SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-12G
GENERAL FORM FOR THE REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
HOMES FOR AMERICA HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 88-0355448
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State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
680-3 West 246th Street, Riverdale, New York 10471
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(Address of principal
executive offices) (Zip Code)
718) 543-4024
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(Issuers Telephone Number)
Securities to be registered under Section 12(b) of the Act
Name of each exchange on
Title of each class: None which registered
Securities registered pursuant to Section 12(g) of the Act:
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Common Stock, .001 par value per share
(Title of class)
[Cover Page 1 of 2 Pages]
HOMES FOR AMERICA HOLDINGS, INC.
Registration Statement on Form 10-12G
Page
Forward Looking Statements...........................................1
PART I
ITEM 1. BUSINESS 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................18
ITEM 3. PROPERTIES, OFFICES AND FACILITIES.........................24
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.............................................25
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS....................................................26
ITEM 6. EXECUTIVE COMPENSATION.....................................30
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............34
ITEM 8. DESCRIPTION OF SECURITIES..................................35
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS...............38
ITEM 2. LEGAL PROCEEDINGS..........................................38
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS..............38
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES....................38
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS..................39
PART F/S
Financial Statements................................................41
PART III
ITEM 1. INDEX TO EXHIBITS..........................................41
Forward-Looking Statements
In addition to historical information, the information included in this
Form 10-12G contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), such as those pertaining to the Company's capital resources, portfolio
performance and results of operations. Forward-looking statements involve
numerous risks and uncertainties and should not be relied upon as predictions of
future events. Certain such forward-looking statements can be identified by the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "seeks," "approximately, "intends," "plans," "pro forma, "estimates,"
or "anticipates" or the negative thereof or other variations thereof or
comparable terminology, or by discussions of strategy, plans or intentions. Such
forward-looking statements are necessarily dependent on assumptions, data or
methods that may be incorrect or imprecise and may be incapable of being
realized. The following factors, among others, could cause actual results and
future events to differ materially from those set forth or contemplated in the
forward-looking statements: defaults or non-renewal of leases, increased
interest rates and operating costs, failure to obtain necessary outside
financing, difficulties in identifying properties to acquire and in effecting
acquisitions, failure to successfully integrate acquired properties and
operations, risks and uncertainties affecting property development and
construction (including, without limitation, construction delays, cost overruns,
inability to obtain necessary permits and public opposition to such activities),
environmental uncertainties, risks related to natural disasters, financial
market fluctuations, changes in real estate and zoning laws and increases in
real property tax rates. The success of the Company also depends upon economic
trends generally, including interest rates, income tax laws, governmental
regulation, legislation, population changes and the availability of governmental
sponsored financing programs. Readers are cautioned not to place undue reliance
on forward-looking statements, which reflect management's analysis only. The
Company assumes no obligation to update forward-looking statements. See also the
Company's reports filed from time to time with the Securities and Exchange
Commission pursuant to the Securities Act or the Exchange Act.
PART I
ITEM 1. BUSINESS
Introduction
Homes for America Holdings, Inc. (the "Company") was organized in
January 1996 to develop a fully integrated real estate operating company which
will own, acquire, develop, rehabilitate and manage select low income and market
rate residential housing throughout the United States. The Company's objective
is to identify and purchase undervalued residential property either through the
use of tax exempt bonds and related financing for affordable housing, or
traditional financing arrangements for market rate transactions. In addition to
the net rental income derived from its portfolio of apartment complexes, the
Company earns a significant portion of its revenues and profits from
transactional fees associated with the acquisition and financing of the various
properties in its portfolio. The Company relies upon a network of experts
developed by the Company to identify acceptable residential properties which can
be purchased with financing provided by municipal bonds and tax credits. The
Company commenced operations in April, 1996 and to date has purchased two
residential complexes located in Dallas, Texas and Bridgeport, Connecticut. The
Company has also contracted for the purchase of three (3) additional properties
and/or portfolios located in New York, Texas and Indiana.
Background
A primary objective of the Company is to develop residential property
which will qualify as affordable housing ("Affordable Housing") under federal
housing programs. Properties which qualify as Affordable Housing enable the
Company to apply for tax exempt bond allocations which are used to finance the
project. Affordable Housing is defined in the Tax Reform Act of 1986 (the
"Act"), as housing for persons with a moderate or low income, and qualified
properties are subject to restrictions on the income of the tenants and the
amount of rent charged. Generally, for existing properties to qualify, the
property must have been held by the seller for at least 10 years and be in an
area where bond allocations are available. Sixty percent of the Company's
anticipated portfolio of apartments will be categorized as Affordable Housing.
The remaining forty percent of the anticipated portfolio will be comprised of
both residential and non-residential property conversions. See "Financing"
below.
In addition to Affordable Housing, the Company also seeks attractive
properties which it will purchase through traditional methods of financing and
develop into market-rate residential rental housing. Residential property
conversions are (i) market rate, multi-use properties that are purchased at a
discount and then constructed or substantially rehabilitated; and (ii)
non-residential properties such as a warehouse or plant that has unique
architectural qualities, such as high ceilings and arched doorways. Upon
conversion into residential condominiums or rentals, these qualities become
marketing tools. The Company believes such conversions are popular in
redeveloping urban areas and will be a source of revenue in the future. However,
no such conversions have been effected to date.
The Company identifies Affordable Housing properties for potential
acquisition by maintaining steady contact with its network of real estate
brokers. The Company informs the brokers that it is interested in acquiring
property in certain locations within a designated state which are eligible for
tax exempt bond and tax credit financing. The Company, through its network of
real estate brokers and bond financiers, is then able to identify eligible
housing properties for possible acquisition.
After the Company has identified an Affordable Housing property, the
Company prepares an application for tax exempt bond and tax credit financing,
and submits the application to the appropriate governmental entity. In addition
to the application, the Company must, among other things, conduct a market
study, provide an architectural analysis of the property, obtain a property
appraisal, and prepare an environmental study and analysis of the property. Upon
approval of the application, the Company receives an allotment of Tax Exempt
Bonds (as defined below), which are automatically accompanied by an allotment of
Tax Credits (as defined below) if the criteria for receiving Tax Credits is
satisfied. The bonds and the tax credits will be used to finance the
acquisition.
The Company, through a third party, sells the Tax Exempt Bonds to
nonaffiliated purchasers. The Company sells limited partnership interests that
entitle the limited partners to receive the Tax Credits. The proceeds of the
sale of the tax exempt bonds and the limited partnership interests are
thereafter used to finance the acquisition of the property. The Company then
closes on the property and receives various fees and reimbursements at the
closing. Transactional fees earned by the Company may include acquisition fees,
rehabilitation fees, general partner fees, and other fees associated with the
financing and purchase of a property. The realization of these fees is dependent
upon the number, type and terms of the purchase and financing transactions that
occur during the course of the year. Following the closing the Company
rehabilitates the property and leases the units.
In addition to the fees received at closing, the Company receives
income from the acquired property through management fees and income
participation. The Company provides several services to the properties
including, but are not limited to, marketing, ownership property reviews, social
service programs for parents, and outreach programs for children that may
include computer learning workshops, tutoring, and organized sports activities.
The Company believes that providing these services reduces apartment turnover,
helps maintain the tenants' quality of life, and controls costs, thereby further
improving profitability.
The Company believes that there is a considerable need for quality
Affordable Housing in the United States, and historically, demand has exceeded
supply. The Company also believes there is a strong market in the conversion of
undervalued market-rate residential properties where new construction or
substantial rehabilitation is required, and in the conversion of non-residential
property to unique residential and loft-type living. Moreover, the founders of
the Company are experienced in these types of conversions and the Company
believes, but cannot assure, it will achieve significant revenues from this area
in the future.
The Company has been in operation only since 1996, and there can be no
assurance it will be able to develop a commercially viable or profitable
business.
Current Operations
The Company believes that strong property management and "hands on"
asset management of its investments is essential to maintaining profitable
operations. Accordingly the Company has established its own on-site management
in areas where the Company has a substantial investment, such as Texas and the
Northeast. In other areas the Company will utilize the best available regional
outside management firms, when necessary, to assist in the operation of the
properties.
Whether the Company is the on-site property manager or off-site asset
manager, the Company strives to oversee every detail in the operation of each
property. Every property managed directly by the Company has a senior manager of
the Company responsible for the day to day operations of the property, and every
site operated by the Company through its asset management division has a
principal of the Company directly responsible for the property. In addition, the
Company engages third parties to verify key financial information and tenant
certification issues, and each property is visited periodically by one of the
principals of the Company. The Company believes that intense and active
management of the Company's assets is necessary to ensure the proper operation
and maintenance of its facilities.
The Company currently owns properties in Texas and Connecticut with
contracts pending for properties in Indiana, Texas, and New York. The following
is a description of the property under management as well as properties subject
to purchase agreements. Willow Pond Apartments Located in Dallas, Texas, the
Willow Pond Apartments, formerly known as the Glen Hills Apartments, is a
386-unit complex located at 6003 Abrams Road. It was renovated by the Company
and is now fully occupied. In addition to the renovation, the Company
established a computer learning facility which provides tenants' children with
professional instruction in, among other things, the use of the internet and
spreadsheet skills. Adults are offered the opportunity to learn word processing
and spreadsheet skills or improve existing skills to aid them in the work place.
The Willow Pond complex is an Affordable Housing project purchased for
approximately $8,400,000. Willow Pond is owned by a limited partnership of which
the Company is the general partner with a 1% interest in the partnership, a 90%
interest the net income, and an 80% interest in the residual value of the
partnership. The Company sold limited partnership interests for $2,500,000 and
the limited partners own 99% of the property and the right to receive 10% of the
net income. The balance of the funding was obtained through mortgages on the
property.
Putnam Square Apartments
The Putnam Square Apartments ("Putnam Square") is an Affordable Housing
complex composed of 18 residential units located in Bridgeport, Connecticut. In
November 1997, in return for an indemnification against operating losses of up
to $65,000, and an agreement to operate and rehabilitate the facility, the
Company succeeded to the interests of the general partner of the partnership
that originally owned the property. The Company has substantially renovated the
property and approximately 90% of the units are currently rented.
Proposed Properties:
Prairie Village Apartments
The Prairie Village Apartments ("Prairie Village") is a 120-unit
Affordable Housing project that the Company is under contract to purchase for
$804,000. Anticipated renovation costs are estimated to be approximately
$1,700,000. The Company has secured tax exempt bond funding in the amount of
$2,400,000, the proceeds of which have been placed in escrow pending the
closing. The Company also intends to sell $500,000 of taxable bonds guaranteed
by the United States Department of Housing and Urban Development ("HUD") at the
closing. In addition, the Company will sell $950,000 in limited partnership
interests and the limited partners will be entitled to certain tax credit
benefits. The project cost is $3,850,000, including the establishment of an
approximately $1,300,000 reserve for future renovations, repairs and
maintenance. At the closing, the Company will draw the purchase price from the
escrowed funds. Thereafter, the Company will periodically draw the remaining
escrowed funds over a six-month period to finance the renovation costs of
approximately $1,700,000.
However, the contract is subject to numerous contingencies, and there can
be no assurance that the Company will be able to secure the necessary financing
or otherwise consummate the purchase of the property.
