EXHIBIT 3.2
REAL ESTATE ASSOCIATES LIMITED II
RESTATED CERTIFICATE AND AGREEMENT
OF LIMITED PARTNERSHIP
This Restated Certificate and Agreement of Limited Partnership by
and
among National Partnership Investments
Corp., a California corporation with
principal offices at 1901 Avenue of the
Stars, Los Angeles, California 90067
(the "Corporate General Partner"), and
National Partnership Investments
Associates, a limited partnership ("NPIA"
or the "Non-Corporate General
Partner"), the general partner of which is
Nicholas G. Ciriello, an individual
residing at 418 South Lucerne Boulevard,
Los Angeles, California 90020, as
general partners (hereinafter collectively
referred to as the "General
Partners"), and Patricia W. Toy, an
individual residing at 1782 Westridge
Road, Los Angeles, California 90049
("Initial Limited Partner"), is entered
into as of December 4, 1979. Such Initial
Limited Partner, and any additional
or substituted limited partners hereafter
admitted to the Limited Partnership
as herein provided, are referred to
collectively as the "Limited Partners" and
individually as a "Limited Partner." The
term "Partners" shall mean all
General and Limited Partners, and the term
"Partner" means any General or
Limited Partner.
W I T N E S S E T H:
WHEREAS, on December 4, 1979, the Partnership was formed pursuant
to
the laws of the State of California;
WHEREAS, the General Partners and the Initial Limited Partner
desire
to change certain provisions in, and
restate in full, their agreement; and
WHEREAS, it is the intention of the parties thereto to admit
additional Limited Partners to the
Partnership for the purpose of acquiring
additional capital therefor;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1:
Formation.
1.1 The General Partners and the Initial Limited Partner do
hereby
form a limited partnership (the
"Partnership") under the Limited Partnership
Act of the State of California.
Section 2:
Name.
2.1 The business of the Partnership shall be conducted under the
name
Real Estate Associates Limited II, which
name may be changed by the General
Partners by written notice to the Limited
Partners.
Section 3:
Addresses of Parties.
3.1 The principal place of business of the Partnership shall be
at
1901 Avenue of the Stars, Suite 1200, Los
Angeles, California 90067, or at
such other place as the General Partners
may from time to time designate in
writing to the Limited Partners. The
Partnership may also maintain such other
offices at such other places as the General
Partners may deem advisable.
3.2 The addresses of the General Partners shall be those stated
in
the first paragraph of this Agreement, or
at such other places as the General
Partners may from time to time designate in
writing to the Limited Partners.
The addresses of the Limited Partners shall
be those stated after their names
on Schedule A hereto or in any amended
certificate hereto. A Limited Partner
may change such address by written notice
to the General Partners, which
notice shall become effective upon
receipt.
Section 4:
Business of the Partnership.
4.1 The business of the Partnership shall be:
(a) to acquire interests as a limited partner in any
partnership
or joint venture
(a "local limited partnership") which will (i) acquire,
lease, hold,
finance, construct, improve, rehabilitate, manage, and/or
operate
government-assisted or other housing projects (the "Projects"
and
the interests of
the Partnership in the local limited partnerships shall
be referred to
as "Project Interests"), (ii) monitor and supervise
management of
construction and operations of the Projects, (iii) arrange
for and
supervise the conversion of any Project to other uses, or (iv)
perform any act
for a purpose authorized by this Agreement;
(b) to acquire, hold (in the Partnership's name or under any
other title
arrangement selected by the General Partners), lease, sell,
mortgage,
convey, or refinance any real or personal property, including,
but not limited
to, the Project Interests described in paragraph (a)
above;
(c) to hold, own, maintain, manage, improve, develop, operate,
sell, transfer,
convey, lease, mortgage, exchange, or otherwise dispose
of or deal in or with Projects and
Project Interests described in
paragraph (a)
above; and
(d) to perform any acts to accomplish the foregoing purposes.
Section 5:
Contributions to Capital; Additional Limited Partners.
