate
Capital Contributions made by all of the Limited Partners.
1.24 "Liquidating Sale" means any Sale resulting in a dissolution of the
Partnership under Article 17.1, including any Sale which is part of a series
of Sales pursuant to a plan to sell or otherwise dispose of all or
substantially all of the Partnership's assets. For purposes of this Agreement,
the phrase "all or substantially all of the Partnership's assets" shall mean
eighty percent (80%) or more in value of the Properties acquired by the
Partnership within two (2) years after the initial date of the Prospectus.
1.25 "Loss" means the loss of the Partnership for federal income tax
purposes arising from any Sale, and includes the Partnership's distributive
share for federal income tax purposes of the loss arising from the sale or
other disposition of all or a substantial portion of the assets of any joint
venture or partnership in which the Partnership is a co-venturer or partner.
1.26 "Management Fee" means the fee paid for day-to-day professional
management services in connection with Properties owned by the Partnership.
1.27 "Monthly Distribution Account" means an account established by the
Partnership for the benefit of those Limited Partners who elect to receive
monthly distributions of Net Cash Flow, into which account the amounts
specified in Article 9.3(a)(iii) shall be deposited.
1.28 "Monthly Distribution Fee" means, for any fiscal year, the excess,
if any, of (i) the amount by which the costs associated with processing and
making distributions to those Limited Partners who elect to receive
distributions of Net Cash Flow on a monthly basis exceed the costs associated
with processing and making distributions to those Limited Partners who elect
to receive distributions of Net Cash Flow on a quarterly basis, over (ii) any
interest earned on amounts in the Monthly Distribution Account. The Monthly
Distribution Fee shall be apportioned equally among those Limited Partners who
elect to receive monthly distributions of Net Cash Flow; provided, however,
that until the end of the fiscal year in which the offering of Units
terminates, each Limited Partner shall be apportioned a pro rata amount of the
Monthly Distribution Fee based upon the number of months such Partner was a
Limited Partner.
1.29 "Net Cash Flow" means the Net Income or Net Loss of the Partnership
for each fiscal year, with the following adjustments: (i) there shall be added
to such Net Income or Net Loss the amount charged for any deduction not
involving a cash expenditure (such as depreciation and amortization), and any
cash receipts (excluding Net Sales Proceeds) which the General Partners, in
their sole discretion, deem to be available for distribution; and (ii) there
shall be subtracted from such Net Income or Net Loss the amount of any
nondeductible reserves established or maintained by the General Partners and
any other nondeductible cash items, including principal payments on
indebtedness, if any, and distributions made to the Partners prior to the end
of such fiscal year and the amount of any and all income not attributable to
cash receipts of the Partnership (such as accrued accounts receivable).
1.30 "Net Income" means the taxable income of the Partnership for
federal income tax purposes for each taxable year, determined using the
accrual method of accounting and calculated without regard to Gain or Loss.
1.31 "Net Loss" means the taxable loss of the Partnership for federal
income tax purposes for each taxable year, determined using the accrual method
of accounting and calculated without regard to Gain or Loss.
1.32 "Net Sales Proceeds" mean, in the case of a Sale described in
Article 1.43(i), the proceeds of any such Sale less all costs and expenses
associated with such Sale and the amount of all Real Estate Commissions paid
by the Partnership. In the case of a Sale described in Article 1.43(ii), Net
Sales Proceeds mean the proceeds of any such Sale less the amount of any and
all costs and expenses, including legal and other selling expenses, incurred
in connection with such Sale. In the case of a Sale described in Article
1.43(iii), Net Sales Proceeds mean the proceeds of any such Sale actually
distributed to the Partnership from the joint venture or partnership.
1.33 "Nonliquidating Sale" means any Sale other than a Liquidating Sale.
1.34 "Operating Expenses" mean any and all costs and expenses incurred
by the Partnership, any General Partner or any Affiliate of any General
Partner which are in any way related to the operation of the Partnership or to
Partnership business, including but not limited to the costs and expenses
listed in Article 8.1, but excluding Selling Commissions, Organizational and
Offering Expenses, Acquisition Expenses, Acquisition Fees, Management Fees,
and Real Estate Commissions.
1.35 "Organizational and Offering Expenses" mean any and all costs and
expenses, exclusive of Selling Commissions, incurred by the Partnership, any
General Partner or any Affiliate of any General Partner in connection with the
formation, qualification, organization, and registration of the Partnership
and in the marketing and distribution of Units, including, without limitation,
the following: legal, accounting, and escrow fees; printing, amending,
supplementing, mailing, and distributing costs; filing, registration, and
qualification fees and taxes; telegraph and telephone costs; and all
advertising, marketing, and due diligence expenses, including the costs
related to investor and broker-dealer sales meetings.
1.36 "Partner" means a General Partner or a Limited Partner, and
"Partners" means all Partners, both General and Limited.
1.37 "Partnership" means CNL Income Fund VI, Ltd., the Florida limited
partnership reorganized pursuant to this Agreement.
1.38 "Partnership Capital" means the total Capital Contributions made by
all Partners of the Partnership, both General and Limited.
1.39 "Partnership Interest(s)" means the ownership interest of a Partner
in the Partnership's profits and losses, other items of income, gain, losses,
deductions, expenses, and credits, and distributions of net cash receipts at
any particular time, including the right of such Partner to any and all
benefits to which a Partner may be entitled as provided in this Agreement and
under the Act, together with the obligations of such Partner to comply with
all the terms and provisions of this Agreement and the Act. The Partnership
Interest of a Limited Partner shall be equal to that percentage expressed by a
fraction, with the numerator consisting of the number of Units purchased by
such Limited Partner, and the denominator consisting of the total number of
Units held by all of the Limited Partners. The term "Partnership Interests"
shall refer to the entire ownership interest of all Partners in the
Partnership.
1.40 "Properties" mean the real properties, including the buildings
located thereon, which are acquired by the Partnership or by any joint venture
or partnership in which the Partnership is a co-venturer or partner.
1.41 "Prospectus" means the final prospectus included in the
Partnership's Registration Statement filed with the Securities and Exchange
Commission, pursuant to which the Partnership will offer Units to the public,
as the same may be amended or supplemented from time to time after the
effective date of such Registration Statement.
1.42 "Real Estate Commissions" mean any and all real estate commissions
and other similar fees, costs, or expenses, including a subordinated real
estate disposition fee payable to CNL Investment Company pursuant to Article
8.3, incurred in connection with the Sale of Properties owned by the
Partnership.
1.43 "Sale" means any transaction or series of transactions whereby:
(i) the Partnership sells, grants, transfers, conveys, or relinquishes its
ownership of any Property or portion thereof, including any event with respect
to any such Property which gives rise to insurance claims or condemnation
awards; (ii) the Partnership sells, grants, transfers, conveys, or
relinquishes its ownership of all or substantially all of the interest of the
Partnership in any joint venture or partnership in which it is a co-venturer
or partner; or (iii) any joint venture or partnership in which the Partnership
is a co-venturer or partner sells, grants, transfers, conveys, or relinquishes
its ownership of any Property or portion thereof, including any event with
respect to any such Property which gives rise to insurance claims or
condemnation awards.
1.44 "Selling Commissions" mean any and all commissions payable to
underwriters, managing dealers, or other broker dealers in connection with the
sale of Units as described in the Prospectus, including, without limitation,
commissions payable to CNL Investment Company.
1.45 "Substituted Limited Partner" means a person or entity admitted to
the Partnership pursuant to the provisions of Article 14.3 hereof and in
accordance with the provisions of the Act.
1.46 "Termination Date" means December 31, 2018, or such earlier date as
the Partnership may be terminated pursuant to any provision of this Agreement.
1.47 "Unit" means the interest of a Limited Partner in the Partnership
which is represented by a Capital Contribution of $500.
ARTICLE TWO
ORGANIZATION
2.1 Formation. The parties hereby acknowledge that the term of the
Partnership commenced on August 17, 1988, and agree to continue the
Partnership as a limited partnership pursuant and subject to the Act.
2.2 Filings. The General Partners shall file, record, and publish such
certificates and other documents as may be necessary and appropriate to comply
with the requirements for the organization and operation of a limited
partnership under the Act.
2.3 Foreign Qualification. In the event that the business of the
Partnership may be carried on or conducted in other states in addition to the
State of Florida, then the parties agree that this Partnership shall exist or
shall be qualified under the laws of each such additional state in which
business is actually conducted by the Partnership, and they severally agree to
execute and authorize the General Partners to execute on their behalf or on
behalf of the Partnership such other and further documents as may be necessary
or appropriate to permit the General Partners to qualify this Partnership, or
otherwise comply with requirements for the formation and organization of a
limited partnership in all such states.
ARTICLE THREE
NAME AND PRINCIPAL OFFICE
3.1 Name and Office. The name of the Partnership is "CNL Income Fund VI,
Ltd." Its principal office and its registered office in the State of Florida
shall be located at 400 East South Street, Suite 500, Orlando, Florida 32801,
or at such other address as the General Partners notify each Limited Partner
in writing in accordance herewith. The registered agent of the Partnership in
Florida shall be James A. Hartman, 400 East South Street, Suite 500, Orlando,
Florida 32801. The General Partners also shall have the right, without notice
to the Limited Partners, to establish a registered office or offices in such
other states as the General Partners deem necessary in order to qualify the
Partnership under the laws of any additional state in which the Partnership
actually conducts business.
3.2 Assumed Names. The business of the Partnership shall be conducted
under the name listed above or under such variations of this name as the
General Partners deem appropriate to comply with the laws of any state in
which the Partnership does business. The General Partners shall execute and
file in the proper offices such certificates as may be required by the Assumed
Name Act or similar law in effect in the counties and other governmental
jurisdictions in which the Partnership may elect to conduct business.
ARTICLE FOUR
PURPOSES AND POWERS OF THE PARTNERSHIP
The purpose of the Partnership shall be to acquire and lease properties
on which restaurants which are part of regional or national restaurant chains
are or will be located, as more fully described in the Prospectus. Subject to
the limitations set forth elsewhere in this Agreement, the Partnership shall
be empowered to do or cause to be done, or not to do, any and all acts deemed
by the General Partners to be necessary or appropriate or in furtherance of
the purpose of the Partnership, including, without limitation, the power and
authority:
(a) to acquire, own, lease, manage, and/or operate any Properties;
(b) to enter into joint venture arrangements or general
partnerships with any person or entity which is not an Affiliate of any
of the General Partners for the acquisition, ownership, leasing,
management, and/or operation of any Properties, provided that the
Partnership has the ability to control the management decisions of any
such joint venture or general partnership and there are no duplicate
fees;
(c) to enter into interim joint venture arrangements or general
partnerships with the General Partners or their Affiliates for the
purpose of temporarily holding title to Properties in order to
facilitate the acquisition of such Properties by the Partnership,
provided that the Partnership has the ability to control the management
decisions of any such joint venture or general partnership and there are
no duplicate fees;
(d) to enter into joint venture arrangements or general
partnerships with another program formed by the General Partners for the
acquisition, ownership, leasing, management, and/or operation of any
Properties provided that (i) there are no duplicate fees, (ii) the two
programs have substantially identical investment objectives, (iii)
compensation to the General Partners and their Affiliates is
substantially identical in each program, (iv) each program's investment
is on substantially the same terms and conditions, and (v) each program
has a right of first refusal to buy the Property held by such joint
venture or general partnership at a purchase price equal to the fair
market value as determined by an independent appraisal, if the other
program has the right to sell the Property held in the joint venture or
general partnership;
(e) to make such elections under the Code as to the treatment of
items of Partnership income, Gain, Loss, deductions, and credit, and as
to all relevant matters as the General Partners believe necessary,
desirable, or beneficial to the Limited Partners;
(f) to purchase or to elect not to purchase from others, at the
expense of the Partnership, contracts of liability, casualty, and other
insurance which the General Partners deem advisable, appropriate, or
convenient for the protection of the assets or affairs of the
Partnership or for any purpose convenient or beneficial to the
Partnership;
(g) subject to the limitations contained in Article 10.6 and
elsewhere in this Agreement, to employ persons, including Affiliates,
for the operation and management of the Partnership and/or the
Properties, on such terms and for such compensation as the General
Partners deem, in their absolute discretion, to be in the best interest
of the Partnership;
(h) to designate the depository or depositories in which all bank
accounts of the Partnership shall be kept and the person or persons upon
whose signature withdrawals therefrom shall be made;
(i) to prosecute, defend, settle, compromise or submit to
arbitration, at the Partnership's expense, any suits, actions or claims
at law or in equity to which the Partnership is a party or by which it
is affected, as may be necessary, proper or convenient, and to satisfy
out of Partnership funds any judgment, decree or decision of any court,
board, agency, or authority having jurisdiction, or any settlement of
any suit, action, or claim prior to judgment or final decision thereon;
(j) to incur, at the expense of the Partnership, bank charges with
respect to bank accounts maintained, and expenses relating to the
purchase of supplies, materials, equipment, or similar items used in
connection with the operation of the Partnership, and to incur escrow
fees, recording fees, insurance premiums, and similar expenses in
connection with the Properties;
(k) to employ persons, at the expense of the Partnership, to
perform administrative, legal and independent auditing services in
connection with the operation and management of the Partnership's
business, and to provide services in connection with the preparation and
filing of any tax return required of the Partnership;
(l) to distribute among the Partners, to the extent deemed
prudent, cash generated from the operations of the Partnership;
(m) subject to the limitations contained elsewhere in this
Agreement, to transfer, sell or convey Properties, including its
interest in any joint ventures or partnerships, if such transactions are
deemed by the General Partners to be in the best interest of the
Partnership;
(n) to invest such funds as temporarily are not required for
Partnership purposes in short-term, highly liquid investments with
appropriate safety of principal, including, without limitation, United
States Treasury bills or bonds and money market funds;
(o) to engage in such other businesses, activities, and
transactions similar in nature and scope to those described in this
Article Four as the General Partners from time to time may determine to
be necessary or appropriate in furtherance of the purpose of the
Partnership;
(p) to enter into such agreements, contracts, documents, leases,
and instruments and to give such receipts, releases, and discharges with
respect to all of the foregoing and any matters incident thereto, as the
General Partners may deem advisable, appropriate or convenient; and
(q) subject to the limitations contained in Article 10.6 and
elsewhere in this Agreement, to execute, deliver, perform and carry out
all contracts, agreements, and undertakings of every kind, pay all
amounts required by this Agreement or by applicable law, and engage in
all activities and transactions as may in the opinion of the General
Partners be necessary, incidental, or advisable to the accomplishment of
the Partnership's purposes or in connection with any of the foregoing.
