EX-4
Partnership Agreement
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EXHIBIT A
LIMITED PARTNERSHIP AGREEMENT
MERIDIAN HEALTH CARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
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Preliminary Statement
........................................................... A-3
Article I - Defined
Terms
................................................... A-3
Article II -Name;
Purpose; Term and Certificate
................ A-10
Section 2.1 Name; Formation
............................................ A-10
Section 2.2 Place of Registered Office
................................ A.10
Section 2.3 Purpose
...........................................................
A-10
Section 2.4 Term
................................................................
A-10
Section 2.5 Recording of Certificate
................................... A-10
Article III -
Partners; Capital
............................................... A-10
Section 3.1 General Partners; Assignor Limited Partner;
Subordinated Limited Partners
....................................... A-10
Section 3.2 Investors
.......................................................... A-11
Section 3.3 Partnership Capital
.......................................... A-11
Section 3.4 Liability of Partners and Investors
.................... A-12
Article IV -
Allocations, Distributions and Applicable Rules
............. A-12
Section 4.1 Allocation of Profit or Loss from a Sale
.......... A-12
Section 4.2 Distribution of Net Proceeds from a Refinancing or Sale
...............
A-13
Section 4.3 Distribution of Net Cash Flow and Allocation of Profit
and Loss from
Operations
.....................................................................
A-13
Section 4.4 Liquidation or Dissolution
............................... A-14
Section 4.5 General and Special Rules
............................... A-14
Article V - Rights,
Powers and Duties of Partners
............... A-18
Section 5.1 Management and Control of the Partnership; Tax Matters
Partner ............
A-18
Section 5.2 Authority of General Partners
......................... A-18
Section 5.3 Authority of Investors
...................................... A-21
Section 5.4 Restrictions on Authority
................................. A-21
Section 5.5 Authority of Partners and Affiliated Persons to Deal
with Partnership ..........A-22
Section 5.6 Duties and Obligations of the General Partners
....................... A-23
Section 5.7 Compensation of General Partners
.................... A-25
Section 5.8 Other Businesses of Partners
..................... ...... A-25
Section 5.9 Liability of General Partners and Assignor Limited
Partner to Limited
Partners or Investors
....................................................... A-25
Section 5.10 Indemnification
............................................... A-25
Article VI -
Transferability of a General Partner's Interest
............................... A-26
Section 6.1 Removal, Voluntary Retirement or Withdrawal of a
General Partner;
Transfer of Interests
........................................................ A-26
Section 6.2 Election and Admission of Successor or Additional
General Partners
............A-26
Section 6.3 Events of Withdrawal of A General Partner
............................. A-26
Section 6.4 Liability of a Withdrawn General Partner
.............. A-27
Section 6.5 Valuation of Partnership Interest of General Partner
............. A-27
Article VII -
Assignment of Assignee Units to Investors; Transferability of
Limited
Partner Interests and Units
............................................. A-28
Section 7.1 Assignments of the Assignee Units to Investors
............................. A-28
Section 7.2 Transferability of Units
.................................... A-29
Section 7.3 Death, Bankruptcy or Adjudication of Incompetence of an
Investor or a
Limited Partner
..............................................................
A-30
Section 7.4 Effective Date
........................................ ......... A-30
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Section 7.5 Substitute Limited Partners
...............................A-30
Section 7.6 Retirement or Withdrawal of a Limited Partner
.. A-30
Article VIII -
Dissolution, Liquidation and Termination of the Partnership
A-31
Section 8.1 Events Causing Dissolution
...............................A-31
Section 8.2 Liquidation
.................................................... A-31
Section 8.3 Capital Contribution Upon Dissolution
.............. A-32
Article IX - Certain
Payments to the
General Partners and
Affiliates
...
A-32 Section 9.1
Reimbursement
of Certain
Costs and Expenses of the
General Partners and
Affiliates
...................................................................
.. A-32
Section 9.2 Fees
...............................................................
A-33
Article X - Books and
Records; Bank Accounts; Reports
................. A-34
Section 10.1 Books and Records
........................................ A-34
Section 10.2 Bank Accounts
.............................................. A-34
Section 10.3 Reports
......................................................... A-34
Section 10.4 Federal Tax Elections
................................... . A-35
Article XI -
Meetings of Investors
....................................... A-36
Section 11.1 Calling Meetings
.............................................. A-36
Section 11.2 Notice; Procedure
.......................................... A-36
Section 11.3 Right to Vote
................................................ A-36
Section 11.4 Proxies; Rules
............................................... A-36
Article XII -
General Provisions
.......................................... A-37
Section 12.1 Appointment of Administrative General Partner as
Attorney-in-Fact
A-37
Section 12.2 Waiver of Partition
........................................ A-37
Section 12.3 Notification
...................................................... A-37
Section 12.4 Word Meanings
................................................ A-37
Section 12.5 Binding Provisions
............................................ A-37
Sectio 12.6
Applicable Law
................................................ A-37
Section 12.7 Counterparts
................................................. A-38
Section 12.8 Separability of Provisions
................................ A-38
Sectio 12.9
Paragraph Titles
............................................... A-38
Section 12.10 Entire Agreement
.......................................... A-38
Section 12.11 Amendments
................................................ A-38
Signatures
............................................................................
A-39
Schedule A
..........................................................................A-41
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MERIDIAN HEALTH
CARE GROWTH AND INCOME FUND LIMITED PARTNERSHIP AGREEMENT
OF LIMITED PARTNERSHIP THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of
December 8, 1987, is by and among Brown Healthcare, Inc., a Maryland
corporation, as the Administrative General Partner, Meridian Healthcare
Investments, Inc., a Maryland corporation,
as the Development
General Partner,
Realty Associates 1988 Limited Partnership,
a Maryland limited partnership, and
Meridian Healthcare Investments,
Inc., a Maryland
corporation, as
Subordinated
Limited Partners, and Brown Healthcare Holding Co., Inc., a Maryland
corporation, as the Assignor Limited
Partner.
Preliminary Statement
The General
Partners, the
Subordinated Limited Partners, and the Assignor
Limited Partner desire to form Meridian Healthcare Growth and Income Fund
Limited Partnership (the "Fund"), pursuant to the Delaware
Revised Uniform
Limited Partnership Act. NOW, THEREFORE, in
consideration of the mutual promises
made herein, the parties hereto,
intending to be
legally bound, hereby agree as
follows: ARTICLE I DEFINED TERMS The
defined terms used in this Agreement shall,
unless the context otherwise expressly
requires, have the
meanings specified in
this Article I.
"Accountants"
means
such nationally recognized firm of independent
certified public accountants as shall be engaged from time to time by the
General Partners on behalf of the Fund.
"Acquisition
Expenses" means expenses, including, but not limited to, legal
fees and expenses, travel and communications expenses, costs of appraisals,
non-refundable option payments on property not acquired,
accounting
fees and
expenses, title insurance, and miscellaneous expenses related
to selection and
acquisition of Facilities or Operating
Partnership
Interests,
whether or not
acquired.
