AGREEMENT OF LIMITED PARTNERSHIP OF CASCADE JOINT VENTURE, L.P

AGREEMENT OF LIMITED PARTNERSHIP

OF CASCADE JOINT VENTURE, L.P.

 

This Agreement is made and entered into on this 24 ^th day of February, 1999, by and between James R. Hoyt and Secured Investment Resources Fund, L.P., a Kansas limited partnership (collectively the “General Partners”) and Secured Investment Resources Fund, L.P., a Kansas limited partnership (“Limited Partner’). The General Partners and Limited Partner may be referred to collectively as the “Partners”.

 

WITNESSETH

 

WHEREAS , the partners desire to form a Limited Partnership under the Kansas Revised Uniform Limited Partnership Act known as Cascade Joint Venture, L.P., to hold and manage a single income-producing apartment complex known as Cascade Apartments located in the city of Topeka, county of Shawnee, state of Kansas (hereinafter the “Property”).

 

NOW, THEREFORE , in consideration of the premises and the terms and conditions hereinafter set forth, the parties hereto agree as follows:

 

A. Name, Place of Business. Registered Office and Registered Agent

 

 

 

3.         Registered Office and Agent . The Partnership’s registered office shall be 5453 West 61st Place, Mission, Kansas 66205 and the name of the registered agent at such address is James R. Hoyt.

 

B. Business and Purpose .

 

 

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(a) make any loans to the General Partners or their Affiliates;

 

(b) except as permitted by the Lender in writing, sell, encumber (except with respect to the Lender) or otherwise dispose of all or substantially all of the properties of the Partnership (a sale or disposition will be deemed to be “all or substantially all of the properties of the Partnership” if the sale or disposition includes the Property or if the total value of the properties sold or disposed of in such transaction and during the twelve months preceding such transaction is 66-2/3% or more in value of the Partnership’s total assets as of the end of the most recently completed Partnership fiscal year);

 

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(c) dissolve, wind-up, or liquidate the Partnership;

 

(d) merge, consolidate or acquire substantially all the assets of another person or entity;

 

(e) change the nature of the business conducted by the Partnership; or

 

(f) except as permitted by the Lender in writing, amend or modify this Agreement.

 

For purposes of this Agreement, Affiliate means any person or entity which directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with a Partner. For purposes hereof, the terms “control”, “controlled”, or “controlling” shall include, without limitation, (i) the ownership, control or power to vote ten percent (10%) or more of (x) the outstanding shares of any class of voting securities or (y) the Partnership or beneficial interests of any such person or entity, as the case may be, directly or indirectly, or acting through one or more persons or entities, (ii) the control in any manner over the general partner(s) or the election of more than one director or trustee (or persons exercising similar functions) of such person or entity, or (iii) the power to exercise, directly or indirectly, control over the management or policies of such person or entity.

 

 

 

 

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state law relating to bankruptcy; or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Partnership or a substantial part of its property; or make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; or take any action in furtherance of any such action.

 

 

 

 

GENERAL PARTNERS:

James R. Hoyt

 

/S/ JAMES R. HOYT

Individual limited partner

 

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Secured Investment Resources Fund, L.P.

 

By: /S/ JAMES R. HOYT

James R. Hoyt, President

 

LIMITED PARTNER:

SECURED INVESTMENT RESOURCES FUND, L.P.

 

By: /S/ JAMES R. HOYT

James R. Hoyt, General Partner

 

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RESTATED CERTIFICATE AND AGREEMENT OF

LIMITED PARNTERSHIP OF

SECURED INVESTMENT RESOURCES FUND, L.P.

 

THIS RESTATED CERTIFICATE AND AGREEMENT is made and entered into this 27th day of July, 1984, by and between JAMES R. HOYT, an individual resident of the state of Kansas, and SECURED INVESTMENT RESOURCES, INC., a Kansas corporation (hereinafter referred to as the “General Partners”); and JAMES R. HOYT, an individual resident of the State of Kansas (hereinafter referred to as the Original Limited Partner) and those other parties who from time to time execute this Agreement or counterparts hereof as Limited Partners (sometimes hereinafter collectively referred to as the “Limited Partners”). The General Partners and Limited Partners are hereinafter sometimes collectively referred to as the “Partners”.

 

WITNESSETH THAT:

 

WHEREAS, the Partners desire to form a Limited Partnership under the Kansas Revised Uniform Limited Partnership Act, known as Secured Investment Resources Fund, L.P., to invest in, hold and manage income-producing real estate which is improved or which will be improved within a reasonable period after acquisition, with emphasis on the acquisition of existing apartment complexes and commercial properties including, but not limited to, shopping centers, office buildings, industrial buildings, hotels, motels, warehouses, mobile home parks and other properties located in the United States; and

 

WHEREAS, it is the intent of the Partners to admit Additional Limited Partners to the Partnership for the purpose of acquiring the additional capital needed to acquire the above real estate.

 

NOW, THEREFORE, in consideration of the premises and the terms and conditions hereinafter set forth, the parties hereto agree as follows:

 

 

1.1  “Name.” The name of the Partnership is Secured Investment Resources Fund, L.P. or such other name as the General Partners shall hereafter designate in writing to the Limited Partners.

 

1.2  “Place of Business.” The partnership’s principal place of business is 5453 West 61st Place, Mission, Kansas 66205, or such other place or places as the General Partners may hereafter determine.

