HomeMy WebLinkAboutCertificate of ConversionCERTIFICATE OF CONVERSION
The undersigned, as Secretary of State of Texas, hereby certifies that the attached
Articles of Conversion of
B.A. CATHEY, L.L.C.
Texas limited liability company
converting to
B.A. CATHEY, LTD.
A Texas limited partnership
have been received in this office and found to conform to law. ACCORDINGLY,
the undersigned, as Secretary of State, and by virtue of the authority vested in the
Secretary by law, hereby issues this Certificate of Conversion.
Filed: April 2, 2001
Effective: April 6, 2001@10:00am
Cuellar
Secretary of State
9LED
fn 'kho Officas tar the
Sporeta£H of State of Texae
ARTIC CONVERSION APR o 2 ZOM
Pursuant to the provision of Article 10.09 of the Texas Limited Liabilityl% RKf ac CteQR
Section 2.15 of the Texas Revised Limited Partnership Act, the undersigned converting entity
certifies the following Articles of Conversion adopted for the purpose of effecting a conversion in
accordance with the provisions of the Texas Limited Liability Company Act and the Texas Revised
Limited Partnership Act.
1. A plan of conversion was approved and adopted in accordance with the provisions
of Article 10.08 of the Texas Limited Liability Company Act providing for the conversion of B. A.
Cathey, L.L.C., a Texas Limited Liability Company, to B. A. Cathey, LTD., a Texas limited
partnership.
2. An executed plan of conversion is on file at the principal place of business of the
converting entity at 3000 Briarcrest Drive, Suite 602, Bryan, Texas 77805 and, from and after the
conversion, an executed plan of conversion will be on file at the principal place of business of the
converted entity at 3000 Briarcrest Drive, Suite 602, Bryan, Texas 77805.
3. A copy of the plan of conversion will be furnished by the converting entity (prior to
conversion) or by the converted entity (after the conversion) on written request and without cost to
any shareholder, partner or member of the converting entity or the converted entity.
4. The approval of the plan of conversion was duly authorized by all action required by
the laws under which B. A. Cathey, L.L.C. is organized and by its constituent documents.
5. Two copies of the Certificate of Limited Partnership of B. A. Cathey, LTD. which
is to be created pursuant to the plan of conversion are being filed with the Secretary of State with the
Articles of Conversion.
6. The converting entity is subject to Texas franchise tax; and for the purpose of
conversion, the converted entity will be obligated to pay such fees and franchise taxes of the
converting entity if the same are not timely paid.
7. The conversion will become effective on April 6, 2001 , at 10:00 o'clock
a in., in accordance with the provisions of Article 9.03 of the Texas Limited Liability Company
Act.
DATED: �� �- t L. '' l B. A. Cathey, L.L.C.
r
B y
B.A.CATHEY
K \WSSCA'III] YWONVERMON AR I ICLFS OP CONVURMON
Corporations Section
P.O. Box 13697 N` v
Austin, Texas 78711-3697 \�
Office of the Secretary of State
ENTITY:
B.A. CATHEY, LTD.
FILE NUMBER:
148689-10
DOCUMENT FILED:
CERTIFICATE OF LIMITED PARTNERSHIP
FILED: APRIL 2, 2001
EFFECTIVE: APRIL 6, 2001@10:00am
Henry Cuellar
Secretary of State
This letter will acknowledge the receipt and filing of the above referenced document. The
relevant statutory provision does not provide for a certificate of filing for this type of document
and, therefore, this letter may be used as evidence of filing.
Corporations Section
Statutory Filings Division
512-463-5581
Come visit its on the Internet @ http://ivii,N+.sos.state.fx us/
(512) 463-5555 FAX (512) 463-5709 TrY (800) 735-2989
PLAN OF COW
B. HEY, L.L.C.
to
B. A. CATHEY, LTD.
This Plan of Conversion is pursuant to Article 10.08C of the Texas Limited Liability
Company Act.
1. The name of the converting entity is B. A. CATHEY, L.L.C.
2. The name of the converted entity is B. A. CATHEY, LTD.
3. B. A. CATHEY, L.L.C. is continuing its existence in the organizational form of B.
A. CATHEY, LTD.
4. B. A. CATHEY, LTD. is a Texas limited partnership, organized pursuant to the
provisions of the Texas Revised Limited Partnership Act (Article 6132a-1, Vernon's
Texas Civil Statutes).
5. The manner and basis of converting the membership interest or other evidences of
ownership of B. A. CATHEY, L.L.C. into membership interests or other evidences
of ownership or securities of B. A. CATHEY, LTD. or any combination thereof will
be as follows:
(a) BLAKE CATHEY owns 100% of the membership interest of B.
A. CATHEY, L.L.C. which will be converted into (i) 1% general
partner interest in B. A. CATHEY, Ltd., which will be owned by
CATHEY DEVELOPMENT, INC. and (ii) 99% limited partner
interest in B. A. CATHEY, Ltd. which will be owned by BLAKE
CATHEY.
6. The Certificate of Limited Partnership filed with the Secretary of State effective
April 6, 2001 , and the Limited Partnership Agreement executed to be effective
on 6th of Anr; i , 0�, LTD. is attached hereto.
7. The purposes for the conversion are to conply. with the advice of legal counsel and
accountant. A/ 1,
Dated:u�' � Lz�?
BLAKE CATHEY, Memb
v
PLAN OF CONVERSION PAGE I
CERTIFICATE OF LI f PARTNERSHIP
B. LTD
TO THE SECRETARY OF STATE OF THE STATE OF TEXAS:
In accordance with Section 2.01 of the Texas Revised Limited Partnership Act, the
undersigned hereby files this original Certificate of Limited Partnership on behalf of @ and states
as follows:
1. Name. The name of the limited partnership is B. A. Cathey, LTD.
2. Registered Office; Registered Agent. The address of the registered office of the
Partnership is 3000 Briarcrest Drive, Suite 602, Bryan, Texas 77805, and the name of the registered
agent for service of process at such address is William Steven Steele.
3. Principal Office. The address of the principal office of the Partnership in the United
States where records are to be kept is 3000 Briarcrest Drive, Suite 602, Bryan, Texas 77805.
4. General Partner. The name, the business mailing address, and the business street
address of the sole General Partner of the limited partnership is:
Name Mailing Address Street Address
Cathey Development, Inc. Box 9517
College Station, Texas 77842
5. B. A. Cathey, LTD is being formed pursuant to a Plan of Conversion
6. The converting entity is B. A. Cathey, LLC, a Texas limited liability company,
organized on March 15, 1999, whose registered and mailing address is Box 9517, College Station,
Texas, 77842.
CONSENT ICU F
SPECIAL MEE -F'!HE MEMBERS
OF
B. A. CATHEY, L.L.C.
The undersigned, being all of the Members of B. A. CATHEY, L.L.C., hereby CONSENT
TO AND CONFIRM the following as if unanimously approved at a special called meeting of the
Members of B. A. CATHEY, L.L.C., duly called and held:
Approve the conversion of B. A. CATHEY, L.L.C. to a limited partnership.
2. Adopt the Plan of Conversion, including the Certificate of Limited Partnership of B.
A. CATHEY, Ltd. and the Limited Partnership Agreement of B. A. CATHEY, Ltd.,
a copy of which is attached hereto as Exhibit "A."
Adopt the Articles of Conversion, a copy of which is attached hereto as Exhibit "B."
4. Authorize B. A. CATHEY, as the sole member of B. A. CATHEY, L.L.C., to
execute the Articles of Conversion and the Certificate of Limited Partnership of B.
A. CATHEY, Ltd., and file them with the Secretary of State.
Dated: `� Gam' 0 Z
/B. A. CATHEY, Member
K:\WSS\CATHEY\CONVERSION\Consent of Members
LIMITED PARTNE GREEMENT
or
B. A. CATHEY
THIS AGREEMENT OF LIMITED PARTNERSHIP; s made and entered into as of the
day of F, 2001, by and between CATHEY DEVELOPMENT, INC., a Texas
Company, as General Partners (hereinafter referred to as the "General Partner") and Blake Cathey
as a Limited Partner (hereinafter individually referred to as "Limited Partner" and jointly referred to
as "Limited Partners"). The General Partner and the Limited Partners (collectively the "Partners"
and individually a "Partner") hereby form a limited partnership under the laws of the State of Texas
(the "Partnership") and hereby agree to operate the Partnership pursuant to the terms and provisions
hereinafter set forth.
ARTICLE I
THE PARTNERSHIP
1.1 Name. The name of the Partnership shall be B. A. CATHEY, LTD. The General Partner
may change the name of the Partnership upon ten (10) days notice to the Limited Partners.
The business of the Partnership may be conducted under any other name selected by the
General Partner.
1.2 Purpose. The purpose of the Partnership shall be to engage in the following business
activities: purchase, development, sale, service, lease and management of personal and real
properties of all kinds and description, and such other activities as may be agreed upon by
the General Partner and a Majority of the Partners from time to time.
1.3 Principal Place of Business and Statutory Agent. The principal place of business of the
Partnership shall be: 3000 Briarcrest Drive, Suite 602, Bryan, Texas 77805. The General
Partner may change the principal place of business of the Partnership to any other place
within or without the State of Texas upon notice to the Limited Partners. The initial
registered statutory agent for service of process upon the Partnership shall be William Steven
Steele, whose address as of the date of this Agreement is 3000 Briarcrest Drive, Suite 602.
Bryan, Texas 77805.
1.4 Term. The term ofthe Partnership commenced on the formation of the Partnership and shall
continue until 20 years from this date, Unless the Partnership is dissolved earlier as set forth
in this Agrcement.