"Acquisition
Fees" means the total
of all fees and commissions paid by any
party on behalf of the Fund or an Operating
Partnership in
connection with
the
selection, purchase or development of, or investment in, any Facility by the
Fund or an Operating Partnership,
including, without limitation, any real estate
commission, selection fee, non-recurring
management fee, development fee, or any
fee of a similar nature, however
designated.
"Act" means the
Delaware Revised
Uniform Limited Fund
Act (6 DEL.C 17-101
et. seq.) as amended or modified from time
to time.
"Additional
General Partner" means any Person who is admitted as an
Additional General Partner of the Fund, under the provisions of Article VI,
after the date of this Agreement.
"Adjusted
Capital Balance" of a Partner or an
Investor means the
Capital
Contribution of the Partner or the Assignor
Limited Partner made on behalf of an
Investor, less any Net Proceeds of Sale or
Refinancing actually
distributed to
the Partner or Investor (other than that
portion, if any, which is payment of an
unpaid Preferred Return), as provided in Article IV herein, at the time of
reference thereto.
"Administrative
General Partner" means
Brown Healthcare,
Inc., a Maryland
corporation, or any Person who is designated as the Administrative General
Partner in the Schedule at the time in
question.
"Affiliate"
means (i) any Person directly or indirectly controlling,
controlled by or under common control with another Person, (ii) any Person
owning or controlling 10% or more of the
outstanding voting
securities of such
other Person, (iii) any officer, director
or partner of such Person, and (iv) if
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such other
Person is an officer, director or partner, any company for
which
such Person acts in any such capacity.
"Agreement"
means this Limited Partnership Agreement as originally executed
and as amended from time to time, as the context requires. Words such as
"herein", "hereinafter," "hereof,"
"hereto," "hereby" and "hereunder," when used
with reference to this Agreement,
refer to this
Agreement as a whole unless the
context otherwise requires.
"Assigned
Limited Partnership
Interest" means a Partnership Interest which
is credited to the Assignor Limited Partner
on the books and records of the Fund
in respect of a purchase of one Unit by an Investor. Each Assigned Limited
Partnership Interest represents a contribution
to the capital of the Fund equal
to $25, regardless of any reduction in
Selling Commissions.
"Assignee
Units" means the
ownership interests of
an Investor in the Fund
at any particular time, including the right of such Investor to any and all
benefits to which an Investor may be
entitled as provided in this Agreement. The
ownership interests of the Investors in the Fund are sometimes referred to
herein as "Units".
"Assignor
Limited Partner" means
Brown Healthcare
Holding Co., Inc. which
will (i) own any Assigned Limited Partnership Interests issued pursuant to
Sections 3.2 and 7.1 hereof, and (ii) transfer and assign to those
Persons who
acquire Units all of its rights and
interest in Assigned
Limited Partnership
Interests in accordance with Sections 3.2
and 7.1 hereof.
"Capital
Account" means (i) the separate account maintained and adjusted
on
the books and records of the Fund for each Partner and (ii) the separate
subaccount of the Capital Account of the
Assignor Limited Partner maintained and
adjusted for each Investor. Each Partner's and Investor's Capital Account is
credited with his Capital Contributions and his distributive share of Fund
Profit (or item thereof). Each Partner's or Investor's Capital Account is
debited with the cash and the fair market
value of any property
distributed to
him (net of liabilities assumed by such Partner or
Investor and
liabilities to
which such distributed property is
subject), his distributive share of Fund Loss
(and deduction (or item thereof)), and his distributive share of Fund
expenditures described in Section 705(a)(2)(B) of the Code
(including
losses
disallowed under Section 267(a)(1) or 707(b) of the Code,
and Section
709(a)
syndication expenditures applied to reduce the
Capital Accounts of the Partners
or Investor's to whom such expenditures are allocable at the time such
expenditures are paid or incurred). Each Partner's and Investor's Capital
Account shall also be adjusted
pursuant to Sections
4.4 and 4.5 hereof and
as
required by the Income Tax Regulations promulgated under Section 704 of the
Code. Any questions concerning a Partner's or
Investor's Capital
Account shall
be resolved by the General Partners in their reasonably
exercised discretion,
applying principles consistent with this Agreement and the regulations
promulgated under Section 704 of the Code in order to assure that all
allocations herein will have substantial economic effect or will otherwise
be
respected for income tax purposes.
For purposes of this
paragraph, a Partner or
Investor who has more than one Partnership
Interest or Unit, as the case may be,
shall have a single Capital Account that reflects all of his Partnership
Interests and Units, regardless of the class of
Interests owned (e.g.,
general
or limited) and regardless of the time or manner in which the Partnership
Interests and Units were acquired.
"Capital
Contribution"
means the total amount
of cash and the fair market
value of any other assets contributed to the Fund by a Partner (net of
liabilities assumed by the Fund and
liabilities to which
any such
contributed
assets are subject) and, with respect to an
Investor, the Capital
Contribution
of the Assignor Limited Partner made on
behalf of such Investor (without regard
to any reduction of Selling Commissions).
Any reference in this Agreement to the
Capital Contribution of a then-Partner or Investor shall include a Capital
Contribution previously made by any prior Partner or Investor with respect
to
the Interest or Unit of such then-Partner
or then-Investor, except to the extent
that all or a portion of the Interest or Unit of any prior
Partner or
Investor
shall have been terminated and the portion so
terminated not
transferred to a
successor Partner or Investor. "Cash Flow
Deficit Guaranty Agreement" means that
certain agreement to be entered into by the Fund pursuant to which the
Development General Partner will agree to fund, on a monthly basis, up to
$570,000 of the operating deficits
generated by the Development Facilities (on a
combined basis)
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in excess of
$570,000 of the
aggregate operating
deficits generated in
respect of such Facilities during the first two years of
operations
of the
Development Facilities. Payments made by the Development
General Partner under
the Cash Flow Deficit Guaranty Agreement
will be non-interest
bearing until the
first quarter after the Commencement Date
that Investors receive
distributions
equal to the Preferred Return and will be
repaid as provided in Article IV.
"Certificate"
means the Certificate of Limited Partnership establishing the
Fund, as filed with the office of the Secretary of State of the State of
Delaware on or about the date of this
Agreement, as it may
be amended from time
to time in accordance with the terms of
this Agreement and the Act. "Code" means
the Internal Revenue Code of 1986, as
amended (or any corresponding provision of
succeeding law).
"Commencement
Date" means the date Facility V commences operations and the
Fund effectively acquires the Operating Partnership Interest relating to
Facility V under the applicable
Development
Partnership
Interest Acquisition
Agreement.
"Consent of the
Investors"
shall mean the
affirmative
vote of Investors
owning more than 50% of the outstanding
Units.