 

1.3 “Registered Office and Agent.” The Partnership’s registered office shall be 2100 Silver Avenue, Kansas City, Kansas 66106. Its registered agent for service of process shall be PW&S Agent Service of Kansas, Inc., 2100 Silver Avenue, Kansas City, Kansas 66106.

 

2. Definitions and Glossary of Terms

 

2.1  The following terms used in this Partnership Agreement shall (unless otherwise expressly provided herein or unless the context otherwise requires) have the following respective meanings as set out below. Other terms may be defined throughout this Agreement as well.

 

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2.1.1 “Acquisition Agent” shall refer to Secured Investment Resources, Inc., a Kansas corporation, Corporate General Partner of the Partnership and an Affiliate of the Individual General Partner, or to any other person or corporation who succeeds it in such capacity or Affiliates of the General Partners.

 

2.1.2 “Acquisition Expenses” shall mean those expenses including, but not limited to legal fees and expenses, travel and communication expenses, costs of appraisals, non-refundable option payments on property not acquired, accounting fees and expenses, title insurance, and miscellaneous expenses related to selection and acquisition of properties, whether or not acquired.

 

2.1.3 “Acquisition Fees” shall mean the total of all fees and commissions paid by any party in connection with the purchase or development of property by the Partnership, except a certain development fee paid to a person not affiliated with a Sponsor in connection with the actual development of a project after acquisition of the land by the Partnership. Included in the computation of such fees shall be any real estate commission, selection fee, nonrecurring management fee, or any fee of a similar nature, however designated, but not any origination or transfer fee paid to a non-affiliated lender or any other type of loan fee (“points”).

 

2.1.4 “Adjusted Invested Capital” of a Holder shall be the Original Invested Capital paid for his Units reduced by the total of cash distributed to him and prior Holders of his Units from Cash From Sales, Financing, Refinancing or Liquidation, Cash From Initial Working Capital Reserves and distributions from uninvested Net Proceeds pursuant to Paragraph 11.13.

 

2.1.5 “Administrator” shall refer to the official or agency administering the securities law of a state.

 

2.1.6 “Affiliate” shall refer to: (i) any person directly or indirectly controlling, controlled by or under common control with another person, (ii) any person owning or controlling 10 percent or more of the outstanding voting securities of such other person, (iii) any officer, director or partner of such person, and (iv) if such person is an officer, director or partner, any company for which such person acts in any such capacity.

 

2.1.7 “Agents” shall refer to such other persons or firms as the General Partners shall select and contract with in the event that the Acquisition Agent or Property Management Agent is unable to serve with respect to any one or more Properties of the Partnership for performance of the services that it is to perform.

 

2.1.8 “Agreement” or “Partnership Agreement” means this Restated Certificate and Agreement of Limited Partnership dated July 27,1984 as amended, modified, supplemented or restated from time to time.

 

2.1.9 “Assignee” shall mean a person who has acquired a beneficial interest in one or more Units from a third party but who is neither a substituted Limited Partner nor an Assignee of Record.

 

2.1.10 “Assignee of Record” shall mean an Assignee who has acquired a beneficial interest in one or more Units whose ownership of such Units has been recorded on the books of the Partnership and which ownership is the subject of a written instrument of assignment, the effective date for which assignment has passed.

 

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2.1.11 “Cash Flow From Operations” means the net cash provided by the Partnership’s normal operations (without deduction for depreciation) after the general expenses and current liabilities of the Partnership (other than the Partnership Management Fee) are paid and reserves are funded or decreased in an amount deemed appropriate by the General Partners. Cash Flow From Operations shall also include, but not be limited to: (1) Working Capital Reserves (established pursuant to Paragraph 3.2 herein) in excess of Initial Working Capital Reserves and funded from Cash Flow From Operations, which are determined by the General Partners to be in excess of the amount deemed sufficient in connection with the operation of the Partnership properties; and (2) funds allocated, if any, for capital additions and improvements from Cash Flow From Operations. Cash Flow From Operations does not include any Cash From Sales, Financing, Refinancing or Liquidation or Cash From Initial Working Capital Reserves.

 

2.1.12 “Cash From Initial Working Capital Reserves” shall mean the cash to be distri buted from Initial Working Capital Reserves (as defined in Paragraph 3.2 herein); provided, however, that any amount distributed from Working Capital Reserves in excess of Initial Working Capital Reserves and funded from Cash Flow From Operations shall not be distributed as Cash From Initial Working Capital Reserves but rather shall be distributed as a part of Cash Flow From Operations. A distribution of Cash From Initial Working Capital Reserves will result in a decrease in the amount of Original Invested Capital contributed by an Investor.