5.1 The capital
of the Limited Partnership shall be divided into no
less than 1 and up to 20 General Partners
Interests and no less than 480 and
up to 13,204 non-assessable limited
partnership interests, each of which
limited partnership interests is
hereinafter referred to as a "Limited
Partnership Interest"
5.2 The General Partners shall contribute an aggregate of $12,500
to
the capital of the Partnership, for which
the General Partners shall be
credited with the ownership of one General
Partners Interest, and shall have
such interest in and to the profits and
losses thereof as is described in
Section 7 hereof. Upon liquidation of the
Partnership, the General Partners
will discharge any debt balance in their
capital accounts by contributing to
the Partnership an amount up to the
difference between 1% of total capital
contributions to the Partnership and
$12,500.
5.3 (a) The Initial Limited Partner has contributed $4,550 to
the
capital of the Partnership pursuant to a
promissory note, and has the right,
but not the obligation, to purchase
additional Units as provided herein.
Furthermore, upon the admission of
additional Limited Partners to the
Partnership, the Initial Limited Partner
may withdraw such investment and
cease to be a Limited Partner.
(b) The General Partners are authorized to admit additional
Limited Partners
to the Partnership by selling not more than 3,301 Units
for cash to
selected persons as may apply to become Limited Partners
pursuant to the
terms of an offering described in a Prospectus (the
"Prospectus") to
which this Agreement will be annexed, by completing a
subscription
agreement (the "Subscription Agreement") in the form to be
set forth in the
Prospectus, provided that no person admitted as a
Limited Partner
shall have been permitted to purchase more than 50 Units,
subject,
however, to the right of the General Partners to establish
special
requirements for larger subscriptions.
(c) The Limited Partnership Interests shall be sold to Limited
Partners in
"Units." The minimum investment shall be one Unit at a
purchase price
of $5,000 per Unit. Each Unit shall consist of two Limited
Partnership
Interests and one Warrant which will entitle the purchaser of
a Unit to
acquire two additional Limited Partnership Interests
("Additional
Limited Partnership Interests") during the period January 1,
1981 to and
including January 23, 1981 at $2,500 each. The Partnership
shall have the
right to offer for sale, at the best prices obtainable,
any Limited
Partnership Interest not purchased pursuant to the exercise
of Warrants. The
foregoing sums relating to the purchase of Units and
Limited
Partnership interests shall be paid to the Partnership
concurrently
with the recordation in the Official Records of Los Angeles
County,
California, of an amendment of this Agreement reflecting the
admission of
each Limited Partner to the Partnership or increase in the
number of
Limited Partnership Interests held by such Limited Partner, as
the case may be.
Investors whose subscriptions have been accepted by the
General Partners
will be admitted as Limited Partners within 15 days
after the
minimum of $1,400,000 from the sale of Units has been received
by the General
Partners. Thereafter, investors will be admitted as
Limited Partners
no later than the last day of the calendar month
following the
date the General Partners accept their subscriptions. The
General Partner
will accept or reject subscriptions within three days
after receipt
thereof.
(d) The Partnership presently contemplates the public offering
of a maximum of
3,000 Units at an offering price of $5,000 per Unit or an
aggregate
offering price of $15,000,000. These Units represent 6,000
Limited
Partnership Interests and 3,000 Warrants to purchase an
aggregate
of 6,000
Additional Limited Partnership Interests at a price of $2,500
per Additional Limited Partnership
Interest, or an aggregate exercise
purchase price
of $15,000,000, provided, that if the Additional Limited
Partnership
Interests can not be sold for $2,500 each, the General
Partner shall
have the authority to offer and sell such Interests at the
best prices that
can be obtained. A sales commission of 9% shall be paid
to E.F. Hutton
& Company Inc. ("Hutton") with respect to the sale of
Units; a sales
commission of 8.75% shall be paid to Hutton with respect
to the sale of
Limited Partnership Interests pursuant to the exercise of
Warrants,
provided, however, that the sales commission to be charged on
Limited
Partnership Interests available for sale by the Partnership
upon
failure to
exercise Warrants shall be 9%. In addition, in anticipation of
receipt of
subscriptions in excess of 3,000 Units, the Partnership will
register with
the Securities and Exchange Commission a total of 3,300
Units (covering
an aggregate of 6,600 Limited Partnership Interests and
Warrants to
purchase an aggregate of 6,600 Additional Limited Partnership
Interests) and
will grant to Hutton the right, exercisable in its sole
discretion, to
sell these additional Units so registered (on the same
terms and
conditions as the other Units) on behalf of the Partnership.