"Controlling
Person" of any General
Partner or Affiliate thereof means any
person who (a) performs functions for a General Partner or
Affiliate similar to
those of (i) a Chairman or member of the Board of
Directors,
(ii) executive
management, such as a President, or a
Vice-President, Secretary or Treasurer, or
(iii) senior management; or (b) holds a 5% or more equity interest in the
General Partner or Affiliate, or has the power to direct or
cause the direction
of the General Partner, or Affiliate, whether through the ownership of
voting
securities, by contract or otherwise.
"Development
General Partner" means Meridian Healthcare Investments,
Inc.,
or any Person who is designated as the Development General Partner in the
Schedule at the time of reference
thereto. "Development Partnership Interest
Acquisition Agreements" means those agreements
pursuant to which the
Fund will
acquire, subject to raising sufficient proceeds of the Offering, Operating
Partnership Interests of the Operating Partnerships that own Facility V,
Facility VI and Facility VII.
"Due Diligence
Expense Reimbursement
Fee" means the fee equal to 2% of the
Gross Proceeds of the Offering allowed to the Selling Agent, which may be
re-allowed to Soliciting Dealers, for advisory services, due diligence
activities and the reimbursement of
expenses.
"Entity" means
any general partnership, limited partnership, corporation,
joint venture, trust, estate, business
trust, cooperative,
association or other
legal form of organization.
"Escrow Agent"
means Mercantile-Safe Deposit & Trust Company, or such
other
escrow agent chosen by the General
Partners to hold funds
from Persons who have
subscribed to become Investors pending the
assignment of Assignee Units to them.
"Existing
Partnership
Interest Acquisition Agreements" means those
agreements pursuant to which the Fund will acquire, subject to raising
sufficient proceeds of the Offering,
Operating Partnership Interests relating to
Facility III and Facility IV.
"Facilities"
mean the nursing centers described in the Prospectus which are
to be acquired, developed, owned and operated by the
Operating Partnerships,
including all replacements thereto and all personal
property which is used
in
connection therewith. Any one of the
Facilities may herein be referred to as a
"Facility".
The terms "Facility I"
through "Facility VII" shall be defined
by reference to the use of such terms in
the Prospectus.
"Front-End
Fees" means fees and expenses paid by any Person for any
services rendered during the organization or acquisition phase of the Fund,
including the Offering and Organization
Expense Fee, the Due
Diligence Expense
Reimbursement Fee, the Selling Commissions, the Acquisition Expenses, the
Acquisition Fees, mortgage placement, financing or refinancing
fees and any
other similar fees.
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"Fund"
means the limited partnership formed in accordance with this
Agreement by the parties hereto, as said limited partnership may from time to
time be constituted.
"Fund Property"
means all or any portion of the assets owned or to be owned
by the Fund, including the Operating
Partnership
Interests and all
incidental
personal property.
"General
Partner" means any
Person designated as a
General Partner in the
Schedule and any Person who becomes a
Successor or Additional General Partner as
provided herein, in each such Person's capacity as a General Partner of the
Fund.
"Gross
Proceeds of the
Offering" means the
aggregate of the proceeds from
the sale of Units in the Offering, which amount is equal to the total of all
Capital Contributions of the Investors.
"Increased
Maximum Offering Amount" means the total
amount of $38,500,000
in Gross Proceeds of the Offering.
"Interest" or
"Partnership Interest"
means the entire
ownership interest
(which maybe segmented into and/or expressed as a percentage of
various rights
and/or liabilities) of a Partner in the
Fund at any particular time, including
the right of such Partner to any and all benefits to which a Partner may be
entitled as provided in the Agreement and in the Act, together with the
obligations of such Partner to comply with all
the terms and provisions of this
Agreement and of the Act.
"Interest
Income" means interest
income under the Purchase Money Financing
with respect to an installment or other
deferred Sale.
"Interest
Income Cash" means Net
Proceeds from a Sale
attributable to an
installment or other deferred Sale.
"Interim
Investments"
means the short-term
investments made with
the Net
Proceeds of the Offering until such Net Proceeds of the
Offering are
disbursed
for acquisition of the Operating
Partnership Interests.
"Investor" means
(i) any Person who holds an Assignee Unit and is reflected
as an Investor on the books and records of
the Fund, and (ii) any
Investor who
has been admitted to the Fund as a Substitute Limited Partner pursuant to
Section 7.5 hereof.
"Investment in
Properties" means the amount of Capital Contributions used
to make or invest in mortgage loans or the
amount actually paid
or allocated to
the purchase and development of the Facilities or the Operating Partnership
Interests (including the purchase of properties, working capital reserves
allocable thereto (except that working
capital reserves in excess of 5% shall
not be included), and other cash payments such as interest and taxes but
excluding Front-End Fees).
"Limited
Partner" means any
Person who is designated as a Limited Partner
on the books and records of the Fund at the
time of reference
thereto, in each
such Person's capacity as a Limited Partner
of the Fund.
"Limited
Partnership Interest" means the ownership interest of the
Assignor
Limited Partner and all other Limited
Partners in the Fund.
"Limited
Partnership Interest
Percentage" in respect of any Investor means
the percentage obtained by converting to a
percentage the
fraction having
the
number of Assignee Units owned by such Investor as
its numerator and having the
number of Assignee Units owned by all
Investors at the time of reference thereto
as its denominator.
"Majority
Vote of the Investors" shall mean the affirmative vote of
Investors owning more than 50% of the
outstanding Units.
"Management
Agreements" means
those certain
agreements to be entered into
by the Operating Partnerships and the Nursing Center Manager
pursuant to which
the Nursing Center Manager shall manage each of the
Facilities for a fee of 6%
of the total revenues of the Facilities,
provided however, that
one-half of the
management fee (3% of total revenues)
payable in respect of a Development
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Facility will be
deferred to the extent necessary to support the Investors'
Preferred Return for the first two years
after the Commencement Date.
"Maximum
Offering Amount" means the total amount of
$24,500,000 in
Gross
Proceeds of the Offering.
"Minimum
Gain" means with
respect to each
non-recourse
liability of the
Fund (including the Fund's share of the non-recourse liabilities of the
Operating Partnerships) and subject to
certain adjustments
pursuant to Income
Tax Reg. ss.1.704-1(b)(4)(iv)(c), the
amount of gain (of whatever character), if
any, that would be realized by the
Fund, if the Fund
disposed of (in a taxable
transaction) any of the assets subject to
such liability in full satisfaction of
the liability. For this purpose, only the portion
of the assets' adjusted basis
allocated to non-recourse liabilities of
the Fund shall be taken into account.
"Minimum
Offering Amount" means
the amount of $2,830,000 in Gross Proceeds
of the Offering.