ARTICLE FIVE
TERM OF PARTNERSHIP
The Partnership commenced on August 17, 1988, and shall continue in
existence until the Termination Date.
ARTICLE SIX
CAPITALIZATION
6.1 Limited Partners' Capital Contributions. No Limited Partner shall be
admitted to the Partnership unless such Limited Partner shall make a Capital
Contribution of $2,500 or more; provided, however, that the required minimum
Capital Contribution for Individual Retirement Accounts and Keogh and pension
plans shall be $1,000 where permitted by applicable state law. Except where
prohibited by applicable state law or the Prospectus, Individual Retirement
Accounts and Keogh and pension plans making the required minimum investment in
the Partnership shall be entitled to make additional purchases in increments
of one-quarter Units. Limited Partners shall be admitted to the Partnership
solely by subscription, upon approval by the General Partners. No Limited
Partner shall borrow funds from the General Partners or their Affiliates in
order to make contributions to the Partnership Capital, and the Partnership
shall not acquire Properties in exchange for Units.
6.2 General Partners' Capital Contribution. On or before the Effective
Date, the General Partners shall contribute to the Partnership the aggregate
sum of $1,000 as their initial General Partners' Capital Contribution. The
General Partners, in their sole discretion, may increase their General
Partners' Capital Contribution by contributing additional amounts to the
Partnership. The General Partners also may acquire Units as Limited Partners
pursuant to the same terms and conditions as other Limited Partners.
6.3 Minimum Capital Contributions. The aggregate Capital Contributions
by the Limited Partners may range from a minimum of $1,500,000 (3,000 Units)
to the maximum amount described in the Prospectus, depending upon the number
of such Units offered and sold in connection with the Partnership's public
offering of the Units. Capital Contributions shall be due and payable in cash
upon subscription.
6.4 Escrow. Prior to the General Partners' acceptance or rejection of
any subscription, funds received from such subscription shall be held in
escrow.
6.5 Admission of Limited Partners. The General Partners, in their sole
and absolute discretion, may reject any subscription for any reason.
Subscriptions for Units shall be accepted or rejected by the General Partners
within thirty (30) days after receipt thereof by the General Partners.
Subscribers whose subscriptions are accepted by the General Partners
subsequent to the Initial Closing Date shall be admitted as Limited Partners
not later than the last day of the calendar month following the date such
subscriptions are accepted. Funds received from subscriptions rejected by the
General Partners shall be returned to subscribers within ten (10) business
days after the date of such rejection with interest and without deduction. No
sale of Units shall be made pursuant to the Prospectus after one year
following the initial date of the Prospectus.
6.6 Liability of Limited Partners. Except as otherwise provided in
Article 12.1, a Limited Partner shall not be liable to the Partnership beyond
the amount of his Capital Contribution, nor shall he be personally liable for
any liabilities, contracts, or obligations of the Partnership. However, it is
the intent of the Partners that no distribution (or any part of a
distribution) made to any Limited Partner pursuant to Article Nine of this
Agreement shall be deemed a return or withdrawal of capital, even if such
distribution represents (in full or in part) a distribution of depreciation or
any other non-cash item accounted for as a Loss or deduction from or offset to
the Partnership's income, and that no Limited Partner shall be obligated to
pay any such amount to or for the account of the Partnership or any creditor
of the Partnership.
6.7 Interest. Except as provided in Articles 7.2 and 9.3, interest
earned on Partnership funds shall inure to the benefit of the Partnership, and
the Partners shall not receive interest on their Capital Contributions.
6.8 Additional Capital Contributions. No Partner shall be required to
make any additional capital contributions beyond the amount of his initial
Capital Contribution, nor shall any Partner be required to lend any funds to
the Partnership. The General Partners shall have the right to make additional
capital contributions to the Partnership and thereby increase their General
Partners' Capital Contribution by the amount of such additional capital
contributions.
6.9 Repayment of Capital Contributions of Limited Partners. Except as
expressly provided in this Agreement, no specific time has been agreed upon
for the repayment of the Capital Contributions of the Limited Partners. The
Limited Partners understand that the General Partners and their Affiliates
make no warranty, guarantee, or representation that the Partnership will have
sufficient funds to repay the Capital Contribution or Capital Account of any
Limited Partner and that repayment of the Capital Contribution or Capital
Account of any Limited Partner shall be made only from available Partnership
funds as provided in this Agreement. No Limited Partner or any successor in
interest shall have a right to withdraw or reduce any capital contributed to
the Partnership.
6.10 No Priorities among Limited Partners. Except as expressly provided
in this Agreement, no Limited Partner shall have the right to demand or
receive property other than cash in return for his Capital Contribution, nor
shall any Limited Partner have priority over any other Limited Partner as to
Capital Contributions or as to compensation by way of income.
ARTICLE SEVEN
APPLICATION OF PARTNERSHIP CAPITAL
7.1 General. Partnership Capital shall initially be applied as set forth
in this Article Seven.
7.2 Return of Earned Interest. Within thirty (30) days after the Initial
Closing Date, the Partnership shall return to each subscriber for Units from
whom the Partnership received funds prior to the Initial Closing Date an
amount equal to the interest earned on such subscriber's funds during the
period in which such subscriber's funds were held in escrow, with such
interest to be calculated by the General Partners based on such subscriber's
pro rata share of all interest on subscribers' funds during such period of
time; provided, however, that a subscriber for Units who subscribes for Units
after the Initial Closing Date shall receive interest on his subscription
funds only if his subscription is accepted and his funds were held in escrow
for more than twenty (20) days.
7.3 Selling Commissions.
(a) Except as otherwise provided in this Article 7.3, the
Partnership shall pay any and all Selling Commissions, in the amount of
Forty-Two Dollars and Fifty Cents ($42.50) per Unit sold, on the Initial
Closing Date and on each Additional Closing Date in accordance with the
Managing Dealer Agreement with CNL Investment Company.
(b) A registered principal or representative of CNL Investment
Company or any other broker-dealer may purchase Units net of
commissions, at a per Unit purchase price of $460. In connection with
purchases of certain minimum numbers of Units, the amount of Selling
Commissions otherwise payable to CNL Investment Company or a soliciting
dealer shall be reduced in accordance with the following schedule:
Number of Selling Commissions Per Unit
Units Purchase Price ----------------------------
Purchased Per Unit Percent Dollar Amount
------------- -------------- ------- -------------
1 - 500 $500 8.5% $42.50
501 - 1,000 $490 6.5% $32.50
1,001 - 2,000 $480 4.5% $22.50
2,001 - 3,000 $475 3.5% $17.50
3,001 or more $470 2.5% $12.50
(c) Any such reduction in Selling Commissions will be credited to
the "purchaser" (as defined in Article 7.3(e) below) by reducing the
total purchase price otherwise payable by the purchaser. The net
proceeds to the Partnership will not be affected by the volume discount.
(d) Subscriptions may be combined for the purpose of determining
the volume discounts in the case of subscriptions made by any
"purchaser," as that term is defined in Article 7.3(e) below, provided
all such Units are purchased through the same soliciting dealer or
through CNL Investment Company. The volume discount will be prorated
among the separate subscribers considered to be a single purchaser. Any
request to combine more than one subscription must be made in writing on
a form to be supplied by the Partnership and must set forth the basis
for such request. Any such request will be subject to verification by
CNL Investment Company that all of such subscriptions were made by a
single purchaser. If a purchaser does not reduce the per Unit purchase
price, the excess purchase price over the discounted purchase price will
be returned to the actual separate subscribers for Units.
(e) For purposes of the volume discounts provided for in this
Article 7.3, "purchaser" includes (i) an individual, his or her spouse,
and their children under the age of 21, who purchase the Units for his
or her or their own accounts, and all pension or trust funds established
by each such individual; (ii) a corporation, partnership, association,
joint-stock company, trust fund, or any organized group of persons,
whether incorporated or not (provided that the entities described in
this clause (ii) must have been in existence for at least six months
before purchasing the Units and must have formed such group for a
purpose other than to purchase the Units at a discount); (iii) an
employee's trust, pension, profit-sharing, or other employee benefit
plan qualified under Section 401 of the Code; and (iv) all pension,
trust, or other funds maintained by a given bank. In addition, the
General Partners, in their sole discretion, may aggregate and combine
separate subscriptions for Units received during the offering period
from (i) CNL Investment Company or the same soliciting dealer, (ii)
investors whose accounts are managed by a single investment adviser
registered under the Investment Advisers Act of 1940, (iii) investors
over whose accounts a designated bank, insurance company, trust company,
or other entity exercises discretionary investment responsibility, or
(iv) a single corporation, partnership, trust association, or other
organized group of persons, whether incorporated or not, and whether
such subscriptions are by or for the benefit of such corporation,
partnership, trust association, or group. Except as provided in this
Article 7.3(e), subscriptions will not be cumulated, combined, or
aggregated.
(f) Any reduction in commissions will reduce the effective
purchase price per Unit to the investor involved but will not alter the
net proceeds payable to the Partnership as a result of such sale.
7.4 Organizational and Offering Expenses. As soon as practicable after
the Initial Closing Date (and thereafter as soon as practicable after such
expenses are incurred), the Partnership shall reimburse the General Partners
and their Affiliates for all Organizational and Offering Expenses incurred by
the General Partners and their Affiliates, and the Partnership shall pay all
other Organizational and Operating Expenses. Notwithstanding anything to the
contrary in the preceding sentence, the General Partners or their Affiliates
shall pay all Organizational and Offering Expenses which exceed three percent
(3%) of Limited Partners' Capital.
7.5 Acquisition Expenses and Fees. The Partnership, as soon as
practicable after such fees and expenses are incurred, shall reimburse the
General Partners and Affiliates for any and all Acquisition Expenses and
Acquisition Fees incurred by any of them, and, in connection with services to
be provided by CNL Investment Company related to the acquisition of
properties, shall pay to CNL Investment Company an Acquisition Fee in an
amount equal to five percent (5%) of Limited Partners' Capital; provided,
however, that the Acquisition Fee paid to CNL Investment Company shall be
reduced or paid back to the Partnership if and to the extent (i) necessary for
the Partnership to make the required Investment in Properties as set forth in
Article 7.7, or (ii) the total of all Acquisition Fees paid by all persons in
connection with the purchase of all of the Properties exceeds the lesser of
eighteen percent (18%) of Limited Partners' Capital or compensation
customarily charged in arms' length transactions by others rendering similar
services as an ongoing public activity in the same geographic locations and
for comparable properties. The Partnership shall pay all other Acquisition
Expenses and Acquisition Fees.
7.6 Reserves. The Partnership shall maintain reserves in such amounts as
the General Partners in their sole and absolute discretion determine to be
adequate to meet the Partnership's working capital or other needs.
7.7 Investment in Properties. The Partnership, when and to the extent
desirable investment opportunities are available as determined by the General
Partners in their sole and absolute discretion, shall acquire, either directly
or through joint venture arrangements or other partnerships, such Properties
as the General Partners in their sole and absolute discretion determine to be
in the best interests of the Partnership. The Partnership shall commit at
least eighty percent (80%) of Limited Partners' Capital to Investment in
Properties within two years following the initial date of the Prospectus;
provided, however, that any amount returned to the Limited Partners pursuant
to Article 7.8 shall not be considered in determining the percentage committed
to Investment in Properties as of such date. If any Acquisition Fees are paid
by the seller of any Property or Properties, such fees shall not be included
in the purchase price of such Property or Properties for purposes of
determining whether the required minimum Investment in Properties set forth
herein has been satisfied.
7.8 Return of Uninvested Partnership Capital. If any portion of Limited
Partners' Capital, within two years after the initial date of the Prospectus,
is not (i) committed to the investment in or actually invested in Properties
or (ii) has not been expended or is not reserved as working capital or
otherwise reserved, then, notwithstanding anything to the contrary herein, the
Partnership shall distribute to the Limited Partners, pro rata in proportion
to their Partnership Interests, as a return of Capital, such portion of
Limited Partners' Capital not so used or invested plus Front-End Fees in the
ratio that the amount of such uninvested funds bears to Limited Partners'
Capital. For purposes of this Agreement, Limited Partners' Capital will be
deemed to have been committed to investment (and therefore will not be
returned to the Limited Partners) to the extent written agreements in
principle or letters of understanding are executed at any time, which
agreements in principle or letters of understanding have not been rescinded,
whether or not any such investments are made, and also to the extent any funds
have been reserved to make contingent payments in connection with any
Property, whether or not any such payments are made.
7.9 Restrictions on Investments.
(a) The Partnership shall not acquire or invest in any of the
following (i) limited partnership interests of another real estate
program; (ii) unimproved or nonincome-producing property, except in
amounts not exceeding ten percent (10%) of Limited Partners' Capital
available for investment in Properties and only upon terms which can be
financed by Partnership Capital or from Net Cash Flow; (iii) the
securities of other issuers (nor shall the Partnership underwrite any
such securities), except that the Partnership may invest in short-term,
highly liquid investments with appropriate safety of principal; (iv)
real estate mortgages, junior trust deeds or other similar obligations;
and (v) any Properties that the Partnership is prohibited from acquiring
pursuant to Article 10.2 or any other provision of this Agreement.
(b) The Partnership shall not reinvest Net Cash Flow. Net Sales
Proceeds shall not be reinvested by the Partnership unless sufficient
cash will be distributed to pay any state (at a rate reasonably assumed
by the General Partners) and federal (assuming the Limited Partners are
taxable at the maximum applicable federal income tax bracket) income
taxes created by the Sale.
(c) Neither the Partnership nor any joint venture or general
partnership in which the Partnership invests or participates will
finance the acquisition of any Properties by secured or unsecured
indebtedness or encumber any of the Properties with a lien.