Pn,c 1
1.5 Section 1.5. Filimzs. A Certificate of Limited Partnership shall be tiled in the Office of the
Secretary of State of Texas in accordance with the provisions of the Texas Revised Limited
Partnership Act (Article 6132a-1, Vernon's Texas Civil Statutes), as amended from time to
time, and any successor to such Act (the "Act"). The General Partner shall take any and all
other actions reasonably necessary to perfect and maintain the status of the partnership as a
Limited Partnership Linder the laws of the State of Texas. The General Partner shall cause
an amended and/or restated Certificate of Limited Partnership to be filed whenever required
by the Act.
1.6 Independent Activities Any of the Partners, whether General or Limited, may engage in
and/or possess an interest in other business ventures of every nature and description,
independently or with others, including but not limited to the ownership, financing, teasing,
operation, management, syndication, brokerage and/or development of real property, and
neither the Partnership nor any of the Partners, General or Limited, shall have any right by
virtue of this Agreement in and to said independent ventures or to the income or profits
derived therefrom. Any of the Partners, whether General or Limited, and any affiliated
person may engage in business transactions of any kind whatsoever with the Partnership,
including real estate transactions in which the Partnership, as seller or buyer, pays such
Partner or affiliated person a real estate commission. Similarly, the fact that a Partner,
whether General or Limited, or a member of the family of a Partner is employed by or is
directly or indirectly interested in or connected with any person, firm, corporation or
partnership employed by the Partnership to render or perform a service or from whom the
Partnership may bury, lease or otherwise acquire any real or personal property or to whom the
Partnership may sell, lease or otherwise convey any real or personal property, shall not
prohibit the General Partner from dealing with such person, firm, corporation or partnership
on behalf of the Partnership; provided, however, that said dealings shall be on terms no less
favorable to the Partnership than those that could be obtained from an unaffiliated party.
Notwithstanding anything in this Section to the contrary, the General Partner recognizes its
fiduciary responsibility to the Partnership and agrees to devote such time and effort to the
Partnership as necessary to manage its affairs properly.
1.7 Definitions - General. Capitalized words and phrases used in this Agreement have the
following meanings:
1.7.1 °Act" means the Texas Revised Limited Partnership Act (Article 6132a-1, Vernon's
Texas Civil Statutes), as amended from time to time, and any successor to such Act.
1.7.2 "Adjusted Capital Account Deficit' means, with respect to any Partner, the deficit
balance, if any, in such Partner's Capital Account as of the end of the relevant fiscal
year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is obligated
to restore pursuant to this Agreement or is deemed to be obligated to restore
IIao, 2
pursuant to Regulations § 1.704-1(b)(2)(ii)(c) or Regulations § 1.704-
I(b)(4)(iv)(f) (and, specifically, the penultimate sentence thereof); and
(b) Debit to such Capital Account the items described in § 1.704-
1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to comply
with the provisions of § 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
1.7.3 "Adjusted vital Contribution" means, as of any day, a Partner's Capital
Contributions adjusted as follows:
(a) Increased by the amount of any Partnership liabilities which, in connection
with distributions pursuant to Section 11.6 hereof, are assumed by such
Partner or are secured by any Partnership Property distributed to such Partner,
and
(b) Reduced by the amount of cash and the Gross Asset Value of any Partnership
Property distributed to such Partner pursuant to Section 11.6 hereof and the
amount of any liabilities of such Partner assumed by the Partnership or which
are secured by any property contributed by such Partner to the Partnership.
In the event any Person transfers all or any portion of his interest in the Partnership
in accordance with the terms of this Agreement, his transferee shall succeed to the
Adjusted Capital Contribution of the transferor to the extent it relates to the
transferred interest.
1.7.4 "Affiliate" means, with respect to any Person, (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person, (ii) any Person
owning or controlling ten percent (10%) or more of the outstanding voting securities
of such Person, (iii) any officer, director or general partner of such Person, or (iv) any
Person who is an officer, director, general partner, trustee or holder of ten percent
(10%) or more of the voting securities of any Person described in clauses (i) through
(iii) of this sentence.
1.7.5 "Agreement" or "Partnership Agreement" means this Limited Partnership Agreement,
as amended from time to time. Words such as "herein", "hereof', "hereto" and
"hereunder" refer to this Agreement as a whole, unless the context otherwise requires.
1.7.6 "Capital Account" means, with respect to any Partner or Holder, the capital account
maintained for such Partner in accordance with the following provisions:
Page 3
(a) To each Partner's capital account there shall be credited such Partner's
Capital Contributions, such Partner's distributive share of Profits and any
items in the nature of income or gain which are specifically allocated
pursuant to Section 3.2 or Section 33 hereof, and the amount of any
Partnership liabilities assumed by such Partner or which are secured by any
Partnership Property distributed to such Partner.
(b) To each Partner's capital account there shall be debited the amount of cash
(not including decreases in such Partner's liabilities pursuant to Code §
752(b)) and the Gross Asset Value of any Partnership Property distributed to
such Partner pursuant to any provision of this Agreement, such Partner's
distributive share of Losses and any items in the nature of expenses or losses
which are specially allocated pursuant to Section 3.2 or Section 3.3 hereof,
and the amount of any liabilities of such Partner assumed by the Partnership
or which are secured by any property contributed by such Partner to the
Partnership.
(c) In the event any interest in the Partnership is transferred in accordance with
the terms of this Agreement, the transferee shall succeed to the capital
account of the transferor to the extent it relates to the transferred interest.
(d) In determining the amount of any liability for purposes of Sections 1.7.3(a),
1.7.3(b), 1.7.6(a) and 1.7.6(b) hereof, there shall be taken into account Code
§ 752(c) and any other applicable provisions of the Code and Regulations.
(e) For purposes of Section 1.7.3 and Section 1.7.6 hereof, liabilities are
considered assumed only to the extent the assuming party is thereby subjected
to personal liability with respect to such obligation, the obligee is aware of
the assumption and can directly enforce the assuming party's obligation, and
as between the assuming party and the party from whom the liability is
assumed, the assuming party is ultimately liable.
The foregoing provision and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations § 1.704-
I(b), and shall be interpreted and applied in a manner consistent with such
Regulations. In the event the General Partner shall determine that it is prudent to
modify the manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which are
secured by contributed or distributed property or which are assumed by the
Partnership or the Partners). are computed in order to comply with such Regulations,
the General Partner may make such modification, provided that it is not likely to have
a material effect on the amounts distributable to any Partner pursuant to Article XI
hereof upon the dissolution of the Partnership. The General Partner also shall (i)
make any adjustments that are necessary or appropriate to maintain equality between
the aggregate Capital Accounts of the Partners and the aggregate amount of
Partnership capital reflected on the Partnership's balance sheet, as computed for book
purposes in accordance with Regulations § 1.704-1(b)(2)(iv)(g), and (ii) make any
appropriate modifications in the event unanticipated events might otherwise cause
this Agreement not to comply with Regulations § 1.704-1(b).
1.7.7 "Capital Contribution" means, with respect to any Partner, the amount of money and
the initial Gross Asset Value of any property (other than money) contributed to the
Partnership with respect to the Partnership interest held by such Partner. The
principal amount of a promissory note which is not readily traded on an established
securities market and which is contributed to the Partnership by the maker of such
note shall not be included in the Capital Contributions of any Person until the
Partnership makes a taxable distribution of such note or until (and to the extent)
principal payments are made on such note, all in accordance with Regulations §
1.704(b)(2)(iv)(d)(2). For purposes of this Section 1.7.7, money contributed to the
Partnership does not include increases in any Partner's share of Partnership liabilities
pursuant to Code § 752(a). "Current Capital Contribution" means, with respect to
any Partner, the amount of money contributed by such a Partner to the Partnership
including the amount of limited special assessments imposed and paid pursuant to
Section 2.4.3 hereof.
1.7.8 "Code" means the Internal Revenue Code of 1986, as amended from time to time (or
any corresponding provisions of succeeding law).
1.7.9 'Depreciation" means, for each fiscal year or other period, an amount equal to the
Depreciation, amortization or other cost recovery deduction allowable with respect
to an asset for such year or other period, except that if the Gross Asset Value of an
asset differs from its adjusted basis for federal income tax purposes at the beginning
of such year or other period, Depreciation shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deductions for such year or other period bears to
such beginning adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deductions for such year is zero,
Depreciation shall be determined with reference to such beginning Gross Asset Value
using any reasonable method selected by the General Partner.
1.7.10 The "Fair Market Value" of an interest in the Partnership or other asset shall be
determined by the Partnership, or, in the case of a determination pursuant to Article
X, by agreement between the Proposed Assignor and the Partnership. Should there
fail to be an agreement as to Fair Market Value, the Proposed Assignor and the
Partnership shall each appoint an appraiser, and the appraisers so appointed shall
attempt to agree upon the Fair Market Value of the interest in the Partnership. if
within sixty (60) days the appraisers so appointed are unable to agree upon the Fair
Market Value of the interest in the Partnership, and the difference is less than ten
Page 5
percent (10%) of the higher (in amount) of the two appraisals, then the Fair Market
Value of the interest in the Partnership shall be the arithmetic average of the two
appraisals. If the difference between the appraisals is ten percent (10%) or more of
the higher (in amount) of the two appraisals, then the two appraisers shall appoint a
third appraiser by agreement (or, if they are unable to agree upon a third appraiser,
they each shall nominate a third appraiser and the third appraiser shall be chosen
from among the two nominees by coin toss or other random method) and the Fair
Market Value of the interest in the Partnership shall be the arithmetic average of the
values determined by the two appraisers whose estimates are closest in value (but
under no circumstances shall Fair Market Value be lower than the lower value
determined by either appraiser appointed by the Partnership or the Proposed
Assignor, or higher than the higher value determined by either appraiser appointed
by the Partnership or the Proposed Assignor).