"Net Cash Flow"
means, with respect to
any fiscal period, the
excess, if
any, of (i) all cash funds derived from the operations of the Fund during
such
period, including the yield from the Interim Investments and excess cash
reserves deemed distributable by the General
Partners pursuant to
Section 3.3E
hereof, over (ii) all cash disbursed in the operations of the
Fund during such
period, including cash used to pay, or establish reasonable reserves for,
operating expenses, fees, commissions,
debt service and loan
repayments (except
for repayment of advances under the Cash Flow Deficit Guaranty Agreement),
improvements, repairs, replacements,
contingencies and
anticipated obligations,
except to the extent any such payment is
made out of reserves set aside for such
purpose. Net Cash Flow shall not include amounts distributed or to be
distributed under Section 4.2 hereof.
"Net
Proceeds of the
Offering" means the Gross Proceeds of the Offering
less the Selling Commis- sions, the Due
Diligence Expense Reimbursement Fee, and
the Offering and Organization Expense
Fee.
"Net Proceeds
from a Refinancing"
means the gross
proceeds to the Fund of
any Refinancing, less any amounts deemed
necessary by the General Partners to be
allocated to the establishment of reserves, the payment of any debts and
liabilities of the Fund to creditors
(except for
repayment of the Operating
Deficit Loan and the Deferred Management Fee Loans), and the payment of any
reasonable expenses or costs associated
with the Refinancing,
including but not
limited to, fees, points, or commissions
paid to any unaffiliated Persons.
"Net
Proceeds from a Sale" means the gross proceeds to the Fund of any
Sale, less any amounts deemed necessary by the General Partners
to be allocated
to the establishment of reserves, the payment of any debts and
liabilities of
the Fund to creditors (except for repayment of the
Operating Deficit Loan and
the Deferred Management Fee Loans), and the
payment of any reasonable expenses
or costs associated with the Sale, including but not limited to, fees
or real
estate brokerage commissions paid to any unaffiliated
Persons and, subject
to
Sections 5.2.A(viii) and 9.2.A(vi),
fees or real estate
brokerage
commissions
paid to the General Partners or
Affiliates.
"Net Proceeds of
sale or Refinancing" means the Net Proceeds from a Sale or
Net Proceeds from a Refinancing, as the
case may be.
"Notification"
means a writing, containing the information required by this
Agreement to be communicated to any Person,
sent or delivered to
such Person in
accordance with the provisions of Section
12.3 of this Agreement.
"Nursing Center
Manager" means Meridian Nursing Centers, Inc.
"Offering"means
the offering and sale
of Units for a minimum of $2,830,000
and a maximum of $38,500,000, as more fully
described in the Prospectus.
"Offering
and Organization Expense Fee" means the fee paid to the
Administrative General Partner equal to 4.35% of the Gross Proceeds of the
Offering, payable at such times as the
Investors
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are recognized as such on the books of the
Fund, for services rendered and costs
incurred in connection with the Organization of the Fund and the offering
of
Units.
"Operating
Deficit Loan" means the funds advanced to the Fund by the
Development General Partner under the terms of the
Cash Flow Deficit
Guaranty
Agreement.
"Operating
Partnerships" means the limited partnerships, each of which
will
own and operate a Facility.
"Operating
Partnership
Interest" means the
98.99% partnership interest of
the Fund in an Operating Partnership.
"Partner" means
any General Partner or Limited Partner.
"Partnership
Interest Options" means those agreements pursuant to which the
Fund will acquire, subject to raising sufficient proceeds of this Offering,
Operating Partnership Interests in respect
of Facility I and Facility II.
"Person" means
any individual or Entity.
"Preferred
Return" means the cumulative, non-compounded annual return
equal
to 10. 125% of the Adjusted Capital Balance of each Investor
commencing on the
earlier of (i) the final closing for the
sale of Units or (ii) June 30, 1988. At
the time of a Sale or Refinancing,
if any portion of the
Preferred Return of an
Investor has not been paid from Net Cash
Flow, such unpaid portion will be added
to the Investor's priority distribution from the Net Proceeds of Sale or
Refinancing, all as more fully set forth in
Article IV.
"Profit" or
"Loss" means, for each
fiscal year or other period, an amount
equal to the Fund's taxable income or loss for such year or
period, with the
following adjustments:
(i) Any income
of the Fund that is exempt from federal income tax shall be
added to such taxable income or loss;
(ii) Any
expenditures of the Fund described in Section 705(a)(2)(B) of the
Code, or treated as Section 705(a)(2)(B) of the Code
expenditures
pursuant to
Income Tax Reg. ss.1.704-1(b)(2)(iv)(i),
shall be subtracted
from such taxable
income or loss; and
(iii) In lieu of
the depreciation,
amortization
and other cost
recovery
deductions taken into account in computing such taxable income or loss, an
amount equal to the depreciation,
amortization, or other cost recovery deduction
allowable with respect to an asset for such year
or other period for
federal
income tax purposes shall be taken into
account, except that
if the fair market
value on the date that the asset is
contributed to the
Fund (or if the basis of
such asset for book purposes is adjusted
under the Income Tax Regulations, such
adjusted book basis) differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, the depreciation,
amortization and other cost recovery deductions taken into account shall be
equal to an amount which bears the same ratio to such
beginning fair market
value (or adjusted book basis) as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis.
Except as otherwise provided herein,
each item of income, gain, loss, deduction, preference or recapture
entering
into the computation of Profit or Loss hereunder shall be allocated to each
Partner in the same proportion as Profit
and Loss are allocated.
"Prospectus"
means the Fund's
Prospectus
contained in the Registration
Statement filed on Form S-1 with the
Securities and Exchange Commission for the
registration of the Units under the
Securities Act of 1933, in the final form in
which it is filed with the Securities and
Exchange Commission
and as thereafter
supplemented pursuant to Rule 424 under the Securities Act of 1933. Any
reference herein to "date of the Prospectus" shall be deemed to refer to
the
date of the Prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act of 1933.
"Purchase
Money Financing" means a purchase money note or other form of
installment sale obligation received by the
Fund pursuant to a Sale.
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"Refinancing"
means the replacement, increase, consolidation, modification,
extension of all or any component of any
loan, debt, obligation
or financing of
the Fund or any Operating Partnership.
"Sale"
means any transaction entered into by the Fund or an
Operating
Partnership resulting in the receipt of cash
or other consideration (other than
the receipt of Capital Contributions) not in the ordinary course of its
business, including, without limitation, sales or exchanges or other
dispositions of Facilities, Operating
Partnership Interests and real or personal
property of the Fund, condemnations, recoveries of damage awards and
insurance
proceeds (other than business or rental
interruption insurance
proceeds),
but
excepting any borrowing, mortgage
financings or Refinancings.
"Schedule" means
Schedule A annexed hereto as amended from time to time and
as so amended at the time of reference
thereto.
"Selling Agent"
means Alex. Brown Realty Securities, Inc., an Affiliate of
the Administrative General Partner, which
will offer the Units on a best efforts
basis pursuant to the Selling Agent
Agreement.