 

2.1.13 “Cash From Sales, Financing, Refinancing or Liquidation” shall mean the net cash realized by the Partnership from any Partnership transaction not in the ordinary course of business, including but without limitation, liquidations (pursuant to Paragraph 20 of this Partnership Agreement), sales, exchanges or other dispositions of real or personal property, any borrowings or mortgage financings or refinancings, condemnations, or recoveries of damage awards and insurance proceeds (other than proceeds applied to restoration, business or rental interruption insurance proceeds) after retirement of applicable mortgage debt and all expenses related to the transaction including any Subordinated Real Estate Commissions payable to the General Partners, and also after any reserves for contingent liabilities to the extent deemed reasonable by the General Partners provided that at the expiration of such period as the General Partners deem advisable, the balance of such reserves remaining after payment of such contingencies shall be distributed in the manner provided in this Partnership Agreement for Cash From Sales, Financing, Refinancing and Liquidations. Cash From Sales, Financing, Refinancing or Liquidation shall not include Cash From Initial Financing. The disposition of a Partnership Property by transfer back to the seller or an Affiliate thereof, whether in the form of a rescission, exchange or resale OY pursuant to an option or other similar arrangement entered into at or prior to the time of taking title to the Property shall not, if the proceeds from such transfer back are reinvested in other Property, result in Cash From Sales, Financing, Refinancing or Liquidation. In the event the Partnership takes back a mortgage note in connection with the sale of a Property, all payments subsequently received in cash by the Partnership with respect to such note shall be included in Cash From Sales, Financing, Refinancing or Liquidations, irrespective of the extent to which any portion of such cash payments shall be treated by the Partnership as principal or interest for tax or accounting purposes.

 

2.1.14 “Close of the Offering Date” shall mean such date designated by the General Partners, but not later than one year from the effective date of the Prospectus.

 

2.1.15 “Code” shall mean the Internal Revenue Code of 1954, as amended, or corresponding provisions of subsequent revenue laws.

 

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2.1.16 “Consumer Price Index” (hereinafter “C.P.I.”) shall mean that number published by the U.S. Department of Labor, Bureau of Labor Statistics, which reflects “The Consumer Price Index for the entire United States; All Urban Consumers; All Items; Index 1967 = 100”, as amended, or such other index as may succeed the C.P.I. as the same or similar indicator.

 

2.1.17 “Cost of Partnership Property” with respect to each Partnership Property means the total consideration paid and capitalized for Federal income tax purposes-by the Partnership in connection with the purchase of such Property, whether paid to the seller, the General Partners or any other person, either in cash or by way of promissory notes, including payments for Acquisition Fees paid by the Partnership, if any. Reference to “Cost Of All Partnership Properties” shall be the total of such consideration paid by the Partnership for all Partnership Properties.

 

2.1.18 “Development Fee” shall mean a fee paid to third parties for the packaging of the Partnership’s Property, including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the specific Property, either initially or at a later date.

 

2.1.19 “Distributions” shall refer to any cash -or other property, valued at its fair market value at date of distribution, distributed to Holders and the General Partners arising from their Interests in the Partnership, but shall not include any payments to the General Partners under the provisions of Paragraph 9, (“Compensation and Fees to the General Partners and Affiliates”), or Paragraph 10, (“Partnership Expenses”), of this Partnership Agreement.

 

2.1.20 “Financing” shall be defined as the indebtedness encumbering Partnership Properties, the principal amount of which is scheduled to be paid over a period of not less than 48 months, and not more than 50% of the principal amount of which is scheduled to be paid during the first 24 months. Nothing in this definition shall be construed as prohibiting a bonafide prepayment provision in the financing agreement.

 

2.1.21 “Front-End Fees” shall mean those fees and expenses paid by any party for any services rendered during the Partnership’s organizational or acquisition phase, including organization and offering expenses, which are those expenses incurred in connection with and in preparing the Partnership for registration and subsequently offering and distributing the Units to the public, including sales commissions paid to broker-dealers in connection with the distribution of Units and all advertising expenses, Acquisition Fees, Acquisition Expenses, and any other similar fees, however designated by the Sponsors.

 

2.1.22 “General Partners” or “General Partner” shall refer to James R. Hoyt, an individual, and Secured Investment Resources, Inc., a Kansas corporation, or to any other person or corporation who succeeds any of them in such capacity.

 

2.1.23 “General Partners’ Interest in Cash From Sales, Financing, Refinancing or Liquidation” shall mean the General Partners’ share of Cash From Sales, Financing, Refinancing, or Liquidation payable to them under the provisions of Paragraph 9.6.2.

 

2.1.24 “Gross Proceeds” shall mean the aggregate total of the Original Invested Capital of all additional Limited Partners.

 

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2.1.25 “Gross Revenues” shall mean all revenues from the operation of Partnership Properties and all revenues from investments made pursuant to Paragraph 15.1.17. The term “Gross Revenues” shall not include revenues from sale, financing, refinancing, liquidation or other disposition of Partnership Properties.

 

2.1.26 “Holders” shall refer to owners of Units who are either Limited Partners or Assignees of Record, and reference to a “Holder” shall be to any one of them.

 

2.1.27 “Initial Working Capital” shall mean those cash reserves established pursuant to Paragraph 3.2 herein in the aggregate equal to 5% or less of the Gross Proceeds applicable to the acquisition of Partnership Properties and not funded from Cash Flow From Operations.

 

2.1.28 “Investment in Properties” shall mean the amount of Gross Proceeds actually paid or allocated to the purchase, development, construction or improvement of Properties acquired by the Partnership, including the purchase of Properties, Working Capital Reserves established in accordance with the provisions of Paragraph 3.2-hereof allocable to such properties (except that Working Capital Reserves so established in excess of 5% and Working Capital Reserves determined to be in excess of the amount deemed to be sufficient in connection with the operation of the Partnership Properties shall not be included), and other cash payments such as interest and taxes, but excluding Front-end Fees.