1.7.11 "General Partner" means any Person who (a) is referred to as such in the first
paragraph of this Agreement or has become a General Partner pursuant to the terms
of this Agreement, and (b) has not ceased to be a General Partner pursuant to the
terms of this Agreement. "General Partners" means all such Persons, subject to
Section 5.3.
1.7.12 "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for
federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner to the
Partnership shall be the gross Fair Market Value of such asset, as determined
by the contributing Partner and the General Partner;
(b) The Gross Asset Value of all Partnership assets shall be adjusted to equal
their respective gross Fair Market Values, as determined by the General
Partner, as of the following times: (i) the acquisition of an additional interest
in the Partnership (other than pursuant to Article II hereof) by any new or
existing Partner in exchange for more than a de minimis Capital Contribution;
(ii) the distribution by the Partnership to a Partner of more than a de minimis
amount of Partnership Property as consideration for an interest in the
Partnership if the General Partner shall reasonably determine that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (iii) the liquidation of the
Partnership within the meaning of Regulations § 1.704- 1 (b)(2)(ii)(g);
(c) The Gross Asset Value of any Partnership asset distributed to any Partner
shall be the gross Fair Market Value of such asset on the date of distribution,
as determined by the distributee Partner and the General Partner; and
P"Le 6
(d) The Gross Asset Value of Partnership assets shall be increased (or decreased)
to reflect any adjustments to the adjusted basis of such assets pursuant to
Code § 734(b) or Code § 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant to
Regulations § 1.704-1(b)(2)(iv)(m) and Section 3.2.5 hereof; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
Section 1.7.11(d) to the extent the General Partner shall determine that an
adjustment pursuant to Section 1.7.12(b) is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
Pursuant to this Section 1.7.12(d). The determination of the Gross Asset
Value of an asset shall take into account the premium or discount, if any, of
the liabilities associated with such asset. If the Gross Asset Value of an asset
has been determined or adjusted pursuant to Section 1.7.12(a), 1.7.12(b) or
1.7.12(d) hereof, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Profits and Losses.
1.7.13 "Limited Partner" means any Person who has been admitted as a Limited Partner or
a Substituted Limited Partner pursuant to the terms of this Agreement. "Limited
Partners" means all such Persons.
1.7.14 "Net Cash From Operations" means for each fiscal year or other period, the revenues
(which do not include refundable deposits or unearned rent) of the Partnership
received in cash during such fiscal period, and other funds not needed for the
Partnership's business, including Capital Contributions, less the sum of (i) operating
expenses of the Partnership paid in cash during such period and a reasonable reserve
for operating expenses in succeeding periods, (ii) the aggregate of all cash payments
during such period with respect to any payments of interest and principal on
Partnership secured indebtedness including loans incurred to purchase the Property,
(iii) reasonable reserves for replacement or preservation, during the current or any
future year, of any Partnership asset, or any part thereof, and (iv) the amount paid on
account of any loans made to the Partnership by the General Partner (interest on
which shall be at the rate of one percent (1%) per annum over the then prevailing
prime rate of the Wall Street Journal, but in no event to exceed the maximum legal
rate (the "Loan Rate"), or of other obligations to the General Partner or its Affiliates.
1.7.15 "Net Proceeds" means (a) in the case of a refinancing of all or a portion of the
Property, the net cash proceeds from such refinancing (net of the costs in connection
therewith, including repayment of existing loans) less the sum of (i) amounts payable
to the General Partner or its Affiliates in satisfaction of principal and interest, if any,
with respect to loans made to the Partnership, and (it) reserves required to meet other
estimated obligations of the Partnership; or (b) in the case of a sale, foreclosure,
abandomncnt, condemnation (other than a temporary taking), long-term lease or other
disposition ofall or a portion of the Property, the net cast) proceeds to the Partnership
Page 7
from any claim, loss, expense, liability, action or damage resulting from or rclating to any
such act or omission, including without limitation reasonable fees and expenses ofattorneys
engaged by it in defense of such act or omission and other reasonable costs and expenses of
litigation and appeal.
5.4 Assignment. The General Partner shall have the right to assign all or any portion of its
interest in Net Cash from Operations or Net Proceeds to third parties. No third party
receiving an assignment of a General Partner's interest (or a portion thereof) in Net Proceeds
shall be deemed a substitute General Partner, nor shall such third party acquire any other
rights appertaining to a General Partner under this Agreement except the right to receive such
General Partners distributive share (or a portion thereof) of Net Cash from Operations or
Net Proceeds provided under the terms of the assignment.
ARTICLE VI
LIABILITIES AND RIGHTS OF THE LIMITED PARTNERS
6.1 Limited Liability. Based on the Act, a Limited Partner, unless he is deemed to be taking part
in the control of the business, shall not be bound by, or be personally liable for, the expenses,
liabilities or obligations of the Partnership or the General Partner, and his liability shall be
limited solely to the amount of his contributions to the Partnership (including those pursuant
to Article II hereof), whether or not returned to him, together with the undistributed share of
the Profits of the Partnership from time to time credited to his Capital Account and any
money or other property paid or conveyed to him or as a return of any part of his Capital
Contribution or wrongfully paid or conveyed to him on account of his Capital Contribution,
including but not limited to money or property to which creditors were legally entitled, and,
to the extent provided by law, interest on such accounts.
6.2 No Role in Management. A Limited Partner shall take no active part in the management,
conduct or control of the Partnership business and shall have no authority to act for or bind
the Partnership or do or perform any act or thing on behalf of the Partnership or concerning
the affairs of the Partnership or involving the relationship among the Partners, whether
General or Limited, which would cause or occasion any Limited Partner to be classified as
or to become a General Partner under the laws of the State of Texas.
6.3 No Right to Withdraw. A Limited Partner shall not have the right to withdraw or reduce his
Capital Contribution to the Partnership, except as a result of its dissolution or as otherwise
provided by and in accordance with the Partnership's Certificate of Limited Partnership. A
Limited Partner shall not have the right to demand or receive property other than cash in
return for his Capital Contribution. A Limited Partner shall not have priority over any other
Limited Partner, either as to the return of his Capital Contribution or as to Profits, Losses or
distributions.
Page 16
less the sum of (i) amounts payable to creditors of the Partnership, other than
Partners, in the order of priority as provided by law, (ii) amounts payable to the
Partners or their Affiliates in satisfaction of principal and interest, if any, with respect
to loans which they have made to the Partnership, and (iii) reserves required to meet
other estimated obligations of the Partnership.
1.7.16 "Nonrecourse Deductions" has the meaning set forth in § 1.704- 1 T(b)(4)(iv)(b) of the
Regulations. The amount of Nonrecourse Deductions for a Partnership fiscal year
equals the excess of (i) net increase, if any, in the amount of Partnership Minimum
Gain during that fiscal year over (ii) the aggregate amount of any distributions during
such fiscal year of proceeds of a nonrecourse liability that are allocated to any
increase in Partnership Minimum Gain, determined according to the provisions of §
1.704-1T(b)(4)(iv)(b) of the Regulations.
1.7.17 "Partners" means all General Partners and all Limited Partners, where no distinction
is required by the context in which the term is used herein. "Partner" means any one
of the Partners.
1.7.18 "Partnership" means the partnership continued pursuant to this Agreement and the
partnership continuing the business of this Partnership in the event of dissolution as
herein provided.
1.7.19 "Partnership Minimum Gain" has the meaning set forth in § 1.704-1T(b)(4)(iv)(c) of
the Regulations.
1.7.20 "Partnership Property" means all real and personal property acquired by the
Partnership and any improvements thereto, and shall include both tangible and
intangible property, including but not limited to any installment note or other
evidence of indebtedness arising out of the sale of any real or personal property
owned by the Partnership.
1.7.21 "Person" means any individual, partnership, corporation, trust or other entity.
1.7.22 "Profits" and "Losses" means, for each fiscal year or other period, an amount equal
to the Partnership's taxable income or loss for such year or period, determined in
accordance with Code § 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code § 703(a)(1) shall be
included in taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal income tax and
not otherwise taken into account in computing Profits and Losses pursuant
to this Section 1.7.22 shall be added to such taxable income or loss;
Page 8
(b) Any expenditures of the Partnership described in Code § 705(a)(2)(13) or
treated as Code § 705(a)(2)(B) expenditures pursuant to Regulations § 1.704-
1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or
Losses pursuant to this Section 1.7.22 shall be subtracted from such taxable
income or loss;
(c) In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.7.12(b) or Section 1.7.12(c) hereof, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Profits and Losses;
(d) Gain or loss resulting from any disposition of Partnership Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(e) In lieu of the Depreciation, amortization and other cost recovery deductions
taken into account in computing such taxable income or loss, there shall be
taken into account Depreciation for such fiscal year or other period, computed
in accordance with Section 1.7.9 hereof; and
(f) Notwithstanding any other provision of this Section 1.7.22, any items which
are specially allocated pursuant to Section 3.2 or Section 3.3 hereof shall not
be taken into account in computing Profits or Losses.
1.7.23 "Property" means the property described on Exhibit B attached hereto, which will
be acquired and operated by the Partnership.
1.7.24 "Regulations" means the Income Tax Regulations promulgated under the Code, as
such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
1.7.25 "Substituted Limited Partner" means any Person admitted to the Partnership as a
Limited Partner pursuant to Article IX hereof.
ARTICLE II
PARTNERS; CAPITAL CONTRIBUTIONS
2.1 Partners. The names and addresses of each Partner are set forth on Exhibit A attached
hereto, as such Exhibit A may be amended by the General Partner from time to time.
Page 9
2.2 Capital Contributions o('the General Partner. The General Partner agrees to make Capital
Contributions and additional Capital Contributions as follows: See ExhibitA attached hereto.