Briar Meadows Apartments
The Company has entered into a contract for the purchase of the Briar
Meadows Apartments ("Briar Meadows"), a 120-unit residential complex located in
Dallas, Texas for $1,050,000. The Company will substantially rehabilitate the
units after the closing of the transaction at an anticipated cost of $500,000.
The Company expects to finance the project with a mortgage in the amount of
approximately $1,395,000 and through an equity investment. This is a market rate
transaction and the Company will not utilize any government guarantee programs.
This transaction is subject to the receipt of financing, as well as other
contingencies, and there can be no assurance that the Company will be able to
complete this purchase.
Schenectady, New York
The Company has entered into an agreement to purchase a market-rate
apartment complex comprised of 156 completed units, 26 units "to-be-completed,"
and vacant land for a proposed 220 additional units. The purchase price for the
existing properties is $3,725,000. The Company is currently attempting to secure
the required financing, and there can be no assurance that the transaction will
be completed.
Financing:
Affordable Housing Financing
The Company purchases Affordable Housing properties through the use of
relatively small amounts of equity capital, the sale of tax credit benefits to
tax credit investor limited partners and the use of low-interest tax exempt
bonds. The Company will often purchase Affordable Housing properties with
relatively small amounts of Company capital through the use of low interest
rate, non-recourse bonds, thereby preserving Company assets for other
transactions. Equity for the purchase is obtained through the sale of a
partnership interest in the property to an investor-limited partner ("Partner")
for cash in exchange for the tax credit benefits associated with the property at
the close. From the transaction, the Company receives: 1) reimbursement of
expenses; 2) an acquisition fee (1-2% of the acquisition); 3) a rehabilitation
fee (7% of any rehabilitation or construction); 4) a management fee (5% of total
income); 5) retention of approximately 90% of all operational income; and 6) 80
- - - 90% of the residual value.
Conversions Financing
A market-rate residential purchase or non-residential conversion of
undervalued, non-residential property that the Company substantially
rehabilitates will be financed with an equity investment of 10-20% of the
project costs with the balance furnished by debt financing. These properties are
generally well situated and/or architecturally unique but due to the need for
significant rehabilitation can be purchased at low prices. The Company believes
this method of acquisition, rehabilitation and financing is much more cost
effective than the approximate $30,000 cost to construct comparable new units.
Low Income Housing Tax Credits
A significant portion of the Company's housing portfolio is financed
through the use of low income housing tax credits (the "Tax Credits").
Generally
Tax Credits were created by the Tax Reform Act of 1986, which
established a single program of Tax Credits benefiting the owners of rental
housing developments specifically targeted to a defined group of lower income
households. Tax Credits can be utilized by the owner of the development and
constitute a dollar for dollar reduction of the owner's federal tax liability.
In the case of pass-through tax entities such as limited partnerships and
limited liability companies, each owner of the entity (i.e., the partners in the
case of a limited partnership or the members in the case of a limited liability
company) is allocated a proportionate share of the Tax Credits which may be used
as a direct reduction of that person's federal tax liability. Individuals and
corporations may utilize the Tax Credits to reduce their federal income tax
liability.
State Allocation of Tax Credits
State housing agencies are responsible for the allocation of Tax Credits
and for monitoring compliance. Each state annually may allocate Tax Credits
equal to $1.25 per state resident (the "Volume Cap"). In addition to its Volume
Cap, a state annually may also allocate an unlimited amount of Tax Credits to
low income housing projects financed with tax-exempt bonds (the "Bond
Allocation"). (See, Tax-Exempt Bond Financing).
Qualifying for Tax Credits
Tax Credits are obtained through an application to the responsible
state agency. Tax Credits are allocated to developments which meet certain
threshold requirements set forth in the Internal Revenue Code and the particular
State Agency's Qualified Allocation Plan ("QAP"). Bond Allocation applicants,
because they are not part of the Volume Cap, do not compete for the Tax Credits.
Once a Bond Allocation development has received its allocation of bonding
authority, it will receive a Tax Credit Allocation if that applicant meets the
minimum threshold standards for a Tax Credit allocation.
Volume Cap Tax Credits and Bond Allocation Tax Credits are allocated to
developments involving either new construction or rehabilitation of existing
housing developments. In addition, Volume Cap Tax Credits and Bond Allocation
Tax Credits may also be awarded for the acquisition of an existing development
if that development qualifies for the rehabilitation Tax Credits.
The amount of the Tax Credit allocated for a new development will be
the equivalent of 70% of the present value (determined over a ten-year period)
of the eligible basis, which includes costs of construction and other
permissible fees and expenses. The amount of the Tax Credit allocated for a
rehabilitation development will be the equivalent of 70% of the present value
(determined over a ten-year period) of the cost of the rehabilitation. The
amount of the Tax Credit allocated for qualified acquisitions will be the
equivalent of 30% of the acquisition cost. If any portion of the permanent
financing for the development is provided at below market interest rates by or
through the federal government, except for certain exceptions, the amount of the
Tax Credit allocated will be the equivalent of 30% of the present value
(determined over a ten-year period) of the cost of the new or construction or
rehabilitation.
The amount of the Tax Credit allocated in Bond Allocation developments
is the equivalent of 30% of the present value (determined over a ten-year
period) of the cost of the new construction or rehabilitation, as the case may
be, and 30% of the cost of acquisition if the development also receives
rehabilitation credits.
The amount of the Tax Credits allocated to a development is also a
function of eligible costs of construction or rehabilitation ("Eligible Basis"),
the number of housing units in the development which are deemed to be qualified
low income units, and the applicable federal rate ("AFR") which is the factor
used to arrive at the present value of the Tax Credits over ten years. The
number of qualified low income units is determined by the number of rental units
in the development which are rented to qualified low income tenants at the
appropriate low income rents. A development must elect a low income set aside
test ("Set Aside"), which is either (1) 40% of the units rented to tenants whose
income is 60% of the area median income or (2) 20% of the units rented to
tenants whose income is 50% of the area median income. Area median income is
determined for all localities in the United States HUD. The Set Aside is a
threshold for Tax Credit Allocation qualification, but due to the intense
competition for Tax Credits, State Agencies have successfully required
developments to set aside more units at significantly lower rent. For a housing
unit to be considered a low income unit, it must be rented at no more than 30%
of the tenant's income. The rental amount is adjusted for family size.
Utilization and Loss of Tax Credits
The Tax Credits are taken over a period beginning in the year in which
the development first is occupied by tenants ("Placed in Service") and ending
ten years later ("Tax Credit Period"). Developments must remain in compliance
with their initial low rent levels and the initial low income occupancy levels
for a minimum of 15 years ("Compliance Period"), but in order to qualify for the
Tax Credits in the first instance, developments must agree ("Extended Use
Agreement") to remain in compliance with the rent levels and the low income
occupancy levels for an additional 15 years beyond the Compliance Period
("Extended Use Period").
Developments are subject to Tax Credit Recapture during the Compliance
Period if they fall below the required number of low income units, if the rental
amounts exceed the targeted rates, if units are rented to tenants whose incomes
exceed the maximum allowed, or if they are transferred. In years 1-11 the amount
of the recapture is equal to one-third of all of the prior Tax Credits claimed
by the taxpayer, and in years 12-15 the amount of the recapture is one-fifteenth
of all of the prior Tax Credits claimed by the taxpayer.
Disposition of Tax Credit Developments
Generally, Tax Credit Developments can be disposed of at any time. When
and how the disposition occurs controls whether there will be Tax Credit
Recapture, and whether the development will remain subject to the Extended Use
Agreement.
Value of the Credits; Sale to Investors and Relationship with Investors
The Company believes the Tax Credit is the single most important source
of equity capital for low income housing developments. Since Tax Credits result
in a dollar for dollar reduction of a taxpayer's federal tax liability, the Tax
Credits are the equivalent of cash in the amount of the tax savings. There is a
significant market for Tax Credits. Generally, developers who have been
allocated Tax Credits form limited partnerships in which the developer acts as
the general partner and the purchaser of the Tax Credits acts as the limited
partner. The value of the Tax Credits and other benefits are allocated between
the partners based upon an agreed upon percentage for each of the items of
benefit such as Tax Credits and cash flow. In the recent past prices paid for
Tax Credits have been in the range of fifty cents to eighty cents per dollar of
Tax Credits. The sale of Tax Credits generates a significant amount of the
equity required to finance the development and operation of low income housing.
Every Tax Credit purchaser has different investment criteria, required
rates of return, and exit strategies. Generally, a developer can expect to
receive a portion of the proceeds from the purchaser during construction or
rehabilitation of the development, a portion when the development is
substantially complete and the remainder when the development has achieved
predetermined stabilized rent and occupancy levels. The partnership agreement
between the Developer and the Tax Credit Purchaser will contain many provisions
which govern the operation of the development, which require regular periodic
reporting, which provide the Tax Credit purchaser with certain remedies if the
development falls out of Tax Credit compliance, and which provides the Tax
Credit purchaser with an exit strategy after 15 years. Tax-Exempt Bonds
Of the three types of tax-exempt bonds available for affordable
housing, the ones which will be used in connection with the Company's
developments are known as private activity bonds issued under Section 142(d) of
the Internal Revenue Code (Tax Exempt Bonds). Private activity bonds are subject
to a Volume Cap for each state equal to the greater of $150 million or $50 per
person. These Volume Cap private activity bonds are the bonds that qualify for
Bond Allocation Tax Credits. (See "Low Income Housing Tax Credits"). Tax-exempt
bonds provide a low interest rate source of debt financing for housing
developments.
Once a local or state agency has passed a resolution inducing the
development ("Inducement Resolution"), the owner of the development can apply to
the appropriate agency for a bond allocation. At the same time the owner of the
development applies for a credit enhancement that guarantees the repayment of
the bonds to the bondholders. The credit enhancement enables the issuer of the
bonds to charge a lower rate of interest on the loan to the development. Once
the credit enhancement is obtained, the issuer can sell its bonds and lend the
money to the development. The revenues of the development are used to make the
monthly payments of principal and interest on the mortgage which are used to
repay the principal and interest on the bonds.
Utilization of tax-exempt bonds adds time to the development process
because of the regulatory approvals necessary, and adds a layer of regulatory
compliance because certain of the Internal Revenue Service regulations must be
complied with to continue the bonds' tax-exempt status. In all other respects,
utilization of tax-exempt bonds to provide debt financing differs little from
the use of conventional mortgage financing.
Each property type is tailored to a specific method of financing
designed by the Company to allow for maximum profitability.
Government Regulations
The Company is subject to environmental and other governmental
regulations. Compliance with laws and regulations governing the business of the
Company could be difficult, expensive, and time-consuming and require
significant managerial and legal supervision. Failure to comply with such laws
and regulations could result in a materially adverse effect on the Company.
Further, any changes in any of these laws and regulations could materially and
adversely affect the Company. There is no assurance that the Company will be
able to secure on a timely basis or at all, any necessary regulatory approvals
in the future. These regulations and related considerations include, but are not
limited to, federal government tax-exempt bond laws and regulations, allocations
of specific amounts of bonds to the various states, state regulations, state
political decisions as to how to use the allocations, obtaining bond inducement
resolutions from state and municipalities and the continued availability of the
HUD insurance, should it be found necessary. In addition, the Company is often
dependent on ratings by bonds offered to finance the real estate.