(d) All investments in Properties shall be supported by an
appraisal prepared by an independent appraiser, and the purchase price
of any Property, plus all Acquisition Fees paid by the Partnership in
connection with the acquisition of such Property, shall not exceed, but
may be less than, the appraised value of such Property. In connection
with the acquisition of a Property which is to be constructed or
renovated, the comparison of the purchase price and the appraised value
of such Property may be based on the "when constructed" price and value
of such Property. Each such appraisal shall be maintained
in the Partnership's records for five (S) years and shall be available
for inspection and copying by the Limited Partners during normal
business hours.
(e) The Partnership shall not deposit funds with financial
institutions, such as banks, saving and loan associations, and money
market funds, that are Affiliates of the General Partners, nor permit
compensating balance arrangements for the benefit of the General
Partners.
ARTICLE EIGHT
OPERATING EXPENSES; OTHER FEES AND EXPENSES
8.1 Operating Expenses. Subject to the restrictions on reimbursement of
the General Partners and their Affiliates set forth in Article 10.1, the
Partnership, as soon as practicable after such expenses are incurred, shall
reimburse CNL Investment Company and Affiliates for any and all Operating
Expenses incurred by CNL Investment Company and Affiliates. All other
Operating Expenses shall be billed directly to and paid by the Partnership.
Operating Expenses shall include, but shall not be limited to, the following
(excluding, however, any costs or expenses listed below which constitute
Selling Commissions, Organizational and Offering Expenses, Acquisition
Expenses, Acquisition Fees, Management Fees or Real Estate Commissions):
(a) all costs of personnel employed or otherwise engaged by the
Partnership and directly involved in the operation of the Partnership or
the Properties; expenses of insurance required in connection with the
operation of the Partnership or the Properties; taxes and assessments on
Properties and other taxes, including, without limitation, sales taxes
allocable to the Partnership as an entity; travel expenses related to
Partnership business; fees and expenses paid to consultants, bankers,
independent contractors, insurance and other brokers and agents, and
expenses in connection with the replacement, alteration, repair,
leasing, maintenance, and operation of Properties and any other
Partnership properties or assets;
(b) all accounting, legal, audit, and other professional and
reporting fees and expenses, which may include, but are not limited to,
preparation and documentation of Partnership bookkeeping, accounting and
audits; preparation and documentation of budgets, economic surveys, cash
flow projections, and working capital requirements; preparation and
documentation of Partnership state and federal tax returns; printing and
other expenses and taxes incurred in connection with the issuance, dis-
tribution, transfer, and recordation of documents in connection with the
business of the Partnership;
(c) expenses in connection with distributions made by the
Partnership to, and communications, bookkeeping and clerical work
necessary in maintaining relations with, the Partners, including
expenses in connection with preparing and mailing reports required to be
furnished to the Limited Partners pursuant to Article 16.3;
(d) expenses of revising, amending, modifying, or terminating this
Agreement, and of dissolving, terminating, reforming, liquidating, or
winding up the Partnership;
(e) costs incurred in connection with any litigation in which the
Partnership is involved as well as any examination, investigation, or
other proceeding conducted by any governmental agency of the
Partnership, including legal and accounting fees incurred in connection
therewith; and
(f) costs of any computer equipment or services used for or by the
Partnership, costs of any accounting, statistical, or bookkeeping
equipment necessary for the maintenance of the books and records of the
Partnership, the costs of preparation and dissemination of informational
material and documentation relating to the potential sale or other
disposition of Partnership property, and the costs of supervision and the
expenses of professionals employed by the Partnership in connection with
any of the foregoing, including attorneys, accountants, and appraisers.
(g) subject to the restrictions contained in Article Four, the
Partnership's share of all fees, commissions, costs, and expenses
incurred by any joint venture or partnership of which the Partnership is
a co-venturer or partner.
8.2 Management Fee. In each fiscal year in which the Limited Partners
have received or will receive an amount equal to their aggregate, cumulative
10% Preferred Return, the Partnership shall pay to CNL Investment Company,
pursuant to the terms of a management agreement to be entered into by and
between CNL Investment Company and the Partnership and within sixty (60) days
following the close of each such fiscal year, an annual, noncumulative
Management Fee equal to one percent (1%) of the sum of the gross revenues
derived from Properties wholly owned by the Partnership plus, in the case of
Properties owned by any joint venture or partnership in which the Partnership
is a co-venturer or partner, the Partnership's allocable share of such gross
operating revenues. Such Management Fee, together with any bookkeeping
services and fees paid to unaffiliated persons or entities for property
management services, shall not exceed fees which are competitive for similar
services in the same geographic area.
8.3 Real Estate Commissions. The Partnership shall pay any and all Real
Estate Commissions. In addition, upon any Sale of one or more of the
Partnership's Properties, the Partnership shall pay to CNL Investment Company,
as a subordinated real estate disposition fee, an amount equal to the lesser
of (i) one-half of a Competitive Real Estate Commission, or (ii) three percent
(3%) of the gross sales price of the Property or Properties. In the case of a
Property or Properties owned by a joint venture or partnership in which the
Partnership is a co venturer or partner, such fee shall be reduced
proportionately by an amount equal to the percentage interest in such joint
venture or partnership which is not owned by the Partnership. The real estate
disposition fee payable to CNL Investment Company shall be paid (i) only if
CNL Investment Company provides a substantial amount of services in connection
with the Sale of the Property or Properties, (ii) in the case of a
Nonliquidating Sale, only after all distributions of Net Sales Proceeds
pursuant to Articles 9.2(b)(i), 9.2(b)(ii) and 9.2(b)(iii) have been made, and
(iii) in the case of a Liquidating Sale, only after all distributions of Net
Sales Proceeds pursuant to Articles 18.2(a) and 18.2(b), plus an additional
amount equal to the sum, as of such date, of the Limited Partners' aggregate
10% Preferred Return and their aggregate Adjusted Capital Contributions have
been distributed to the Limited Partners. The total compensation paid by the
Partnership to all persons and entities in connection with any Sale of
Partnership Properties shall not exceed the lesser of (i) a Competitive Real
Estate Commission or (ii) six percent (6%) of the gross sales price of the
Property or Properties.
ARTICLE NINE
ALLOCATIONS AND DISTRIBUTIONS
9.1 Definitions. For purposes of this Article Nine, the following terms
shall have the meanings set forth below:
(a) "Limited Partners" means each Limited Partner of the
Partnership, as defined in Article 1.22, and includes all the Monthly
Limited Partners and all the Quarterly Limited Partners.
(b) "Monthly Limited Partner" means any Limited Partner who, for
the fiscal year in question, has elected to receive monthly
distributions of Net Cash Flow.
(c) "Quarterly Limited Partner" means any Limited Partner other
than a Monthly Limited Partner.
9.2 Allocations. Net Income, Net Loss, Gain, and Loss for any taxable
year shall be allocated in the following manner. For purposes of this Article
9.2, Capital Accounts shall be determined as if the Partnership's taxable year
had ended immediately prior to any Sale.
(a) Net Income and Net Loss (and each Partner's allocable share of
any Partnership item of income, gain, loss, deduction, credit, or
allowance for any Partnership tax year or other period taken into
account in determining Net Income and Net Loss) shall be allocated 99%
to the Limited Partners and 1% to the General Partners.
(b) Gain shall be allocated as follows:
(i) first, to the Partners having negative balances in their
Capital Accounts, in the proportion that the negative balance of
each such Partner's Capital Account bears to the aggregate
negative balances in the Capital Accounts of all such Partners,
until the balances in their Capital Accounts equal zero;
(ii) second, 100% to the Limited Partners until the
aggregate positive balances in the Limited Partners' Capital
Accounts equal the sum of their aggregate 10% Preferred Return and
their aggregate Adjusted Capital Contributions;
(iii) third, 100% to the General Partners until the
aggregate positive balances in their Capital Accounts equal the
sum of (1) their General Partners' Capital Contributions, plus (2)
an amount equal to 1% of all prior and current distributions of
Net Cash Flow, reduced by (3) any amounts previously distributed
to the General Partners from Net Cash Flow and from Net Sales
Proceeds pursuant to subparagraphs (iii) and (iv) of Article
9.2(b); and
(iv) thereafter, 95% to the Limited Partners and 5% to the
General Partners.
(c) Any Loss shall be allocated as follows:
(i) first, to the Partners with positive balances in their
Capital Accounts in the proportion that the positive balance in
each such Partner's Capital Account bears to the aggregate
positive balances in the Capital Accounts of all such Partners,
until the balances in their Capital Accounts equal zero; and
(ii) thereafter, 95% to the Limited Partners and 5% to the
General Partners.
9.3 Distributions. Except as provided in Article 18.2, Partnership
distributions shall be made as provided in this Article 9.3.
(a) Net Cash Flow shall be distributed as follows:
(i) The General Partners, within thirty (30) days following
the close of each fiscal quarter or as soon thereafter as
practicable, shall determine, in their sole and absolute
discretion, the amount of Net Cash Flow that is available for
distribution. Such Net Cash Flow available for distribution shall
be apportioned 99% to the Limited Partners and 1% to the General
Partners; provided, however, that the 1% of Net Cash Flow to be
distributed to the General Partners shall be subordinated to
receipt by the Limited Partners of their aggregate cumulative 10%
Preferred Return.
(ii) Net Cash Flow available for distribution to the Limited
Partners on a quarterly basis shall be allocated between the
Monthly Limited Partners, as a group, and the Quarterly Limited
Partners, as a group, in proportion to the number of Units owned
by each such group of Limited Partners.
(iii) The portion of Net Cash Flow allocable to the
Quarterly Limited Partners shall be distributed to the Quarterly
Limited Partners and one-third (1/3rd) of the portion allocable to
the Monthly Limited Partners shall be distributed to the Monthly
Limited Partners, with all such distributions to be made within
thirty (30) days following the close of each fiscal quarter or as
soon thereafter as practicable; provided, however, that the first
distributions payable to the Monthly Limited Partners that are
attributable to the last quarter of each fiscal year shall be
reduced by the Monthly Distribution Fee. The remaining two-thirds
(2/3rds) of the Net Cash Flow available for distribution to the
Monthly Limited Partners shall be deposited in the Monthly
Distribution Account. One-half (1/2) of the amount so deposited
shall be distributed to the Monthly Limited Partners within
seventy (70) days following the close of such immediately
preceding fiscal quarter, or as soon thereafter as practicable,
and the remainder of the Net Cash Flow so deposited shall be
distributed within one hundred (100) days following the close of
such immediately preceding fiscal quarter, or as soon thereafter
as practicable.
(b) Net Sales Proceeds from a Nonliquidating Sale shall be
distributed in the following order of priority:
(i) first, 100% to the Limited Partners until the Limited
Partners have received an amount equal to their aggregate
cumulative 10% Preferred Return;
(ii) second, 100% to the Limited Partners until the Limited
Partners have received an amount equal to their aggregate Adjusted
Capital Contributions;
(iii) third, 100% to the General Partners until the General
Partners have received the sum of (1) their General Partners'
Capital Contributions, plus (2) an amount equal to 1% of all prior
and current distributions of Net Cash Flow, reduced by (3) any
amounts previously distributed to the General Partners from Net
Cash Flow and from Net Sales Proceeds pursuant to subparagraphs
(iii) and (iv) of this Article 9.3(b);
(iv) thereafter, 95% to the Limited Partners and 5% to the
General Partners.
9.4 Determination of Allocations and Distributions among the Limited
Partners. For purposes of making allocations and distributions among the
Limited Partners pursuant to Articles 9.2 and 9.3 (or as required elsewhere in
this Agreement), if the operative provision refers to positive or negative
balances of Capital Accounts, aggregate 10% Preferred Return, or Adjusted
Capital Contributions, then the allocation or distribution shall be made in
accordance with the respective sizes of such items for each Limited Partner;
if, however, no specific item is referred to, then the allocation or
distribution shall be made in accordance with the Limited Partners' respective
Partnership Interests.
9.5 Determination of Allocations and Distributions among the General
Partners. The allocations and distributions pursuant to Articles 9.2 and 9.3
(or as required elsewhere in this Agreement) shall be made among the General
Partners in such amounts as the General Partners may agree among themselves.
9.6 Admission of Limited Partners. In connection with the admission of
any Limited Partner to the Partnership, the General Partners may select any
method and convention permissible under Code section 706(d) for the
allocations of tax items during the time persons are admitted as Limited
Partners. However, any method or convention first utilized must be applied
consistently thereafter for all subsequent admissions of Limited Partners
unless it is later determined that such method or convention is not
permissible under section 706(d).
9.7 Transfer of Units. Net Income, Net Loss, or Net Cash Flow for a
fiscal year attributable to any Units which may have been transferred during
such year shall be allocated or distributed between the transferor and the
transferee based upon the number of days that each was recognized as the
holder of the Units for purposes of this Article Nine. Gain, Loss, or Net
Sales Proceeds from a Nonliquidating Sale for a fiscal year attributable to
any Units which may have been transferred during such year shall be allocated
to the Limited Partner who owned such Units on the date such Gain or Loss was
realized for federal income tax purposes or, as the case may be, shall be
distributed to the Limited Partner who owned such Units on the date of such
Nonliquidating Sale.
9.8 Interest of the General Partners. Notwithstanding anything contained
in this Agreement to the contrary, the interest of the General Partners in
each material item of Partnership income, gain, loss, deduction, and credit
will be equal to at least one percent (1%) of each such item at all times
during the existence of the Partnership.
9.9 Allocation of Recapture Items for Tax Purposes. Notwithstanding the
allocation of Gain described above in Article 9.2(b), any income recognized
pursuant to the recapture provisions of sections 1245 or 1250 of the Code, or
pursuant to Code section 751 with respect to such recapture provisions, shall
be allocated among the Partners in the proportions in which the original
depreciation deductions being recaptured were allocated to them or to their
predecessors in interest.
9.10 Qualified Income Offset. Notwithstanding the allocation of Net
Income and Gain provided in Article 9.2, any Limited Partner who receives an
allocation or distribution described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d)(5) or (6), as may be amended from time to time, respectively,
which causes or increases a deficit balance in such Limited Partner's Capital
Account, will first be allocated items of income or gain in an amount and
manner sufficient to eliminate such deficit balance as quickly as possible. In
the event there is more than one such Limited Partner, items of income or gain
shall be allocated among such Limited Partners in proportion to the respective
sizes of their deficit balances attributable to the allocations or
distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(5)
or (6) (as may be amended from time to time).