2.3 Capital Contributions of the Limited Partners. Each Limited Partner shall be obligated to
make Capital Contributions and additional cash contributions to the Partnership as follows:
See Exhibit A attached hereto. Based on the Act, no Limited Partner shall have any
obligation to make contributions to the capital of the Partnership in excess of the amounts
contributed or to be contributed pursuant to the provision of this Article II, and shall not be
responsible for obligations or liabilities of the Partnership in excess of such contributions
(whether or not returned to him) together with any amounts remaining in his Partnership
account, money or other property wrongfully paid or conveyed to him on account of his
contributions, money or other property paid to him as the return of any part of his Capital
Contribution, and, to the extent provided by law, interest on the return of such amounts. The
Capital Contributions of the Partners and the respective interests of the Partners in the profits
and losses of the Partnership are reflected in this Agreement and any amendment hereto.
2.4 Default. If any Partner fails to make the required Capital Contributions under the terms of
this Agreement, the Partnership shall have all rights and remedies, at law or equity, to
enforce the provisions of this Agreement.
ARTICLE III
ALLOCATIONS
3.1 Profits. Except as provided in Sections 3.4 and 3.5.2 hereof, Profits and Losses for any fiscal
year shall be allocated to the Partners pro rata in accordance with their Capital Accounts.
3.2 Special Allocations.
3.2.1 Except as provided in Section 3.2.4 hereof, in the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in § 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, items of Partnership income and gain
shall be specially allocated to each such Partner in an amount and manner sufficient
to eliminate, to the extent required by the Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible.
3.2.2 In the event the adjusted tax basis of any Code § 38 property that has been placed in
service by the Partnership is increased pursuant to Code § 48(q), such increase shall
be specially allocated among the Partners (as an item in the nature of income or gain)
in the same proportions as the investment tax credit that is recaptured with respect
to such property is shared among the Partners.
3.2.3 Except as provided in Section 3 2.4 hereof, in the event any Partner has a deficit
Capital Account at the end of any Partnership fiscal year which is in excess of the
sum of (a) the amount such Partner is obligated to restore, and (b) the amount such
Partner is deemed to be obligated to restore pursuant to the penultimate sentence of
Regulations § 1.704- 1 T(b)(4)(iv)(f), each such Partner shall be specially allocated
items of Partnership income and gain in the amount of such excess as quickly as
possible.
3.2.4 Notwithstanding any other provision of this Article III, if there is a net decrease in
Partnership Minimum Gain during any Partnership fiscal year, each Partner who
would otherwise have an Adjusted Capital Account Deficit at the end of such year
shall be specially allocated items of Partnership income and gain for such year (and,
if necessary, subsequent years) in an amount and manner sufficient to eliminate such
Adjusted Capital Account Deficit as quickly as possible. The items to be so allocated
shall be determined in accordance with § 1.7044T(b)(4)(iv)(e) of the Regulations.
This Section 3.2.4 is intended to comply with the minimum gain chargeback
requirement in such sections of the Regulations and shall be interpreted consistently
therewith.
3.2.5 To the extent an adjustment to the adjusted tax basis of any Partnership asset
pursuant to Code § 734(b) or Code § 743(b) is required, pursuant to Regulations §
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the
amount of such adjustment to the Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the adjustment decreases
such basis) and such gain or loss shall be specially allocated to the Partners in a
manner consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such section of the Regulations.
3.2.6 Any reduction in the adjusted tax basis (or cost) of Partnership Code § 38 property
pursuant to Code § 48(q) shall be specially allocated among the Partners (as an item
in the nature of expenses or losses) in the same proportions as the basis (or cost) of
such property is allocated pursuant to Regulations § 1.46-3(f)(2)(i).
3.2.7 The Losses allocated pursuant to Section 3.1 hereof shall not exceed the maximum
amount of Losses that can be so allocated without causing any Limited Partner to
have an Adjusted Capital Account Deficit at the end of any fiscal year. In the event
some but not all of the Limited Partners would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to Section 3.1, the
limitation set forth in this Section 3.2.7 shall be applied on a Limited Partner by
Limited Partner basis so as to allocate the maximum permissible Loss to each
Limited Partner under § 1.704-1(b)(2)(ii)(d) of the Regulations. All Losses in excess
of the limitation set forth in this Section 3.2.7 shall be allocated to the General
Partner.
3.3 Curative Allocations. The allocations set forth in Sections 3.2.7 (last sentence), 3.2.1, 3.2.3,
3.2.4 and 3.2.5 hereof (the "Regulatory Allocations") are intended to comply with certain
Page I I
requirements of Regulations § 1.704-1(b). Notwithstanding any other provision of this
Article III (other than the Regulatory Allocations), the Regulatory Allocations shall be taken
into account in allocating other Profits, Losses and items of income, gain, loss and deduction
among the Partners so that, to the extent possible, the net amount of such allocations of other
Profits, Losses and other items and the Regulatory Allocations to each Partner shall be equal
to the net amount that would have been allocated to each such Partner if the Regulatory
Allocations had not occurred. Notwithstanding the preceding sentence, Regulatory
Allocations relating to (a) Nonrecourse Deductions shall not be taken into account except to
the extent there has been a reduction in Partnership Minimum Gain, and (b) Partner
Nonrecourse Deductions, as defined in Regulations § 1.704-1T(b)(4)(iv)(h), shall not be
taken into account except to the extent that there has been a reduction in Partnership
Minimum Gain attributable to a Partner nonrecourse debt (within the meaning of Regulations
§ 1.704-1T(b)(4)(iv)(h)).
3.4 Other Allocations.
3.4.1 The basis (or cost) of any Partnership Code § 38 property, and the related investment
tax credit, shall be allocated among the Partners in accordance with Regulations §
1.46-3(f)(2)(i). All other tax credits shall be allocated among the Partners in
accordance with applicable law.
3.4.2 In the event Code § 38 property is disposed of during any taxable year by the
Partnership, Profits for such taxable year (and, to the extent such Profits are
insufficient, Profits for subsequent taxable years) in an amount equal to the excess,
if any, of (a) the reduction in the adjusted tax basis (or cost) of such property
pursuant to Code § 48(q), over (b) any increase in the adjusted tax basis of such
property pursuant to Code § 48(q) caused by the disposition of such property, shall
be excluded from the Profits allocated pursuant to Section 3.1 hereof and shall
instead be allocated among the Partners in proportion to their respective shares of
such excess, determined pursuant to Sections 3.2.2 and 3.2.6 hereof. In the event
more than one item of such property is disposed of by the Partnership, the foregoing
sentence shall apply to such items in the order in which they are disposed of by the
Partnership, so that Profits equal to the entire amount of such excess with respect to
the first such property disposed of shall be allocated prior to any allocations with
respect to the second such property disposed of, and so forth.
3.4.3 hn the event additional Limited Partners are admitted to the Partnership on different
dates during any fiscal year, the Profits (or Losses) allocated to the Partners for each
such fiscal year shall be allocated among the Partners in proportion to the Capital
Accounts from time to time during such fiscal years in accordance with Code § 706,
using any convention permitted by law and selected by the General Partner.
3.4.4 For purposes of determining the Profits, Losses or any other items allocable to any
period, Profits, Losses and any such other items shall be determined on a daily,
Page 12
monthly or other basis, as determined by the General Partner using airy permissible
method under Code § 706 and the Regulations thereunder.
3.4.5 Except as otherwise provided in this Agreement, all items of Partnership income,
gain, Toss, deduction and any other allocations not otherwise provided for shall be
divided among the Partners in the same proportions as they share Profits or Losses,
as the case may be, for the year.
3.4.6 The Partners are aware of the income tax consequences of the allocations made by
this Article III and hereby agree to be bound by the provisions of this Article III in
reporting their shares of Partnership income and loss for income tax purposes.
3.5 Tax Allocations: Code & 704(c).
15.1 In accordance with Code § 704(c) and the Regulations thereunder, income, gain, loss
and deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so as to
take account of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with Section 1.7.12(a) hereof).
3.5.2 In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to
Section I.7.12(b) hereof, subsequent allocations of intone, gain, loss and deduction
with respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value in the
same manner as under Code § 704(c) and the Regulations thereunder.
3.5.3 Any elections or other decisions relating to such allocations shall be made by the
General Partner in any manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to Section 3.5 are solely for purposes of
federal, state and local taxes and shall not affect, or in any way be taken into account
in computing any Person's Capital Account or share of Profits, Losses, other items
or distributions pursuant to any provision of this Agreement.
ARTICLE IV
DISTRIBUTIONS
4.1 Net Cash From Operations. Except as otherwise provided in Article XI hereof, Net Cash
From Operations and Net Proceeds. if any, shall be distributed to the Partners pro rata in
accordance with their Capital Accounts.
42 Amounts Withheld. All amounts withheld pursuant to the Code (including but not limited
to withholding pursuant to § 1441-1446 on distributions to Partners who are foreign Persons)
Pace I7
or any provision of any state or local tax law with respect to any payment or distribution to
the Partnership shall be treated as amounts distributed to the Partners pursuant to this Article
IV for all purposes under this Agreement. The General Partner may allocate any such
amounts among the Partners in any manner that is in accordance with applicable law.
ARTICLE V
RIGHTS, POWER AND LIABILITIES OF THE
GENERAL PARTNER
5.1 Management of Partnership Business. The General Partner shall have full discretion,
responsibility and authority for the management of the Partnership's business and shall have
all rights and powers generally conferred by law or necessary, advisable or consistent in
connection therewith. The General Partner shall perform such reasonable acts as may be
consistent with good business practices in its performance as General Partner.