Such right to
sell an additional 300 Units will expire on the date of
termination of
the offering and will provide additional compensation for
Hutton.
(e) No Partner shall have the right to withdraw or reduce his
capital
contribution. No Limited Partner shall have the right to bring
an
action for
partition against the Partnership or to demand or receive
property other
than cash in return for his capital contribution. No
Limited Partner
shall have priority over any other Limited Partner,
either as to the
return of his capital contribution or as to profits,
losses, or
distributions.
(f) The net proceeds to the Partnership will be $4,550 for each
Unit. A person
acquiring Units will participate with other Limited
Partners in the
income, gains, losses, deductions, credits, and cash
distributions on
a pro rata basis in accordance with the number of
Limited
Partnership Interests owned. A Capital Account shall be
maintained for
each Partner. To each Account shall be credited the amount
of money paid by
a Partner to the Partnership to acquire his Limited
Partnership
Interests (but not Warrants), (ii) the Partner's distributive
share of
Profits, and (iii) the Partner's distributive share of any
tax-exempt
Partnership income, and from each Capital Account there shall
be debited (iv)
the net fair market value of property distributed to the
Partner, (v) the
amount of money distributed to the Partner, (vi) the
Partner's
distributive share of losses, and (vii) the Partner's
distributive
share of Partnership expenditures not deductible in
computing
taxable income and not properly capitalized.
(g) To accomplish the purpose of this Section 5.3, the General
Partners are
hereby authorized to do all things necessary to admit such
additional
Limited Partners, including, but not limited to, registering
the Units under
the Securities Act of 1933, as amended, pursuant to the
rules and
regulations of the Securities and Exchange Commission,
qualifying the
Units for sale with state securities regulatory
authorities or
perfecting exemptions from qualification, and entering
into such
underwriting or agency arrangements for the solicitation of the
Units upon such
terms and conditions as the General Partners may deem
advisable.
5.4 Proceeds from contributions for Units and other Partnership
funds
shall be held by the General Partners as
fiduciaries for the exclusive use of
the Partnership and after the start of
Partnership operations shall be
temporarily invested in U.S. Treasury Bills
and Bonds, bank certificates of
deposit, commercial paper (investment
grade), and tax-exempt notes and bonds,
or registered investment companies holding
such securities. Interest thereon
shall inure to the benefit of the
Partnership, and the Limited Partners, as
such, shall not receive interest on funds
contributed by them. Any funds
(other than designated reserves) not
invested in Projects or Project Interests
within 18 months from the effective date of
the Prospectus shall be
distributed pro rata to the Limited
Partners as a return of capital.
Section 6:
Organizational Expenses.
6.1 The Partnership shall pay all costs of qualifying and
offering
the Units (including sales commissions) and
all formation and organization
expenses, including expenses associated
with the selection and acquisition of
Projects (which expenses are, however,
subject to the limitation set forth in
Section 9.6.1 hereof). The General Partners
will be liable for the amount, if
any, by which the aggregate organizational
expenses and sales commissions
exceed 15% of the gross proceeds from the
sale of Units.
Section 7:
Profits and Losses.
7.1 Prior to the amendment to this Agreement for the purpose of
admitting additional Limited Partners to
the Partnership in accordance with
Section 5.3 (b) hereof, the General
Partners shall be allocated, as they may
agree between themselves, 99% of each item
of income, gain, loss, deduction,
and credit (collectively, "Partnership Tax
Items" and individually,
"Partnership Tax Item"). During such
period, the Initial Limited Partner shall
be allocated 1% of each Partnership Tax
Item. At all times thereafter, except
as provided in Section 7.2 and the
following sentence, the General Partners
shall be allocated 1% and the Limited
Partners as a class shall be allocated
99% of each Partnership Tax Item. The
General Partners shall not be allocated
any income recognized by the Partnership
upon the expiration of Warrants; all
income recognized by the Partnership upon
expiration of Warrants shall be
allocated to the non-exercising Limited
Partners in proportion to their
respective Limited Partnership
Interests.