Competition
All of the properties currently owned, or under agreement to be
purchased, by the Company are located in developed areas. There are numerous
other multifamily properties and real estate companies, many of which have
greater financial and other resources than the Company, within the market area
of each of the properties which will compete with the Company for tenants and
development and acquisition opportunities. The number of competitive multifamily
properties and real estate companies in such areas could have a material effect
on (i) the Company's ability to rent the apartments and the rents charged and
(ii) development and acquisition opportunities. The activities of these
competitors could cause the Company to pay a higher price for a new property
than it otherwise would have paid or may prevent the Company from purchasing a
desired property at all, which could have a materials adverse effect on the
Company. In addition, there is intense competition for Tax Credit and Tax Exempt
Bond allocations, and many of these competitors have greater financial resources
and longer operating histories than the Company. There can be no assurance the
Company will be able to successfully compete in the future.
Employees
The Company employs 14 full-time employees including its executive
officers. No employees are covered by a collective bargaining agreement, and the
Company believes its relations with its employees are satisfactory.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Homes for America Holdings, Inc. and Respective Partnership Results of
Operations and Financial Condition as of December 31, 1997 and June 30, 1998
Overview
The Company is a real estate development and operating company that
owns and operates a portfolio of apartment complexes primarily located in the
Southwestern and Northeastern United States. In addition to the net rental
income derived from the operation of its portfolio of apartment complexes, the
Company earns a significant portion of its revenues and profits from
transactional fees associated with the acquisition and financing of its
properties.
Presently, 100% of the Company's portfolio consists of affordable
housing, the acquisition of which is generally financed through Low Income
Housing Tax Credits (ALIHTC) partnerships, and the use of tax exempt bond
financing. Investors in these partnerships gain various tax benefits, including
tax credits, as provided for in the Internal Revenue Code. In turn, the Company
acts as general partner in the various partnerships, receiving most or all of
the operating cash flow and residual value. In addition, the Company provides
certain guarantees to the lenders, all of which are typical of those generally
provided by general partners. The Company anticipates completing the acquisition
of and/or beginning development of market rate properties. With these
acquisitions, the Company's portfolio will approximate 60% affordable housing
and 40% market rate properties. HFAH plans to continue to own and operate its
apartment complexes for the foreseeable future. Accordingly, no cash flow from
dispositions, or gains or losses from the sale of assets, is anticipated.
In 1997, the Company completed the acquisition of a 386 unit affordable
housing property, Willow Pond, located in Dallas, Texas. Tax benefits associated
with the property were sold for $2.5 million. The Company acquired the Putnam
Square property in November, 1997, but did not actually begin operations there
until January, 1998.
The Company's revenue stream is primarily generated in one of two ways,
either from rental and related income, or transactional fees earned by the
Company in accordance with certain property purchasing and financing agreements.
Rental income and related revenues (vending, parking, late fees, etc.) result
from the ongoing operation of the Company's various rental properties. Cash
receipts occur on a relatively even basis throughout the year, though
fluctuations resulting from seasonal changes in occupancy levels can occur.
The Company's strategic plan encompasses the acquisition of up to $100
million of additional properties in 1998 and 1999. The Company presently has
agreements, or is in contract, to purchase over $10 million of property located
in the mid-Atlantic region, the Southwest, and in Indiana. These transactions
will provide equity into the Company through the sale of tax credits and other
benefits, as well as through a variety of transaction fees earned during the
course of the purchases. The Company will continue to utilize tax exempt bonds
to finance the purchases, where appropriate.
The Company was formed in 1996 and had no revenues during that year;
accordingly, the Company had a net loss of $324,800 in the year 1996. Its
expenses were limited to administrative costs related to the formation and
start-up of the Company.
The following discussion should be read in conjunction with the
consolidated financial appearing elsewhere in this form. Certain statements in
this Management's Discussion and Analysis of Financial Condition and Results of
Operations may constitute forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Company believes that the expectations
reflected in such forward looking statements are based on reasonable
assumptions, such statements are subject to risks and uncertainties, including
those discussed elsewhere in this form, that could cause actual results to
differ from those projected. The first property, Willow Pond, was acquired
during the second quarter of 1997.
Results of Operations For the twelve months ended December 31, 1997.
Revenues
Revenues reported in 1997 for the two properties owned and operated in
that year did not reflect a full year's activity because of the dates of
acquisition. Dallas/Willow Pond was owned by the Company for nine months in
1997. During that period it generated rental and related incomes of $1,526,634.
Putnam Square did not have any business activities in 1997 other than the
acquisition of the property.
Transactional fees earned by the Company may include acquisition fees,
rehabilitation fees, general partner fees, and other fees associated with the
financing and purchase of a property. In 1997, these fees were $1,082,079 and
included the following:
Development Note - Glen Hills $ 270,079
Acquisition Fees - Glen Hills 362,000
General Partner Fees - Putnam 400,000
Developer Fee - Reliance Capital - Glen Hills 50,000
----------
$1,082,079
The realization of these fees is dependent upon the number, type and
terms of the purchase and financing transactions that
occur during the course of the year.
Expenses
Reported expenses include the costs of operating the Dallas/Willow Pond
property, as well as corporate administrative expenses. As previously stated,
this property was owned by the Company for nine months in 1997 and, as such, do
not reflect a full year's activity. The Company remains committed to reducing
expenses, through effective management practices, at its present sites, as well
as those to be acquired in the future.
Real estate expenses include repairs and maintenance, utilities,
on-site payroll, insurance, property taxes and other direct expenses.
Administrative expenses comprise corporate overhead and other items not directly
chargeable to the rental property. For the year ended December 31, 1997, total
operating expenses were $1,150,367, before interest, depreciation and taxes.
Depreciation of $273,754 reflects the expense on the Glen Hills
property for the portion of the year that the Company owned the property. The
Company utilizes accelerated methods of depreciation over a seven (7) year life
for personal property. Realty is depreciated by the straight line method over
lives ranging from 25 to 27.5 years.
The 1997 interest expense of $371,883 was incurred on the mortgage
payable of $5,150,700 due on the Glen Hills property. The property was acquired
at the end of March 1997 and, therefore, the reported interest does not
represent 12 months interest. Interest expense on this property in future years
will reflect a full year's expense and will, of course, be greater.
For the six months ended June 30, 1998
Revenues
For the first six months of 1998, the Company earned rental and other
operating income, as follows:
Willow Pond $ 1,124,703
Putnam Square 43,811
----------
$1,168,514
Transactional fees earned by the company may include acquisition fees,
rehabilitation fees, general partner fees and other fees associated with the
purchase, development and financing of a property. During the six months ended
June 30, 1998, the Company earned $138,500 in general partner fees from the
Putnam Square partnership.
The realization of these fees is dependent upon the number, type and terms
of the purchase, development and financing transactions that occur during the
course of the year.
Expenses
Reported expenses include the cost of operating the Willow Pond and
Putnam Square properties, as well as corporate administrative expenses.
Real estate expenses include repairs and maintenance, utilities,
on-site payroll, insurance, property taxes, management fees and other direct
expenses. Administrative expenses comprise corporate overhead and other items
not directly chargeable to the rental properties. For the six months ended June
30, 1998, property expenses, exclusive of interest, management fees,
depreciation and amortization were as follows:
Willow Pond $ 649,359
Putnam Square 40,169
----------
$ 689,528
Interest expense included $214,762 incurred on the mortgage payable of
$5,190,366 on the Willow Pond property, and $12,000 on general corporate
obligations for a total interest expense of $226,762 for the six months ended
June 30, 1998.
Management fees are incurred by each property and generally consist of
a 5% property management fee, a 1% asset management fee, and may also include an
incentive fee. Total management fees paid by each property were:
Willow Pond $ 94,917
Putnam Square 8,275
-----------
$ 103,192
Management fees incurred by Willow Pond were paid to Homes For America
Holdings, Inc. The Company utilizes accelerated methods of depreciation over a
seven (7) year life for personal property. Realty is depreciated by the straight
line method over lives ranging from 25 to 27.5 years. For the six months ended
June 30, 1998, depreciation was as follows:
Willow Pond $ 174,000
Putnam 24,500
------------
$ 198,500
Liquidity and Capital Resources
Unrestricted cash on hand was $267,486 at December 31, 1997 and
$139,730 at June 30, 1998. In addition to unrestricted cash, at both dates the
Company had restricted proceeds from the sale of tax exempt bonds in the amount
of $2,408,200 to be used for the planned purchase of Prairie Village Apartments
in Indiana. Also as of both dates, the Company had a $1,500,000 deficit
reduction reserve held in escrow with the mortgagee of the Glen Hills property.
This escrow is to be applied against the outstanding mortgage on February 28,
1999.
The properties are generating positive cash flow to the Company.
Accordingly, the Company does not anticipate any difficulties in continuing to
meet its operating cash requirements. In addition, cash flow will be enhanced
upon the completion of certain transactions. The Company believes it will be
able to meet all of its debt obligations from property cash flow.
Future growth is dependent upon the Company's ability to secure adequate
capital to consummate acquisitions. The Company has no available capital at the
present time but believes it will be able to secure capital through bond
financing, the sale of tax credits and traditional sources of equity and debt
financing. However, there can be no assurance adequate capital for acquisitions
will be obtained.
ITEM 3. PROPERTIES, OFFICES AND FACILITIES
In New York, the Company entered into a 2-year lease, commencing in
July of 1997 for 2,500 square feet of executive office space located at 680-3
West 246th Street, Riverdale, New York 10471. The rent for the premises is $800
per month, which includes utilities. (See "Certain Relationships and Related
Transactions.") This agreement can be terminated at the Company's option.
At 1725 DeSales Street, N.W. Suite 300 Washington, DC 20036, the
Company rents 800 square feet to house its property operations/acquisitions
offices. The 2-year lease provides for monthly base rent of $500 for the first
year, and $550 for the second year. This agreement can be terminated at the
Company's option.
The Company also has an office at 6003 Abrams Road, Dallas Texas 75231.
As is the case in other regional sites, there are no leasing or tenancy costs in
Dallas since the office is located on property that the Company has already
purchased.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of June 30, 1998 by (i)
each person who is known by the Company to own beneficially more than five
percent of the Company's outstanding Common Stock; (ii) each of the Company's
directors and officers; and (iii) all directors and officers of the Company as a
group. As of June 30, 1998 there were 6,005,768 shares of Common Stock issued
and outstanding.
Shares of Common Approximate
Name of Stock Beneficially Percentage
Beneficial Owner Owned Owned
Robert A. MacFarlane 1,818,930 30.3%
680-3 West 246th Street
Riverdale, NY 10471
Robert M. Kohn (1) 1,242,930 20.7%
1725 DeSales Street, N.W.
Washington, DC 20036
Richard Weiss (2)
680-3 West 246th Street
Riverdale, NY 10471
Joel Hefron 200,000 3.3%
c/o Risk Management Corp.