5.2 Specific Powers. In addition to any rights and powers which it may possess, the General
Partner shall have all specific rights and powers required for, or appropriate to, its
management of the Partnership business, conferred by this Agreement, by the Act or
otherwise, and by way of illustration but not by way of limitation, the following:
5.2.1 To purchase, sell, exchange, lease or otherwise manage all or any part of the assets
of the Partnership, including devising and implementing acquisition, leasing and
disposition plans for the Property; to incur obligations on behalf of the Partnership;
to borrow money for and on behalf of the Partnership; to maintain, operate, improve
and repair any Partnership Property; to refinance, modify, amend, extend, renew,
revise, terminate or otherwise deal with any contracts or obligations of the
Partnership; to hold record title to any and all Partnership real property in its name
as nominee; and to borrow money on the security of any Partnership assets or
otherwise encumber all or any portion of the Partnership Property without limit as to
the term thereof and whether or not such term (including renewal terms) shall extend
beyond the date of the termination of the Partnership; to take any actions consistent
with the purpose of the Partnership as defined in Article I hereof,
5.2.2 To employ and dismiss from employment persons, firms or corporations on behalf
of the Partnership and at the Partnership's expense to aid in operation and
management of the Partnership Property, or for other Partnership purposes, including
but not limited to accountants, attorneys, appraisers, architects, engineers and real
estate agents (any of whom may be principals of a Partner or organizations having
common ownership or control with a Partner) on such reasonable terms and for such
reasonable compensation as the General Partner shall deem in the best interests of the
Partnership. Any compensation received by persons or entities affiliated with the
General Partner, or in which the General Partner has financial interest, shall be on
Page 14
terms no less favorable to the Partnership than those that could be obtained from an
unaffiliated party;
5.2.3 To make such elections under the tax laws of the United States and other relevant
jurisdictions as to the treatment of items of Partnership income, gain, loss, deduction
and credit and as to all other relevant matters (including without limitation elections
under § 754 of the Code), as it believes necessary or desirablc;
5.2.4 In the event the Partnership has funds available for investment, to invest the same in
such manner as the General Partner deems appropriate under the circumstances and
consistent with the purposes of the Partnership;
5.2.5 To execute, on behalf of the Partnership without joinder by any Limited Partner, any
and all documents or instruments of any kind which the General Partner deems
appropriate in carrying out the purposes of the Partnership, including, but without
limitation, powers of attorney, sale and purchase contracts, loan agreements and other
documents or instruments of any kind or character or any amendments thereto;
5.2.6 To reimburse itself for expenses incurred in the conduct of the Partnership's
business, including the cost of organizing the Partnership;
5.2.7 To prepare and file any registration statement, this Agreement or any document or
instrument necessary or appropriate to the Partnership's existence or business under
any federal or state statute or regulation;
5.2.8 To delegate to other persons, firms or corporations such duties and responsibilities
as it, in its sole discretion, may deem appropriate or advisable in order to conduct the
business and affairs of the Partnership efficiently and effectively; and
5.2.9 To pay all the ordinary and necessary expenses of the Partnership, including but not
limited to the expenses for real estate taxes, professional fees for accounting and
legal services (including reasonable legal fees to defend the Partnership status as a
partnership for tax purposes and reasonable legal fees necessary to defend the status
of the offering as a private placement under state or federal law) land planning and
land use studies, property management and other fees and commissions (including
those set forth in Article VIII hereofl_
5.3 Partnership Indemnity of General Partner. The doing of any act or the failure to do any act
by the General Partner which shall not constitute fraud or intentional, wrongful misconduct
in pursuance of the authority granted, the effect of which may cause or result in loss or
damage to the Partnership, if done in good faith, shall not subject the General Partner, its
partners, affiliates, officers, directors, employees or their successors and assigns, to any
liability; and, in such event, the Partnership will indemnify and hold harmless the General
Partners, its partners, affiliates_ officers, directors. employees or their successors and assigns,
Pay r>
6.4 Right to Vote. Except as otherwise set forth herein, Limited Partners shall have the right to
vote on the following matters affecting the Partnership:
6.4.1 Amendments of the Agreement materially and adversely affecting the Limited
Partners as set forth herein.
6.4.2 Termination of the Partnership.
6.4.3 Removal of a General Partner.
6.4.4 Election of a successor General Partner pursuant to Section 11.7.1 hereof.
6.4.5 Election of a trustee to liquidate or distribute the Partnership assets upon a
dissolution caused by one of the events set forth in Section 11.2 hereof.
6.4.6 Reestablishment of the Partnership as set forth in Section 11.7.1 hereof.
ARTICLE VII
BOOKS, RECORDS, ACCOUNTS, REPORTS AND CERTAIN
TAX MATTERS
7.1 Fiscal Year. The fiscal year of the Partnership shall be the calendar year.
7.2 Books of Accounts. The Partnership shall keep proper and complete books of account
adequate for its purposes. The books of account shall be maintained at its principal place of
business and shall be open to inspection and copying by any of the Partners, whether General
or Limited, or by their authorized representatives at any reasonable time during business
hours. Balance sheets, income reports and income tax returns shall be prepared at
Partnership expense at the end of each fiscal year by an accountant selected by the General
Partner.
7.3 Basis of Accounting. The Partnership books shall be kept on a cash basis; provided,
however, that if applicable federal income tax law requires the Partnership to use an accrual
method of accounting, the Partnership shall change its accounting method to an accrual
method or to any other permissible method of accounting that the General Partner shall
designate.
7.4 Bank Accounts. All funds of the Partnership are to be deposited in the Partnership's name
in such bank account or money market account or accounts as may be designated by the
General Partner and may be withdrawn on the signature of the General Partner or such other
person or persons as the General Partner may authorize.
Page 17
7.5 Annual Reports. Within seventy-five (75) days after the close of the Partnership's fiscal
year, the General Partner shall prepare and mail to each Partner a copy of the Internal
Revenue Service Form K-1 as attached to the federal partnership tax return to be filed for the
Partnership. Upon request by a Limited Partner, the General Partner will provide a written
report setting forth the following:
7.5.1 The assets and liabilities of the Partnership;
7.5.2 The net profit or net loss of the Partnership;
7.5.3 Such Partner's Capital Account and the manner of its calculation; and
7.5.4 Any other information necessary to enable such Partner to prepare his individual
income tax returns.
7.6 Meetings. It is not contemplated that there will be regular meetings of the Partnership.
However, meetings of the Partnership may be called at any time by the General Partner and
shall be called by the General Partner upon written request of a Majority of Limited Partners.
7.7 Written Minutes. Written minutes of the business transacted at Partnership meetings (if any)
shall be made and retained at the Partnership office, only if requested by any Partner.
7.8 Tax Matters Partner. The General Partner is hereby appointed as the "tax matter partner" of
the Partnership within the meaning of Code § 6231(a)(7).
7.9 Majority of Limited Partners. For purposes hereof, a "Majority of Limited Partners" shall
be those Limited Partners whose aggregate Capital Accounts exceed 50% of the aggregate
Capital Accounts of all Limited Partners.
ARTICLE VIII
FEES
8.1 Annual Administration Fee. The Partnership shall pay to the General Partner an annual
Administration Fee that is approved by unanimous written consent of the Limited Partners.
The annual Administration Fee shall compensate the General Partner for the time and costs
of hiring and supervising various professional advisors (such as lawyers and accountants),
and working with regulatory agencies and municipal or county administrative bodies as
required to promote and protect the interests of the Partnership. Said fee shall be cumulative
from year to year as to amounts not paid in prior years.
Page IS
ARTICLE IX
TRANSFER OF LIMITED PARTNERSHIP INTERESTS
9.1 Requirements for Assignment. Subject to any restrictions on transferability required by
federal or Texas taw or contained elsewhere in this Agreement, a Limited Partner shall have
the right to assign any of his interests in the Partnership by a written assignment to any
person, provided that (i) such assignment is not in contravention of any of the provisions of
this Agreement (with particular reference to the representations contained in Section 9.5
hereof); (ii) such assignment has been duly executed and acknowledged by the assignor and
assignee, with the discretionary approval of the General Partner; and (iii) the assignee
represents that he satisfies the specific suitability standards applicable to the assigning
Limited Partner. Upon making any such assignment, the assignor shall no longer be entitled
to vote with respect to the assigned interest or exercise any other rights of a Limited Partner
except with respect to the matters set forth in Section 11.7 hereof.
9.2 Assignee's Rights. An assignee of any interest in the Partnership previously held by a
Limited Partner shall be entitled to receive distributions of cash or other property from the
Partnership and to receive allocations of the Profits and Losses and other distributive share
items of the Partnership attributable to such interest under the provisions of this Section after
the effective date of the assignment. The "effective date" of an assignment shall be that date
set forth on the written instrument of assignment, which may in no event be any earlier than
the date upon which the requirements of Section 16.11 hereof have been satisfied.
9.3 Distributions and Allocations in Respect of Transferred Interests in the Partnership. If any
interest in the Partnership is sold, assigned or transferred during any accounting period in
compliance with the provisions of this Article IX, Profits, Losses, each item thereof and all
other items attributable to such item for such period shall be divided and allocated between
the transferor and the transferee by taking into account their varying interests during the
period in accordance with Code § 706(d), using any conventions permitted by law and
selected by the General Partners. All distributions on or before the date of such transfer shall
be made to the transferor, and all distributions thereafter shall be made to the transferee.
9.4 Satisfactory Written Assignment Required. Anything herein to the contrary notwithstanding,
both the Partnership and the General Partner shall be entitled to treat the assignor of an
interest in the Partnership as the absolute owner thereof in all respects, and shall incur no
liability for distributions of cash made in good faith to him, until such time as a written
assignment that conforms to al I requirements of this Article IX have been received by and
recorded on the books of the Partnership.