7.2 Upon the total or partial liquidation of the Partnership or
the
disposition or partial disposition of a
Project or Project Interest, income
and losses of the Partnership shall be
allocated as follows. Income not
exceeding an amount equal to the sum of the
negative adjusted capital account
balances of all Partners with such balances
(computed after any distributions
made under Section 9.6.2) shall be
allocated among such Partners in proportion
to their respective negative capital
account balances and without regard to
Section 7.3; and income in excess thereof
shall be allocated 1% to the General
Partner and 99% to the Limited Partners as
a class. Losses not exceeding an
amount equal to the sum of the positive
adjusted capital account balances of
all Partners with such balances (computed
after any distributions under
Section 9.6.2) shall be allocated among
such Partners in proportion to their
respective positive adjusted capital
account balances and without regard to
Section 7.3; and losses in excess thereof
shall be allocated 1% to the General
Partner and 99% to the Limited Partners as
a class.
7.3 Each Limited Partner shall be allocated the same fractional
share
of each Partnership Tax Item allocable to
Limited Partners as a class as the
total number of Limited Partnership
Interests owned by him divided by the
total number of Limited Partnership
Interests outstanding, subject to the
following exception. Commencing with the
1981 taxable year, each Partnership
Tax Item allocable to Limited Partners as a
class shall be allocated 62 1/2%
to holders of Additional Limited
Partnership Interests, and 37 1/2% to holders
of 1980 Partnership Interests until the
total amount of each Partnership Tax
Item allocated to each Additional Limited
Partnership Interest equals the
total amount of each Partnership Tax Item
(including a weighted average of
each 1980 Partnership Tax Item) allocated
to each 1980 Partnership Interest.
The weighted average of each 1980
Partnership Tax Item shall be a fraction,
the numerator of which is a sum, consisting
of the product, for each month
until January 1, 1981, of the total amount
of that Partnership Tax Item
allocated to the group comprised of 1980
Limited Partnership Interests
purchased through that month times the
number of months remaining, including
the month in question, until January 1,
1981, and the denominator of which is
a sum, consisting of the product, for each
month until January 1, 1981, of
1980 Limited Partnership Interests
purchased through that month times the
number of months remaining, including the
month in question, until January 1,
1981. As each Partnership Tax Item is so
equalized between 1980 Limited
Partnership Interests and Additional
Limited Partnership Interests, this
allocation shall cease as to that
Partnership Tax Item.
7.4 In determining whether Partnership Tax Items are realized,
paid,
accrued or incurred during any period in
which any Limited Partner is a member
of the Partnership, such Items shall be
allocated on any basis permitted by
Section 706(c) of the Internal Revenue Code
of 1954, as determined by the
General Partners. In the event of the
transfer of a Limited Partnership
Interest (other than in the case of a
default), the distributive share of
these Partnership Tax Items (in respect of
the Limited Partnership Interest so
transferred) shall be allocated between the
transferor and the transferee in
accordance with this Section.
Section 8:
Cash Distributions.
8.1 The General Partners shall distribute annually substantially
all
of the Partnership's Net Cash Flow as
defined herein. Except as provided in
Section 8.2, the General Partners shall be
entitled to receive 1% of the Net
Cash Flow to be distributed, but any such
distributions to the General
Partners shall be reduced by the amount
paid as an Annual Management Fee as
set forth in Section 9.5 hereof. The
Limited Partners as a class shall receive
the balance of the distributed Net Cash
Flow, which shall be distributed among
individual Limited Partners as Partnership
Tax Items are allocated to them
under Section 7.3.