9.11 Allocation with Respect to Reserved Liquidation Proceeds. Any
deduction allowed to the Partnership by reason of the payment of any liability
from liquidation proceeds reserved pursuant to Article 18.2(b) shall be
allocated among the Partners in the same proportions that the amount paid on
such liability would otherwise have been distributed pursuant to Article 18.2.
9.12 Limitation on Distributions. Not withstanding the foregoing, no
distribution shall be made unless, after such distribution, the Partnership's
assets are in excess of all liabilities of the Partnership except liabilities
to Limited Partners on account of their Capital Contributions and liabilities
to the General Partners.
9.13 Certain Computations for Monthly Limited Partners. For purposes of
allocating Gain and Loss pursuant to Article 9.2 and, for all purposes of this
Agreement, in making any computation of the Limited Partners' 10% Preferred
Return (i) the Monthly Distribution Fee shall not be deducted from Net Cash
Flow in computing the 10% Preferred Return, and (ii) the Monthly Limited
Partners shall be deemed to have received their distributions of Net Cash Flow
pursuant to Article 9.3(a) as if they were Quarterly Limited Partners.
9.14 Optional Monthly Distributions.
(a) The General Partners, in their sole discretion, may elect to
make all distributions of Net Cash Flow that the General Partners, in
their sole and absolute discretion, determine is available for
distribution on a monthly basis.
(b) In the event that the General Partners elect to make all
distributions of Net Cash Flow on a monthly basis pursuant to this
Article 9.14, such distributions shall be made, at the option of the
General Partners, to all Limited Partners either (i) in the manner
specified in Articles 9.3(a) and 9.13 for Monthly Limited Partners,
except that there shall be no Monthly Distribution Fee, or (ii) within
thirty (30) days following the close of each calendar month or as soon
thereafter as practicable, 99% to the Limited Partners and 1% to the
General Partners; provided, however, that the 1% of Net Cash Flow to be
distributed to the General Partners shall be subordinated to receipt by
the Limited Partners of their aggregate cumulative 10% Preferred Return.
(c) In the event the General Partners elect to make all
distributions of Net Cash Flow on a monthly basis pursuant to this
Article 9.14, amounts previously deposited in the Monthly Distribution
Account shall be distributed pursuant to Articles 9.3(a)(iii) and
11.2(b), thereafter, the Monthly Limited Partners shall not be assessed
any Monthly Distribution Fee.
ARTICLE TEN
TRANSACTIONS WITH GENERAL PARTNERS AND AFFILIATES
10.1 Services and Goods.
(a) The following conditions shall apply to all transactions
between the Partnership and the General Partners or their Affiliates in
which the General Partners or their Affiliates render services or sell
or lease goods to the Partnership and for which the General Partners or
their Affiliates are compensated by the Partnership (other than those
transactions in which the General Partners or their Affiliates provide
goods or services to the Partnership in accordance with other provisions
of this Agreement): (i) the services or goods for which the General
Partners or their Affiliates are to receive compensation shall be
embodied in a written contract which details the services to be rendered
and all compensation to be paid; (ii) such contract may be modified only
by a vote of a majority in interest of Limited Partners' Capital; (iii)
such contract shall contain a clause allowing termination without
penalty on sixty (60) days notice to the General Partners; (iv) the
terms of such contract shall be comparable to and competitive with the
terms that would be demanded by unaffiliated persons or entities for
comparable services or for the sale or lease of comparable goods; (v)
the compensation paid shall be the lower of the actual cost of such
goods and services or ninety percent (90%) of the amount charged by
independent parties for comparable services in the same geographic area;
and (vi) the General Partners or their Affiliates must have engaged
previously in the business of rendering such services or selling or
leasing such goods, independent of the Partnership as an ordinary and
ongoing business.
(b) Reimbursement of the General Partners and their Affiliates for
Operating Expenses incurred by the General Partners or their Affiliates
shall be limited to: (i) the actual cost to the General Partners and
their Affiliates of all goods, materials, and services used for or by
the Partnership, which, in the opinion of the General Partners, are
reasonably necessary to the prudent operation of the Partnership and are
obtained from entities unaffiliated with the General Partners or their
Affiliates; and (ii) the lower of the actual cost of administrative
services performed by the General Partners or their Affiliates which, in
the opinion of the General Partners, are reasonably necessary to the
prudent operation of the Partnership, or ninety percent (90%) of the
amount charged by independent parties for comparable services in the
same geographic area. Such reimbursement shall not include (i) rent or
depreciation, utilities, capital equipment, and other overhead items, or
(ii) salaries, fringe benefits, travel expenses, and other overhead
items incurred by or allocated to any controlling persons of the General
Partners or their Affiliates. For purposes of this Article 10.1(b) only,
controlling persons shall mean any person who: (i) holds a five percent
(5%) or more equity interest in a General Partner or Affiliate or has
the power to direct or cause the direction of a General Partner or
Affiliate whether through the ownership of voting securities or
otherwise; or (ii) performs functions for the General Partners similar
to those of the chairman or member of the board of directors; executive
management, such as the president, vice-president, corporate secretary,
or treasurer; or senior management, such as the vice-president of an
operating division who reports directly to executive management. No
reimbursement shall be permitted for services for which the General
Partners are entitled to compensation by way of a separate fee as
provided for elsewhere in this Agreement. None of the restrictions on
reimbursement of the General Partners or their Affiliates set forth in
this Article 10.1(b) shall apply to any fees or other compensation to
which the General Partners or their Affiliates are entitled in
accordance with any other provision of this Agreement.
(c) No rebates or give-ups may be received by the General Partners
or their Affiliates in connection with any services or goods provided to
the Partnership by unaffiliated persons or entities, nor may the General
Partners or their Affiliates participate in any reciprocal business
arrangement which would circumvent any restriction contained in this
Agreement with respect to transactions between the Partnership and the
General Partners or their Affiliates.
(d) Independent certified public accountants shall verify the
allocation of all Operating Expenses for which the General Partners or
their Affiliates are reimbursed. Such verification shall at a minimum
include the following: (i) a review of the time records of individual
employees, the costs of whose services were reimbursed; and (ii) a
review of the specific nature of the work performed by each such
employee. The methods of verification shall be in accordance with
generally accepted auditing standards. The cost of such verification
shall be itemized by such accountants, which costs may be reimbursed to
the General Partners or their Affiliates only to the extent that such
reimbursement, when added to the cost to the Partnership of the
administrative services rendered by the General Partners or their
Affiliates, does not exceed the amount the Partnership would be required
to pay to independent parties in the same geographic area for
administrative services comparable to those rendered by the General
Partners or their Affiliates.
10.2 Purchases, Sales, and Leases
(a) The Partnership shall not purchase or lease Properties in
which the General Partners or their Affiliates have an interest, nor
shall the Partnership acquire any Properties from any partnership or
other organization in which the General Partners or their Affiliates
have an interest; provided, however, that the General Partners or their
Affiliates may purchase Properties in the name of any one or more of
them and temporarily hold title thereto or enter into an interim joint
venture to purchase and temporarily hold title to Properties for the
purpose of facilitating the acquisition of such Properties by the
Partnership, or the completion of construction of the Properties, or any
other purpose related to the business of the Partnership, if such
Properties are purchased by the Partnership for a price no greater than
the cost of such Properties to the General Partners or their Affiliates
(including their closing costs incurred in connection with the purchase
and resale to the Partnership of such Properties, but excluding any of
such closing costs that duplicate closing costs paid by the Partnership
in connection with its own purchase of the Properties as well as any and
all fees and other compensation payable under this Agreement) and there
is no other benefit to the General Partners or their Affiliates arising
out of such sale transaction apart from any and all fees and other
compensation otherwise permitted under this Agreement.
(b) The Partnership shall not sell or lease Properties to the
General Partners or their Affiliates.
10.3 Loans.
(a) The Partnership shall not make any loans to the General
Partners or their Affiliates.
(b) Neither the General Partners nor their Affiliates shall make
loans to the Partnership; provided, however, that the General Partners
or their Affiliates shall be entitled to reimbursement, at cost, for
actual expenses incurred by the General Partners or their Affiliates on
behalf of the Partnership.
10.4 No Exclusive Right to Sell. The Partnership shall not give the
General Partners or their Affiliates an exclusive right to sell or exclusive
employment to sell Properties for the Partnership.
10.5 Construction and Development of Properties. The General Partners
and their Affiliates shall not construct or develop any Properties or render
any services for which they will receive compensation from the Partnership in
connection with their construction or development of Properties.
10.6 No Other Compensation. The Partnership shall not pay any
commissions, fees, or compensation to the General Partners or their
Affiliates, except for those provided for in this Agreement, including Selling
Commissions, Organizational and Offering Expenses, Acquisition Expenses,
Management Fees, Real Estate Commissions, reimbursement for Operating
Expenses, and the General Partners' share of allocations and distributions.
ARTICLE ELEVEN
MANAGEMENT BY GENERAL PARTNERS
11.1 Duties of the General Partners. The General Partners shall manage
and control the Partnership and its business and affairs, and each of the
General Partners shall participate in all decisions made by the General
Partners hereunder, and the vote of a majority of the General Partners shall
control. The General Partners' obligations shall include the following:
(a) management of the Partnership affairs;
(b) fiduciary responsibility (i) for the safekeeping and use of
all funds of the Partnership, whether or not in their immediate
possession or control, and (ii) for ensuring that Partnership funds and
assets are employed for the exclusive benefit of the Partnership or its
Partners;
(c) furnishing Limited Partners with reports and information as
specified in Article Sixteen hereof;
(d) maintenance of records of Partnership assets, including
information and reports of architects, appraisers, engineers, attorneys,
accountants, or other professionals;
(e) maintenance of books of account regarding Partnership
operations and business affairs;
(f) keeping all records of the Partnership available for
inspection and audit by any Limited Partner or his representative,
during normal business hours at the principal place of business of the
Partnership and at the expense of the Limited Partner, following
reasonable notice to the Partnership; and
(g) submitting to officials or agencies administering applicable
state securities laws information required to be filed with such
officials or agencies, including reports and statements required to be
distributed to Limited Partners.
11.2 Rights and Powers. The General Partners shall have all the rights
and powers which may be possessed by a general partner under the Act and such
rights and powers as are otherwise conferred by law or are necessary,
advisable, or convenient to the discharge of their duties under this Agreement
and to the management of the business and affairs of the Partnership. Without
limiting the generality of the foregoing powers of the General Partners, it is
agreed that the General Partners shall have the following rights and powers,
which they may exercise on behalf of the Partnership at the cost, expense, and
risk of the Partnership, on terms and conditions deemed necessary or
appropriate in their discretion:
(a) to carry out and implement any and all of the purposes of the
Partnership set forth in Article Four hereof;
(b) to employ the funds of the Partnership in the exercise of any
rights or powers possessed by the General Partners hereunder, including,
without limitation, remitting funds in the Monthly Distribution Account
to the Partnership in accordance with the limitations set forth in
Articles 9.14(c) and 11.3(j);
(c) to pay all fees and expenses incurred in the organization of
the Partnership and in the offer and sale of the Units;
(d) to invest such funds as temporarily are not required for
Partnership purposes in any short- term, highly liquid investments with
appropriate safety of principal;
(e) to obtain and maintain, at the expense of the Partnership, or
in their sole discretion to elect not to obtain, insurance policies
covering the property and operations of the Partnership;
(f) subject to the limitations contained elsewhere in this
Agreement, to sell, lease, exchange, or otherwise dispose of all or any
portion of the Properties of the Partnership;
(g) to hire, train, transfer, supervise, and discharge employees
of the Partnership and establish the compensation and benefits thereof;
(h) subject to the limitations contained elsewhere in this
Agreement, to delegate, by vote of a majority of the General Partners,
any or all of their duties hereunder, and to appoint, employ, or
contract with any person, which person shall be under the ultimate
supervision of the General Partners;
(i) to hold Properties in the Partnership name or the name of any
of them or in the name of any designee;
(j) to establish any reserves deemed necessary or advisable by the
Partnership;
(k) to make ministerial amendments to the Agreement and to make
any amendments to this Agreement which are approved or authorized in
accordance with Article 13.3;
(l) to admit, in their discretion, one or more additional Limited
Partners to the Partnership at any time after the Effective Date and, in
accordance with Article 14.6 hereof and without the vote of the Limited
Partners, to amend the Agreement to reflect the admission of such person
or persons as Limited Partners; and
(m) to enter into such agreements, contracts, documents, and
instruments and perform such acts with respect to all of the foregoing
and any matter incident thereto.
11.3 Limitations on General Partners' Authority. The General Partners
shall not:
(a) do any act in contravention of this Agreement;
(b) do any act which would make it impossible to carry on the
ordinary business of the Partnership;
(c) possess Properties, or assign the Partnership's rights in any
Properties, for other than a Partnership purpose;
(d) confess a judgment against the Partnership;
(e) sell or transfer all or substantially all of the Partnership
assets without the prior consent of a majority in interest of Limited
Partners' Capital;
(f) admit a person as a General Partner except as provided in this
Agreement;
(g) admit a person as a Limited Partner except as provided in this
Agreement;
(h) contract away the fiduciary duty owed to the Limited Partners
under the common law of any applicable jurisdiction;
(i) cause or permit the Partnership to borrow money, provided that
the General Partners or their Affiliates shall be entitled to
reimbursement, at cost, for actual expenses incurred by the General
Partners or their Affiliates on behalf of the Partnership; or
(j) cause or permit money to be withdrawn from the Monthly
Distribution Account, except (i) to make distributions to those Limited
Partners who elect to receive distributions of Net Cash Flow on a
monthly basis, as described in Article 9.3, or (ii) to remit to the
Partnership, from time to time, but in no event prior to the calculation
of the Monthly Distribution Fee for the immediately preceding fiscal
year, any interest earned on deposits in the Monthly Distribution
Account.