9.5 Limitation on Sale or Exchange. No interest in the Partnership may be sold or exchanged
if such transaction, in lioht of the total of all other Partnership interests sold or exchanged
within the period of twelve (12) consecutive months prior thereto, might, in the opinion of
counsel for the Partnership_ result in the termination of the Partnership under Code § 708.
Page 10
This requirement is in addition to, and not in lieu of, the representation and warranty given
by a Limited Partner pursuant to Section 16.11 hereof that he will not sell or distribute an
interest in the Partnership unless an opinion of counsel is obtained which addresses the
matters specified in Section 16.11 hereof.
9.6 Requirements for Substitution. No assignee of any interest in the Partnership shall have the
right to become a Substitute Limited Partner in place of his assignor unless all of the
following conditions are satisfied:
9.6.1 The written consent of the General Partner to such substitution is obtained, the
granting or denial of which shall be within the sole and absolute discretion of the
General Partner and shall not be subject to any requirement of reasonableness.
9.6.2 A duly executed and acknowledged written instrument of assignment, being either
a certificate evidencing the interest in the Partnership owned by the assignor prior to
such assignment or some other instrument approved by the General Partner, is filed
with the Partnership setting forth the intention of the assignor that the assignee
become a Substitute Limited Partner in his place.
9.6.3 The assignee executes an irrevocable Power of Attorney, satisfactory to the General
Partner, appointing the General Partner as the assignee's lawful attorney -in -fact for
certain specified purposes.
9.6A The assignor and assignee execute and acknowledge such other instruments as the
General Partner may deem necessary or desirable to effect such substitution.
9.6.5 A transfer fee is paid to the Partnership sufficient to cover all reasonable expenses
connected with such assignment and substitution.
No assignee of less than the entire interest in the Partnership owned by the assignor may
become a Substitute Limited Partner. Except as provided herein, no persons may be
admitted to the Partnership as additional Limited Partners.
9.7 Evidence of Intent to Substitute. A Limited Partner who assigns any interest in the
Partnership must evidence his intention that his assignee be admitted as a Substitute Limited
Partner in his place and execute any instruments required by the General Partner in
connection therewith.
9.8 Substitution Required for Vote. Unless or until an assignee of an interest in the Partnership
becomes a Substitute Limited Partner, neither such assignee nor his assignor shall be entitled
to exercise any vote with respect to such interest in the Partnership or exercise any other
rights of the Limited Partner, except that the assignor shall be entitled to vote with respect
to matters set forth in Section 1 1.7.1 hereof.
Page 10
9.9 Effective Date. The effective date of a substitution shall be the first day of the calendar
quarter next following the date upon which the General Partner has given its written consent
to such substitution and at which time the General Partner shall, if necessary, file for
recordation with the Office of the Secretary of State of the State of Texas an amended
Certificate of Limited Partnership evidencing such substitution.
ARTICLE X
RIGHT OF FIRST REFUSAL
10.1 Limitation on Transfer. Except with the prior written consent of all the Partners or as
provided below in Section 10.5 or Section 10.6, no Limited Partner shall voluntarily or
involuntarily assign, sell, mortgage or otherwise encumber, transfer or dispose of, in whole
or in part, his interest in the Partnership or enter into any agreement as a result of which any
Person shall obtain a direct or indirect interest in such Person's interest in the Partnership (an
"Assignment"), without first complying with the requirements of this Article X.
10.2 Notice of Offer. In the event of an Assignment, the Limited Partner whose Partnership
interest is subject thereto (the "Proposed Assignor") shall, prior to consummating the same,
give written notice thereof to the other Partners, which notice (the "Notice of Offer") shall
set forth in reasonable detail the terms and conditions of the offer so received, including the
identity and the address of the offeror (the "Proposed Assignee").
10.3 Exercise of Option. The Partners shall have thirty (30) days following the later of the receipt
of the Notice of Offer by all the Partners or the determination of the Fair Market Value of the
interest to be assigned in which to give written notice (the "Notice of Exercise") to the
Proposed Assignor of their election to acquire or encumber (as the case may be) the entire
interest proposed to be assigned (but not any different interest) at the lesser of (i) a cash price
equal to the price set forth in the Notice of Offer (computed using the Fair Market Value of
any non -cash consideration) or (ii) the Fair Market Value of the interest (the "Acquisition
Price"). The Partners to whom the offer is made shall determine by mutual agreement the
proportion of the Proposed Assignor's interest, if any, which shall be purchased or
encumbered by each Partner; provided, however, that if the Partners are unable to agree, the
offer shall be accepted by each Partner desiring to accept the offer in the proportion that such
Partner's current interest in the Partnership's distributions of Net Cash From Operations set
forth in Article IV hereof on the date of the Notice of Offer bears to the total of such interest
of all Partners desiring to accept the offer. Notice of acceptance of the offer shall be given
jointly by all exercising Partners in writing. Acceptance shall be upon the same terms and
conditions contained in the offer; provided, however, that the Acquisition Price shall be as
set forth above and provided further than such Acquisition Price may, at the election of each
Partner accepting the offer, be paid as follows: a cash down payment of no less than twenty-
five percent (25%) of the Acquisition Price at closing and the balance in four (4) equal
annual installments of principal plus interest at eleven percent (II%) per annum. The
Partners electing to acquire or encumber shall have the right to prepay all or a portion of such
Page 21
obligations without premium or penalty. Any acquisition or encumbrance hereunder shall
be consummated within thirty (30) days after receipt by the Proposed Assignor of the Notice
of Exercise. Notwithstanding any provision of this Section to the contrary, the Proposed
Assignor may require that the terms of any sale hereunder be such that it qualify as an
"installment sale" under Code § 453.
10.4 Failure to Exercise. Should the Partners choose not to exercise this right of first refusal, the
Proposed Assignor shall, subject to Article IX hereof, be free to assign or encumber the
interest in the Partnership covered by this Notice of Offer on the terms and conditions, and
to the Proposed Assignee set forth in the Notice of Offer; provided, however, if said
proposed transaction is not consummated within thirty (30) days then all the terms and
conditions of this Agreement shall be deemed to apply again to the interest in the Partnership
covered by the Notice of Offer, and the same shall not be disposed of or encumbered except
after full compliance with the provisions hereof. No person receiving an assignment of an
interest in the Partnership under this Section shall become a substituted Limited Partner
except upon strict compliance with the terms of Article IX hereof.
10.5 Transfer to Grantor Trust. The right of first refusal provided in this Article X shall not arise
or apply with respect to a transfer by a Partner of all or any portion of his interest in the
Partnership to a trust (the "Transferee Trust") whose income is currently taxable, pursuant
to Subpart E, Part I of Subchapter J, Chapter 1, Subtitle A of the Code (relating to grantor
trusts), to the Partner making the transfer; provided, however, that a right of first refusal as
provided in this Article X shall arise and apply upon the occurrence of an event which causes
the income of the Transferee Trust to be taxed to any person or entity other than the Partner
or his spouse.
ARTICLE XI
DISSOLUTION AND WINDING UP
11.1 Dissolution. The Partnership shall dissolve upon the first to occur of any of the following
events:
11.1.1 The expiration of the term of the Partnership;
11.1.2 Upon the sale or other disposition of all the assets to which the Partnership has any
right, title and interest, and the distribution to the Partners of the proceeds from such
sale or other disposition;
11.1.3 Upon an order of dissolution by a court of competent jurisdiction or upon any
recognized process of dissolution as provided by the laws of the State of Texas;
11.1.4 Upon the retirement (including resignation or removal), death, dissolution,
termination, legal disability or bankruptcy of the General Partner. For purposes of
Page 22
this subsection, "bankruptcy" has occurred if the General Partner: (i) makes an
assignment for the benefit of creditors; (ii) files a voluntary petition in bankruptcy,
(iii) is adjudicated a bankrupt or insolvent; (iv) files a petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, (v) files an answer
or other pleading admitting or failing to contest the material allegations of a petition
filed against it in any proceeding of this nature; or (vi) seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of the General
Partner or of all or any substantial part of its properties; or
11.1.5 Upon the agreement of (i) the General Partner, and (ii) a Majority of Limited
Partners.
11.2 Winding Up. Upon a dissolution of the Partnership, the General Partner or a trustee elected
by a Majority of Limited Partners (the "Trustee") in the case of a dissolution caused by one
of the events specified in Section 11.1.4 hereof shall take full account of the Partnership's
liabilities and Partnership Property, and the Partnership Property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom,
to the extent sufficient therefor, shall be applied and distributed in the following order and
priority:
112.1 To the payment and discharge of all of the Partnership's debts and liabilities
(including those to Partners), including the establishment of any necessary reserves;
1 1.2.2 To the reimbursement of expenses of the General Partner and payment of any fees
to which the General Partner is entitled; and
11.23 To the Partners in accordance with, and in an amount equal to, their Capital
Accounts.
113 Compliance With Timing Requirements and Regulations hn the event the Partnership is
"liquidated" within the meaning of Regulations § 1.704- 1 (b)(2)(ii)(g):
11.3.1 Distributions shall be made pursuant to this Article XI (if such liquidation constitutes
a dissolution of the Partnership) or Article IV hereof (if it does not) to the General
Partner and Limited Partners who have positive Capital Accounts in compliance with
Regulations § 1.704-1(b)(2)(ii)(b)(2); and
11.3 2 If any General Partners Capital Account has a deficit balance (after giving effect to
all contributions, distributions and allocations for all taxable years, including the year
dining which such liquidation occurs), such General Partner shall contribute to the
capital of the Partnership the amount necessary to restore such deficit balance to zero
in compliance with Regulations § 1.704-1(b)(2)(n)(b)(3).