8.2 Upon the total or partial liquidation of the Partnership or
the
disposition or partial disposition of a
Project or Project Interest, net
assets available for distribution remaining
after all distributions required
to be made under Section 9.6.2 shall be
distributed to the Partners in
proportion to their positive adjusted
capital account balances (computed after
the allocation of income or loss under
Section 7.2).
8.3 "Net Cash Flow" shall mean the Partnership's share of all
cash
receipts derived from the ownership of
Projects and Project Interests therein
(exclusive of any proceeds from the sale or
financing of Projects or Project
Interests, refinancing or other
extraordinary transactions not in the ordinary
course of business) less (a) expenses, (b)
such reserves as the General
Partners deem reasonably necessary for the
proper operation of the
Partnership's business, and (c) any fees
and expenditures authorized by this
Agreement (except for construction
expenditures paid out of capital or loan
proceeds). The General Partners may at
their discretion reinvest or distribute
all or any portion of the proceeds from the
disposition or refinancing of any
Project or Project Interest therein,
provided, that in the event of a sale,
the Partners shall have first received any
distributions to which they are
entitled under Section 9.6.2. To the extent
that such proceeds are not
reinvested or committed within twelve
months from the date of the sale or
refinancing, they shall be distributed.
Distributions of the net proceeds from
the sale or financing of Projects or
Project Interests, refinancing thereof,
or other extraordinary transactions not in
the ordinary course of business
shall be distributed to the General and
Limited Partners in the same manner as
net cash is distributed under Section
8.2.
8.4 The General Partners shall designate a record date to
determine
Partners entitled to cash distributions,
which shall not be less than 15 days
nor more than 30 days before each cash
distribution. The Partnership shall
cause to be maintained records reflecting
the name, address, and number of
Limited Partnership Interests and General
Partners Interests held by each
Partner for the purpose of determining
recipients of cash distributions and
notices.
Section 9:
The General Partners.
9.1 The General Partners shall have complete discretion in the
management and control of the business of
the Partnership for the purposes
herein stated, shall make all decisions
affecting the business of the
Partnership and shall manage and control
the affairs of the Partnership to the
best of their abilities and use their best
efforts to carry out the purposes
of the Partnership. The powers of the
General Partners include, but are not
limited to, the powers:
(a) to expend the capital and profits of the Partnership in
furtherance of
the Partnership's business;
(b) to acquire, hold (in the Partnership's name or, in the best
interest of the
Partnership, under any other title arrangement selected
by the General
Partners), lease, sell, mortgage, convey, or refinance any
real or personal
property, including Projects and Project Interests, at
such price and
upon such terms, as they deem to be in the best interests
of the
Partnership, including the power to vote to amend a local
limited
partnership
agreement in such a manner as to reduce the limited
partnership
interest of the Partnership in the local limited partnership,
to vote to
reduce the Partnership's interests in the profits, losses, and
special
allocations of the local limited partnership and assign a part
of
the limited
partnership interest in such partnership, provided that such
action is
necessary to preserve the economic value of the Partnership's
Project
Interest;
(c) to monitor the construction and operations of any of the
Projects,
Project Interests, or other Partnership property and to make
recommendations
with respect thereto;
(d) to retain independent consultants to evaluate the Projects,
Project Interests, and other
Partnership property;
(e) to borrow money and execute promissory notes and to secure
the same by
mortgage upon the Partnership's property;
(f) to invest in short-term debt obligations (including
obligations of
federal and state governments and their agencies,
commercial
paper, and certificates of deposit of commercial banks,
savings banks,
or savings and loan associations) such funds as are
temporarily not
required for investment in Projects, Project Interests,
or other
Partnership property;
(g) to lend money or provide advances in furtherance of the
Partnership's
purposes; and
(h) to enter into and carry out agreements of any kind,
provided
that all
contracts with the General Partners or their affiliates must
provide for
termination by the Partnership on 60 days written notice,
without penalty,
and to do any and all other acts and things necessary,
proper,
convenient, or advisable to effectuate and carry out the
purposes
of the
Partnership.