11.4 Nonexclusive Duties.
(a) The General Partners shall devote such time, effort, and skill
as they in their discretion determine may be reasonably required for the
conduct of the Partnership's business and affairs, which may be less
than full time. The Limited Partners recognize and agree that the
General Partners' involvement with the Partnership is not exclusive and
that they or the Affiliates of any one of them may perform similar
duties for other entities in another business, including the real estate
business, some or all of which may compete with the Partnership. The
General Partners, however, will not offer or sell interests in any
future public investor program that (i) has investment objectives
similar to the Partnership and (ii) intends to invest in a diversified
portfolio of existing restaurant properties, as well as properties upon
which restaurants are to be constructed, to be leased on a "triple net"
basis to operators of national and regional fast-food and family-style
restaurant chains until the Partnership's offering has been concluded,
and the General Partners will not purchase property for any such
subsequently formed public investor program until substantially all of
the funds of the Partnership have been fully invested or committed for
investment. For purposes hereof, Partnership funds will be deemed to
have been committed for investment to the extent written agreements in
principle or letters of under- standing are executed at any time, which
agreements in principle or letters of understanding have not been
rescinded, whether or not any such investments are made, and also to the
extent any funds have been reserved to make contingent payments in
connection with any Property, regardless of whether or not any such
payments are made.
(b) The General Partners and the Affiliates of any of them shall
be entitled to engage in any other transactions and possess interests in
any other business ventures of any nature or description, independently
or with others, whether existing as of the date hereof or hereafter
coming into existence, and neither the Partnership nor the Limited
Partners shall have any rights in or to any such independent ventures or
the income or profits derived therefrom. The Limited Partners recognize
and agree that such other business ventures may be in or related to the
real estate business and/or the restaurant business and from time to
time may compete with the Partnership.
(c) At all times when the Partnership has funds available for
investment, the General Partners first will offer to the Partnership, on
the same terms and conditions, any real estate investment in a
restaurant that also would be suitable for investment by the Partnership
and which the General Partners or their Affiliates (other than a public
or private entity with which the General Partners or their Affiliates
are affiliated and that has investment objectives similar to those of
the Partnership) may be considering for their personal investment. In
the event that the Partnership and a public or private entity with which
the General Partners or their Affiliates are affiliated have the same
investment objectives, and an investment opportunity becomes available
which is suitable for both entities and for which both entities have
sufficient uninvested funds, then, unless the acquisition of a property
by a particular entity will require the preparation of audited financial
statements for that property, the entity which has had uninvested funds
for the longest period of time will commit to make such investment. (In
determining whether or not an investment opportunity is suitable for
more than one program, the General Partners and their Affiliates will
examine such factors, among others, as the cash requirements of each
program, the effect of the acquisition on diversification of each
program's investments, the estimated income tax effects of the purchase
on each program, the anticipated cash flow of each program, the size of
the investment, the amount of funds available to each program, and the
length of time such funds have been available for investment.) If the
acquisition of a property by a particular entity would require the
preparation of audited financial statements, however, the General
Partners may cause an affiliated entity to acquire that property.
Further, if a subsequent development, such as a delay in the closing of
a property or a delay in the construction of a property, causes any such
investment, in the opinion of the General Partners, to be more
appropriate for an entity other than the entity which committed to make
the investment, the General Partners have the right to cause an
affiliated program to make the investment. The General Partners also
have agreed not to sell any of the Partnership's Properties
contemporaneously with a property owned by another program managed by
the General Partners, if the two properties are part of the same
restaurant chain and are within a three mile radius of each other unless
the General Partners are able to locate a suitable purchaser for each
property.
11.5 Limitation on Liability. No General Partner or Affiliate, as the
term Affiliate is defined in Article 19.1, shall be liable to the Partnership
or to any Limited Partner for any loss incurred by the Partnership which as
out of any action or inaction of a General Partner or Affiliate, if the
General Partner or Affiliate acted within the scope of the General Partners'
authority and, 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, misconduct, or breach of fiduciary duty to the Limited
Partners.
ARTICLE TWELVE
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Limited Partners shall have the following rights and obligations.
12.1 Liabilities. Except as otherwise provided in this Article 12.1 or
under applicable law, no Limited Partner shall be personally liable for any of
the debts of the Partnership or any of the losses thereof beyond the amount of
his Capital Contribution and the share of undistributed profits of the
Partnership attributable to such Limited Partner. The Limited Partners may be
additionally liable under applicable partnership law to:
(a) return any cash wrongfully distributed which represents a
return of a Capital Contribution, together with interest thereon, for a
period of six (6) years thereafter; and
(b) repay any cash distributions which represent a return of a
Capital Contribution, together with interest thereon, pro rata in
accordance with their Partnership Interests, for a period of one (1)
year after the date of such distribution, to the extent required to
discharge liabilities of the Partnership to creditors who extended
credit or whose claims arose during the period the returned Capital
Contribution was held by the Partnership.
Limited Partners also may be liable for the general obligations of the
Partnership if they are found, under applicable law, to have participated in
the management and control of the Partnership.
12.2 Management. No Limited Partner, as such, shall take part in the
management of the business or transact any business for the Partnership. All
management responsibility is vested in the General Partners.
12.3 Authority. No Limited Partner, as such, shall have the power to
sign for or to bind the Partnership. All authority to act on behalf of the
Partnership is vested in the General Partners.
12.4 Rights. A Limited Partner shall have the right to:
(a) have the Partnership books and records maintained pursuant to
Article Sixteen, and this Agreement, kept at the principal office of the
Partnership or at an office designated by the General Partners through
written notice to the Limited Partners and, following reasonable prior
notice, at all times during regular business hours to inspect and copy
any of them;
(b) have on demand, at his own expense and for any purpose
reasonably related to his Partnership Interest, true and full
information regarding the state of the business and financial condition
of the Partnership, and other information regarding Partnership affairs
whenever circumstances render it just and reasonable, as well as copies
of the Partnership's federal, state, and local income tax returns for
each fiscal year of the Partnership;
(c) have on demand, at his own expense, by mail, a copy of the
names, addresses, and Capital Contributions of all Limited Partners if
the requesting Limited Partner confirms that the names of the Limited
Partners and other information provided by the list will be held in
strictest confidence and that no distribution of the list will be made;
provided, however that the confidentiality provisions of this
sub-paragraph (c) will not apply to any Limited Partner resident in
Minnesota and Massachusetts;
(d) approve or disapprove a Liquidating Sale by a vote of a
majority in interest of Limited Partners' Capital;
(e) propose and vote on certain amendments to this Agreement, as
provided in Article Thirteen;
(f) remove any one or more of the General Partners and elect one
or more substitute General Partners, as provided in Article Fifteen;
(g) have dissolution and winding up by decree of court as provided
in Articles Seventeen and Eighteen;
(h) upon sixty (60) days' notice to the General Partners,
terminate by vote of a majority in interest of Limited Partners' Capital
any contract between the Partnership and the General Partners or their
Affiliates pursuant to which the General Partners or their Affiliates
are to receive compensation from the Partnership for services rendered
or goods sold or leased to the Partnership; and
(i) with the consent of the General Partners, modify by vote of a
majority in interest of Limited Partners' Capital any contract between
the Partnership or their Affiliates pursuant to which the General
Partners or their Affiliates are to receive compensation from the
Partnership for services rendered or goods sold or leased to the
Partnership.
ARTICLE THIRTEEN
VOTING RIGHTS AND MEETINGS OF THE PARTNERSHIP
13.1 Voting Rights. Except as otherwise expressly provided in this
Agreement, a Limited Partner shall have no right to vote upon any matter
affecting the Partnership. Votes may be cast on any matter submitted for
consideration at a duly called meeting of the Partnership, or without a
meeting upon call of the General Partners or written request (stating the
purpose of such vote) of the Limited Partners holding ten percent (10%) or
more of the Limited Partners' Capital. Within twenty (20) days after receipt
of such a request, the General Partners (i) shall provide all Limited Partners
with appropriate ballots, which ballots shall include a verbatim statement of
the wording of any resolution proposed for adoption by any Limited Partner
requesting a vote on such resolution, and (ii) shall specify a time not less
than fifteen (15) nor more than sixty (60) days after receipt of such request
by which such ballots shall be returned. Notwithstanding anything contained
herein to the contrary, at any time that the General Partners collectively
own, in their capacities as Limited Partners, five percent (5%) or more of the
Limited Partners' Capital, the General Partners shall not have the right to
vote the Partnership Interests held by them in their capacities as Limited
Partners on any of the following issues: (i) termination of the Partnership;
(ii) cancellation or other termination of contracts between the Partnership
and Affiliates; or (iii) removal of a General Partner.
13.2 Meetings of the Partnership. Meetings of the Partnership may be
called by the General Partners, or by written request (stating the purpose of
such meeting) of Limited Partners holding ten percent (10%) or more of the
Limited Partners' Capital. Within ten (10) days after receipt of such
request, the General Partners shall provide all Limited Partners with written
notice of a meeting to be held not less than fifteen (15) nor more than sixty
(60) days after receipt of such written request, which notice (i) shall
specify the time and place of such meeting, (ii) shall contain a detailed
statement of each matter to be acted on at such meeting, (iii) shall include a
verbatim statement of the wording of any resolution proposed for adoption by
any Limited Partner calling such meeting, and (iv) shall include proxies or
written consents which specify a choice between approval or disapproval of
each matter to be acted upon at such meeting. Meetings of the Partnership
shall be held at such location as shall be specified by the General Partners.
Voting by proxy shall be permitted. A majority of the Limited Partners'
Capital entitled to vote, represented in person or by proxy, shall constitute
a quorum at a meeting of the Partnership.
13.3 Amendment of Agreement.
(a) Amendments to this Agreement may be proposed by the General
Partners or by Limited Partners owning not less than ten percent (10%)
in interest of the Limited Partners' Capital. The General Partners shall
have the right, without first proposing such amendment to the Limited
Partners and without notice to, or the vote or consent of, the Limited
Partners, to amend the Agreement to reflect a ministerial amendment
pursuant to Article 11.2(k), to reflect the transfer of Partnership
Interests pursuant to Article 14.3, or to reflect the admission of
additional Limited Partners pursuant to Article 14.6. Proposed
amendments, subject to the conditions set forth in this Article
Thirteen, may concern any Article in this Agreement, including, but not
limited to (i) removal of any one or more of the General Partners and
election of one or more substitute General Partners and (ii) termination
of the Partnership.
(b) Following any proposal of an amendment, other than a
ministerial amendment to be made pursuant to Article 11.2(k), or an
amendment to be made pursuant to Articles 14.3 or 14.6, the General
Partners, within fifteen (15) days after receipt, shall submit to all
Limited Partners a verbatim statement of the proposed amendment. The
General Partners shall include in such submission an opinion of counsel
to the General Partners concerning whether the proposed amendment would
result in changing the Partnership to a general partnership, changing
the liability of the General Partners or the Limited Partners, or
allowing the Limited Partners to take part in the control or management
of the Partnership. The General Partners also may include in said
submission their recommendation as to the proposed amendment. In the
case of any proposed amendment that would affect the allocations or
distributions provided for in Articles Nine or Eighteen hereof or would
amend Article 7.9(c) hereof, the General Partners shall include in said
submission the written advice of counsel experienced in federal income
tax matters as to the effect, if any, which such amendment would have on
such allocations and distributions and on the bases of the Limited
Partners' Partnership Interests. Any Limited Partner, at his sole
expense, may include an opinion of counsel experienced in matters under
the Act concerning the effect of the proposed amendment. Except as other
vise provided in Articles 13.3(a) or 13.3(d) hereof, all proposed
amendments, whether proposed by the General Partners or by Limited
Partners, shall be submitted to Limited Partners for a vote, and the
affirmative vote of holders of a majority in interest of Limited
Partners' Capital (or such greater majority as may be required by
Article 13.3(e)) shall be required to approve any such amendment. The
General Partners may seek the written vote of the Limited Partners as
provided in Article 13.1 hereof or may call a meeting as provided in
Article 13.2 thereof.
(c) Notwithstanding the provisions of Article 13.3(a), no such
amendment shall alter the allocations specified in Articles Nine and
Eighteen hereof, alter the Capital Contributions of the Partners, or
otherwise materially adversely affect the interests of the Limited
Partners without the specific written consent of each Limited Partner
adversely affected thereby; provided, however, that Articles 13.3(d) and
14.6 shall control in all events.
(d) Notwithstanding any provision of Article 13.3(c) or any other
provision of this Agreement to the contrary, the General Partners are
authorized and directed to allocate Net Income, Net Loss, Gain, and Loss
arising in any year differently than otherwise provided for in this
Agreement to the extent that the General Partners determine that
allocating income, gain, loss, deduction, or credit (or item thereof) in
the manner provided for in this Agreement would not be permitted under
section 704(b) of the Code and Treasury regulations promulgated
thereunder. Any such allocation (hereinafter referred to as the "New
Allocation") shall be deemed to be a complete substitute for any
allocation otherwise provided for in this Agreement, and no amendment of
this Agreement or approval of any Limited Partner shall be required. In
making a New Allocation, the General Partners are authorized to act only
after having been advised by the Partnership's counsel that the existing
allocations are not or may not be permissible under section 704(b) of
the Code and Treasury regulations promulgated thereunder. The General
Partners shall use their best efforts to cause the New Allocations to
resemble in all material ways and to the maximum extent possible the
allocations contained in this Agreement as originally adopted; the
General Partners, however, make absolutely no warranties in this regard.
No New Allocation, and no choice by the General Partners among possible
alternative New Allocations, shall give rise to any claim or cause of
action by any Limited Partner against any party, including, but not
limited to, the General Partners, the Partnership's counsel, or any
individual related thereto.
(e) This Article 13.3 may not be amended without the unanimous
written consent of all Partners, and no provision of this Agreement
requiring the consent of greater than a majority in interest of the
Limited Partners' Capital may be amended without the same consent of the
Limited Partners' Capital as is required in the provision to be amended.
ARTICLE FOURTEEN
RESTRICTIONS ON TRANSFER OF INTEREST IN PARTNERSHIP
14.1 Representations of Limited Partners. Each Limited Partner
acknowledges that he is fully aware that the Partnership is selling the Units
in reliance upon the truth and accuracy of the representations of each Limited
Partner contained in this Agreement and in such Limited Partner's Subscription
Agreement.