 

2.1.29 “Limited Partners” shall refer to the original Limited Partner and to any other persons who are admitted to the Partnership as additional or substituted Limited Partners. Reference to a “Limited Partner” shall refer to any one of them.

 

2.1.30 “Majority Vote” shall mean the vote of Limited Partners who own more than 50 percent of the Total Outstanding Units at a given time.

 

2.1.31 “Minimum Subscription Closing Date” shall mean that date which is the first full business day following the Minimum Subscription Date or such date thereafter as the General Partners, in their discretion, may designate.

 

2.1.32 “Minimum Subscription Date” shall mean that date on which the Partnership has received and accepted subscriptions for 2,500 Units (exclusive of subscriptions from New York residents).

 

2.1.33 “Net Cash Flow From Operations” shall mean Cash Flow From Operations less the Partnership Management Fee.

 

2.1.34 “Net Income” or “Net Loss” shall mean the net income or net loss of the Partnership, as determined in accordance with the accounting methods followed for Federal income tax purposes. -

 

2.1.35 “Net Proceeds” shall mean the total Gross Proceeds less expenses incurred and to be paid by the Partnership in organizing the Partnership and in offering the Units to the public.

 

2.1.36 “Original Invested Capital” shall mean the amount in cash contributed by the original and each additional Limited Partner to the capital of the Partnership for his Units, which amount shall be attributed to such Units in the hands of a subsequent Holder

 

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provided, however that the Original Limited Partner’s Interest shall be redeemed by the Partnership at the Minimum Subscription Closing Date.

 

2.1.37 “Original Limited Partner” shall refer to James R. Hoyt whose Interest in the Partnership shall be redeemed at the Minimum Subscription Closing Date.

 

2.1.38 “Partners” shall refer collectively to the General Partners and to the Limited Partners, when no distinction is required by the context in which the term is used herein, and reference to a “Partner” shall be to any one of the Partners.

 

2.1.39 “Partnership” shall refer to the limited partnership created under this Partnership Agreement.

 

2.1.40 “Partnership Interest” or “Interest” means the interest in the capital of the Partnership.

 

2.1.41 “Partnership Management Fee” shall refer to the fee or fees paid to the Sponsor or other Persons for management and administration of the Partnership’s normal operations pursuant to Paragraph 9.5 herein.

 

2.1.42 “Partnership Properties” or “Properties” shall refer to all properties or any interest therein acquired directly or indirectly by the Partnership. Reference to “Partnership Property” or “Property” shall be to any one of them.

 

2.1.43 “Percentage Increase In C.P.I.” shall mean that percentage which reflects the annual increase in C.P.I. (as that term is defined in paragraph 2.1.17). For the purpose of determining the Percentage Increase In C.P.I., the base C.P.I. shall be the C.P.I. published for the month in which the Prospectus becomes effective. The Percentage Increase in C.P.I. shall be determined annually on the anniversary of the date of the Prospectus and shall be that percentage which reflects the numerical increase in the C.P.1 on the present anniversary date from the immediately preceding anniversary date, divided by the C.P.1 on the immediately preceding anniversary date.

 

2.1.44 “Percentage Interest7’ shall mean the total of a Partner’s limited Partnership Units in relation to the Total Outstanding Units at any given time.

 

2.1.45 “Person7’ shall mean any natural person, partnership, corporation, association, trust, estate or other legal entity.

 

2.1.46 “Property Management Agent” shall refer to En-Com Properties, Ltd., a Missouri corporation and an Affiliate of the General Partners, or to any other person or corporation who succeeds it in such capacity.

 

2.1.47 “Property Management Fee7’ shall refer to the fee payable to the Property Management Agent under the provisions of Paragraph 9.4.1 of this Partnership Agreement.

 

2.1.48 “Prospectus” shall have the meaning given to that term by Section 2(10) of the Securities Act of 1933, including a preliminary Prospectus; provided, however, that such term as used herein shall also include an offering circular as described in Rule 256 of the General Rules and Regulations under the Securities Act of 1933 or, in the case of an intrastate offering, any document by whatever name known, utilized for the purpose of . offering and selling securities to the public.

 

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2.1.49 “Sponsor” shall mean any Person directly or indirectly instrumental in organizing, wholly or in part, the Partnership or any Person who will manage or participate in the management of the Partnership including the General Partners and their Affiliates, but .excluding (i) any Person whose only relationship with the-Partnership or the General Partners is that of an independent property manager whose only compensation from the Partnership is as such, and (ii) wholly independent third parties such as attorneys, accountants and underwriters whose only compensation from the Partnership is for professional services rendered in connection with the offering of Units, the acquisition, sale, financing or refinancing of Properties, or the operations of the Partnership.

 

2.1.50 “Total Loans and Cash Attributable To A Property” shall mean with respect to each Partnership Property the total consideration paid by the Partnership in connection with the purchase of such Property, whether paid to the seller, the General Partners or any other Person either in cash or by way of promissory note including additional cash considerations in the form of payments for Acquisition Fees, initial cash reserves, Acquisition Expenses and financing expenses and charges, but excluding any points and prepaid interest, if any. Reference to “Total Loans and Cash Attributable To All Properties” shall be the total of such consideration paid or allocated by the Partnership for all Partnership Properties.