"Selling Agent
Agreement" means that
certain agreement to
be entered into
by the Fund, Alex. Brown Realty
Securities,
Inc., the Administrative General
Partner, and the Development General Partner, pursuant to which Alex.
Brown
Realty Securities, Inc. will offer and sell
the Units on a best efforts basis.
"Selling
Commissions"
means the maximum
total (or any portion thereof) of
7.0% of the Gross Proceeds of the Offering
paid to the Selling
Agent or other
soliciting dealers for their efforts in offering the Units. The 7.0% maximum
Selling Commissions will be reduced for volume purchases and purchases by
certain Affiliates as specified in the
Prospectus.
"Sponsor"
means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Fund or
who will manage or participate in the
management of the Fund, and any Affiliate of such Person,
but does not
include
(a) any Person whose only relationship with the Fund or the General
Partner is
that of an independent property manager if such person's
only compensation from
the Fund is in the form of fees for the performance of property management
services, or (b) wholly- independent third parties such as attorneys,
accountants and broker-dealers whose only compensation from the Fund is for
professional services rendered in
connection with the Offering or the operations
of the Fund.
"Subordinated
Limited Partner" means any Person who is
designated
as a
Subordinated Limited Partner on the books
and records of the Fund.
"Substitute
Limited Partner" means
any Investor who has elected to convert
from an Investor to a Limited Partner
pursuant to Section 7.5 of this Agreement.
"Successor
General Partner" means any Person who is admitted as a
Successor
General Partner to the Fund under the
provisions of Article VI after the date of
this Agreement.
"Tax Matters
Partner" means the
Administrative General
Partner designated
in Section 5.1 as the tax matters partner,
as defined in Section
6231(a)(7) of
the Code.
"Termination
Date of the Offering"
means the date upon
which the Offering
will terminate, which, if not sooner
terminated by the General Partners, will be
one year from the date of the
Prospectus.
"Unit"
means (i) an
Assignee Unit representing the assignment by the
Assignor Limited Partner of one Assigned
Limited Partnership Interest, and (ii)
the Partnership Interest attributable to
one Unit of any Investor who has become
a Substitute Limited Partner pursuant to
Section 7.5 hereof.
"U.S.
Person" means a Person who is (i) an individual who is either a
United States citizen or a resident of the
United States for federal income tax
purposes, (ii) a corporation, partnership, or other legal entity created or
organized in or under the laws of the
United States or any political subdivision
thereof, (iii) a corporation that is not created or organized
in or under the
laws of the United States or any political subdivision thereof but which has
made an election under Section 897(i) of
the Code to
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<PAGE>
be treated as a
domestic corporation for certain purposes of federal income
taxation, or (iv) an estate or trust
whose income from sources without the
United States is includable in its gross
income for federal
income tax purposes
regardless of its connection with a trade or business
carried on in the
United
States.
"Working
Capital Reserves" means, initially, the portion of the Net
Proceeds of the Offering set aside as working capital reserves pursuant to
Section 3.3E, as increased or decreased
from time to time at
the discretion of
the General Partners.
ARTICLE II
NAME; PURPOSE; TERM AND CERTIFICATE
Section 2.1 Name; Formation
The Partners
hereby form the
limited partnership to
be known as "Meridian
Healthcare Growth and Income Fund Limited
Partnership",
and such name shall
be
used at all times in connection with the
Fund's business and affairs; provided,
however, that the Fund may use trade names
in its business operations. The Fund
shall be governed by the Act.
Section 2.2 Place of Registered Office
The address of
the registered
office in the State of
Delaware of the Fund
is Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801; the
name of the registered agent for service of process on
the Fund in the State of
Delaware at that address is The Corporation
Trust Company. The
Fund's principal
place of business is 555 Fairmount Avenue,
Suite 301, Towson, Maryland 21204, or
such other place(s) as the General Partners may hereafter determine.
Notification of any change in the location of the principal office shall be
given to the Partners and Investors on or
before the date of any such change.
Section 2.3 Purpose
The purpose of
the Fund is to acquire, own, develop, maintain, finance,
encumber, operate as a business, lease,
sell, dispose of and otherwise deal with
the Operating Partnership Interests, and to
do all things necessary, convenient
or incidental to the achievement of the
foregoing.
Section 2.4 Term
The Fund shall
continue until December 31, 2037, unless the Fund is sooner
dissolved in accordance with the provisions
of this Agreement.
Section 2.5 Recording of Certificate
The General
Partners shall take
all necessary action
to maintain the Fund
in good standing as a limited partnership under the Act, including, without
limitation, the filing of the Certificate and such amendments and further
certificates as may be necessary under the
Act and necessary to qualify the Fund
to do business in such states as the Fund
owns property.
The General
Partners
shall not be required to send a copy of the Fund's
filed Certificate to each
Partner and Investor.
ARTICLE III
PARTNERS; CAPITAL
Section 3.1 General Partners; Assignor
Limited Partner;
Subordinated Limited Partners
The name,
address and Capital
Contribution of each
General Partner,
the
Assignor Limited Partner and the
Subordinated Limited
Partners are set forth on
the Schedule. Upon the dissolution and termination of the Fund, each
General
Partner, within 90 days after the fiscal
year in which the
dissolution of the
Fund occurs, shall make a Capital
Contribution to the Fund in an amount equal to
the lesser of (i) the deficit balance, if any, in its Capital
Account or (ii)
its proportionate share of the
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<PAGE>
excess of 1.01 %
of the Capital
Contributions of the Investors and Limited
Partners (excluding capital contributions of the Assignor Limited Partner
on
behalf of Investors) over the Capital
Contributions
previously
contributed by
the General Partners.
Section 3.2 Investors
A. The General
Partners are
authorized to accept orders for Units pursuant
to the Offering. All orders for Units shall
be held in trust and deposited in an
escrow account with the Escrow Agent. Orders for Units shall be accepted or
rejected by the General Partners within 30 days after their receipt by the
Escrow Agent.
B. Upon the
receipt by the Escrow
Agent of orders for an
amount equal to
the Minimum Offering Amount, the Escrow Agent shall
release the funds in
the
escrow account to the Assignor Limited
Partner which shall immediately transmit
such funds to the Fund. Subsequent orders for Units that are
accepted by the
General Partners shall be released from
the escrow account and
transmitted to
the Fund or returned to subscribers in accordance with the Prospectus. Upon
release of an Investor's funds from the escrow account to
the Fund, an Assigned
Limited Partnership Interest shall be credited to the
Assignor Limited Partner
on the books and records of the Fund in
respect of such Unit
and the Assignor
Limited Partner shall assign all of its rights
with respect to such
Assigned
Limited Partnership Interest to the Investor to the
extent permitted by, and in
accordance with, the Agreement and applicable
law. The Assignor Limited Partner
hereby agrees to exercise any and all rights with respect to such Assigned
Limited Partnership Interest as directed by the
Investor. At such
times as the
General Partners deem practicable and as required by the Act, the
Certificate
and this Agreement shall be amended to reflect the
ownership by the Assignor
Limited Partner of Assigned Limited
Partnership Interests
in the amount of such
purchased Units.