P.O. Box 3685
Beverly Hills, CA 90212
Daniel Hayes, Esq. 0 0
8779 Mathis Avenue
Manassas, VA 20110
David Harwell 0 0
680-3 West 246th Street
Riverdale, NY 10471
Robert Pozner 650,000 10.8%
454 Stevens Avenue
Ridgewood, NJ 07450
Officers and Directors
as a Group (6 Persons) 3,911,860 65.1%
- - --------------------------------------------------------------------------
1. Mr. Kohn disclaims beneficial interest in shares indicated which are
owned by International Business and Realty Consultants, LLC, at which
he is employed and which is solely owned by Mr. Kohn's spouse.
2. Excludes options to purchase 100,000 shares of Common Stock vesting
quarterly over the first year of employment.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The executive officers and directors of the Company are as follows:
Name Age Office
- - ---------------------------------------------------------------------------
Robert A. MacFarlane 54 President, Chief Executive Officer
and Chairman of the Board
Richard J. Weiss 47 Chief Financial Officer
Robert M. Kohn 47 Director
David Harwell 50 Director and Secretary
Joel Heffron 54 Director
Daniel Hayes 40 Director
All directors hold office until the next annual meeting of shareholders
or until their successors are elected and qualify. Officers are elected annually
by, and serve at the discretion of, the Board of Directors. There are no
familial relationships between or among any officers or directors of the
Company.
Robert A. MacFarlane has served as the Company's Chief Executive
Officer and Chairman of the Board of the Company since 1996. From 1994 to 1996,
Mr. MacFarlane was an independent tax exempt bond and tax credit consultant.
From 1992 to 1994, he was Senior Property Acquisitions Officer of the Boutwell
Company, which represented a Rockefeller Family Trust.
Richard J. Weiss has been the Company's Chief Financial Officer since
August 1998. From 1994 to 1998, Mr. Weiss was a senior manager with Stuart
Fleischer Associates, Certified Public Accountants; from 1993 to 1994, he served
as corporate controller of Mountain Hospitality Corp.; from 1993 to 1994, Mr.
Weiss also founded and was the president of Playgrounds USA of America, Inc.;
from 1982 to 1994, Mr. Weiss served as the Chief Financial Officer of Rayel
Hotels Group; and from 1986 to 1992, he was an accountant with the firm of
Siskin, Shapiro & Company. Mr. Weiss has a B.A. in psychology from American
International College; a B.S. in Accounting from the University of Massachusetts
at Amherst where he graduated magna cum laude. Mr. Weiss is a certified public
accountant.
Robert M. Kohn has been a director of the Company since 1998. From 1979 to
1996, Mr. Kohn was the president of Alfred Kohn Realty Corporation and Schuyler
Realty. Mr. Kohn graduated cum laude from Ohio University with a B.S. in
economics. Daniel Hayes, Esq. has had an individual law practice since 1990.
From 1987 to 1990, he was the General Counsel to The Rojac Group, Inc., a real
estate development. He is admitted to the bars of Virginia, the District of
Columbia and Illinois. He holds a JD from Cornell Law School.
David Harwell has been the Company's Operations Manager since 1996.
Previously, he was corporate controller for ABC Air Freight, Inc. for over six
years. Prior to 1990, he was an accountant in independent practice. Mr. Harwell
holds an B.B.A. in finance from Baruch College.
Joel Heffron, Esq. has been president of Risk Management Corp. since 1994,
a company that assists businesses in the conversion and disposal of assets. From
1987 to 1994, he was president of Westminster Equities and, from 1983 to 1987 he
was, vice president of Whitney Stores, Inc. From 1966 to 1983, Mr. Heffron was a
partner in the law firm of Sohn, Gross, Findlay and Heffron, New York, NY. He
holds a Bachelor of Laws degree from New York University. Committees of the
Board of Directors The Board of Directors has two Committees: Audit and
Compensation.
Audit Committee. The members of the Audit Committee are Daniel Hayes
and Joel Heffron. The Audit Committee acts to: (i) acquire a complete
understanding of the Corporation's audit functions; (ii) review with management
the finances, financial condition and interim financial statements of the
Corporation; (iii) review with the Corporation's independent auditors the
year-end financial statements; and (iv) review implementation with the
independent auditors and management any action recommended by the independent
auditors. The Audit Committee was formed during the current fiscal year and has
not met yet.
Compensation Committee. The members of the Compensation Committee are
Daniel Hayes and Joel Heffron. The Compensation Committee functions include
administration of the Corporation's 1998 Employee Stock Option Plan and
Non-Executive Director Stock Option Plan and negotiation and review of all
employment agreements of executive officers of the Corporation. The Compensation
Committee was formed during the current fiscal year and has not met to date.
Meetings of the Board of Directors During the fiscal year ended December 31,
1998, the Board of Directors of the Company met on three occasions and voted by
unanimous written consent on three occasions. No member of the Board of
Directors attended less than 75% of the aggregate number of (i) the total number
of meetings of the Board of Directors; or (ii) the total number of meetings held
by all Committees of the Board of Directors.
ITEM 6. EXECUTIVE COMPENSATION
The following table provides certain information concerning all Plan
and Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation
awarded to, earned by, paid by the Company during the years ended December 31,
1997 to each of the named executive officers of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation
---------------------------------------------------
Long Term Compensation Awards
Name/Principal Fiscal Salary/ Other Annual Restricted Number of
Principal Year Bonus Compensation Stock Awards Securities
Underlying
Options/SARS
- - -------------------- ----- ------- ------------ ------------ ------------
Robert A. MacFarlane 1997 $/0 (1) 0 0
Chairman, President
and Chief Executive
Officer
Richard J. Weiss 1997 $/0 0
Chief Financial
Officer(2)
1. Compensation received as a consultant to the Company. During fiscal
1997, Mr. MacFarlane received consultant fees of $120,000.
2. Richard J. Weiss commenced employment with the Company in August 1998.
Stock Option Grants
No stock options were granted during the year ended December 31, 1997.
Employment Agreements
The Company has employment contracts with certain of its employees. The
following is a brief description of each contract.
Robert A. MacFarlane
In August 1998, the Company entered into a five-year employment
agreement. The contract provides for Mr. MacFarlane to receive a base salary at
the rate of $186,000 per year for the period covering August 1998 through
December 1998. Thereafter, his base salary will be determined annually by the
Company's Board of Directors, with a minimum annual increase in base salary of
5%. The contract provides for the reimbursement for all reasonable expenses
incurred by Mr. MacFarlane on behalf of the Company. The contract is subject to
termination provisions and also contains a two year non-competition provision.
Mr. MacFarlane or an affiliated entity, is entitled to receive separate
compensation as consulting and/or brokerage fees for sales of tax credits for
Company transactions. The Company has also agreed to pay F.C. Partners, of which
Mr. MacFarlane is a partner, a one time payment of $64,400 for reimbursement of
expenses incurred in the investigation of a project which the Company chose not
to pursue.
Compensation of Directors
Directors were not compensated for their services as such during the last
fiscal year. The Directors receive options to purchase 15,000 shares for each
year of service under the Non-Executive Director Stock Option Plan and are
reimbursed for expenses incurred in order to attend meetings of the Board of
Directors.
Stock Option Plans
In September 1998, the Company adopted the 1998 Employees Stock Option
Plan (the "Plan") which provided for the grant of options to purchase up to
750,000 shares of the Company's Common Stock. Under the terms of the 1998 Plan,
options granted thereunder may be designated as options which qualify for
incentive stock option treatment ("ISOs") under Section 422A of the Code, or
options which do not so qualify ("Non-ISOs").
The 1998 Plan is administered by a Compensation Committee designated by
the Board of Directors. The Compensation Committee has the discretion to
determine the eligible employees to whom, and the times and the price at which,
options will be granted. Whether such options shall be ISOs or Non-ISOs; the
periods during which each option will be exercisable; and the number of shares
subject to each option, shall be determined by the Committee. The Board or
Committee shall have full authority to interpret the 1998 Plan and to establish
and amend rules and regulations relating thereto.
Under the 1998 Plan, the exercise price of an option designated as an
ISO shall not be less than the fair market value of the Common Stock on the date
the option is granted. However, in the event an option designated as an ISO is
granted to a ten percent stockholder (as defined in the 1998 Plan) such exercise
price shall be at least 110% of such fair market value. Exercise prices of
Non-ISOs options may be less than such fair market value. The aggregate fair
market value of shares subject to options granted to a participant, which are
designated as ISOs that become exercisable in any calendar year shall not exceed
$100,000. The "fair market value" will be the closing NASDAQ bid price, or if
the Company's Common Stock is not quoted by NASDAQ, as reported by the National
Quotation Bureau, Inc., or a market maker of the Company's Common Stock, or if
the Common Stock is not quoted by any of the above, by the Board of Directors
acting in good faith.
The Compensation Committee may, in its sole discretion, grant bonuses
or authorize loans to or guarantee loans obtained by an optionee to enable such
optionee to pay any taxes that may arise in connection with the exercise or
cancellation of an option.
Unless sooner terminated, the 1998 Plan will expire in 2008.
In September 1998, the Board of Directors adopted the Non-Executive
Director Stock Option Plan (the "Director Plan"). The Director Plan provides for
issuance of a maximum of 400,000 shares of Common Stock upon the exercise of
stock options granted under the Director Plan. Options are granted under the
Director Plan until April, 2008 to (i) non-executive directors as defined and
(ii) members of any advisory board established by the Company who are not
full-time employees of the Company or any of its subsidiaries. The Director Plan
provides that each non-executive director will automatically be granted an
option to purchase 15,000 shares, upon joining the Board of Directors, and on
each September 1st thereafter, provided such person has served as a director for
the 12 months immediately prior to such September 1st. Similarly, each eligible
director of an advisory board will receive, upon joining the advisory board, and
on each September 1st thereafter, an option to purchase 10,000 shares of the
Company's Common Stock, providing such person has served as a director of the
advisory board for the previous 12 month period.
The exercise price for options granted under the Director Plan shall be
100% of the fair market value of the Common Stock on the date of grant. The
"fair market value" will be the closing NASDAQ bid price, or if the Company's
Common Stock is not quoted by NASDAQ, as reported by the National Quotation
Bureau, Inc., or a market maker of the Company's Common Stock, or if the Common
Stock is not quoted by any of the above by the Board of Directors acting in good
faith. Until otherwise provided in the Stock Option Plan the exercise price of
options granted under the Director Plan must be paid at the time of exercise,
either in cash, by delivery of shares of common Stock of the Company or by a
combination of each. The term of each option commences on the date it is granted
and unless terminated sooner as provided in the Director Plan, expires five
years from the date of grant. The Director Plan is administered by a committee
of the board of directors composed of not fewer than three persons who are
officers of the Company (the "Committee"). The Committee has no discretion to
determine which non-executive director or advisory board member will receive
options or the number of shares subject to the option, the term of the option or
the exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan are not qualified for incentive stock option treatment.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has an agreement with Mr. Robert MacFarlane, the Company's
Chief Executive Officer, whereby he retains the right to earn commissions on
certain tax credit transactions that were procured by him prior to his
employment as Chief Executive Officer of the Company. All commissions, if any,
paid to Mr. MacFarlane are for amounts consistent with industry standards for
transactions of this type. Since inception, and through October 15, 1998, Mr.
MacFarlane has been paid $62,500 in commissions.