 

2.1.51 “Total Outstanding Units7’ shall mean the number of all Units issued at any given point in time.

 

2.1.52 “Working Capital Reserves” shall refer to the aggregate of all cash reserves established for Partnership Properties pursuant to Paragraph 3.2 of this Partnership Agreement. 2.1.53 A “Unit” shall represent a capital contribution of $500 to the Partnership in exchange for a limited Partnership Interest.

 

3. Business and Purpose

 

3.1 Purpose. The primary purpose (character of business) of the Partnership is to invest in, hold and manage income-producing real estate which is improved or which will be improved within a reasonable period after acquisition, with emphasis planned to be upon the acquisition of existing apartment complexes and commercial properties including, but not limited to, shopping centers, office buildings, industrial buildings, hotels, motels, warehouses and mobile home parks. The Partnership may enter into ventures, partnerships, and other business arrangements with respect to real estate deemed prudent by the General Partners in order to achieve successful operations for the Partnership; subject, however, to the provisions of Paragraph 15.3.8 of this Partnership Agreement.

 

3.2 Working Capital Reserves. For the Partnership Properties, the Partnership shall establish a cash reserve designated as Working Capital Reserves for normal repairs, replacements, contingencies and related items. Working Capital Reserves shall initially be an amount equal to in the aggregate at least five percent (5%) of the Gross Proceeds applicable to the acquisition of Partnership Properties and this five percent (5%) shall be designated as “Initial Working Capital Reserves.” However, the General Partners may subsequently increase these reserves (by funding from Cash Flow From Operations) or decrease these reserves if in their opinion additional reserves are necessary or the reserves are deemed to be in excess of the amount deemed sufficient in connection with the operation of the Partnership Properties.

 

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If in any fiscal quarter the General Partners should determine that Initial Working Capital Reserves are in excess of the amount deemed sufficient in connection with the operation of the Partnership Properties, such reserves may be reduced and the amount of such reduction for a particular quarter may be distributed as a portion of Cash From Initial Working Capital Reserves thus reducing the amount of Original Invested Capital contributed by the Limited Partners. If in any fiscal quarter the General Partners should determine that reserves established by them in excess of Initial Working Capital Reserves and funded from Cash Flow From Operations are in excess of that amount deemed sufficient in connection with the operation of Partnership Properties, such reserves may be reduced and the amount of such reduction distributed as a portion of Cash Flow From Operations: provided, however, that a reduction below the Initial Working Capital Reserves level shall be distributed as a part of Cash From Initial Working Capital Reserves (as set out above) and not as a portion of Cash Flow From Operations.

 

Upon the sale, financing, refinancing or liquidation of any Partnership Property, any Working Capital Reserves applicable to that property need not be maintained thereafter, but may be distributed in the same manner as set out above in this Paragraph 3.2 (i.e., Working Capital Reserves in excess of Initial Working Capital Reserves and funded from Cash Flow From Operations shall be distributed as Cash Flow From Operations and Initial Working Capital Reserves shall be distributed as Cash From Initial Working Capital Reserves).

 

In all events, however, the General Partners may apply any funds to be distributed from Working Capital Reserves toward reserves for other Partnership Properties rather than distributing such funds according to this Paragraph 3.2.

 

3.3 Initial Financing. Subject to the provisions of Paragraph 11 of this Partnership Agreement, during that portion of the term of the Partnership after the Close of the Offering Date, the Partnership may obtain initial financing on any Partnership Property purchased for all or substantially all cash (over 75% of the purchase price consists of cash), and all proceeds therefrom may be reinvested by the Partnership. Proceeds from such financing occurring after said 24 month period will not be reinvested and.wil1 be available for and used in Distributions.

 

4. Term of the Partnership

 

4.1 Term . The Partnership shall commence as of the date of this Agreement and shall continue for a period ending the earlier of:

 

4.1.1 That date which is 180 days after the date of the Prospectus provided that on said date the Partnership has not received a minimum of $1,250,000 of Gross Proceeds

from Limited Partners;

 

4.1.2 Sixty (60) years from the date of this Partnership Agreement;

 

4.1.3 The date on which all of the assets (Properties, notes, receivables, etc.) acquired by the Partnership are sold and converted to cash;

 

4.1.4 Subject to the provisions of Articles 16 and 20, the date on which the Partnership is voluntarily dissolved by agreement of the Limited Partners or by operation of law;

 

4.1.5 The date on which the Partnership is dissolved by judicial decree; or

 

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4.1.6 Subject to the provisions of Article 20, the date on which the last remaining General Partner retires, dies, becomes legally incapacitated, dissolves, withdraws, is removed, or is adjudicated bankrupt, unless within ninety (90) days after such event the Limited Partners holding a majority of the Units agree to continue the Partnership business and, by written consent or vote, effective as of the date of such event, elect one or more new General Partners to continue the Partnership business.

 

5 . General Partners

 

5.1 Contribution. The General Partners have contributed an aggregate of $1,000 in cash to the Partnership and they shall on or before the Close of the Offering Date contribute additional cash in the sum of $95,000, as Limited Partners, both amounts allocated among the General Partners pursuant to paragraph 5.2 below, and shall receive 190 Units for such additional cash contribution (which 190 Units acquired by the General Partners and the 5 Units acquired by James R. Hoyt, a General Partner, as Original Limited Partner pursuant to Paragraph 6.1 shall not be sold, hypothecated or. otherwise transferred in any manner; provided, however, that the Original Limited Partner’s 5 units shall be redeemed by the Partnership at the Minimum Subscription Closing Date), and at all times during the existence of the Partnership, have a present and continuing interest in Net Income, Net Loss and Distributions according to the provisions of Article 11, of this Partnership Agreement.