9.2 The General Partners shall (a) diligently and faithfully
devote
such of their time to the business of the
Partnership as they deem necessary
to conduct it for the greatest advantage of
the Partnership; (b) file and
publish all certificates, notices,
statements, or other instruments required
by law for formation and operation of the
Partnership in all appropriate
jurisdictions; (c) cause the Partnership to
carry adequate public liability,
property damage, and other insurance, any
or all of which may name the General
Partners as the sole insured; (d) indemnify
and hold the Partnership harmless
from any loss, damage or liability due to,
or arising out of, any General
Partner's breach of fiduciary duty; and (e)
maintain capital accounts on the
books and records of the Partnership in
respect of each interest in the
Partnership. The General Partners may
become Limited Partners and thereby
become entitled to all of the rights of
Limited Partners to the extent of the
Limited Partnership Interests so acquired,
provided that such acquisition of
Limited Partnership Interests shall not
reduce any liability of the General
Partners under this Agreement.
Notwithstanding the foregoing, the General
Partners shall have fiduciary
responsibility for the safekeeping and use of
all funds and assets of the Partnership,
whether or not in their immediate
possession or control and they shall not
employ, or permit another to employ,
such funds, or assets in any manner except
for the exclusive benefit of the
Partnership.
9.3 Notwithstanding any provision in this Agreement to the
contrary,
it is understood and agreed that (i) in
conducting, carrying on, and managing
the business of the Partnership, the
General Partners shall be bound by the
following investment policies, which may
not be changed, altered, or amended
except as provided in Section 14 hereof and
(ii) the General Partners shall
endeavor to conduct the Partnership's
business in accordance with the policies
set forth in the Prospectus:
(a) except for interim commitments in short-term government
obligations, commercial paper (investment grade), certificates
of
deposit and tax-exempt notes and bonds or registered investment
companies holding such securities, investments will be
initially
limited to Project Interests, provided that (i) not less than 90%
of
the amount of public offering proceeds available for investment
will
be invested in Project Interests in partnerships or joint
ventures
which will own or lease federal, state, or local
government-assisted
housing projects and (ii) the Partnership may subsequently
refinance
or convert such Project Interests to other uses with a view to
realizing higher revenue or capital gains, although reinvestment
of
cash flow (excluding proceeds resulting from a disposition or
refinancing of property) shall not be allowed.
(b) Projects or Project Interests will be acquired with a view
toward maximizing tax deductions, with cash income and
long-term
appreciation as additional considerations, and not with a view
to
early resale;
(c) the Partnership will seek to avoid depreciation recapture
and defer taxes by not selling any Projects or Project
Interests
within ten years, except (i) to qualified tenant cooperatives
as
defined in the Internal Revenue Code, and (ii) under
circumstances
described in the Prospectus;
(d) upon any sale or refinancing, the Partnership shall not
reinvest any proceeds thereof;
(e) the Partnership may (i) borrow money only against
individual
Projects or Project Interests to acquire Projects or interests
therein, to defray expenses or preserve its interest in each
individual Project or interest therein, but may not pledge or
encumber other Projects or Project Interests for this purpose,
and
(ii) borrow only such amount for which the Partnership can
reasonably
expect to meet debt service requirements from anticipated Net
Cash
Flow. The Partnership may make or cause its affiliates to make
loans
or advances for the acquisition of Projects or Project Interests,
but
may not receive interest or other financing charges or fees in
excess
of the amounts which would be charged by unrelated banks for
comparable
loans for the same purpose in the locality of the Project
or in amounts which otherwise are unreasonable or require any
prepayment charge or penalty, provided that in connection with any
of
the foregoing transactions, (A) the Partnership shall not enter
into
transactions involving the use of "all- inclusive" or
"wrap-around"
notes except as permitted by the Rules of the Department of
Corporations of the State of California, and (B) the
Partnership
shall not incur any indebtedness whereby the lender will have
or
acquire, at any time as a result of making such loan, any direct
or
indirect interest in the profits, capital, or property of the
Partnership other than as a secured creditor;
(f) the Partnership shall not (i) issue senior securities,
except as set forth in the preceding paragraph and even then only
at
par or at a premium, (ii) invest in other issuers for the purpose
of
exercising c
