Exhibit 3.40
7/18/03
KIMBALL HILL CHADWICK FARMS
LIMITED PARTNERSHIP AGREEMENT
This Agreement of Limited
Partnership (the “Agreement”) made and entered into by
and between Kimball Hill Homes Dallas, L.P., a Texas limited
partnership (the “General Partner”) and Kimball Hill
Texas Development, LLC, a Texas limited liability company (the
“Limited Partner”) dated effective as of July 21,
2003. The General Partner and the Limited Partner are collectively
sometimes hereinafter referred to as the
“Partners”.
ARTICLE I
FORMATION OF LIMITED
PARTNERSHIP
The parties hereby enter into a
limited partnership (the “Partnership”) under the
provisions of the Limited Partnership Act of the State of Texas,
and the rights and liabilities of the Partners shall be provided in
that Act except as herein otherwise expressly provided.
ARTICLE II
NAME
The business of the Partnership
shall be conducted under the name of Kimball Hill Chadwick Farms
Limited Partnership or such other similar name as the General
Partner shall designate.
ARTICLE III
PROPERTY AND
PURPOSES
The business of the Partnership is
to invest in, purchase, acquire, hold, maintain, operate, improve,
develop, sell, exchange, lease and otherwise use real property
(“Property”) located in the Forth Worth, Denton County,
Texas. The Property is legally described on Exhibit A attached
to and made a part of this Agreement. As of the effective date of
this Agreement, the General Partner, as the contract purchaser of
the Property, assigns to the Partnership all of its right, title
and interest in and to the Property as an additional capital
contribution to the Partnership.
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ARTICLE IV
TERM
The term of the Partnership shall
commence on the date of filing by the General Partner of the
Certificate of Limited Partnership with the Secretary of State of
Texas, which date shall be subsequent to the date of this
Agreement, and shall terminate 20 years thereafter; provided,
however, that the Partnership shall be dissolved prior to such date
upon the earlier of (a) the disposition by the Partnership of
its entire interest in all of the Property, or
(b) dissolution, insolvency or bankruptcy of the General
Partner as provided herein, (c) as elsewhere expressly
provided in this Agreement, or (d) as required under the Texas
Limited Partnership Act notwithstanding the other provisions of
this Agreement.
ARTICLE V
OFFICES
Section 5.1
Principal Place of
Business
(a)
The principal place of the business
shall be as follows:
c/o Kimball Hill Homes Dallas,
L.P.
8584 Katy Freeway, Suite 200
Houston, Texas 77024
(b)
The General Partner may from
time-to-time change the principal place of business, and in such
event, the General Partner shall notify the Limited Partner in
writing within twenty 20 days of the effective date of such
change.
Section 5.2
Registered Agent and
Office
(a)
The registered agent of the
Partnership is CT Corporation System and the registered office of
the Partnership is as follows:
350 N. St. Paul Street
Dallas, TX 75201
(b)
The General Partner may from
time-to-time change the registered agent and the registered office
of the Partnership, and in such event the General Partner shall
notify the Limited Partner in writing 20 days prior to the
effective date of such change and shall file with the Secretary of
State of Texas an amendment to the certificate of limited
partnership of the Partnership reflecting any such
changes.
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ARTICLE VI
CAPITAL CONTRIBUTIONS AND SALE
TO PARTNERSHIP
Section 6.1
Capital Contribution of
General Partner and Sale of Property to
Partnership
(a)
The General Partner shall contribute
$50,000.00 to the Partnership upon execution of this
Agreement.
(b)
The General Partner hereby confirms
its assignment of Interest to the Partnership, as an additional
capital contribution, of all of its rights to and obligations of
the Property. The Partnership hereby confirms its consent to and
acceptance of such assignment of interest and agrees to reimburse
the General Partner for all expenses in connection with or
incidental to the purchase, development and sale of the Property
and the other Partnership purposes as set forth in Article III
of this Agreement, whether said expenses are incurred or paid
before or after the date of this Agreement, provided, however, that
all such expense must be incurred by the General Partner directly
and solely for such Partnership purposes. Accordingly, the general
office and executive salaries and similar expenses of the General
Partner shall not be paid or reimbursed by the
Partnership.
Section 6.2
Capital Contributions of
Limited Partner
(a)
Upon execution of this Agreement,
the Limited Partner shall contribute $10,000 to the Partnership,
representing total capital contribution to the
Partnership.