Mr. MacFarlane also owns the property in which the Company's New York
office is located. See Business - Properties. The Company has an agreement with
Mr. Robert Kohn, a Director of the Company, whereby he retains the right to earn
real estate broker fees on certain transactions that were procured by him prior
to his appointment as Director. The Company believes that all commissions, if
any , paid to Mr. Kohn are for amounts consistent with industry standards for
transactions of this type. The Company engages one of its shareholders,
International Business Realty & Consultants, LLC ("IBRC"), to perform various
consulting services related to the purchase, acquisition, and management of its
properties. Mr. Robert M. Kohn, a Director of the Company, is an employee of
IBRC and actually performs services for the Company on behalf of IBRC. IBRC is
wholly owned by Mr. Kohn's spouse. Since inception and through October 15, 1998,
IBRC has been paid $254,000 for consulting services. In January 1997, the
Company entered into a settlement agreement (the "Settlement Agreement") with a
former financial consultant of the Company (the "Former Consultant") and Homes
For America, L.C., a Virginia Corporation which is an affiliate of the Company
and principally owned by the Company's President, Chief Executive Officer and
Chairman of the Board, Mr. Robert MacFarlane. Among other things, the Settlement
Agreement provided for the termination of a consulting agreement, and any other
relationship, between the Company and the Former Consultant. Pursuant to the
Settlement Agreement, the Company agreed to pay the Former Consultant $89,096.88
and reimburse the Former Consultant $15,891.43 for out-of-pocket expenses. The
Former Consultant agreed to surrender 2,000,000 restricted shares of Common
Stock of the Company and also agreed to transfer the remaining 500,000 shares of
common stock it owned to Homes For America, L.C. By Unanimous Written Consent
dated February 14, 1997, the Company, for various financial and consulting
services, transferred the 2,000,000 shares of the Company's common stock
represented by the Former Consultant's surrendered shares, to Homes For America,
L.C.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 25,000,000 shares of Common Stock, par
value $.001 per share, and 5,000,000 shares of Preferred Stock, par value $.001
per share. As of June 30, 1998, there were 6,005,768 shares of Common Stock
issued and outstanding. Common Stock Subject to the rights of the holders of any
shares of Preferred Stock which may be issued in the future, holders of shares
of Common Stock of the Company are entitled to cast one vote for each share held
at all stockholders' meetings for all purposes, including the election of
directors. Directors are elected each year at the Company's annual meeting of
stockholders to serve for a period of one year and until their respective
successors have been duly elected and qualified. Common stockholders have the
right to share ratably in such dividends on shares of Common Stock as may be
declared by the Board of Directors out of funds legally available therefor. Upon
liquidation or dissolution, each outstanding share of Common Stock will be
entitled to share equally in the assets of the Company legally available for
distribution to stockholders after the payment of all debts and other
liabilities, subject to any superior rights of the holders of Preferred Stock.
Common stockholders have no pre-emptive rights. There are no conversion
or redemption privileges or sinking fund provisions with respect to the Common
Stock. All of the outstanding shares of Common Stock are, and all of the shares
of Common Stock offered hereby will be, validly issued, fully paid and
non-assessable. The Common Stock does not have cumulative voting rights so
holders of more than 50% of the outstanding Common Stock can elect 100% of the
Directors of the Company if they choose to do so, subject to the rights of the
holders of outstanding Series A Preferred Stock.
Preferred Stock
The Board of Directors is authorized to issue shares of Preferred
Stock, $.10 par value per share, from time to time in one or more series. The
Board may issue a series of Preferred Stock having the right to vote on any
matter submitted to stockholders, including, without limitation, the right to
vote by itself as a series, or as a class together with any other or all series
of Preferred Stock. The Board of Directors may determine that the holders of
Preferred Stock voting as a class will have the right to elect one or more
additional members of the Board of Directors, or the majority of the members of
the Board of Directors. The Board of Directors has designated a series of
preferred stock as Series A Preferred Stock which has the right to elect a
majority of the Board of Directors. The holders of Preferred Stock who have the
right to elect a majority of the Board of Directors, are able to control the
Company's policies and affairs.
The Board of Directors may also grant to holders of any series of Preferred
Stock preferential rights to dividends and amounts payable in liquidation.
Furthermore, the Board of Directors may determine whether the shares of any
series of Preferred Stock may be convertible into Common Stock or any other
series of Preferred Stock of the Company at a specified conversion price or
rate, and upon other terms and conditions as determined by the Board of
Directors. Transfer Agent Signature Stock Transfer, Inc. of Dallas, Texas, is
the Company's stock transfer agent.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
There is no established trading market for the Company's Common Stock. The
Company has not paid any cash dividends and does not anticipate that it will pay
cash dividends in the foreseeable future. Payment of dividends is within the
discretion of the Company's Board of Directors and will depend, among other
factors, upon the Company's earnings, financial condition and capital
requirements.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings that could have a
material adverse effect on its business.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Since inception the Company has sold securities in the manner set forth
below without registration under the Securities Act of 1933, as amended (the
"Act"):
In October, 1996, in connection with the founding of the Company, the
Company issued 3,324,700 shares of Common Stock to 16 individuals and entities.
This transaction was exempt from registration under the Act, pursuant to Section
4(2) promulgated thereunder as a transaction by an issuer not involving a public
offering. No underwriter was involved in the transaction.
During the period April 1996 and January 1997, the Company sold 370,000
shares of Common Stock at an offering price of $2.00 per share. In addition, in
connection with the transaction, the Company issued 3,500,000 shares of common
stock services rendered to a broker-dealer, which issuance was subsequently
rescinded on January 1, 1997. This transaction was exempt from registration
under the Act, pursuant to Rule 504 and the rules and regulation promulgated
thereunder.
In July, 1998, the Company issued a promissory note in the amount of
$250,000, and 25,000 shares of Common Stock and warrants to purchase 30,000
shares of Common Stock to one investor in a private transaction. This
transaction was exempt from registration under the Act, pursuant to Section 4(2)
promulgated thereunder as a transaction by an issuer not involving a public
offering. No underwriter was involved in the transaction.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of Nevada provides generally that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative in nature
to procure a judgment in its favor, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, in a proceeding not by or in
the right of the corporation, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by him in connection with such suit or
proceeding, if he acted in good faith and in a manner believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reason to believe his conduct was
unlawful. Delaware law further provides that a corporation will not indemnify
any person against expenses incurred in connection with an action by or in the
right of the corporation if such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for the expenses which such court shall deem proper.
The By-Laws of the Company provide for indemnification of officers and
directors of the Company to the greatest extent permitted by Delaware law for
any and all fees, costs and expenses incurred in connection with any action or
proceeding, civil or criminal, commenced or threatened, arising out of services
by or on behalf of the Company, providing such officer's or director's acts were
not committed in bad faith. The By-Laws also provide for advancing funds to pay
for anticipated costs and authorizes the Board to enter into an indemnification
agreement with each officer or director.
In accordance with Nevada law, the Company's Certificate of
Incorporation contains provisions eliminating the personal liability of
directors, except for breach of a director's fiduciary duty of loyalty to the
Company or to its stockholders, acts or omission not in good faith or which
involve intentional misconduct or a knowing violation of the law, and in respect
of any transaction in which a director receives an improper personal benefit.
These provisions only pertain to breaches of duty by directors as such, and not
in any other corporate capacity, e.g., as an officer. As a result of the
inclusion of such provisions, neither the Company nor stockholders may be able
to recover monetary damages against directors for actions taken by them which
are ultimately found to have constituted negligence or gross negligence, or
which are ultimately found to have been in violation of their fiduciary duties,
although it may be possible to obtain injunctive or equitable relief with
respect to such actions. If equitable remedies are found not to be available to
stockholders in any particular case, stockholders may not have an effective
remedy against the challenged conduct.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and therefore is
unenforceable.
PART F/S
FINANCIAL STATEMENTS
To the Board of Directors
Homes for America Holdings, Inc.
We have audited the accompanying consolidated and unconsolidated balance sheets
of Homes for America Holdings, Inc., a Nevada Corporation and Dallas/Glen Hills
Limited, a Texas partnership, and the related consolidated and unconsolidated
statements of operations, retained earnings (deficit), and cash flows for the
years ended December 31, 1997 and 1996. These consolidated and unconsolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements of the
Dallas/Glen Hills Limited Partnership which statements reflect total assets of
$8,227,397 and total revenues of $1,526,634. These amounts represent 69% of the
total assets and 58% of the total revenues for the years ended December 31,
1997. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion insofar as it related to the amounts included
for Dallas/Glen Hills Limited Partnership is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated and unconsolidated financial statements referred to the above
present fairly, in all material respects, the financial position of Homes for
America Holdings, Inc. as of December 31, 1997 and 1996 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
RAPPAPORT, STEELE & COMPANY, P. C.
New York, New York
March 2, 1998
Homes For America Holdings, Inc.
CONSOLIDATED AND UNCONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
- - -------------------------------------------------------------------------------
Unconsolidated
December 31, December 31,
1997 1996
- - --------------------------------------------------------------------------
RENTAL AND OTHER PROPERTY (Note 2):
Land $ 904,000 $
Building 5,503,635
Equipment 6,310
Accumulated Depreciation (260,014)
--------- ---------
Net Rental Property and Other 6,153,931
--------- ---------
CURRENT ASSETS:
Cash 267,486 5,553
Deposit for Acquisition 51,000
Due from Partnerships:
Corporate Partner SLP
Dallas/Glen Hills (Related) 140,846
Putnam Square LTD Partnership 200,000
Middlebury Elkart LP 127,306
Other 13,715
--------- ---------
Total Current Assets 749,353 56,553
--------- ---------
OTHER ASSETS (Note 2):
Note Receivable TVMJG
Putnam Sq. LTD Partnership 200,000
Restricted Cash Deposits(Note 2) 2,408,200
Escrow Deposit 1,500,000
Deficit Guarantee Escrow 15,242
Investments - Glen Hills Partnership 447,116 190,823
- - - Middlebury Elkart Prairie Village 62,747
- - - University Park Continental Apt. 134,410 80,000
Deferred: Financing Costs (Note 2) 118,571
: Management Fees 104,325
--------- ---------
Total Other Assets 4,990,611 270,843
--------- ---------
TOTAL ASSETS $11,893,895 $327,396
--------------- ---------------
Unconsolidated
December 31, December 31,
1997 1996
- - ----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS
EQUITY (Note 2)
LONG TERM LIABILITIES:
Mortgage Payable $5,150,700 $
Notes Payable - Other 318,157
Security Deposits 44,198
Due to Middlebury Elkart LP 2,408,200
Deferred Income Taxes 179,700
--------- ---------
Total Long Term Liabilities 8,100,955
--------- ---------
Current Liabilities:
Current Maturities of Long-Term Debt 372,695
Accounts Payable 204,739 60,991
Interest Payable 46,492
Real Estate Tax Payable 107,738
Unearned Rent 9,577
Commissions Payable 21,850
Notes Payable - Current 227,450
--------- ---------
Total Current liabilities 763,091 288,441
--------- ---------
Total Liabilities 8,864,046 288,441
--------- ---------
Stockholders' Equity and Minority
Interests:
Common Stock - par value .001, 25,000,000
shares authorized, issued 6,548,966 shares 6,549 10,772
Paid-in Capital 771,651 559,428
Stock Subscriptions Receivable (Note 5) (211,268) (206,445)
Treasury Stock (103,250)
Minority Interest -
Dallas/Glen Hills (Note 2) 2,286,258
Retained Earnings (Deficit) 279,909 (324,800)
--------- ---------
Total Stockholders' Equity 3,029,849 38,955
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $11,893,895 $327,396
----------------- ---------------
See notes to financial statements.