 

5.2 Allocation Among General Partners. As between the General Partners, their interest in Net Income, Net Loss and Distributions shall be allocated to the General Partners, so long as they act as such, in a proportion to be determined by them.

 

5.3 Restoration of Deficit in General Partners’ Capital Accounts. In the event that, immediately prior to the dissolution of the Partnership referred to in Paragraph 20.1, the General Partners shall have a deficiency, if any, in their capital accounts, the General Partners shall contribute in cash to the capital of the Partnership an amount equal to whichever is the lesser of (a) the deficiency in the General Partners’ capital accounts or (b) 1.01% of the Original Invested Capital which has not been returned pursuant to Paragraph 11 below. Any further deficit payment shall be borne by the General Partners in a proportion as determined by them.

 

5.4 Admission of Additional General Partners. After the filing of the Partnership’s initial certificate of limited partnership, additional General Partners may be admitted only with a Majority Vote.

 

6. Original and Additional Limited Partners

 

6.1 Original Limited Partners. The Original Limited Partner (James R. 30yt) has contributed the sum of $2,500 to the capita1 of the Partnership and has received 5 Units for such contribution. The Original Limited Partner’s interest will be redeemed by the Partnership on or before the Minimum Subscription Closing Date.

 

6.2 Additional Limited Partners. The Partnership intends to sell and issue not less than 2,500 nor more than 100,000 Units in addition to those Units issued in accordance with Paragraphs 5.1 and 6.1, and to admit as additional Limited Partners the persons who contribute cash to the capital of the Partnership for such Units.

 

6.3 Requirements to Becoming Limited Partner. Each person who acquires any such additional Units shall become a Limited Partner in the Partnership at such time as: (i) he has

 

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purchased 5 or more Units (except that the required purchase shall only be four Units for an Individual Retirement Account established under Section 408 of the Code), (ii) he has contributed the sum of $500 in cash for each Unit purchased, (iii) he has executed and filed with the Partnership a written instrument which sets forth an intention to become a Limited Partner, represents that he satisfies the net worth and/or income suitability standards set forth in the Prospectus, and requests admission to the Partnership in that capacity, together with such other instruments as the General Partners may deem necessary or desirable to effect such admission, including the written acceptance and adoption by such person of the provisions of this Partnership Agreement, and the execution, acknowledgement and delivery to the General Partners of a special power of attorney, the form, style and content of which are more fully described herein, and (iv) the Partnership Agreement shall have been amended to reflect the fact of the additional Limited Partner. The investors shall be admitted as additional Limited Partners not later than 15 days after the release from escrow of the capital contributions received up to that time, and thereafter investors shall be admitted into the Partnership not later than the last day of the calendar month following the date their subscription was accepted by the Partnership. Subscriptions shall be accepted or rejected within 30 days of their receipt; if rejected, all funds should be returned to the investors within 10 business days.

 

6.4 Amendment of Partnership Agreement. Within 15 days of the release from escrow of ail capital contributions, and thereafter within 30 days following the date of acceptance of the additional Limited Partners’ subscriptions, the General Partners shall in timely fashion amend this Partnership Agreement and any separate certificate of limited partnership filed for record to reflect the admission of a person as an additional Limited Partner.

 

6.5 Issuance ofAdditiona1 Units. The Partnership shall not issue any additional Units after the Close of the Offering Date. Subscriptions shall be accepted or rejected by the Partnership within 30 days of their receipt; if rejected, all subscription monies shall be returned to the subscriber within ten (10) business days with any interest earned thereon on a per diem basis from the date of subscription.

 

6.6 Escrow Account. All Original Invested Capital of Holders received by the Partnership until the Minimum Subscription Closing Date shall be held in trust, and shall be deposited in an escrow account in any of the branches of Mission Bank of Mission, Kansas as escrow holder for the Original Invested Capital (except for Original Invested Capital received from New York residents which shall be separately escrowed) and shall be temporarily invested in short term interest bearing bank accounts where there is appropriate safety of principal. The Partnership will commence admitting purchasers of Units (except New York purchasers) into the Partnership as additional Limited Partners on the Minimum Subscription Closing Date. And thereafter, additional Limited Partners shall be admitted into the Partnership not later than the last day of the calendar month following the date their subscription was accepted by the Partnership. At the time the purchaser is admitted as a Limited Partner, the escrow holder shall transfer such person’s Original Invested Capital to the Partnership. If the Minimum Subscription Date has not been reached within 180 days from the date of the Prospectus, all Original Invested Capital will be refunded within ten (10) business days to the purchasers with any interest earned on such Original Invested Capital on a per diem basis from the date of subscription.

 

7. Status of Limited Partners

 

7.1 Liability of Lim i ted Partners

 

7.1.1 Liability For Partnership Obligations. A Limited Partner is not liable for the obligations of the Partnership unless the Limited Partner is also a General Partner, or in

 

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addition to the exercise of the rights and powers of a Limited Partner, the Limited Partner participates in the control of the business. However, if the Limited Partner does participate in the control of the business, the Limited Partner is liable only to Persons who transact business with the Partnership reasonably believing, based upon the Limited Partner’s conduct, that the Limited Partner is a General Partner.