(b)
No further capital contributions
shall be required of the Limited Partner, except to the extent
requested by the General Partner from the Limited Partner and the
Limited Partner agrees to make such contributions to the
Partnership. The Limited Partner shall not be required to make any
loans to the Partnership.
(c)
The Limited Partner understands that
time is of the essence with respect to such capital contribution.
In addition to any other appropriate remedies available to the
General Partner, the Limited Partner shall not at any time be
entitled to any distributions from the Partnership if it fails to
make any capital contributions to the Partnership when same are due
under the terms of this Agreement.
Section 6.3
Capital
Accounts
A capital account shall be
established for each Partner and shall be maintained in accordance
with the capital accounting rules set forth in
Treasury
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Regulations, Section 1.704-1 (b)(2)(iv), as
such rules may be amended. In general, a Partner’s
capital account shall be credited with the cash and the fair market
value of property contributed by such Partner to the Partnership
net of liabilities secured by such contributed property that the
Partnership is considered to assume or take subject to under
Section 752 of the Internal Revenue Code of 1986, as amended
(the “Code”), and such Partner’s distributive
share of net income (including for this purpose income exempt from
tax) and gain from capital transactions, and shall be debited with
the cash and the fair market value of property distributed to such
Partner (net of liabilities secured by such distributed property
and that such Partner is considered to assume or take subject to
under Code Section 752), such Partner’s distributive
share of net loss and losses from capital transactions, and such
Partner’s distributive share of expenditures of the
Partnership described in Code Section 705(a)(2)(B). No
interest shall be paid or accrued at any time on a Partner’s
capital account or on any capital contribution. Each Partner shall
have a single capital account regardless of the time or times and
the manner in which such interest was acquired.
ARTICLE VII
ADDITIONAL
PARTNERS
Additional Partners, either General
or Limited, may be admitted to the Partnership only upon prior
written approval and consent of both the General Partner and the
Limited Partner.
ARTICLE VIII
MANAGEMENT POWERS, DUTIES AND
RESTRICTIONS
Section 8.1
Authority of General
Partner
The General Partner shall have
exclusive authority to manage the operations and affairs of the
Partnership and to make all decisions regarding the business of the
Partnership and shall devote such time to the Partnership as shall
be reasonably required for its welfare and success. The General
Partner, without limitation on any power that may be conferred upon
it by law, and except as may be provided to the contrary elsewhere
in this Agreement, shall have full power, right and
authority:
(a)
to deal with, purchase, sell,
mortgage, transfer, assign or otherwise dispose of any and all of
the assets of the Partnership, provided that the net proceeds
resulting from any new or refinanced loan, lien or encumbrance
shall be used in the operation, management or improvement of the
Property owned by the Partnership and in furtherance of the
Partnership’s interest, or shall be distributed to the
Partners in accordance with the distribution provisions hereinafter
set forth; dispose of any and all
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of the assets of the Partnership; to borrow
money on behalf of the Partnership. The Limited Partner
specifically approves and consents to the execution and delivery by
the General Partner of: (i) such documents as are necessary to
cause the Partnership to become a borrower under a Revolving
Construction Loan Agreement, with a bank to be determined, as agent
and any other banks which are a party to such Revolving
Construction Loan Agreement providing for a construction loan to
the Partnership and to other borrowers who are parties to such
Revolving Construction Loan Agreement and (ii) the mortgage
and other collateral security documents that will encumber the
Partnership’s assets for all borrowers’ obligations
under such Revolving Construction Loan Agreement. The Limited
Partner also expressly acknowledges that a default by any other
borrower, even if not the Partnership, under such Revolving
Construction Loan Agreement could jeopardize or cause the loss of
some or all assets of the Partnership, including without limitation
all of the Property, even though the Partnership was not itself
under default under any of the terms of the Revolving Construction
Loan Agreement and associated mortgage and other collateral
security documents;
(b)
to borrow money on behalf of the
Partnership;
(c)
to repay in whole or in part,
refinance, recast, increase, modify or extend any loan which may
affect any of the Property owned by the Partnership;
(d)
to execute or cause to be executed
for and on behalf of the Partnership any mortgage, note, assignment
of rents, assignment of beneficial interest for collateral
purposes, and other documents, and any renewals, extensions or
modifications thereof; provided that with respect to any financing
of any property the sole security for such financing shall be
Partnership property only and none of the Partners except the
General Partner shall have any personal liability
thereon;
(e)
to make expenditures and incur
obligations in the ordinary course of business;
(f)
to acquire and enter into any
contract of insurance which it deems necessary and proper for the
protection of the Partnership, for conservation of its assets, or
for any purpose convenient or beneficial to the
Partnership;
(g)
to employ, retain or contract, from
time-to-time, with persons, firms or corporations, which may be or
include the General Partner, for the right to acquire and for the
improvement of the Property and for the operation and management of
the Partnership business and to carry out all of its purposes,
including but not limited to supervisory and managing agents,
building management agents, contractors and subcontractors,
insurance brokers, real estate brokers, loan brokers, consultants
in management and finance, attorneys and accountants, on such terms
and for such compensation as the General Partner shall
determine;
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(h)
to obtain such zoning, planned unit
development and/or other approvals as are necessary and desirable
to allow the Partnership to develop on the Property the residential
dwelling units as generally described in Article III of this
Agreement.