Homes For America Holdings, Inc. CONSOLIDATED AND UNCONSOLIDATED
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) FOR THE YEARS
ENDED DECEMBER 31, 1997 AND 1996
Unconsolidated
December 31, December 31,
1997 1996
- - ----------------------------------------------------------------------------
MANAGEMENT AND
OPERATING INCOME:
Management Development Fees (Note 3) $1,082,079 $
Rental Income and Other (Note 2) 1,526,634
--------- ---------
Total 2,608,713
--------- ---------
Operating Expenses:
Administrative Expenses 182,631 324,800
Paid to Outside Consultants 42,948
Insurance 36,331
Management Fees 81,999
Office Expenses 13,680
Professional Fees 43,257
Repairs and Maintenance 270,721
Taxes 116,341
Telephone 17,709
Travel 23,456
Utilities 321,294
--------- ---------
TOTAL OPERATING EXPENSES 1,150,367 324,800
--------- ---------
Operating Income (Loss) before Interest
and Depreciation 1,458,346 (324,800)
--------- ---------
Interest 371,883
Depreciation 273,754
--------- ---------
645,637
--------- ---------
Income (Loss) Before Provision for Taxes 812,709 (324,800)
Provision for Income Taxes (Note 2) 208,000
--------- ---------
NET INCOME (LOSS) 604,709 (324,800)
Retained Earnings (Deficit) - Beginning (324,800)
--------- ----------
Retained Earnings (Deficit) - Ending $ 279,909 $(324,800)
--------- ----------
See notes to financial statements.
Homes For America Holdings, Inc.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED
DECEMBER 31, 1997
- - ---------------------------------------------------------------------------
CASH January 1, 1997 $ 5,553
---------
Net Income 604,709
---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 273,754
Increase in interest payable 20,718
Increase in accrued liabilities 106,388
Net security deposits received 7,064
Increase in accounts payable 106,492
Increase in tax and insurance escrows (46,379)
Increase in unearned rent 9,577
Increase in notes payable 21,186
---------
Total Adjustments 498,800
---------
Deferred Income Taxes 208,000
Proceeds from Stock Issued 58,000
---------
266,000
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from partner's capital contributions 2,211,912
Increase in debt reduction escrow (1,500,000)
Addition to deficit guarantee reserve, net (15,242)
Principal payments on long-term debt (54,247)
---------
Net Cash Provided by Financing Activities 624,423
---------
Total Funds Provided 2,011,932
---------
CASH FLOWS FROM REAL ESTATE INVESTING ACTIVITIES:
Increase in rental property (835,836)
Addition to rehabilitation reserve (210,185)
Increase in other assets (110,756)
Withdrawals from reserve for replacements 210,185
---------
Net Cash (Used) by Investing Activities (946,592)
---------
Increase in Current Management Fees Receivable 353,471
Increase in Non-Current Management Fees Receivable 200,000
Acquisition Costs of Partnership Interests 486,345
Purchase of Equipment 6,310
Decrease in Stock Subscriptions Receivable (41,927)
---------
1,004,199
---------
Total Funds Applied 1,950,791
---------
Net Cash Provided 61,141
Add: Cash held for future liabilities (Glen Hills) 200,792
---------
Cash December 31, 1997 $ 267,486
---------
See notes to financial statements.
Homes For America Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
- - -----------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND ORGANIZATION
Homes for America Holdings, Inc., a Nevada Corporation (The Company")
established in 1996, is engaged in the business of (a) acquiring,
rehabilitating and managing select "Affordable Housing properties; (b)
acquiring and converting specially situated, non-residential properties
into residential rentals or condominium sales; and ( c) acquiring multi-use
market rate residential real estate. As to the Affordable Housing portion
of the portfolio, the Company sells partnership, including "tax-credit"
benefits, according to Section 42 of the IRS Code and depreciation and
amortization for equity, acquisition and management fees.
Homes for America Holdings owns:
:Prairie Village Homes for America Holdings, Inc., an Indiana
Corporation, which is the General Partner of Middlebury Limited
Partnership.
:Putnam Homes for America Holdings, Inc., a Connecticut
Corporation, which is the General Partner of TVMJG 1996 Putnam Square
Limited Partnership.
:100% of Glen Hills Homes for America Holdings, Inc., a Texas
Corporation, which is the General Partner in the Dallas/Glen Hills Limited
Partnership ("The Partnership").
During 1997, neither Putnam Homes for American Holdings, Inc., nor
Prairie Village Homes for America Holdings, Inc., had any business
activities. These partnerships were formed to acquire rental real estate
properties.
Dallas/Glen Hills, LP (the "Partnership") was formed in Texas on
October 18, 1995 as a Limited Partnership and commenced operations on
February 9, 1996. On March 27, 1997, the Partnership Agreement was amended
to provide for the withdrawal or the reduction in ownership interest of the
existing partners and the contribution of capital and the admittance of new
partners. Under the terms of the Amended and Restated Agreement of Limited
Partnership dated March 27, 1997 (the "Partnership Agreement"), the general
partner is Glen Hills Homes for America, Inc., (the "General Partner"), the
Class Z general partner, is David H. Korb (the "Class Z General Partner"),
the investor limited partner is Related Corporate Partners V, LP (the
"Investor Limited Partner") and the special limited partner is Related
Corporate SLP LP (the "Special Limited Partner").
In view of the significance of the changes in ownership and financial
position, the Partnership has been treated as a new accounting entity, and
accordingly, the Partnership established a new accounting basis, where
appropriate, for its assets and liabilities, based on the acquisition cost
of the new partners as of March 27, 1997.
The Partnership was organized to purchase, rehabilitate and operate
the Willow Pond Apartments (formerly the Glen Hills Apartments project (the
"Project"), located in Dallas, Texas. The project operates a 396
multi-family residential units for rental to low and moderate income
tenants. As of December 31, 1997, 350 units were occupied.
The Project received an allocation of Three Million, Five Hundred
Thousand Dollars ($3,500,000.00) of low income housing tax credits from the
Texas Department of Housing and Community Affairs ("TDHCA") under Section
42 of the Internal Revenue Code of 1986, as amended. As such, the Project
is required to lease a minimum of 40% of its units to families whose income
is 60% or less of the area median gross income.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
Basis of Accounting
The consolidated and unconsolidated financial statements are prepared
on the accrual basis of accounting and in accordance with generally
accepted accounting principles. The consolidated financial statements
include Glen Hills Homes for America, Inc. and Dallas/Glen Hills Limited
Partnership. The unconsolidated financial statements include Homes for
America Holdings, Inc.
Rental Property
Land, buildings, furniture and equipment are recorded at cost.
Depreciation is computed using straight-line method over the estimated
useful lives of the assets as follows:
Buildings 27.5 years
Furniture & Equipment 7.0 years
Improvements are capitalized, while expenditures for maintenance and
repairs are charged to expenses as incurred.
Deferred Financing Costs
Costs directly associated with obtaining permanent debt financing have
been deferred and are amortized over the term of the permanent loans, on a
straight-line basis, over fifteen (15) years.
Income Taxes
Homes for America Holdings, Inc. had approximately $313,450.00 net
operating loss carryover which reduced its deferred income tax liability.
The Company plans to file its 1997 income tax returns on a cash basis. On a
cash basis, the Company will not have any income tax liabilities. No
Federal Income Taxes are payable by the Partnership and none have been
provided in the accompanying financial statements. The partners are to
include their respective share of Partnership income or loss in their
separate tax returns.
Guarantee of Tax Credits
Under the terms of the Partnership Agreement, the General Partner has
the duty to use its best efforts to maintain, for the Partnership, the
low-income-housing tax credits. In the event, the actual low-income housing
tax credits accruing to the benefit of the investment Limited Partner are
less that the amount of credits that were qualified at the formation of the
Partnership, the additional contributions of capital otherwise required by
the Investment Limited Partner may be reduced, or constructive advances
deemed made, in accordance with applicable procedures contained within the
Partnership Agreement.
Rental Income
The Company's management and developmental fees are recorded as income
when earned. Rental income is recognized as rent becomes due. Rental
payments received in advance are deferred until earned.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of financial statements
and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Reliance on Other Auditors
The financial statements of the Dallas/Glen Hills Limited Partnership
were prepared by other independent CPA's and we have relied solely on their
accountant's report.
Minority Interest
The Minority Interest represents the equity investments, of the
Partnership, in the Dallas/Glen Hills Limited Partnership. Pursuant to the
Partnership Agreement, Related Capital Corporation V, Limited Partnership
(the "Investor Limited Partner") , invested Two Million Five Hundred
Thousand Dollars ($2,500,000.00) and in return, earned the right to use the
tax credits and associated depreciation. Conversely, Dallas/Glen Hills
Homes for America Holdings, Inc., (the "General Partner") has the right to
ninety percent (90%) of the cash flows and eighty percent (80%) of the
residual value.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
investments purchased with an original maturity of three months or less to
be cash equivalents.
TVMJG 1996 - Putnam Square Limited Partnership Notes
These notes represent two separate notes receivables of Two Hundred
Thousand Dollars ($200,000.00) each. One Note was received in consideration
for the Company's agreement to replace the General Partner and has a
priority to the first mortgage. The fee was earned in 1997 and $200,000.00
will be paid in 1998. Therefore, it has been reflected as a current asset.
The other Two Hundred Thousand Dollars ($200,000.00) Note is a First
Mortgage Commercial Note. This represents 50% of the TVMJG 1996 first
Mortgage Commercial Note which is payable monthly at 7% interest, and
maturing December 31, 2006.
INVESTMENTS
Investments in Partnerships represents acquisition costs, legal,
accounting and architectural fees which the Company has advanced to acquire
their partnership interests. These costs are non-reimbursable and they are
part of the Company's investment in the related entities.
RESTRICTED DEPOSITS
Restricted Cash Deposit
The Company deposited the proceeds from the sale of the Prairie
Village Bonds (the "Bonds") that will be used to acquire the real estate.
The Company is liable to the bondholders for this amount. The proceeds are
held in an interest-bearing escrow account. Further, the funds will remain
in escrow until the real estate securing the Bonds is purchased. At the
closing of the real estate transaction, the Bonds will be secured and
enhanced by a Housing and Urban Development ("HUD") insurance policy thus
rendering the Bond non-recursive to the Company. The Bonds carry a fixed
interest rate of 6.100%, for thirty (30) years.
Asset Management Fee
For its services in monitoring the operations of the Project, the
Partnership shall pay the General Partner an amount equal to the lessor of:
(1) available cash flow as defined in the Partnership Agreement and (2) 1%
of net rental income.
In addition, the Partnership paid an affiliate of the Investor Limited
Partner, One Hundred Ten Thousand, Seven Hundred Fifty Six Dollars
($110,756.00) consulting monitoring fee in consideration for its services
in assisting the Partnership in acquiring the Project. This fee is
classified as a deferred asset management fee.