 

7.1.2 Personal Liability. If the certificate of limited partnership or certificate of amendment or cancellation of such certificate of limited partnership contains a materially false statement, one who suffers loss by reliance on such statement may recover damages for the loss from any Person, including a Limited Partner, who executes the certificate or causes another to execute it on the Person’s behalf, and who knew the statement to be false in any material respect at the time the certificate was executed. However, no person, including a Limited Partner, shall have any liability for failing to cause the amendment or cancellation of a certificate to be filed or failing to file petition for its-amendment or cancellation if the certificate of amendment or cancellation or petition is filed within thirty (30) days of when that Person knew or should have known that the statement in the certificate was inaccurate in any material respect.

 

7.1.3. Liability As A General Partner.

 

7.1.3.a Except as provided in subsection 7.1.3.b, a Person who makes a contribution to a Partnership and who erroneously but in good faith believes that that Person has become a Limited Partner in the Partnership is not a General Partner in the Partnership and is not bound by its obligations by reason of making the contribution, receiving distributions from the Partnership or exercising any rights of a Limited Partner if, on ascertaining the mistake:

 

 

 

7.1.3.b A person who makes a contribution under the circumstances described in subsection 7.1.3.a is liable as a General Partner to any third party who transacts business with the Partnership prior to the occurrence of either of the events referred to in subsection ‘7.1.3.a:

 

 

 

8. Status of Units. Each Unit shall be fully paid and nonassessable.

 

9. Compensation and Fees to the General Partners and Affiliates

 

9.1 Compensation. The General Partners and their Affiliates shall receive compensation only as specified by this Partnership Agreement.

 

9.2 Compensation on Acquisition

 

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9.2.1 Acquisition Fees. Subject to the provisions of Paragraph 9.3, the Acquisition Agent and all other Persons shall receive an aggregate amount of Acquisition Fees not to exceed the lesser of: (i) 11.5% of the Gross Proceeds, or (ii) 6%: of the Total Loans and Cash Attributable To All Partnership Properties.

 

9.2.1.a. The amount of the Acquisition Fee with respect to each separate Partnership Property shall not exceed the lesser of: (i) 11.5% of the Gross Proceeds, applied separately to the purchase of each Property and computed on that portion of the Gross Proceeds included in the Total Loans and Cash Attributable To A Property, reduced for a pro-rata amount of all sales commissions and organizational expenses paid by the Partnership and Working Capital Reserves established with respect to each Property in accordance with the provisions of Paragraph 3.2, or (ii) 6% of the Total Loans And Cash Attributable To A Property.

 

9.2.1.b. The Acquisition Fee shall be paid by the Partnership or by the seller of the Property acquired and shall be payable at the close of escrow or, if there is no escrow, at the time legal title to such Property is transferred to the Partnership, or later if the General Partners determine that it is in the best interest of the Partnership.

 

9.2.l.c. No Acquisition Fee shall be paid by the Partnership to any Affiliate of the Partnership, nor shall any Affiliate of the Partnership receive a fee, commission, or other benefit from any Person upon any reinvestment of Cash From Sales, Financing, Refinancing or Liquidation of Property by the Partnership other than any Acquisition Fees in connection with the investment of Cash From Initial Financing.

 

9.2.1.d. Except as set forth in Paragraph 9 of this Partnership Agreement, no other real estate commission, property purchase fee, or finder’s fee shall be paid or payable by the Partnership to the General Partners or to any other Person in connection with the acquisition of specific real properties.

 

9.3 Investment In Properties. The Partnership shall commit a portion, as set out below, of the Gross Proceeds toward Investment in Properties. At a minimum, the Partnership shall commit an amount of the Gross Proceeds to Investment in Properties which is equal to the greater of: (i) 80% of the Gross Proceeds reduced by .1625% for each 1%of indebtedness encumbering Partnership Properties, (ii) 67% of the Gross Proceeds, or (iii) $1,000,000. The remaining Gross Proceeds may be used by the Partnership to pay Front-end Fees; provided, however, that when any Front-end Fees, including any Acquisition Fees, are paid by the seller of Properties acquired, such fees shall not be included in satisfying the required minimum Investment in Properties..

 

9.4 Operating Stage (Operating Compensation)

 

9.4.1 Property Management Fee. The Property Management Agent shall be entitled to a Property Management Fee for services in providing continuing professional property management of the Partnership Properties. Such fee shall be paid monthly and shall be equal to the lesser of the maximum fees set forth in (i) through (iii) below: (i) in the case of a residential property, the lesser of 5% of the Gross Revenues from such Property or the normal and competitive fee for similar services in the same geographic area (including all rent-up, leasing and re-leasing fees and bonuses, and leasing related services, paid to any person): (ii) in the case of an industrial and commercial Property, except as set forth in subparagraph (iii) below, the lesser of 5% of the Gross Revenues from such Property (where the General Partners or their Affiliates provide leasing, re-leasing and leasing related services) or the normal and competitive fees for similar services in the same geographic area; provided,

 

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however, that the Property Management Fee payable according to this subparagraph (ii) shall not exceed 3% of the Gross Revenues from such Property where the General Partners or their Affiliates do not perform the leasing, re-leasing and leasing related services with respect to the Property; and (iii) in the case of an industrial and commercial property which is leased on a long-term (ten or more years), net or similar basis, the lesser of 1% of the Gross Revenues or the normal and competitive fee for similar services in the same geographic area; provided, however, that the Property Management Agent may also receive a one-time initial leasing fee of 3% of the Gross Revenues on each lease payable over the first five full years of the original term of such lease.