Vag,,,„
1 1.4 Distribution to Trust; Reserves. In the discretion of the General Partner, a pro rata portion
of the distributions that would otherwise be made to the Partners pursuant to Section 11.3
may be:
11.4.1 Distributed to a trust established for the benefit of the Partner for the purposes of
liquidating Partnership assets, collecting amounts owed to the Partnership, and
paying any contingent or unforeseen liabilities or obligations of the Partnership or of
the General Partner arising out of or in connection with the Partnership. The assets
of any such trust shall be distributed to the Partners from time to time, in the
reasonable discretion of the General Partner, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been distributed to
the Partners pursuant to this Agreement; or
11.4.2 Withheld to provide a reasonable reserve for Partnership liabilities (contingent or
otherwise) and to reflect the unrealized portion of any installment obligations owed
to the Partnership, provided that such withheld amounts shall be distributed to the
Partners as soon as practicable.
11.5 Rights of Limited Partners. The General Partner shall not be liable for the return of the
Capital Contributions of the Limited Partners, who shall look only to the assets of the
Partnership for any return of capital. No Person shall have the right to demand or receive
property other than cash upon dissolution and termination of the Partnership (although the
General Partner or Trustee may distribute property other than cash) or to demand the return
of his Capital Contributions to the Partnership prior to dissolution and termination of the
Partnership.
1.6 Distribution in Kind. In lieu of liquidating the Partnership's assets, the General Partner or,
in his stead, the Trustee, may elect, in his sole discretion, to distribute all or a portion of such
assets in kind. In such event, the provisions of Section 1.7.3(a) and (b) hereof shall apply.
11.7 Reestablishment Upon Dissolution.
11.7.1 If the Partnership is dissolved for any of the reasons stated in Section 11.1.4 hereof,
the remaining Partners may, upon the vote of one hundred percent (100%) in interest
of such remaining Partners (General and Limited) reestablish this Partnership in
accordance with the terms of this Agreement by unanimous appointment of a
successor General Partner.
11.7.2 If the Partnership is re-established pursuant to Section 1 1.7.1 hereof, the successor
General Partner so selected, upon acceptance of the position, shall after amendment
of the Certificate of Limited Partnership become the General Partner of the
Partnership. The successor General Partner shall, before taking office, agree in
writing with the form General Partner or its representatives to assume all of the then
I ecourse obligations of the Partnership and of the former General Partner as General
Page 24
Partner and to indemnify the former General Partner's estate against any and all
liability, cost, loss and expense, including reasonable attorney fees. arising out of the
nonpayment of any obligations which are assumed by the new General Partner.
1 1.7.3 In the event of the legal disability, dissolution, death or bankruptcy of a General
Partner and the Partnership or its business is continued as provided in this
Agreement, the former General Partner, its successors and assigns, shall be entitled
to compensation under Article XV of this Agreement in the same manner and to the
same extent as if the General Partner had resigned, subject to the exception for fraud,
gross negligence or willful malfeasance.
ARTICLE XII
POWER OF ATTORNEY
12.1 General Partner as Attorney -in -Fact. By executing this Agreement, each Limited Partner
hereby acknowledges that the General Partner has been constituted and appointed with full
power of substitution, as the attorney -in -fact for such Limited Partner, with power and
authority to act in his name and on his behalf in the execution, acknowledgment and filing
of documents relating to the Partnership and its business including but not limited to the
following:
12.1.1 This Agreement and the Certificate of Limited Partnership (and, specifically, the
initial admission to the Partnership of all Limited Partners), as well as any
amendments hereto and thereto (including, without limitation, amendments which
provide for the admission of Limited Partners), subject to the provisions of Section
13.2 hereof.
12.1.2 Any other instruction which may be required to be filed by the Partnership under
appropriate state law or by any governmental agency of which the General Partner
deems it in the best interests of the Partnership to file.
12.1.3 Any documents which may be required to effect or evidence the continuation of the
Partnership, the admission of Substituted or additional Limited Partners, the consent
of all Partners to the admission of Substituted Limited Partners pursuant to the Act,
or the dissolution and termination of the Partnership, provided such continuation or
dissolution and termination are in accordance with the specific terms of this
Agreement.
12.2 Attributes of Power of Attorney Granted to General Partner. Each Limited Partner further
acknowledges and reaffirms that such Power of Attorney thereby granted to the General
Partner:
12.2.1 Is a Special Power of Attorney coupled with an interest, is irrevocable and shall
survive the death of the Limited Partner.
12.2.2 May be exercised by the General Partner either by signing separately as attorney -in -
fact for each Limited Partner or, after listing all of the Limited Partners executing any
instrument, by a single signature of the General Partner acting as attorney -in -fact for
all of them.
12.2.3 Shall survive the delivery of an assignment of a Limited Partner of the whole or any
portion of his interest in the Partnership; except that where the assignee of the whole
interest in the Partnership has been approved by the General Partner for admission
to the Partnership as a Substituted Limited Partner, the Power of Attorney of the
assignor shall survive the delivery of such assignment for the sole purpose of
enabling the General Partner to execute, acknowledge and file any instrument
necessary to effect such substitution.
Nothing herein contained shall require any person to investigate the authority of the General
Partner to sign any instruments executed under the authority of the aforesaid power of
attorney.
ARTICLE XIII
AMENDMENT OF AGREEMENT AND CERTIFICATE OF
LIMITED PARTNERSHIP
13.1 Amendments Not Requiring Agreement of Limited Partners. The Partnership's Certificate
of Limited Partnership shall be amended whenever required by the Act or otherwise law.
Both this Agreement and the Certificate of Limited Partnership may be amended without the
consent or vote of any Limited Partner to effect any changes required by law or changes
which do not materially and adversely affect the rights of the Limited Partners.
13.2 Amendments Requiring Agreement of Limited Partners. Amendments other than those set
forth in Section 13.1 must be approved by (a) the General Partner and (b) a Majority of the
Limited Partners; provided, however, that no amendment hereunder which increases the
obligation of the Limited Partners to make Capital Contributions pursuant to Article II hereof
shall be effective unless approved by all the Limited Partners.
13.3 Obligations of Limited Partners. Each Limited Partner covenants, on behalf of himself, his
successors, assigns, heirs and personal representatives, to execute and deliver with
acknowledgment or affidavit, if required, all documents and writings that may be necessary
or appropriate to effectuate amendments pursuant to the provisions of Sections 13.1 and 13.2
hereof.
Page 26
ARTICLE XIV
WITHDRAWAL, DEATH, INCOMPETENCY, BANKRUPTCY
OR DISSOLUTION OF A LIMITED PARTNER
14.1 Individual Limited Partner. Upon the death, legal incompetency or bankruptcy of an
individual Limited Partner, his personal representative, guardian, trustee in bankruptcy, or
comparable person shall have all of the rights of a Limited Partner for the purpose of settling
or managing his estate, but shall not become a Substituted Limited Partner without obtaining
the consent of the General Partner. He shall also have such power as the decedent,
incompetent or bankrupt possessed to assign his Partnership interests and to join with the
assignee thereof in making application to substitute such assignee as a Limited Partner.
14.2 Other Limited Partners. Upon the bankruptcy, insolvency, dissolution or other cessation to
exist as a legal entity of a Limited Partner which is not an individual, the authorized
representative or trustee in bankruptcy of such Limited Partner shall have all of the rights of
a Limited Partner for the purpose of effecting the orderly disposition of that Limited
Partner's affairs or business but shall not become a Substituted Limited Partner without
obtaining the consent of the General Partner. lie shall also have such power as the Limited
Partner possessed to assign his interest in the Partnership and to join with the assignee
thereof in making application to substitute such assignee as a Limited Partner.
143 Death. Etc. of a Limited Partner. The death, legal incapacity, bankruptcy, dissolution or
insolvency of a Limited Partner shall not dissolve the Partnership.
14.4 Withdrawal of a Limited Partner. No Limited Partner may terminate all or any part of his
interest in the Partnership or withdraw from the Partnership prior to March 1, 2051;
provided, however, that a Limited Partner may assign his Partnership interest in compliance
with the requirements of Article IX.
ARTICLE XV
REMOVAL OR RESIGNATION OF THE
GENERAL PARTNER
15.1 Removal. At any time, upon the vote of those Limited Partners whose aggregate Current
Capital Contributions exceed 75% of all of the aggregate Current Capital Contributions of
Limited Partners, a General Partner may be removed as a general partner of the Partnership;
provided, however, that no removal shall be effective hereunder unless the Limited Partners
seekin- removal first obtain (i) an opinion of counsel, satisfactory to all the Limited Partners,
that exercise of the removal right will not jeopardize the limited liability of the Limited
Partners. o ('ii) a declaratory judgment by a court of competent jurisdiction declaring that
exercise of the removal right will not jeopardize the limited liability of the Limited Partners.
Act, on the grounds that no public offering is involved, and upon the
representations, warranties and agreements set forth in this Section.
16.12 Status of Partners. Each Person acquiring an interest in the Partnership shall be deemed to
be a Partner as such term is used herein, provided that unless such Person is admitted as a
Substitute Limited Partner pursuant to Section 9.6 hereof or is a new General Partner as
contemplated by Section 11.7.2 hereof, such Person shall have none of the rights conferred
herein on Partners except the right to receive allocation of Profits and Losses and to receive
distributions with respect to the interest acquired.
IN WITNESS WHEREOF, the parties have set their respective hands as of the _2_9_ day of
ter'. 2001.
B. A. CATHEY, LTD
By Its: GENERAL PARTNERS:
CATHEY DEVELOPMENT, INC.
BLAKE CATHEY, PRESIDENT
By Its: LIMITED PARTNERS:
BLAKE CATHEY
15.2 Resignation. Any General Partner may resign at any time, provided, however, that sixty (60)
days, unless such time period is waived by the remaining General Partners and the Limited
Partners, prior to the resignation of all or the sole remaining General Partner such resigning
General Partner shall nominate one or more substitute General Partners, satisfactory to a
majority of the Limited Partners which would meet the requirements for continued
qualification of the Partnership as a partnership for federal income tax purposes.