Property Management Fee
The General Partner shall have the responsibility for managing the
apartment complex and obtaining a management agent. The management agent
shall receive a management fee from the Partnership in an amount not to
exceed 4% of net rental income.
Operating Deficit Guaranty Agreement
On March 27, 1997, the Partnership executed an Operating Deficit
Guaranty Agreement with the General Partner, whereby, the General Partner
agreed to loan to the Partnership any funds required to fund operating
deficits (as defined in the Agreement) of the Partnership incurred during
the period commencing with the break-even date (as defined in the
Agreement) and ending on the third anniversary of the break-even date. The
Guaranty amount shall not exceed 10% of the Partnership's first Mortgage
Loan, net of the balance in the deficit reduction escrow account. The
General Partner initially funded an escrow account in the amount of Fifty
Thousand Dollars ($50,000.00) on March 27, 1997. An additional Seventy Five
Thousand ($75,000.00) will be funded upon receipt of the Investor Limited
Partner's second capital contribution and the balance will be funded from
available cash flow (as defined in the Partnership Agreement).
Development Deficit Guaranty Agreement
The General Partner has entered into an agreement with the Limited
Partners, whereby, at the option of the Limited Partners, the General
Partner may be required to (1) purchase the interest of the Limited
Partner's upon the occurrence of certain events described in the
Development Deficit Guaranty Agreement and (2) pay all expenses of
operating and maintaining the apartment complex in excess of the gross
collections to the extent necessary to maintain break-even operations until
the break-even date (as defined in the Agreement). Presently, the
Development Deficit Guaranty has been satisfied by having met the ninety
(90) days occupancy at ninety percent (90%) requirement.
Replacement and Rehabilitation Reserve Escrows
The General Partner is required under a Replacement Reserve Guaranty
Agreement to fund a replacement reserve escrow each month during the
guaranty period to meet replacement reserve obligations. At December 31,
1997, the Partnership held Sixty Three Thousand, Seventeen Dollars
($63,017.00) in this escrow account.
LONG TERM LIABILITIES
The Partnership entered into a mortgage loan agreement with Hanover
Capital Mortgage Corporation for Five Million Three Hundred Fifty Thousand
Dollars ($5,350,000.00) (the "Mortgage Loan") dated February 9, 1996. The
Mortgage Loan bears interest at a rate of 8.250% per annum. Monthly
principal and interest payments of Forty Two Thousand One Hundred Eighty
Two Dollars ($42,182.00) are payable until February 2011. The Note matures
March 1, 2011, at which time, the entire remaining outstanding principal
and interest is due. The Mortgage Loan is collateralized by the
Partnership's real property, personal property and other rights attached to
the property. The Partnership has funded a deficit reduction escrow account
in the amount of One Million Five Hundred Thousand Dollars ($1,500,000.00)
to be applied against the outstanding loan balance on February 28, 1999.
The Mortgage Loan agreement requires "all risk insurance policies to
be maintained in an amount not less than the full insurable value of the
property on a replacement cost basis".
Aggregate projected maturities of long-term debt for the next five
years are as follows:
December 31, of the following years:
1998 $ 77,735
1999 94,396
2000 91,629
2001 99,480
2002 108,005
-----------
Thereafter $ 4,761,190
Notes Payable other consists of:
The liability to David Korb, a former partner in the Dallas/Glen Hills
Partnership. The note was issued on March 1, 1997 and is payable in monthly
installments, of approximately Five Thousand Four Hundred Dollars
($5,400.00) per month, including interest, beginning March 21, 1997. The
note is payable over seven (7) years, bearing interest at approximately
9.000% per annum with the final payment due March 20, 2004. The note is
secured by a collateral assignment of rights in the Dallas/Glen Hills
Partnership.
Debt Reduction Escrow
On December 29, 1996, the Partnership entered into an escrow agreement
with the TDHCA, whereby, the Partnership placed One Million Five Hundred
Thousand Dollars ($1,500,000.00) in a bank escrow account. The bank will
deliver the entire balance to Mellon Mortgage Company on February 29,1999
which will be paid toward the principal balance of the Mortgage Loan. The
Partnership will disburse any interest earned on this escrow account to the
Class Z General Partner.
Current Notes Payable consists of:
: Cyber Connect, Inc. $ 60,693
: Cyber Dimensions, Inc. 60,693
: Robert Pozner 54,000
: Canton Financial 73,250
Current Portion of : Mortgage 77,735
: Notes Payable - other 46,324
----------
$ 372,695
----------
The Cyber Connect note is comprised of a Principal payment of Fifty
Seven Thousand Five Hundred Dollars ($57,500.00) and an Interest payment of
One Thousand Nine Hundred Seventeen Dollars ($1,917.00).
Payment of the obligation evidenced by this Note shall be repaid in
two (2) equal payments of Ten Thousand Dollars ($10,000.00) on the
following dates: (the "Due Date") commencing April 5, 1998 and May 5, 1998,
and terminating June 5, 1998 with a final payment of Thirty Nine Thousand
Four Hundred Seventeen Dollars ($39,417.00).
The Cyber Dimension note is comprised of a Principal payment of Fifty
Seven Five Hundred Dollars ($57,500.00) and an Interest payment of One
Thousand Nine Hundred Seventeen Dollars ($1,917.00).
Payment of the obligation evidenced by this Note shall be repaid in
two (2) equal payments of Ten Thousand Dollars ($10,000.00) on the
following dates (the "Due Date") commencing April 5, 1998 and May 5, 1998,
and terminating June 5, 1998 with a final payment of Thirty Nine Thousand
Four Hundred Seventeen Dollars ($39,417.00).
The Promissory Note payable to Robert Pozner of Fifty Four Thousand
($54,000.00) has a first payment due on March 15, 1998 bearing a simple
interest rate of Ten Percent (10%) per year. This agreement has been
amended and reads as follows:
"Homes for America Holdings, Inc. (the "Maker") shall pay Robert
Pozner (the "Holder") a total of Sixty Five Thousand Thirty Dollars and
Eighty Four Cents ($65,030.84).
Twenty Two Thousand Eight Hundred Twenty Four Dollars and Sixty Seven
Cents ($22,824.67) worth of Principal and Two Thousand Two Hundred Six
Dollars and Seventeen Cents ($2,206.17) worth of Interest on the July 20,
1998 ("End Date").
The Promissory Note shall be repaid in four (4) equal payments of Ten
Thousand Dollars ($10,000.00), on the following dates ("Due Date")
commencing March 20, 1998, of which a prepayment has been made at the
Note's inception (see 2), and terminating June 20, 1998 with a final
payment of Twenty Five Thousand Thirty Dollars and Eighty Four Cents
($25,030.84), comprised of The Maker shall also deliver One Hundred
Thousand (100,000) shares of common, unrestricted shares of Homes for
America Holdings, Inc., with an additional One Hundred Thousand (100,000)
shares, held in escrow, to be delivered to the Holder if the due dates are
not adhered to pursuant to the "Promissory Note".
The Promissory Note for Seventy Three Thousand Two Hundred Fifty
Dollars ($73,250.00) payable to Canton Financial Services provides as
follows:
Homes for America Holdings, Inc., (the "Maker") shall pay Canton
Financial Services (the "Holder") a total of Seventy Three Thousand Two
Hundred Fifty Dollars ($73,250.00). This amount is comprised of a Principal
payment of Sixty Five Thousand Dollars ($65,000.00) and an Interest payment
of Three Thousand Two Hundred Fifty Dollars ($3,250.00).
The obligation evidenced by this Note shall be repaid in an initial
payment of Five Thousand Dollars ($5,000.00) on March 15,1998, followed by
four (4) equal payments of Ten Thousand Dollars ($10,000.00), on the
following dates ("Due Date") commencing April 15, 1998 and terminating July
15, 1998 with a final payment of Twenty Three Thousand Two Hundred Fifty
Dollars ($23,250.00).
NOTE 3. ALLOCATION OF PROFITS, LOSSES, CASH FLOW AND TAX CREDITS FOR
DALLAS/GLEN HILLS LIMITED PARTNERSHIP
The Dallas/Glen Hills Partnership Agreement provides that
substantially all tax benefits for Depreciation and Low Income Housing
Credits (IRS Section 42) are allocated to the Limited Partners as described
below. The Partnership Agreement also provides for the excess of ninety
percent (90%) of cash flow and residual value are provided to the General
Partner.
Tax credits are allocated 99.98% to the Investor Limited Partner, and
one hundredth percent (.01%) to the Special Limited Partner, and one
hundredth percent (.01%) to the General Partner.
Subject to certain provisions, losses shall be allocated 99.98% to the
Investor Limited Partner, and .01% to the Special Limited Partner, .01% to
the General Partner.
Annual distributable cash flow shall be applied in the following order of
priority:
1. To repay loans payable to any partner other than the General Partner.
2. To the General Partner in an amount equal to any unpaid voluntary loans.
3. In the event the Partnership, using its best efforts is unsuccessful in
refinancing the mortgage loan on February 28, 1999, the Class Z General Partner
may receive an amount up to One Million Five Hundred Thousand Dollars
($1,500,000.00) plus accrued interest. Terms depend on whether the mortgage
lender agrees or does not agree to reduce the mortgage principal to reflect
payment of One Million Five Hundred Thousand Dollars ($1,500,000.00) held in
escrow.
4. To pay any accrued but unpaid management fees.
5. To the Special Limited Partner for accrued annual local administrative
fees not to exceed Five Thousand Dollars ($5,000.00) per year.
6. To the General Partner, to repay the Contractor Note.
7. To the General Partner, to the extent of fifty percent (50%) of
remaining cash flow, the difference.
8. To the General Partner, the difference between any operating loans and
any unpaid credit reduction payments.
9. To the General Partner, to pay the difference, if positive, between Eighty
Eight Thousand Dollars ($88,000.00) and any unpaid credit reduction payments.
10. To the extent of forty percent (40%) of remaining cash flow, to the General
Partner, the difference between the Supervisory Management Fee and any unpaid
credit reduction payments.
11. Of the remainder, 49.89% to the Investor Limited Partner, 50.1% to the
General Partner and 0.1% to the Special Limited Partner. Net proceeds from a
sale or refinancing transaction will be paid to Class Z General Partner in an
amount equal to the excess of (1) One Million Five Hundred Thousand Dollars
($1,500,000.00) plus accrued interest over (2) certain previous distributions.
Any remaining net proceeds will be distributed according to specific provisions
of the Partnership Agreement.
The Partnership leases residential units under leases, which require rent
payments at the beginning of each month some of which are subsidized under the
HUD Section 8 Program (rent subsidies are approximately One Hundred Fifteen
Thousand Eight Hundred Forty Dollars ($115,840.00) during the period). Each
tenant is also required to make a security deposit of a portion of one month's
rent. Credit risks associated with the lease agreements is limited to the amount
of rents receivable from tenants, less security deposits, and HUD Section 8
disbursements.
NOTE 4. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Partnership's financial instruments consist of cash and notes payable.