14.2 Transfer of Limited Partners' Partnership Interests. Subject to
compliance with applicable state and federal securities laws and the
conditions on transfer set forth in this Article Fourteen, a Limited Partner
shall have the right to sell, assign, transfer, encumber, pledge, convey,
hypothecate, or otherwise transfer or dispose (which actions are collectively
referred to in this Article Fourteen as a "transfer") of all or any part of
his Partnership Interest. Transfers may be made only with the consent of the
General Partners, which consent may be granted or withheld at the sole
discretion of the General Partners. Any such transfer also shall comply with
the following conditions:
(a) No transfers will be permitted if counsel for the Partnership
or the General Partners is of the view that there is a substantial risk
that (i) such transfers would result in the Partnership being considered
to have terminated within the meaning of Section 708 of the Code or (ii)
such transfers would cause the Partnership to be treated as a
corporation or as a publicly traded partnership for purposes of Sections
7704, 469(k), and 512(c) of the Code.
(b) In no event shall Units be transferred to a minor or an
incompetent except by will or intestate succession.
(c) No transfer after which the transferor or the transferee will
hold an interest representing a Capital Contribution of less than $2,500
($1,000, or such greater amounts as may be required by applicable state
law, in the case of transfers by an Individual Retirement Account, Keogh
or pension plan), will be recognized for any purpose.
14.3 Effect of Transfer.
(a) No transfer will be binding upon the Partnership or the
Partners until (i) the provisions of Article 14.2 have been met; and
(ii) there shall have been filed with the Partnership a duly executed
and acknowledged counterpart of the instrument making such transfer,
signed by both the transferor and the transferee, with such instrument
evidencing the written acceptance by the transferee of all of the terms
and provisions of this Agreement and containing a representation by the
transferor that such transfer was made in accordance with all applicable
laws and regulations.
(b) All transfers of a Limited Partner's Partnership Interest
shall entitle the transferee only to receive the economic interest to
which the transferring Limited Partner otherwise would be entitled.
Notwithstanding anything herein to the contrary, the General Partners
shall have the absolute right to prohibit the transfer of a Limited
Partner's economic interest if, in the opinion of counsel for the
Partnership, there is a substantial risk that such transfers would cause
the Partnership to be treated as a corporation or as a publicly traded
partnership for purposes of sections 7704, 469(k), and 512(c) of the
Code. A transferee shall become a Substituted Limited Partner only with
the written consent of the General Partners following compliance with
the conditions set forth in this Article 14.3 and in Article 14.2
hereof. The Substituted Limited Partner also shall be required to (i)
execute and acknowledge such instruments as the General Partners deem
necessary or advisable to effect the admission of such person as a
Substituted Limited Partner and (ii) pay all reasonable expenses
incurred by the Partnership in connection with such person's admission
as a Substituted Limited Partner (not to exceed $100).
(c) All transfers made in compliance with Articles 14.2 and 14.3
hereof shall be effective as of the close of business on the last day of
the calendar month in which the provisions of Article 14.3 relating to
the transfer occurred, or, at the General Partners' election, at 7:00
o'clock a.m., Orlando, Florida time, on the following day. Each Partner
agrees to execute such certificates and other documents and perform such
acts as may be requested by the General Partners in connection with such
transfer. The General Partners shall be required to amend this
Agreement at least once each calendar quarter to reflect the
substitution of Limited Partners. Until this Agreement is so amended
(which amendment may consist solely of amending and updating Schedule A
hereto), an assignee shall not become a Substituted Limited Partner. The
date on Schedule A shall be the date on which the transfer is effective.
The General Partners are not required to file any such amendment to this
Agreement with the State of Florida. Any Substituted Limited Partner so
admitted to the Partnership will succeed to all the rights and be
subject to all the obligations of the transferring Limited Partner with
respect to the Partnership Interest as to which such Limited Partner was
substituted. The Limited Partners hereby consent to the substitution as
a Limited Partner of any individual or entity approved by the General
Partners.
14.4 Liability of Transferring Limited Partner. Any Limited Partner who
shall transfer all of his Partnership Interest shall cease to be a Limited
Partner of the Partnership, except that unless and until a Substituted Limited
Partner is admitted in his stead, such transferring Limited Partner shall
retain the statutory rights of an assignor of a limited partnership interest
under the Act. No substitution of an assignee as a Limited Partner shall
operate to relieve the assignor of the liabilities imposed under the Act or of
his duties and obligations hereunder, unless the General Partners agree in
writing to release such Limited Partner.
14.5 Record Owner of Partnership Interest. Notwithstanding anything
contained in this Agreement to the contrary, both the Partnership and the
General Partners shall be entitled to prohibit the transfer of a Limited
Partner's economic interest in the Partnership in accordance with Article
14.3(b) hereof and to treat the transferor of any Partnership Interest as the
absolute owner thereof in all respects, and shall incur no liability for
distributions of cash or other property made to such transferor (i) if, in the
view of counsel for the Partnership, there is a substantial risk that such
transfer, or the recognition of such transfer of the economic interest, would
cause the Partnership to be treated as a corporation or as a publicly traded
partnership for purposes of sections 7704, 469(k), and 512(c) of the Code and
(ii) in all events, until such time as the above-referenced written instrument
of transfer has been received by, approved, and recorded on the books of, the
Partnership.
14.6 Admission of Additional Limited Partners. The General Partners are
authorized, in their sole discretion and without the approval of any of the
Limited Partners, to admit from time to time as additional Limited Partners
such persons or entities who subscribe for Units during the period in which
Units are offered for sale to the public as described in the Prospectus. Each
such person or entity may apply for admission by completing, executing and
delivering to the General Partners (i) a form of subscription agreement
required by the General Partners which shall include, and constitute, an
agreement by such person or entity to be bound by this Agreement and to become
a Limited Partner, (ii) the required per Unit Capital Contribution, and (iii)
such other documents as may be required by the General Partners. Admission of
an additional Limited Partner will become effective upon an amendment to
Schedule A of this Agreement reflecting such admission. The recordation of
such amendment with the State of Florida is not required. The admission of an
additional Limited Partner therefore will be effective as of the date
indicated on Schedule A to this Agreement.
14.7 Death, Incompetency, or Dissolution of a Limited Partner. The
death, legal incompetency, bankruptcy, or dissolution of a Limited Partner
shall not dissolve the Partnership. The rights and obligations of such Limited
Partner to share in the Net Income, Net Loss, Net Cash Flow, Gain, and Loss of
the Partnership, to receive distributions of Partnership funds and to transfer
his Partnership Interest pursuant to this Article Fourteen, upon the happening
of such an event, shall devolve upon such Limited Partner's legal
representative or successor in interest, as the case may be, subject to the
terms and conditions of this Agreement, and the Partnership shall continue as
a limited partnership. Upon the death of a Limited Partner, his legal
representative shall have all the other rights of a Limited Partner solely for
the purpose of settling his estate. In no event, however, may such estate,
legal representative, or other successor in interest become a Substituted
Limited Partner except in accordance with Articles 14.2 and 14.3 hereof. Each
Limited Partner's estate or other successor in interest shall be liable for
all the obligations and liabilities of such Limited Partner.
ARTICLE FIFTEEN
ADDITION, REMOVAL OR WITHDRAWAL OF A GENERAL PARTNER
15.1 Additional General Partners. The General Partners may at any time
designate one or more additional general partners whose Partnership Interests
shall be such as shall be agreed upon by the General Partners and such
additional general partners, provided that the Partnership Interests of the
Limited Partners shall not be affected thereby.
15.2 Removal and Election of General Partners.
(a) Notwithstanding anything else herein contained, any General
Partner may be removed and a new General Partner may be elected as a
substitute General Partner in the place of such removed General Partner
by the vote of a majority in interest of the Limited Partners' Capital.
(b) Written notice of the removal of a General Partner shall be
served upon such General Partner, either by certified or registered
mail, return receipt requested, or by personal service. Such notice
shall set forth the reasons for the removal and the date upon which the
removal is to become effective. Notwithstanding the foregoing sentence,
any removal of the last remaining General Partner shall be effective
only on the earlier of (i) such date as a substituted General Partner
shall have been admitted to the Partnership pursuant to Section 15.4
hereof or (ii) a date ninety (90) days after the date on which the
required majority in interest of the Limited Partners' Capital shall
have voted for such removal of the General Partner. Upon the effective
date of the removal of a General Partner, he or it shall cease to be a
General Partner, and any loans made by such General Partner or his or
its Affiliates to the Partnership in accordance with the provisions
hereof shall be repaid as expeditiously as possible.
(c) In the event a General Partner is removed and the remaining
General Partner or General Partners agree to continue the business of
the Partnership pursuant to Article 17.2, or if the business of the
Partnership is continued pursuant to Article 17.2 in the event of the
removal of the last remaining General Partner, then (i) the Partnership
shall purchase the General Partner's Partnership Interest at a price
determined in accordance with Article 15.5 hereof, and (ii) if no
substituted General Partner is elected in the place of any removed
General Partner, those persons or entities who are General Partners
following such removal shall use their best efforts to release such
removed General Partner (and his or its Affiliates, if applicable) from
personal liability on any existing or future Partnership borrowing.
15.3 Death, Incompetency, Bankruptcy, Dissolution, or Withdrawal of a
General Partner.
(a) Subject to the provisions of Articles 17.1(e) and 17.2 hereof,
the death, incompetency, bankruptcy or dissolution of a General Partner
shall dissolve the Partnership. In the event that, following the death,
incompetency, bankruptcy or dissolution of a General Partner, the
remaining General Partner or General Partners (if any) agree to continue
the business of the Partnership pursuant to Article 17.2, or if the
business of the Partnership is otherwise continued pursuant to Article
17.2, the Partnership shall have the obligation, in accordance with
Article 17.2, to purchase the Partnership Interest of such General
Partner at a purchase price determined in accordance with Article 15.5
hereof.
(b) A General Partner may withdraw, whether through resignation or
otherwise, or transfer all of his General Partner's Partnership Interest
at any time provided that he shall give at least sixty (60) days' prior
written notice to the Limited Partners of such resignation, and such
withdrawal shall become effective at the expiration of such sixty-day
period; provided, however, that a majority in interest of Limited
Partners' Capital must consent in writing to such withdrawal,
resignation, or transfer if, as a result of such withdrawal,
resignation, or transfer (i) the remaining General Partners would have
less than two years of relevant real estate experience, (ii) the
remaining General Partners or any Affiliate thereof that will continue
to provide services to the Partnership after such withdrawal,
resignation, or transfer, would have less than four years of relevant
experience in the type of service being rendered, (iii) the remaining
General Partners would have an aggregate net worth of less than
$1,000,000 (exclusive of home, furnishings, and personal automobiles),
or (iv) counsel for the Partnership is of the view that such withdrawal
would result in the dissolution of the Partnership for purposes of state
law or the loss of partnership status for federal income tax purposes.
Notwithstanding the foregoing, the last remaining General Partner may
withdraw or transfer all of such General Partner's Partnership Interest
only if (i) such General Partner shall give the notice specified in the
foregoing sentence, (ii) in such notice, such General Partner shall
nominate as a substituted General Partner a willing person or entity
that, in such General Partner's reasonable discretion, meets the
requirements for qualification of the Partnership as a partnership for
federal income tax purposes, and (iii) a majority in interest of Limited
Partners' Capital shall consent in writing to such withdrawal,
resignation, or transfer. Such General Partner, concurrently with the
request for such consent, shall identify to the Limited Partners the
interest to be transferred, the date of the transfer, the proposed
transferee, and the proposed substituted General Partner, if any, who,
in such General Partner's reasonable discretion, shall meet the
requirements for qualification of the Partnership as a partnership for
federal income tax purposes. If the Limited Partners consent to a
transfer of such General Partner's Partnership Interest by the requisite
majority, the nominated substituted General Partner shall seek admission
to the Partnership in accordance with the provisions of Article 15.4
hereof prior to the withdrawal of such General Partner, and the
withdrawal, resignation, or transfer by such General Partner shall
become effective only upon the admission of a substituted General
Partner or the expiration of ninety (90) days following such withdrawal,
resignation, or transfer. The substituted General Partner shall
purchase such withdrawing, transferring, or resigning General Partner's
Partnership Interest at such price as the substituted General Partner
and such withdrawing, transferring, or resigning General Partner shall
agree upon or, if they cannot so agree, at a price determined in
accordance with Article 15.5 hereof. Notwithstanding anything else
herein contained, no person or entity shall be admitted as a substituted
General Partner until the full purchase price for the Partnership
Interest of such withdrawing, transferring, or resigning General Partner
has been paid in full or arrangements satisfactory to such withdrawing,
transferring, or resigning General Partner for full payment have been
made. Upon the effective date of the withdrawal or resignation of any
General Partner, or the transfer of his Partnership Interest, he shall
cease to be a General Partner of the Partnership.
15.4 Admission of Substituted General Partner. No person or entity shall
be admitted as a substituted General Partner unless all of the following
conditions are met or, by unanimous agreement of the Limited Partners, waived:
(a) such person or entity agrees in writing to accept the
responsibilities of the removed General Partner and, unless waived by
the removed General Partner, makes arrangements or causes the
Partnership to make arrangements (i) to release such General Partner
(and his Affiliates, if applicable) from personal liability on any
existing or future Partnership borrowing and to indemnify such General
Partner and his or its Affiliates against all other liabilities of the
Partnership, fixed, contingent, or otherwise, except liabilities for
which the General Partners may not be indemnified by the Partnership
under Article Nineteen, or (ii) to indemnify such General Partner and
his or its Affiliates against all liabilities of the Partnership, fixed,
contingent, or otherwise (including any existing or future Partnership
borrowing), except such liabilities for which the General Partners may
not be indemnified by the Partnership under Article Nineteen:
(b) such person or entity agrees in writing to become a
substituted General Partner;
(c) counsel for the Partnership renders an opinion that such
admission is in conformity with the Act and will not cause a termination
or dissolution of the Partnership or cause it to be classified other
than as a partnership for federal income tax purposes;
(d) a majority in interest of Limited Partners' Capital consent to
the admission of such person as a substituted General Partner; and
(e) such person or entity executes and acknowledges such
instruments as may be necessary or advisable to effect the admission of
such person or entity as a substituted General Partner, including,
without limitation, the written acceptance and adoption by such person
of the provisions of this Agreement and the filing of an amendment to
this Agreement evidencing such admission.