15.3 Notice Requirement and Effective Date. Written notice of the removal (or resignation) of
a General Partner shall be served upon him (or the other Partners) either by certified or
registered mail, return receipt requested, or by personal service. Such notice shall set forth
the reasons for the removal (or resignation) and the date upon which the removal (or
resignation) is to become effective, which date shall not be less than thirty (30) days after the
service of such notice upon the General Partner (or other Partners) unless such time period
is waived by all of the remaining Partners, general and limited.
15.4 Accounting. Upon receipt of such notice of removal (or upon the resignation of a General
Partner), the removed or resigning General Partner shall cause an independent accounting
to be prepared covering the transactions of the Partnership since the end of the previous fiscal
year through the date of receipt of such notice of removal or resignation, unless such
independent accounting is waived by all of the remaining Partners, general and limited.
After receipt of such notice of removal or resignation, the removed General Partner shall not
sell or dispose of any of the Partnership Property unless such sale or disposition is subject
to a contract entered into by, and binding upon, the Partnership prior to the date upon which
such notice was received or given by the General Partner. If possible, the accounting shall
be completed by the effective date of removal or resignation and shall consist of the
Statement of Earnings and Balance Sheet for the period and as of the date specified above,
in sufficient detail to accurately and fully reflect the earnings or losses for the period and the
financial condition of the Partnership. The expenses of the accounting shall be borne by the
Partnership in the event of removal and by the resigning General Partner in the event of
resignation. Selection of the independent accountant to perform the accounting shall be in
the discretion of the party bearing the accounting expense.
15.5 Payment for Partnership Interest. Upon removal or resignation of a General Partner, such
General Partner shall be entitled to compensation for his interest in the Partnership as
provided in this Section. If removal is for any reason other than fraud, gross negligence or
willful malfeasance, or if a General Partner resigns, the purchase price for the General
Partner's interest in the Partnership shall be determined in accordance with Section 15.6
hereof. hl the event of removal of a General Partner for fraud, gross negligence or willful
malfeasance, such General Partner shall not be entitled to receive any portion of the purchase
price which would otherwise be payable to him.
15.6 Appraisal. Upon the removal (or resignation) of a General Partner, the purchase price for the
General Partner's interest in the Partnership shall be based upon an appraisal of the Property
as of the effective date of removal (or resignation) which shall be completed, if possible, no
Page 28
later than the effective date of removal or resignation, unless all of the Partners, general and
limited, agree otherwise. The value of the General Partner's interest shall be equal to the
amount of such General Partner's Capital Account assuming all Partnership Property were
sold by the Partnership on the effective date of removal (or resignation) for the appraised
market value (less an imputed six percent [6%] brokerage commission) and the resulting gain
or loss allocated pursuant to Article III in accordance with Section 1.7.6 hereof. If the
removed or resigning General Partner(s) and the Partnership cannot agree on an appraiser or
such appraiser is not appointed within thirty (30) days after receipt of the notice of removal
(or resignation), the appraiser will be appointed by the District Judge of the 851' Judicial
District Court of Brazos County, Texas. The decision of the appraiser shalt bind the removed
or resigning General Partner and the Partnership. The cost of such appraisal shall be borne
by the Partnership.
15.7 Method of Payment. The purchase price of a General Partner's interest in the Partnership,
as determined by appraisal, shall be paid, unless the General Partner and the Partnership
agree otherwise, as follows: If a General Partner resigns or is removed for just cause, other
than fraud, gross negligence or willful malfeasance, the Partnership shall give the General
Partner a non -interest bearing, unsecured promissory note evidencing such purchase price,
due at the date on which the Property or portions thereof are actually refinanced, sold or
otherwise disposed of (including by long-term lease). If a General Partner is removed for any
reason other than just cause, the Partnership shall give the General Partner a non -interest
bearing, unsecured promissory note evidencing such purchase price, due and payable at the
earlier of the refinancing, sale or other disposition (including long-term lease) of the Property
or portions thereof or five (5) years from the date of such removal. In either event, if less
than the entire Property is refinanced, sold or otherwise disposed of, the note shall be due and
payable in the same proportion as the Fair Market Value portion refinanced, sold or
otherwise disposed of bears to the remaining portions of the Property. Notwithstanding the
foregoing, in any event the purchase price shall be paid only in accordance with and to the
extent of the priorities provided in Article XI hereof. The note shall also provide that the
Partnership may prepay all or any part thereof without penalty.
15.8 Repayment of a General Partner's Loans. Upon the effective date of the removal or
resignation of a General Partner, the General Partner shall cease to be a General Partner of
the Partnership and all loans made by him or his affiliates to the Partnership shall be repaid
as expeditiously as possible, from the first Net Cash From Operations or Net Proceeds
available, and before any distributions to the remaining Partners, together with interest at the
Partner's Loan Rate as permitted under this Agreement.
ARTICLE XVI
MISCELLANEOUS
16.1 Notices. All notices under ibis Agreement shall be in writing and shall be given to the
Partners entitled thereto M personal service or by certified or registered mail, return receipt
?a,_i 20
requested: to the Limited Partners, at the address on file with the General Partner; and to the
General Partner, at the principal place of business of the Partnership as set forth in this
Agreement.
16.2 Validity of Agreement. The invalidity of any portion of this Agreement shall not affect the
validity of the remainder hereof.
16.3 Titles and Captions. Article and Section titles or captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision hereof.
16.4 Person and Gender. Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural, and the masculine gender shall
include the feminine and neuter genders and the word "person" shall include a corporation,
firm, partnership or other form of association.
16.5 Annlicable Law. The terms and provisions of this Agreement and any dispute arising
hereunder shall be governed by the laws of the State of Texas. The Courts of the State of
Texas shall have the sole and exclusive jurisdiction in any case or controversy arising under
this Agreement or by reason of this Agreement, and for this purpose each Partner (and each
person becoming a Partner) hereby expressly and irrevocably consents to the jurisdiction of
such Courts.
16.6 Costs of Litigation. In any actions between the parties to enforce any of the terms of this
Agreement or of any other contract relating to the Partnership or any action in any other way
pertaining to the Partnership or any action in any other way pertaining to the Partnership
affairs or this Agreement, the prevailing party shall be entitled to recover expenses, including
reasonable attorney fees, including expenses and fees of any appeals.
16.7 Incorporation of Documents and Exhibits. All documents and exhibits referred to herein are
by this reference made a part hereof as though fully set forth herein.
16.8 Entire Agreement. This Agreement is the final integration of the agreement of the parties
with respect to the matters covered by it and supersedes any prior understanding or
agreements, oral or written, with respect thereto.
16.9 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors in interest and assigns, but in no event shall
any party be relieved of its obligations hereunder without the express written consent of each
other party.
16. t 0 Litigation. The General Partner shall, in its sole discretion, prosecute, defend and settle such
actions at law or in equity as it deems necessary to enforce or protect the interests of the
Partnership. The Partnership and the General Partner shall respond to any final decree,
Page 30
judgment or decision of any court, board or authority having jurisdiction in the premises.
The General Partner shall satisfy any such judgment, decree or decision first out of any
insurance proceeds available therefor, next out of assets of the Partnership and finally as
provided by law.
16.11 Investment Representations. Each of the Limited Partners, by becoming obligated hereunder,
hereby represents and warrants to the General Partner and to the Partnership as follows:
16.11.1 His acquisition of an interest in the Partnership is made as a principal for his sole
account for investment purposes only and not with a view toward the distribution
of all or any portion of his interest in the Partnership except in compliance with
the provisions of this Agreement.
16.11.2 He is aware of the restrictions on transfer of his interest in the Partnership
hereunder and that the same will at no time be freely transferable or be assignable
otherwise than to a person or entity accepting similar restrictions on
transferability.
16.11.3 He has no reason to anticipate any change in personal circumstances, financial
or otherwise, which should cause him to sell or distribute or necessitate or require
any sale or distribution of his interest in the Partnership.
16.11.4 He has a personal net worth of at least $500,000.00 (excluding the value of home,
furnishings and automobiles) and is otherwise capable of bearing the economic
risks of this investment.
16.11.5 He is fully aware of the restrictions on resale of his interest in the Partnership
under this Agreement and the Securities Act of 1933, as amended (the "Securities
Act"), the Rules promulgated thereunder, and applicable state securities laws; in
particular, he is aware that the interest in the Partnership will not be registered
under the Securities Act at any time, will not at any time be freely salable and that
any sale thereof may have significant adverse tax consequences.
16.11.6 He will not, in any event, sell or distribute his interest in the Partnership or any
portion thereof, unless, in the opinion of counsel, which opinion shall be
satisfactory to counsel for the Partnership, such interest in the Partnership may
be legally sold or distributed without registration under the Securities Act, and/or
registration and/or qualification under then -applicable state and/or federal
statutes. or such Unit shall have been so registered and/or qualified and an
appropriate prospectus shall then be in effect.
16.11.7 He is fully aware that the interest in the Partnership is being issued by the
Partnership in reliance upon the exemption provided by § 4(2) of the Securities
Pave 31
EXHIBIT "A"
NAME
ADDRESS
TELEPHONE
PERCENT
CAPITAL
ADDITIONAL
and FAX NO.
OWNERSHIP
CONTRIBUTION
CONTRIBUTION
i
S
Cathey Development, Inc.,
P. O. Box 9517
97912 55-7064
1%
$1,000
$
General Partner
College Station, Tx 77845
Blake Cathey
P. O. Box 9517
979/255-7064
99%
$99,000
$
Limited Partner
College Station, Tx 77845