 

9.4.1.a In the event the Property Management Agent retains third parties to perform a portion or all of the services set forth below, the Property Management Agent will be solely responsible for any fees charged by such persons which will be paid by the Property Management Agent without cost to the Partnership.

 

9.4.1.b The Property Management Fee shall be paid on a monthly basis as compensation for the services of the Property Management Agent in overall management of the Partnership Properties, including, but not limited to: (i) review of the maintenance, repair, remodeling, and refurbishing of all Partnership Properties, (ii) review of rental schedules and recommendations with respect to changes thereto, (iii) employment and supervision of on-site property managers together with the establishment of procedures and preparation of operational manuals regarding the management of Partnership Properties, (iv) review of rental surveys, (v) review of historical and projected performance and variation analyses, (vi) review of leases management agreements and maintenance agreements, (vii) review of reserves and working capital and recommendations with respect to changes thereto, (viii) review of regional economic surveys, (ix) review of budgets and cash flow projections for each project and the Partnership as a whole over the term of the Partnership, (x) review of working capital levels, (xi) periodic physical inspections and market surveys, (xii) determination and implementation of capital improvements, (xiii) continuing review to recommend to the General Partners when Properties should be sold and acceptable terms of sale, (xiv) initiation of any necessary litigation, and (xv) providing reports at certain intervals and in such form as the General Partners may require with respect to the operation of Partnership Properties. Property management services to be rendered by the Property Management Agent, or by third parties retained by the Property Management Agent, do not include the salaries of on-site property managers or maintenance and security personnel, contract services and materials: professional fees paid to accountants or attorneys, supplies, repair, furniture and equipment costs and such other costs as are directly attributable to the Partnership’s Property operations.

 

9.5 Partnership Management Fees. The General Partners shall receive fees designated as Partnership Management Fees for managing the Partnerships normal operations, in an amount equal to five percent (5%) of Cash Flow From Operations.

 

9.6 Liquidating Stage (Final Compensation)

 

9.6.1 Sub ordinated Real Estate Commission. The Acquisition Agent or such other Affiliate as the General Partners may designate shall be paid by the Partnership for real estate brokerage services in connection with the sale of Partnership Properties in which the Acquisition Agent or such Affiliate provided a substantial amount of the services in the sales effort, one-half of the real estate brokerage commission which is reasonable, customary and competitive in light of the size, type and location of the Property, but in no event shall such subordinated real estate commission exceed three percent (3%) of the contract price of a

 

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Property. Said real estate brokerage fee shall be payable upon the completion or” the sale of each Property; provided, however, the payment thereof to the Acquisition Agent or to any Affiliate of the General Partners shall be made only after the Partnership has distributed cash in accordance with Paragraph 11.7.2. There is no subordination far any real estate commission paid only to non-Affiliates. If the Acquisition Agent or any of the General Partners participates with a non-Affiliated broker, the limitations contained in this Paragraph 9.6.1 shall apply to commissions paid by the Partnership to the Acquisition Agent or to any such Affiliate involved in the transaction. However, the aggregate real estate commission paid to all parties involved in the sale of a Partnership Property shall be limited to the commission which is reasonable, customary and competitive in light of the size, type and location of the Property, and in no event shall such commission exceed 6% of the contract price of the Property.

 

9.6.2 General Partners’ Interest in Cash From Sales, Financing, Refinancing or Liquidation. The General Partners shall be entitled to receive an amount equal to fifteen percent (15%) of the remaining Cash From Sales, Financing, Refinancing or Liquidation after the Partnership has distributed (a) to Holders in an amount in cash which is equal to Payout as defined in Paragraph 11.4 herein less all prior cash distributions and (b) to the General Partners in (i) an amount equal to their Original Invested Capital plus any additional contributions less the amount of all prior cash distributions and (ii) an amount equal to the subordinated real estate commission payable in accordance with Paragraph 9.6.1. The amount distributed to the General Partners as the General Partners’ Interest in Cash From Sales, Financing, Refinancing or Liquidation shall be distributed to the General Partners as determined between them.

 

9.7 Interest on Loans on Expulsion of General Partner. Should a General Partner be expelled from the Partnership, such Partner shall be entitled to interest on any loans made subject to the provisions of the Partnership Agreement. However, the General Partner may not receive interest in excess of the amounts which would be charged by unrelated lending institutions on comparable loans for the same purpose’ in the same locality.

 

9.8 Payment of Fees on Expulsion or Termination. Should a Genera1 Partner be expelled from the Partnership according to provisions of Paragraph 17 of this Partnership Agreement, or any agreement with the Acquisition Agent or Property Management Agent terminated according to the provisions of Paragraph 15.1.5 of this Partnership Agreement, any portion of the Acquisition Fee, Property Management Fee, Partnership Management Fee, subordinated real estate commission, General Partner