C. Any interest
earned on moneys paid
by Investors during
the period such
moneys are held in escrow by the Escrow Agent shall be paid to the Fund
following the release of orders and shall be
distributed
in accordance with
Section 4.5A hereof. Persons whose orders for Units are
rejected by the General
Partners shall be returned their moneys
(and interest earned
thereon) within10
days after such rejection.
D. No order for
Units sold as part of the Offering shall be accepted after
the Termination Date of the Offering. If the General Partners do not accept
orders totalling an amount equal to the
Minimum Offering Amount on or before the
Termination Date of the Offering, the Escrow Agent shall
promptly return all
moneys deposited by subscribers together with any interest earned on such
moneys.
E. For purposes
of this Agreement,
an Investor who
acquires Units in
the
Offering shall be recognized as an Investor with respect to
such Units on the
date that the General Partners accept the
order for such Units.
Section 3.3 Partnership Capital
A. Each
Partner's and Investor's Capital Contribution shall be paid in
cash
on or prior to the date of such
Partner's admission to the Fund or the date
of
the recognition of the Investor on the
books and records of the Fund.
B. Except to the extent of any
interest income earned on an Investor's
Capital Contribution while it is held in escrow, and
later distributed to such
Investor pursuant to Section 4.5A, no
Partner or Investor shall be paid interest
on any Capital Contribution.
C. Except as
otherwise provided in
this Agreement, no
Partner or Investor
shall have the right to withdraw, or receive any return of, his Capital
Contribution prior to December 31,
2037.
D. Under
circumstances
requiring a return of any Capital Contribution, no
Partner shall have the right to receive
property other than cash.
E. The Fund shall initially set aside Working Capital Reserves for
contingencies related to ownership of the
Operating Partnership Interests in an
amount equal to at least 3.0% of the Gross
Proceeds of the
Offering;
provided,
however, that if only the Minimum Offering
Amount is received
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<PAGE>
by the Fund,
Working Capital
Reserves shall be
approximately 1.5% of
the
Gross Proceeds of the Offering.
If in any fiscal
quarter, the General
Partners
determine that the Working Capital Reserves of the Fund are in excess
of the
amount deemed sufficient in connection with the ownership of the Operating
Partnership Interests and that such Working
Capital Reserves may be reduced, the
amount of such reduction may be distributed to the Partners and
Investors as a
portion of the Fund's Net Cash Flow.
If in any fiscal quarter, the General
Partners determine that the Working Capital Reserves are insufficient in
connection with the Fund's operations and that such Working
Capital Reserves
shall be increased, the amount of such
increase shall reduce Net Cash Flow. Upon
the Sale or disposition of a Facility or Operating Partnership, any Working
Capital Reserves maintained for such Facility or
Operating Partnership
may be
distributed, in the General Partners'
discretion, to
Partners and Investors or
applied as Working Capital Reserves for
other Facilities.
Section 3.4 Liability of Partners and
Investors
A. Except as
provided in the Act, the Limited Partners and Investors shall
be liable only to pay their Capital Contributions and no Limited Partner or
Investor will be personally liable for the debts, liabilities, contracts, or
other obligations of the Fund. In
accordance with Section 17-608 of the Act, (i)
if a Limited Partner or an Investor
has received the
return of any part of his
Capital Contribution in violation of the Agreement or the Act, he shall be
liable to the Fund for a period of six
years thereafter
for the amount of the
Capital Contribution wrongfully returned, (ii) if without violating this
Agreement or the Act, a Limited Partner or
an Investor receives a
return of any
part of his Capital Contribution, then he shall be liable to the Fund for a
period of one year thereafter for the
amount of the returned
contribution, but
only to the extent necessary to discharge
liabilities to
creditors who extended
credit to the Fund during the period the Capital
Contribution
was held by the
Fund and (iii) a Limited Partner or Investor receives a return of his
Capital
Contribution to the extent that a distribution
to him reduces his
share of the
fair market value of the net assets of the
Fund below the agreed
value of his
Capital Contribution that has not been
distributed to him.
B. Except as set
forth in 3.4A, no
Limited Partner or
Investor shall be
required to lend any funds to the Fund or,
after his Capital
Contribution
has
been fully paid, to make any further
capital contribution to the Fund, nor shall
any Limited Partner or Investor be liable for
or have any obligation to restore
any negative balance in his Capital
Account.
C. Subject to
the provisions of Sections 3.1 and 5.9 of this Agreement,
no
General Partner shall have any personal liability for the repayment of the
Capital Contribution or the Preferred
Return of any Limited Partner or Investor
or be required to repay to the Fund all or
any portion of any
negative balance
of the Capital Accounts of the Limited
Partners or the Investors.
D. The funds
advanced by the
Development
General Partner under the Cash
Flow Deficit Guaranty Agreement shall not constitute a
Capital Contribution
of
the Development General Partner or be credited to the
Capital Account of
the
Development General Partner.
ARTICLE IV
ALLOCATIONS, DISTRIBUTIONS AND APPLICABLE RULES
Section 4.1 Allocation of Profit or Loss
from a Sale
A. Profit from any Sale (and Profit from any deemed Sale pursuant to
Sections 4.4 or 4.5) shall be allocated in
the following order of priority:
(i) First,
if one or more
Partners or Investors has a negative balance in
his Capital Account, to such Partners and Investors, in proportion to their
negative Capital Accounts, until all such
Capital Accounts have zero balances.
(ii) Second,
any Profit not
allocated pursuant to Section 4.IA(i) shall be
allocated to the Investors until the Capital Account of each Investor is
equal
to the sum of his Adjusted Capital Balance
plus his unpaid Preferred Return, if
any.
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<PAGE>
(iii)
Third, any remaining Profit shall be allocated 80.816% to the
Investors, 14.143% to the Development General Partner, 4.041% to Realty
Associates 1988 Limited Partnership,
.5% to the Development
General Partner and
.5% to the Administrative General Partner. B. Loss from any
Sale (and Loss from
any deemed Sale pursuant to Sections 4.4 and 4.5) shall be allocated in the
following order of priority:
(i) First,
if one or more
Partners or
Investors has a positive Capital
Account, to such Partners or Investors,
in proportion to their
positive Capital
Accounts, until all such positive Capital
Accounts have zero balances.
(ii) Any
remaining Loss shall be allocated as follows: 80.816% to the
Investors, 14.143% to the Development General Partner, 4.041% to Realty
Associates 1988 Limited Partnership,
.5% to the Development
General Partner and
.5% to the Administrative General
Partner.