(i)
to compromise, arbitrate or
otherwise adjust claims in favor of or against the Partnership and
to commence or defend litigation with respect to the Partnership or
any assets of the Partnership as the General Partner may deem
advisable, all or any of the above matters being at the expense of
the Partnership;
(j)
to hold title for the Partnership to
the Property;
(k)
to perform and carry out all other
powers, rights and authority authorized under the Limited
Partnership Act of the State of Texas; and
(l)
to execute, acknowledge and deliver
any and all instruments to effectuate any of the foregoing
management responsibilities.
Section 8.2
General Partner Builder
Expense Reimbursement
In addition to any other provision
in this Agreement with respect to sharing of profits and
reimbursement and payment of expenses, the General Partner shall
receive a general contractor and nonsite-specific cost
reimbursement fee (“General Partner Builder Expense
Reimbursement”) from the Partnership payable at the closing
of the sale of each lot on the Property in the amount of five
percent (5%) of the total gross sales price for such lot. This and
any other reference in this Agreement to the total gross sales
price for each lot shall in all cases mean the amount actually paid
by the purchaser of such lot. The General Partner Builder
Reimbursement shall constitute a Partnership expense for all
purposes and not a profit or tier distribution to the General
Partner. The General Partner Builder Expense Reimbursement may
commence at any time during the term of the Partnership. If and
while payments of First Tier Distributions or Second Tier
Distributions as defined and provided for in Section 15.2
below are not current, then payments of the General Partner Builder
Expense Reimbursement shall be deferred until such First and Second
Tier Distributions are current. Under all circumstances and for all
purposes, the General Partner Builder Expense Reimbursement shall
be subordinate to the First and Second Tier
Distributions.
Section 8.3
Limited Partner’s
Liability
The Limited Partner shall not take
part in the management of the business or transact any business for
the Partnership or have the power to sign for or to bind the
Partnership to any agreement or document. Except as and to the
extent expressly set forth in this Agreement, the Limited Partner
shall not be subject to assessment nor shall the Limited Partner be
personally liable as a Limited Partner for any of the debts of the
Partnership or for any of the losses thereof beyond the
amount
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contributed by it as capital to the Partnership
and its share of the undistributed profits of the Partnership,
provided, however, that the Limited Partner shall be personally
liable to the General Partner with respect to the capital
contributions required of the Limited Partner pursuant to the terms
of this Agreement.
Section 8.4
Requests for Information and
Meetings
(a)
Any Partner shall be entitled upon
request, provided such request is made in good faith and for proper
purpose, to (i) review and copy the books and records of the
Partnership at reasonable times and at the location where the
records are kept, (ii) obtain the list of the names and
addresses of all of the Partners, and (iii) have an accounting
of all Partnership affairs and finances.
(b)
The General Partner shall have a
designated employee available to meet monthly with a designated
employee of the Limited Partner to discuss Partnership matters and
to provide to the Limited Partner monthly financial statements and
sales and construction status reports.
Section 8.5
No Guaranty of
Investment
The Limited Partner acknowledges
that its capital contributions are being made without any guaranty
or representation by the General Partner of any particular return
on investment or of a return of its capital contribution and that
such investment involves a high degree of risk which the Limited
Partner is willing to assu