Upon satisfaction or waiver of the foregoing conditions, this Agreement shall
be amended in accordance with the Act, and all other steps shall be taken as
are reasonably necessary to effect the admission of the substituted General
Partner.
15.5 Purchase Price of a General Partner's Interest.
(a) In the event that a General Partner's Partnership Interest is
purchased pursuant to Articles 15.2(c) or 15.3(a), or pursuant to
15.3(b) if a purchase price cannot be agreed upon, the purchase price
shall be based upon an appraisal performed as set forth in this Article
15.5 and shall be equal to the fair market value of the distribution of
Partnership funds to which such General Partner would have been entitled
if the Partnership were dissolved and wound up pursuant to Article
Eighteen hereof on the effective date of the dissolution and its assets
sold on such date without compulsion of the Partnership to do so.
(b) The Partnership (or the substituted General Partner in the
event of a purchase pursuant to Article 15.3(b) hereof) and the General
Partner whose Partnership Interest is being purchased (or the legal
representative of such General Partner) each shall select an appraiser
which is not an Affiliate of the Partnership or such General Partner to
perform the appraisal. If such General Partner (or such General
Partner's legal representative) and the Partnership (or the substituted
General Partner in the event of a purchase pursuant to Article 15.3(b)
hereof) cannot agree upon such an appraiser, then each shall appoint one
appraiser. If the two appraisers so appointed cannot agree on a purchase
price, the two appraisers shall select a third appraiser, or if the
first two appraisers are unable to agree upon a third appraiser, such
third appraiser shall be selected by the American Arbitration
Association or by a similar impartial person or entity mutually agreed
upon by such General Partner and the Partnership. The third appraiser
shall submit a written report on the value of such General Partner's
Partnership Interest. If the value arrived at by the third appraiser is
between the values arrived at by the first two appraisers, the report of
the third appraiser shall govern. If the value arrived at by the third
appraiser is higher than the value arrived at by the first two
appraisers, the report of the higher of the first two appraisers shall
govern. If the value arrived at by the third appraiser is lower than the
value arrived at by the first two appraisers, the report of the lower of
the first two appraisers shall govern. The costs of the appraisals shall
be borne equally by such General Partner (or such General Partner's
legal representative) and the Partnership.
(c) In the event that a General Partner's Partnership Interest is
purchased pursuant to Article 15.2(c) or 15.3(a), the purchase price of
such General Partner's Partnership Interest shall be paid by the
Partnership giving such General Partner (or such General Partner's legal
representative) a non interest-bearing, unsecured promissory note
evidencing such purchase price payable only from Net Cash Flow otherwise
payable to the General Partners pursuant to Article Nine hereof or, as
the case may be, from assets available for payment of Partnership
liabilities upon dissolution and liquidation pursuant to Articles
Seventeen and Eighteen hereof.
ARTICLE SIXTEEN
REPORTS, ACCOUNTING AND TAX MATTERS
16.1 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
16.2 Books of Account and Accounting. The General Partners shall
maintain or cause to be maintained, full, complete, accurate, and proper books
of account and records of the Partnership's operations. The General Partners
also shall maintain, or cause to be maintained, the following records:
(a) A current list of the full names and last-known business
addresses of all Partners, separately identifying in alphabetical order
the General Partners and the Limited Partners;
(b) A copy of the Partnership's Certificate of Limited Partnership
and all certificates or amendments thereto, together with executed
copies of any powers of attorney pursuant to which any such Certificate
was executed;
(c) Copies of the Partnership's federal, state, and local income
tax returns and reports, if any, for the three (3) most recent years;
and
(d) Copies of the Agreement, as amended, and of all of the
Partnership's financial statements, if any, for the three (3) most
recent years.
The Partnership's books and records shall be maintained at the principal
office of the Partnership or at an office designated by the General Partners
through written notice to the Limited Partners, and each Partner or his
representative, upon reasonable prior notice, shall have access thereto during
regular business hours.
16.3 Reports to the Limited Partners.
(a) An annual report, examined and reported on by independent
certified public accountants, will be furnished to Limited Partners
within one hundred twenty (120) days following the close of each fiscal
year. The annual report will contain an audited balance sheet, statement
of operations, statement of Partners' equity, statement of changes in
financial position or equivalent, an unaudited cash flow statement, and
a report of the activities of the Partnership during the relevant
period. The annual report also will contain a complete statement of
distributions to Partners and of any transactions with the General
Partners or their Affiliates, as well as a summary of compensation and
fees paid or payable to the General Partners and their Affiliates
(including reimbursable expenses).
(b) Within sixty (60) days after the end of each fiscal quarter in
which the General Partners or their Affiliates received fees or other
compensation from the Partnership, Limited Partners will be furnished
with a detailed statement setting forth the services rendered or to be
rendered by the General Partners or their Affiliates for the Partnership
and the fees or compensation received therefor.
(c) Information necessary for the preparation of federal income
tax returns will be furnished to Limited Partners within seventy-five
(75) days following the close of each fiscal year.
(d) Within seventy-five (75) days following the close of each
fiscal year, each Limited Partner will be furnished with an annual
statement of Unit valuation to enable Limited Partners subject to annual
reporting requirements under ERISA to file such annual reports as they
relate to their Partnership investment. The statement will report an
estimated value of each Unit based on the amount Limited Partners would
receive if the Properties were sold at their appraised values as of the
close of the fiscal year, and if such proceeds and any other funds of
the Partnership were distributed in a liquidation of the Partnership as
described in the Prospectus. For Properties acquired during the fiscal
year, an appraisal will not be obtained as of the end of such fiscal
year if the Partnership obtained an appraisal within a nine-month period
prior to the close of such fiscal year. Limited Partners will not
receive copies of appraisals. For the first three annual valuation
reports to Limited Partners after the termination of the offering, the
General Partners will value all Properties at cost and report the net
asset value per each Unit at $500. In providing such reports to the
Limited Partners, the Partnership and the General Partners and their
Affiliates do not thereby make any warranty, guarantee, or
representation that (i) the Limited Partners or the Partnership, upon
liquidation, actually will realize the estimated value per Unit, or (ii)
the Limited Partners will realize the estimated net asset value if they
attempt to sell their Units.
(e) If the Partnership is required by the Securities Exchange Act
of 1934, as amended, to file quarterly reports with the Securities and
Exchange Commission, Limited Partners, within sixty (60) days after the
end of each fiscal quarter, will be furnished with a summary of the
information contained in such report. Such summary information generally
will include a balance sheet, a quarterly statement of income and cash
flow, and any other pertinent information regarding the Partnership and
its activities during the quarter. Limited Partners also may receive a
copy of any Form 10-Q required to be filed by the Partnership under the
Securities Exchange Act of 1934 upon request to the Partnership. If the
Partnership is not subject to this filing requirement, Limited Partners
will be furnished with a semi-annual report within sixty (60) days after
the end of each six (6) month period containing information similar to
that contained in the quarterly report but applicable to such six (6)
month period.
(f) Until such time as all of the Limited Partners' Capital
remaining after payment of the amounts specified in Articles 7.2, 7.3,
7.4, and 7.5 and creation of reserves as provided in Article 7.6 is used
to acquire Properties as provided in Article 7.7 or is returned to
investors as provided in Article 7.8, special reports will be furnished
to the Limited Partners on a quarterly basis, which shall contain the
following information: (i) the location and a description of the general
character of all Properties which the Partnership acquired during such
quarter or which the Partnership intends to acquire during the following
quarter, (ii) the present or proposed use of such Properties, their
suitability and adequacy for such uses, (iii) the material terms of any
leases affecting such Properties, (iv) the method of financing such
Properties, and (v) a statement that title insurance has been or will be
obtained on all Properties acquired or to be acquired. The Partnership
may incorporate the information contained in such reports into any of
the reports furnished to the Limited Partners pursuant to this Article
16.3.
(g) Within sixty (60) days after the end of each fiscal quarter in
which Limited Partners have received distributions from the Partnership,
each Limited Partner who is at that time a resident of the State of New
York will be furnished with the information required by New York Form
SD-1 or any successor form.
(h) Financial information contained in all reports to Limited
Partners will be prepared on the accrual basis of accounting in
accordance with generally accepted accounting principles. If such
information differs from the information furnished to Limited Partners
for tax purposes, the two set of information will be reconciled.
16.4 Tax Returns. The General Partners shall use their best efforts to
cause the Partnership to file on a timely basis all federal, state, and local
tax and information returns required of the Partnership and, on behalf of the
Limited Partners, shall make such elections and determinations as are provided
for herein or as they otherwise in their sole discretion deem appropriate.
Such returns shall be prepared on the accrual basis of accounting.
16.5 Tax Matters. Upon the transfer of a Partnership Interest, the
Partnership will consider, upon any Partner's request, an election to cause
the basis of the Partnership property to be adjusted for federal income tax
purposes, as provided in Section 754 of the Code. Robert A. Bourne, or his
successor, is hereby designated as the "Tax Matters Partner" in accordance
with Section 6231(a)(7) of the Code and, in connection therewith and in
addition to all other powers given thereunto, shall have all other powers
necessary or appropriate to fully perform such role, including without
limitation the power to retain all attorneys and accountants of his choice and
the right to settle any audits without the consent of the Limited Partners.
This designation is hereby expressly consented to by each Limited Partner as
an express condition to becoming a Limited Partner.
ARTICLE SEVENTEEN
DISSOLUTION OF THE PARTNERSHIP
17.1 Events of Dissolution. The Partnership shall dissolve upon the
first to occur of:
(a) the expiration of the term of the Partnership;
(b) the vote of a majority in interest of the Limited Partners'
Capital that the Partnership shall dissolve;
(c) the Sale or other disposition in a single Sale, or in a series
of Sales within a period of twelve (12) consecutive months, of all or
substantially all of the Partnership's assets (as defined in Article
1.24), other than a transfer thereof as security for indebtedness of the
Partnership;
(d) the removal of any General Partner pursuant to Article 15.2
hereof or the withdrawal or resignation of any General Partner pursuant
to Article 15.3, subject in each case to the provisions of Article 17.2
hereof;
(e) the bankruptcy, death, dissolution, or adjudication of
incompetency of any General Partner, in each case subject to the
provisions of Article 17.2, and further provided that for purposes of
this Article 17.1(e), the term "dissolution" shall not include the
merger, consolidation or recapitalization of any corporate General
Partner; or
(f) any other event causing the &dissolution of the Partnership
under the Act.
17.2 Reformation. Notwithstanding Article 17.1, in the event of a
dissolution pursuant to Article 17.1(d) or 17.1(e) above, the Partnership
shall not be dissolved if either of the following conditions is met: (i) all
the remaining General Partners agree to continue the business of the
Partnership or (ii) in the event there are no General Partners remaining at
such time, then if all of the Limited Partners agree to continue the business
of the Partnership on the same terms and conditions as are contained herein
and, by vote of a majority in interest of Limited Partners' Capital, elect a
substituted General Partner admitted pursuant to Article 15.4 hereof within
ninety (90) days following the occurrence of one of the events specified in
Article 17.1(d) or 17.1(e). If either of the foregoing conditions are met,
then the provisions of Article Eighteen hereof shall not apply, the
Partnership shall continue its business without dissolving, and the interest
in the Partnership of the General Partner to whom one of the events specified
in Article 17.1(d) or 17.1(e) applies shall be purchased by the Partnership.
In the event of such reformation, all of the assets and liabilities of the
Partnership shall be contributed to the new partnership which shall be formed
and all parties to this Agreement shall become partners in such new
partnership and, unless otherwise agreed to by unanimous vote of the Limited
Partners, this Agreement, as it may from time to time be amended, shall
continue as the Limited Partnership Agreement of such new partnership.
ARTICLE EIGHT
WINDING UP OF PARTNERSHIP
18.1 Liquidation of Assets. The Partnership shall not terminate upon a
dissolution, but shall cease to engage in further business except to the
extent necessary to wind up its affairs, perform existing contracts, and
preserve the value of its assets. The General Partners or a liquidation
trustee appointed by the General Partners or, if there is no General Partner,
a liquidation trustee selected by a majority in interest of Limited Partners'
Capital (the "Liquidation Trustee") shall take full account of the
Partnership's assets and liabilities, file all certificates and notices of
dissolution as are required by law, wind up its affairs, and liquidate the
Partnership's assets as promptly as is consistent with obtaining the fair
value thereof. The General Partners or the Liquidation Trustee, as the case
may be, shall have full power and authority to:
(a) sell or otherwise dispose of, at such prices and upon such
terms as they or it in their or its sole discretion may deem
appropriate, all of the Partnership's assets; and
(b) as promptly as possible after such liquidation, effect a
distribution of the assets of the Partnership in cash as set forth in
Article 18.2.
During the course of winding up, the Partners shall continue to share in Net
Income, Net Loss, Net Cash Flow, Gain, and Loss as provided in this Agreement,
and all of the provisions of this Agreement shall continue to bind the parties
and apply to the activities of the Partnership except as specifically provided
to the contrary, but there shall be no distributions to the Partners except
pursuant to this Article Eighteen.
18.2 Distributions. Distribution of the proceeds of liquidation pursuant
to Article 18.1 hereof, any Net Sales Proceeds from a Liquidating Sale, and
the cash assets of the Partnership following a dissolution, subject to Article
8.3, shall be made in the following order of priority:
(a) first, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than Partners;
(b) second, to the establishment of any reserves which the General
Partners or the Liquidation Trustee, as the case may be, may deem
necessary for any anticipated, contingent, or unforeseen liabilities or
obligations of the Partnership arising out of the conduct of its
business, which reserves will be held in escrow until the expiration of
such period of time as the General Partners or the Liquidation Trustee,
as the case may be, shall deem advisable, at which time any balance of
any such reserves not required to discharge such liabilities or
obligations shall be distributed as provided in subsections (c) and (d)
below;
(c) third, to the payment and discharge of all of the
Partnership's debts and liabilities, if any, to the Partners (other than
in respect of their Partnership Interests);
(d) fourth, after allocations of (i) Net Income or Net Loss, if
any, have been made pursuant to Article 9.2(a) hereof and (ii) Gain or
Loss have been made pursuant to Articles 9.2(b) or 9.2(c) hereof, to the
Partners with positive Capital Account balances, in proportion to such
balances, up to amounts sufficient to reduce such positive balances to
zero; and
(e) thereafter, any funds then remaining shall be distributed 95%
to the Limited Partners and 5% to the General Partners.