Section 4.2 Distribution of Net Proceeds of
Sale or Refinancing
A. Upon a
Refinancing
and upon a Sale that
does not constitute a
Sale of
all or substantially all of the Facilities
or Operating
Partnership
Interests,
Net Proceeds from a Refinancing or Net
Proceeds from a Sale, as the case may be,
shall be distributed, credited and applied
in the following order of priority:
(i) First,
to the Investors until each Investor has received an amount
equal to his unpaid Preferred Return, if any, and then his Adjusted Capital
Balance.
(ii)
Second, to repay accrued and unpaid interest under the Cash Flow
Deficit Guaranty Agreement and the Deferred
Management Fee Loans.
(iii) Third, to
repay any outstanding principal under the Cash Flow Deficit
Guaranty Agreement and the Deferred
Management Fee Loans.
(iv) Fourth,
any remaining Net Proceeds of Sale or
Refinancing
shall be
distributed 80.816% to the Investors
14.143% to the Development General Partner,
4.041% to Realty Associates 1988 Limited Partnership, .5% to the Development
General Partner and .5% to the
Administrative General
Partner. B. Upon the Sale
of all or substantially all of the Facilities or Operating Partnership
Interests, Net Proceeds from such Sale, if
any, shall be distributed, credited
and applied in the following order of
priority:
(i) First, to
repay accrued and unpaid interest under the Cash Flow Deficit
Guaranty Agreement and the Deferred
Management Fee Loans.
(ii) Second, to
repay any outstanding principal under the Cash Flow Deficit
Guaranty Agreement and the Deferred
Management Fee Loans.
(iii) Third,
to the Partners and
Investors, in
proportion to their
positive Capital Accounts, after the allocation of Profit and Loss
pursuant
to Sections 4.lA and 4.1B, until all such
Capital Accounts have been reduced to
zero.
Section 4.3
Distribution of Net Cash Flow and Allocation of Profit and Loss
from Operations A. Net Cash Flow, if any,
for each year shall be distributed and
applied by the Fund in the following order
of priority:
(i) First,
99% to the Investors,
.5% to the Development
General Partner,
and .5% to the Administrative General Partner, until each
Investor has received
an amount equal to his unpaid Preferred
Return.
(ii) Second,
to repay any accrued
but unpaid interest
under the Cash Flow
Deficit Guaranty Agreement and the Deferred
Management Fee Loans.
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<PAGE>
(iii) Third, to
repay any outstanding principal under the Cash Flow Deficit
Guaranty Agreement (but, only (i) if less
than four years have elapsed since the
Commencement Date, the Development Facilities are at least 95%
occupied and at
least 27% of the income therefrom is from private pay
sources, or (ii) if
four
or more years have elapsed since the Commencement Date, the Development
Facilities are at least 90% occupied and at
least 20% of the income therefrom is
from private pay sources, or (iii) if the
Development Facilities
have been sold
by the Fund), and the Deferred Management
Fee Loans.
(iv) Fourth, 99%
to the Investors, .5%
to the Development
General Partner
and .5% to the Administrative General Partner, until each
Investor has received
a non-compounded, non-cumulative return for the current year equal
to 12.5% of
his Adjusted Capital Balance.
(v) Fifth,
90.918% to the
Investors,
8.582% to the
Development
General
Partner and.5% to the Administrative General Partner. To the extent feasible,
the General Partners will endeavor to distribute any Net Cash Flow on a
quarterly basis.
B. Profit from
ordinary operations
for each fiscal year shall be allocated
as follows:
(i) First,
to the Partners and
Investors who have received a distribution
of Net Cash Flow during such fiscal year, an amount of Profit from
ordinary
operations equal to the amount of such Net Cash
Flow, in proportion to the
amount of such distribution received by
each of them.
(ii) Second, if
there has been no distribution of Net Cash Flow during such
fiscal year, or to the extent that the Profit
from ordinary
operations
is in
excess of the Net Cash Flow during such fiscal year, Profit from ordinary
operations shall be allocated 99% to the Investors, .5% to the Development
General Partner and .5% to the
Administrative
General Partner. C. Loss from
ordinary operations for each fiscal year shall be allocated 99% to the
Investors, .5% to the Development General
Partner and .5% to the Administrative
General Partner.
Section 4.4 Liquidation or Dissolution
A. If the Fund
is liquidated
or dissolved, the net proceeds from such
liquidation, as provided in Article VIII, shall be distributed first to
creditors, including Partners who are creditors, to the extent otherwise
permitted by law (whether by payment or by
establishment
of reserves), other
than liabilities for distributions to
Partners and Investors, and any remaining
net proceeds shall be distributed in proportion to the
Capital Accounts of
the
Partners and Investors, determined after the allocations in Sections
4.1 A and
4.1 B, unless applicable law shall otherwise require, in which event the
allocations set forth in Sections 4.1A and
4.1B shall be modified to the extent
necessary, but only to the extent
necessary, to comply with such applicable law.
B. All
distributions under this Section 4.4 shall be made by the end of
the
taxable year of liquidation of the Fund or, within 90 days of the date of
liquidation, whichever is later.
Section 4.5 General and Special Rules
A. Except as otherwise provided herein, the timing and amount of all
distributions shall be determined by the
General Partners. No Partner shall have
the right to demand and receive any
distribution
of property
other than cash.
Notwithstanding any other provision of this Agreement, the General Partners
shall have authority to make the following distributions to certain of the
Investors: First, if the Fund has realized a savings on Selling Commissions
payable by the Fund with respect to the purchase of Units (as more fully set
forth in the Prospectus), the General
Partners shall make a distribution to such
Investor equal to the amount of such
savings realized by
the Fund. Second,
if
any interest is earned on an Investors
Capital Contribution
while it is held in
escrow pending recognition as an Investor
under Article VII, such interest shall
be paid by the Fund to such Investor and Profit attributable to such interest
shall be allocated in the same manner.
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<PAGE>
B. Subject to all of the special
rules of this
Section 4.5, if any Fund
Property is distributed to the Partners in
kind, such Fund
Property first shall
be valued on the basis of the fair market
value thereof to
determine the Profit
or Loss that would have resulted if such
Fund Property had been
sold, and then
such Profit or Loss shall be allocated as provided in Section 4.lA and
Section
4.1B, and shall be properly credited or charged to the Capital Accounts in
accordance with Income Tax Reg. ss.1.704- l(b)(2)(iv)(e) or any successor
provision thereto. Any Partner entitled to any interest in such assets shall
receive such interest as a tenant-in-common
with all other Partners so entitled.
The fair market value of such assets shall be determined by an independent
appraiser who shall be selected by the
General Partners.
C. Notwithstanding Sections 4.1 and 4.3 hereof,
if an allocation of
Loss
(or item thereof) to an Investor or Partner would cause or increase a
deficit
balance in his or its Capital Account in excess of: (i) in the case of an
Investor or Partner other than a General
Partner, his proportionate share of
Minimum Gain, or (ii) in the case of a
General Partner,
the sum of the
amount
which it is obligated to restore to the
Fund pursuant to
Section 3.1 hereof and
its proportionate share of Minimum Gain (in each case, such excess being
referred to hereafter as the "Excess
Deficit Balance"), then the allocation
shall not be made to such Investor or
Partner. Instead, such
Loss (or deduction
or item thereof) shall be allocated
first to the Partners
and Investors
having
positive Capital Accounts, in proportion to such positive
Capital Accounts,
until all such positive Capital Accounts have been reduced to zero,
and any
additional Loss (or deduction or item
thereof) shall be allocated to the General
Partners in accordance with their interests in the Fund.
For purposes of making
the determination set forth above, each Investor's and each Partner's
Capital
Account balance shall be reduced by reasonably expected allocations or
adjustments of loss (or item thereof)
including Loss from a Sale under Income
Tax Reg. ss.ss.1.704-l(b)(2)(ii)(a)(4)
and (5), and by reasonably expected
distributions to the extent not offset by
reasonably expected
Capital Account
increases ("Account Reduction Items").
For purposes of
calculating
reasonably
expected Capital Account increases, the value of the Fund's
assets shall be
presumed to be equal to their adjusted
basis for federal income tax purposes.
D. Notwithstanding Sections 4.1 and 4.3 hereof, in
accordance with Income
Tax Reg. ss.ss.1.704- 1(b)(2)(ii)(d) and 1.704-1(b)(4)(iv)(e), (i) if, in any
fiscal year of the Fund, an Account Reduction Item unexpectedly causes or
increases an Investor's or Partner's Excess
Deficit Balance, or (ii) if there is
a net decrease in Minimum Gain during a taxable year, then all Investors or
Partners with an Excess Deficit Balance at the end of such year shall be
specially allocated Profit and, to the extent necessary, gross income (as
defined in Section 61 of the Code) to the extent of such Excess Deficit
Balances, in proportion to the Excess Deficit Balance of each Investor or
Partner. Any remaining Profit or Loss, after adjustment has been made for
allocation of income or gain pursuant to this Section 4.5D,
shall be allocated
in accordance with Sections 4.1 and 4.3 hereof.
The General
Partners shall be
authorized to interpret and apply this Section 4.5D so as to satisfy the
requirements of Income Tax Reg.ss.ss.1.704-
l(b)(2)(ii)(d) and
1.704-1(b)(4)(iv)(e) and any successor
provisions.
E. Any special
allocations
of Profit,
Loss or gross income
under Section
4.5D shall be taken into account in
computing subsequent
allocations of
Profit
or Loss, so that to the extent possible,
the aggregate amounts of Profit or Loss
allocated to each Partner or Investor will be equal to the aggregate amounts
that would have been allocated to them in
the absence of the unexpected Account
Reduction Items.
F. For each
fiscal year, all Profit and Loss allocated pursuant to Section
4.3 hereof to the Investors shall be allocated among the Persons that are
recognized as Investors during such year by determining the Profit and Loss
attributable to each month during such year
and by allocating the amount of such
Profit and Loss among Persons who are recognized as Investors on the books of
the Fund on the first business day of such month. The Profit or Loss
attributable to each month of the fiscal year
shall be determined
by dividing
the Profit or Loss for such year by the
number of days in such
year, and then
multiplying such per diem amount by the
number of days in each month.
G. All Net Cash
Flow distributable
to the Investors
attributable to
each
month of a fiscal quarter, if any, pursuant to Section 4.3 hereof, shall be
distributed among the Persons recognized as Investors on the
books of the Fund
on the first business day of such month
during the fiscal quarter. The Net
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<PAGE>
Cash
Flow attributable to each month of the fiscal quarter shall be
determined by dividing the amount of Net Cash Flow for such
quarter by the
number of days in the quarter, and then multiplying such per diem
amount by the
number of days in each month.
H. Notwithstanding Sections 4.5F and 4.5G, the Fund shall adopt the
"interim closing of the books" method of allocating Fund Profit and Loss, in
accordance with a "semi-monthly
convention", among
persons who become Investors
pursuant to a closing of the sale of the
Units on or before the Termination Date
of the Offering. Accordingly, if there is more than one closing
of the sale of
the Units, Investors who are recognized on the books of the
Fund (i) prior to
the sixteenth day of a calendar
month, shall be treated as an Investor on
the
books of the Fund on the first business day of the month of recognition, and
(ii) on or after the sixteenth day of a calendar month shall be treated as an
Investor on the books of the Fund on the
first day of the month
following the
month of recognition.
I. Except as
provided in Section 4.5M, for each taxable year, all Profit or
Loss allocated pursuant to Section 4.1 hereof and
all Net Proceeds of
Sale or
Refinancing, allocable or distributable with respect to any Unit which is
transferred during a taxable year of the Fund, shall be allocated or
distributed, as the case may be, to the Persons
recognized (in
accordance with
Section 7.4 hereof) as Investors as of the
first business day of
the month that
includes the date on which the Sale or
Refinancing occurs;
provided, however,
that all such Profit or Loss which is
attributable to, and all Net Proceeds from
a Sale which represent, Net Proceeds from a Sale received by the Fund as a
result of an installment or other deferred Sale, shall be allocated or
distributed, as the case may be, to the Persons
recognized (in
accordance with
Section 7.4 hereof) as Investors as of the
first business day of
the month that
includes the date on which the deferred Net
Proceeds from a Sale are received by
the Fund, and the allocable cash basis items shall be
allocated as required
under Section 706(d) of the Code and the
Income Tax Regulations thereunder.
J. In the event
that any Investor fails to furnish to the General Partners
evidence, in form and substance satisfactory to the General Partners,
establishing that the General Partners have no
obligation under Section 1445 of
the Code with respect to such Investor to
withhold and pay over an amount to the
Internal Revenue Service, the General Partners may, in their
sole discretion,
withhold with respect to such Investor the amount they would be required to
withhold pursuant to Section 1445 of the
Code if such Investor
were not a U.S.
Person, and any amount so withheld shall be treated as a distribution under
Sections 4.2 or 4.3 of this Agreement,
as the case may be,
and shall reduce the
amount otherwise distributable to such
Investor thereunder.
Alternatively, the
General Partners may at their option loan the Investor an amount
equal to the
tax to be withheld (at an interest
rate equal to the
Escrow Agent's
announced
"prime rate" plus two percentage points), such loan to be repaid by
retaining
such investor's distributions.
K.
Nowithstanding anything to the contrary that may be expressed or
implied
in this Agreement, if at any time the allocation
provisions of this
Article IV
do not result in the allocation to the General Partners of an aggregate of at
least 1% of the Profit or Loss being
allocated,
the General Partners in the
aggregate, shall be allocated 1%
thereof.
L. It is the
intent of the General Partners that each Investor's and
Partner's distributive share of Profit and Loss shall be determined and
allocated in accordance with this Article
IV to the fullest extent permitted by
Sections 704(b