18.3 Distribution in Kind. The Partnership shall not make any
distribution in kind of tangible or intangible assets.
18.4 Time for Orderly Liquidation. A reasonable amount of time shall be
allowed for the orderly liquidation of the assets of the Partnership and the
discharge of liabilities to creditors so as to enable the General Partners or
the Liquidation Trustee, as the case may be, to minimize the normal losses
attendant upon such liquidation.
18.5 Indebtedness of Partners. Notwithstanding the foregoing, if any
Partner shall be indebted to the Partnership, then until payment of such
amount by him, the General Partners or the Liquidation Trustee, as the case
may be, shall retain such Partner's distributive share of the assets and apply
such assets or the income therefrom to the liquidation of such indebtedness
and the cost of holding such assets during the period of such liquidation. If
such amount has not been paid or otherwise liquidated at the expiration of six
months after the statement required by the first sentence of Article 18.7
hereof has been given to such Partner, the General Partners or the Liquidation
Trustee, as the case may be, may sell the interest of such Partner at public
or private sale at the best price immediately obtainable which shall be
determined in the sole judgment of the General Partners or the Liquidation
Trustee, as the case may be. The proceeds of such sale shall be applied to the
liquidation of the amount then due under this Article Eighteen, and the
balance of such proceeds, if any, shall be delivered to such Partner.
18.6 Deficit Restoration. Notwithstanding any other provision of this
Agreement to the contrary, if, upon the liquidation of a General Partner's
Partnership Interest (whether or not in connection with the liquidation of the
Partnership), such General Partner has a negative balance in his Capital
Account (as determined after taking into account Capital Account adjustments
for the Partnership taxable year during which such liquidation occurs, other
than those made pursuant to this Article 18.6), then such General Partner
shall be required to pay to the Partnership, by the end of such taxable year
(or, if later, within 90 days after the date of such liquidation), an amount
in cash equal to the difference between such Partner's negative Capital
Account and zero. The aggregate of such payments by all General Partners
having negative Capital Accounts, upon liquidation of the Partnership, shall
be distributed to the Partnership's then-creditors, if any, and any excess
among the Partners having positive Capital Account balances.
18.7 Final Accounting. Upon the dissolution of the Partnership pursuant
to Article Seventeen, the accountants for the Partnership shall promptly
prepare, and the General Partners or the Liquidation Trustee, as the case may
be, shall furnish to each Partner, a statement setting forth the assets and
liabilities of the Partnership upon its dissolution. Promptly following the
complete liquidation and distribution of Partnership property and assets, the
Partnership accountants shall prepare, and the General Partners or the
Liquidation Trustee, as the case may be, shall furnish to all Partners, a
statement showing the manner in which the Partnership assets were liquidated
and distributed.
18.8 Compliance with Law. The General Partners and each Liquidation
Trustee shall comply with any requirements of the Act or other applicable law
pertaining to the winding up of a limited partnership, upon the completion of
which the Partnership shall be deemed terminated. Upon the complete
liquidation and distribution of the Partnership's assets, the Partners shall
cease to be Partners of the Partnership and the General Partners or the
Liquidation Trustee, as the case may be, shall execute, acknowledge, and cause
to be filed all certificates and notices required by law to terminate the
Partnership.
ARTICLE NINETEEN
INDEMNIFICATION
19.1 General. In any pending or completed action, suit, or proceeding to
which a General Partner or an Affiliate, as defined below, is or was a party
by reason of the fact that such General Partner or Affiliate (i) is or was a
General Partner, or (ii) is an Affiliate of a General Partner, the Partnership
shall hold harmless and indemnify such General Partner or Affiliate against
any and all losses, harm, liabilities, damages, costs, and expenses
(including, but not limited to, attorneys' fees, judgments, and amounts paid
in settlement) incurred by such General Partner or Affiliate in connection
with such action, suit, or proceeding if such General Partner or Affiliate
acted in good faith, within the scope of the General Partners' authority, and
in a manner reasonably believed to be in the best interests of the
Partnership, and provided that such General Partner's or Affiliate's conduct
does not constitute negligence, misconduct, or breach of fiduciary duty to the
Limited Partners or the Partnership. Notwithstanding anything to the contrary
in this Agreement, for purposes of this Article Nineteen only, the term
"Affiliate" shall mean any person performing services on behalf of the
Partnership who (i) directly or indirectly controls, is controlled by, or is
under common control with a General Partner; or (ii) owns or controls ten
percent (10%) or more of the outstanding voting securities of a General
Partner; or (iii) is an officer, director, partner, or trustee of a General
Partner; or (iv) if a General Partner is an officer, director, partner, or
trustee, is any company for which a General Partner acts in any such capacity.
19.2 Securities Laws Violations. Notwithstanding anything to the
contrary in Article 19.1, the Partnership shall not indemnify a General
Partner or Affiliate, as the term Affiliate is defined in Article 19.1, or any
person acting as a broker-dealer, for any liability imposed by judgment, and
costs associated therewith, including attorneys' fees, arising from or out of
a violation of state or federal securities laws; provided, however, that
indemnification will be allowed for any and all settlements and related
expenses of lawsuits alleging securities laws violations and for any and all
expenses incurred in successfully defending such lawsuits, if a court either
(i) approves the settlement and finds that indemnification of the settlement
and related costs should be made or (ii) approves indemnification of
litigation costs if a successful defense is made on each count involving
alleged securities laws violations. The General Partner, Affiliate or
broker-dealer agrees to apprise the court from which approval of
indemnification pursuant to this Article 19.2 is sought, prior to seeking such
approval, of the positions of the Securities and Exchange Commission, the
Massachusetts Securities Division, and all other state securities agencies
with which the Partnership has registered Units for sale to the public with
respect to indemnification for securities laws violations.
19.3 Liability Insurance. The Partnership shall not incur the cost of
that portion of any liability insurance which insures a General Partner or
Affiliate, as the term Affiliate is defined in Article 19.1, against
liabilities as to which such General Partner or Affiliate may not be
indemnified under this Article Nineteen.
ARTICLE TWENTY
POWER OF ATTORNEY
20.1 General Partners as Attorney-in-Fact. In order to induce the
General Partners to accept each Limited Partner as a Limited Partner of the
Partnership, and in consideration of the General Partners' agreement to serve
as General Partners of the Partnership, each Limited Partner, by the execution
of this Agreement (either individually or through his agent and attorney),
irrevocably does constitute and appoint the General Partners, and each of
them, with full power of substitution and ratification, his true and lawful
attorney, in his name, place, and stead, to execute, acknowledge, swear to,
file, and record in the appropriate public offices all documents, instruments,
and certificates of whatsoever nature which the General Partners determine are
necessary or advisable to execute or conduct the business of the Partnership,
including, without limitation:
(a) those (including counterparts of this Agreement) which the
General Partners deem appropriate to qualify or continue the Partnership
as a limited partnership (or a partnership in commendam) in any
jurisdiction in which the Partnership may conduct business;
(b) those which the General Partners deem appropriate to reflect a
change or modification of the Partnership or this Agreement made in
accordance with the terms of this Agreement;
(c) those, including, without limitation, amendments to this
Agreement, which the General Partners deem appropriate to reflect the
admission of additional Limited Partners or General Partners or
Substituted Limited Partners admitted to the Partnership in accordance
with the terms of this Agreement; and
(d) all conveyances and other documents, instruments, and
certificates which the General Partners deem necessary, appropriate, or
convenient to sell, assign, convey, or transfer Partnership property in
accordance with the terms of this Agreement or to effect the
dissolution, termination, and liquidation of the Partnership.
20.2 Special and Durable Power. The foregoing grant of authority is
hereby declared to be irrevocable, and a special power coupled with an
interest which shall survive the death, disability, dissolution, bankruptcy,
incapacity, or insolvency of the Limited Partners. In the event of any
conflict between the provisions of this Agreement and any document executed or
filed by any of the General Partners pursuant to the Power of Attorney granted
in this Article Twenty, this Agreement shall govern. Each Limited Partner
authorizes the General Partners, and each of them, to take any further action
which such General Partner(s) shall consider necessary or advisable in
connection with any of the foregoing, hereby giving the General Partners full
power and authority to do and perform each and every act or thing whatsoever
requisite or advisable to be done relating to the foregoing as fully as such
Limited Partner might or could do if personally present, and hereby ratifying
and confirming all that the General Partners shall lawfully do or cause to be
done by virtue hereof. This Power of Attorney may be exercised by the General
Partners by listing all of the Limited Partners executing any agreement,
certificate, instrument, or document with the single signature of the General
Partners, or any of them, in their, his, or its capacity as attorney-in-fact
for any and all of them; and shall survive the delivery of a transfer by a
Limited Partner of his Partnership Interest, except that where the purchaser,
transferee, or assignee of the whole of such Partnership Interest with the
consent of the General Partner is admitted as a Substituted Limited Partner,
the Power of Attorney shall survive the delivery of such transfer for the sole
purpose of enabling such General Partner to sign, execute, certify,
acknowledge, swear to, file, and record any such agreement, certificate,
instrument, or document necessary to effect such substitution. The power
hereby conferred to make agreements, certificates, instruments, and documents
shall be deemed to include the power to sign, execute, acknowledge, swear to,
verify, deliver, file, record, and publish the same.
ARTICLE TWENTY-ONE
MISCELLANEOUS
21.1 Reliance Upon General Partners. No person or entity dealing with
any General Partner shall be required to determine such General Partner's
authority to make any commitment or undertaking on behalf of the Partnership,
nor to determine any fact or circumstance bearing upon the existence of his or
its authority.
21.2 Banking. All funds of the Partnership shall be deposited in such
bank account or accounts as shall be determined by the General Partners. Such
bank accounts shall be maintained separately from other bank accounts of any
of the General Partners. All withdrawals therefrom shall be made upon checks
signed by one of the General Partners or by a person authorized to do so by
the General Partners. The funds of the Partnership shall not be commingled
with those of any other person or entity.
21.3 Investment Company Act. The Partnership shall not operate in such a
manner as to be classified as an "investment company" for purposes of the
Investment Company Act of 1940.
21.4 Notices. Any notice or other communication required or permitted to
be given by any provision of this Agreement shall be in writing and shall be
deemed to have been delivered and given for all purposes (i) if delivered
personally to the party to whom the same is directed or (ii) whether or not
the same is actually received, if sent by registered or certified mail, return
receipt requested, postage and charges prepaid, addressed to Robert A. Bourne,
CNL Investment Company, 400 East South Street, Suite 500, Orlando, Florida
32801, if to the Partnership or any General Partner, or to such other address
as any of the General Partners may from time to time specify by written notice
to the Limited Partners; and if to a Limited Partner, at such Limited
Partner's address as set forth on Schedule A hereto, or to such other address
as such Limited Partner may from time to time specify by written notice to the
Partnership in accordance herewith.
21.5 No Inducement to Advise. Neither the General Partners nor their
Affiliates shall directly or indirectly pay or award any commission or other
compensation to any person engaged by a potential investor for investment
advice as an inducement to such advisor to advise the purchase of Units;
provided, however, that this provision shall not prohibit the Selling
Commissions authorized in the Prospectus and this Agreement which are payable
to a registered broker-dealer or other properly licensed person or entity for
selling Units.
21.6 Issuance of Senior Securities. The Partnership shall not issue
senior securities.
21.7 Section Headings. All headings contained in this Agreement are for
convenience of reference only and are in no way intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
21.8 Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision shall not
affect the validity of enforceability of the remainder of this Agreement or
any valid clause of any invalid portion. Any such invalid or unenforceable
provision shall be replaced with a valid and enforceable provision which comes
closest to the intent of the parties with respect to such invalid or
unenforceable provision.
21.9 Governing Law. Florida law shall govern the validity of this
Agreement, the construction of its terms and the interpretation of the rights
and duties of the parties.
21.10 Counterpart Execution. This Agreement may be executed in any
number of counterparts with the same effect as if all parties hereto had
signed the same document. All counterparts shall be construed together and
shall constitute one Agreement.
21.11 Parties in Interest. Each and every covenant, term, provision and
agreement herein contained shall be binding upon, and inure to the benefit of,
the heirs, successors, assigns, and legal representatives of the respective
parties hereto.
21.12 Gender and Number. As the context requires, all words used herein
in the singular number shall extend to and include the plural; all words used
in the plural number shall extend to and include the singular; and all words
used in any gender shall extend to and include all genders or be neutral.
21.13 Partition. Each of the parties hereof irrevocably waives during
the term of the Partnership any right, if any, to maintain an action for
partition with respect to Partnership property.
21.14 Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof, and no amendment,
modification, or alteration of the terms shall be binding unless the same be
in writing, dated subsequent to the date hereof, and duly executed as required
by law.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written by the General Partners, the Initial Limited Partner and
the Limited Partners.
GENERAL PARTNERS:
Sworn to this 22nd day of June, 1989
/s/Glenie Marie Byrd /s/Robert A. Bourne
- --------------------------------- ----------------------------
NOTARY PUBLIC ROBERT A. BOURNE
In and For Orange County, Florida
/s/Glenie Marie Byrd /s/James M. Seneff, Jr.
- --------------------------------- ----------------------------
NOTARY PUBLIC JAMES M. SENEFF, JR.
In and For Orange County, Florida
CNL REALTY CORPORATION
/s/Glenie Marie Byrd By:/s/James M. Seneff, Jr.
- --------------------------------- ----------------------------
NOTARY PUBLIC Name: James M. Seneff, Jr.
In and For Orange County, Florida Title: President
LIMITED PARTNERS:
Sworn to this 22nd day of June, 1989 By Robert A. Bourne, as
Attorney-in-Fact for the
Limited
Partners:
/s/Glenie Marie Byrd /s/Robert A. Bourne
- --------------------------------- ----------------------------
NOTARY PUBLIC ROBERT A. BOURNE
In and For Orange County, Florida
INITIAL LIMITED PARTNER:
/s/Glenie Marie Byrd /s/Jeanne A. Wall
- --------------------------------- ----------------------------
NOTARY PUBLIC JEANNE A. WALL
In and For Orange County, Florida