The Partnership estimates that the fair value of all financial instruments does
not differ materially from the aggregate carrying values of its financial
instruments recorded in the accompanying balance sheet. The estimated fair value
amounts have been determined by the Partnership using available market
information and appropriate valuation methodologies. Considerable judgment is
required in interpreting market data to develop the estimates of fair value, and
accordingly, the estimates are not necessarily indicative of the amounts that
the Partnership could realize in a current market exchange. None of the
financial instruments are held for trading purposes.
NOTE 5. SUBSCRIPTIONS RECEIVABLE
Since January 1, 1998, the Company collected Ninety Eight Thousand Dollars
($98,000.00) of the subscriptions receivable and anticipates that it will
collect the balance in 1998.
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
Homes For America Holdings, Inc.
Consolidated Balance Sheet
June 30, 1998
Unaudited
- - ----------------------------------------------------------------------------
Assets:
Rental and Other Property:
Land 949,000.00
Building 5,175,318.77
Equipment 1,168,854.53
---------------
7,293,173.30
Accumulated Depreciation (530,613.43)
---------------
Net Rental Property and Other 6,762,559.87
---------------
Current Assets:
Cash 139,730.30
Accounts Receivable 13,164.36
Prepaid Expenses 38,062.55
---------------
Total Current Assets 190,957.21
---------------
Other Assets:
Restricted Cash Deposit - Elkart 2,408,200.00
Escrow Deposit - Glen Hills 1,500,000.00
Investments:
Glen Hills Partnership 447,116.00
Elkart 266,900.90
Arlington 41,718.24
Briar Meadows 18,919.90
Capitalized Pre-acquisition Costs 94,399.74
Contribution Receivable -The Related Group 140,846.00
Deferred Management Fees - Net 95,948.00
Deferred Loan Fees - Net 111,071.77
Organization Costs - Net 10,667.00
Deferred Asset Management Fee 341,000.00
Deficit Guarantee Escrow 15,241.80
Other 12,535.34
---------------
Total Other Assets 5,504,564.69
---------------
Total Assets 12,458,081.77
---------------
Liabilities and Stockholders' Equity:
Long Term Liabilities:
Mortgage Payable 4,813,366.23
Note Payable - Gall 200,000.00
Note Payable - Marlow 13,000.00
Note Payable - Korb 311,847.22
Due to Elkart 2,408,200.00
--------------
Total Long Term Liabilities 7,746,413.45
--------------
Current Liabilities:
Current Maturities of Long Term Debt 402,000.00
Accounts Payable 170,425.11
Security Deposits 51,153.86
Prepaid Rents 7,710.46
Accrued Expenses 133,634.48
Notes Payable - Other 158,950.00
--------------
Total Current Liabilities 923,873.91
--------------
Stockholders' Equity and Minority Interests:
Common Stock 6,548.96
Paid-in Capital 771,651.04
Stock Subscriptions Receivable 161,831.50
Treasury Stock (103,250.00)
Minority Interest - Glen Hills 2,280,952.61
Minority Interest - Putnam 438,488.17
Retained Earnings 231,572.13
--------------
3,787,794.41
--------------
Total Liabilities and Stockholders' Equity 12,458,081.77
----------------
- - ----------------------------------------------------------------------------
Homes For America Holdings, Inc.
Consolidated Statement of Income and Retained Earnings
for the Six Months Ended
June 30, 1998
Unaudited
- - -------------------------------------------------------------------------------
Management and Operating Income:
Management Development Fees 138,500.00
Rental Income and Other 1,169,739.43
--------------
Total 1,308,239.43
--------------
Operating Expenses:
Administrative Expenses 306,804.19
Building Expense 366,947.86
Maintenance & Repairs 79,035.47
Payroll & Related 135,374.88
Advertising 17,000.88
Management Fees 14,990.80
--------------
Total 920,154.08
--------------
Operating Income (Loss) Before Interest, Depreciation
and Amortization 388,085.35
Interest 226,762.14
Depreciation 198,500.00
Amortization 11,160.08
--------------
Net Loss (48,336.87)
Retained Earnings at December 31, 1997 279,909.00
--------------
Retained Earnings, June 30, 1998 231,572.13
--------------
- - --------------------------------------------------------------------------------
PART III
ITEM 1. INDEX TO EXHIBITS
No. Description
- - --------------------------------------------------------------------------------
3.1 Articles of Incorporation
3.2 By-Laws
10.1 Agreement of Purchase and Sale of Partnership Interests in
Dallas/Glen Hills, L.P. between David Korb and the
Company dated September 16, 1996.
10.2 Capital Note dated March 27, 1997 of Related Corporate
partners V, L.P.
10.3 Promissory Note dated March 21, 1997 of Glen Hills Homes
for America, Inc.
10.4 Promissory Note dated February 8, 1996 for a loan to
Dallas/Glen Hills, L.P. from Hanover Capital Mortgage
Corporation.
10.5 Dallas/Glen Hills, L.P. First Amendment to Amended and
Restated Agreement of Limited Partnership.
10.6 First Amendment to TVMJG 1996 - Putnam Square Limited
Partnership Seconded Amended and Restated Agreement of Limited
Partnership.
10.6.1 First Amendment to Certification and Agreement dated September
29, 1997.
10.6.2 First Amendment to Partnership Administration Services
Agreement dated September 29, 1997.
10.6.3 Promissory Note dated April 26, 1996 between TVMJG 1996 -
Putnam Square Limited Partnership and Donald Snyder.
10.6.4 First Amendment to Commercial Promissory Note between TVMJG
1996 - Putnam Square Limited Partnership and Joseph Gall.
10.7 Agreement of Purchase and Sale dated March 28, 1997 between
Prairie-Middlebury Associates and the Company.
10.7.1 Assignment of Agreement of Purchase and Sale dated July 24,
1997, amending an Agreement of Purchase and Sale dated March
28, 1997, between Prairie-Middlebury Associates and the
Company.
10.8 Agreement of Purchase and Sale by and between BRE-N, Inc. and
the Company dated July 13, 1998.
10.9 Agreement of Purchase and Sale by and between Homes For
America Holdings, Inc. and William C. Mannix DBA Lawrence
R. Mannix Inc.
10.10 Promissory Note dated July 29, 1998 between the Company
and William Kaplovitz, Jr.
10.11 Consulting Agreement dated August 1, 1998 between the Company
and International Business & Realty Consultants, L.L.C.
10.12 Employment Agreement dated August 1, 1998 between the Company
and Mr. Robert A. MacFarlane.
21 List of Subsidiaries
27 Financial Data Schedule
ARTICLES OF INCORPORATION OF GELT ENTERPRISES, INC. .
FIRST. The
SECOND. The registered agent in the State of Nevada is:
Brandi Flinders
2222 South Street
Pioche Hwy.
P.O. Box 150345
East Ely, Nevada 89315
THIRD. The purpose for which this corporation is to transact any
lawful business, or to promote or conduct any legitimate object or
purpose, under and subject to the laws of the State of Nevada.
FOURTH. The stock of the corporation will be issued as one class
of common stock in the amount of twenty-five million (25,000,000)
shares having par value of $0.001 each. The Board of Directors shall
have the authority, by resolution or resolutions, to divide the stock
*into more than one class of stock or more than one series of any
class, to establish and fix the distinguishing designation of each
such series and the number of shares thereof (which number, by like
action of the Board of Directors from time to time thereafter may be
increased, except when otherwise provided by the Board of Directors in
creating such series, or may be decreased. but not below the number of
shares thereof then outstanding) and, within the limitations of
applicable law of the State of Nevada or as otherwise set forth in
this article, to fix and determine the relative voting powers,
designations, preferences, limitations, restrictions and relative
rights of the various classes or stock or series thereof and the
qualifications, limitations or restrictions of such rights of each
series so established prior to the issuance thereof There shall be no
cumulative voting by shareholders.
FIFTH. The Company, by action of its directors, and without action by
its shareholders, may purchase its own shares in accordance with the
provisions of Nevada Revised Statutes. Such purchases may be made
either in the open market or at public or private sale, in such manner
and amounts, from such holder or holders of outstanding, shares of the
Company, and at such prices as the directors shall from time to time
determine.
SIXTH. No holder of shares of the Company of any class, as such, shall
have any preemptive right to purchase or subscribe for shares of the
Company, of any class, whether now or hereafter authorized.
SEVENTH. The Board of Directors shall consist of
no fewer that one member and no more than seven members. The initial
Board of Directors will consist of Steven A. Christensen who is also
the Incorporator, and his address as both a Director and as
Incorporator is :
Steven A. Christensen
268 West 400 South, Suite 313
Salt Lake City UT 84101
EIGHTH. No officer or director shall be personally liable to the
corporation or its shareholders for money
damages except as provided in Section 78.07, Nevada Revised Statutes.
NINTH. The Corporation shall not issue any non-voting equity
securities.
IN WITNESS WHEREOF, these Articles of Incorporation are hereby
executed this 8th day of January, 1996.
GELT ENTERPRISES, INC.
- - -----------------------------
Steven Christensen
Incorporator
NOTARIZATION OF SIGNATURE OF STEVEN A. CHRISTENSEN:
State of Utah
County of Salt Lake
On this 8 day of January, 1996, before me Matthew G. Colvin a notary public,
personally appeared Steven A. Christensen personally known to me to be the
person whose name is subscribed to this instrument, and acknowledged that he
executed the same as Incorporator of GELT Enterprises, Inc. and was fully
authorized by said company to so act.
----------------------------
Notary Publ i c
----------------------------
My Commission Expires
ARTICLES OF AMENDMENT
OF
GELT Enterprises, Inc.
The undersigned incorporator of GELT Enterprises, Inc., a Nevada corporation
does hereby submit two copies of the following amendment to the Articles of
Incorporation of GELT Enterprises, Inc.
1. This director constitutes at least two - thirds, as the sole
original director of GELT Enterprises, Inc.
2. The original Articles were filed in the Office of The Secretary of State on
January 9, 1996.
3. As of the date of this certificate, no stock of the corporation has been
issued.
4. He hereby adopts the following amendment to the articles of incorporation of
the corporation:
Article One is amended to read as follows:
The name of the corporation is changed from GELT Enterprises, Inc., to Homes for
America Holdings, Inc
- - -----------------------------
Steven A. Christensen, sole Director
State of Utah
ss.
County of Salt Lake
On February 26,1996, personally appeared before me, a Notary Public, Steven A.,
Christensen acknowledge that he executed above instrument.
BYLAWS FOR THE REGULATION,
EXCEPT AS OTHERWISE PROVIDED BY STATUTE
OR ITS ARTICLES OF INCORPORATION, OF
HOMES FOR AMERICA HOLDINGS, INC.
ARTICLE I
Offices
Section 1.01 - Principal And Registered Office.
The principal and registered office for the transaction of the business
of the Corporation is hereby fixed and located at: State Route 233 and
Interstate 80, P.O. Box 2004, Wells, Nevada 89835. The Corporation may have such
other offices, either within or without the State of Nevada as the Corporation's
board of directors (the "Board) may designate or as the business of the
Corporation may require from time to time.
Section 1.02 - Other Offices.
Branch or subordinate offices may at any time be established by the
Board at any place or places wherein the Corporation is qualified to do
business.
ARTICLE 2
Meetings of Shareholders
Section 2.01 - Meeting Place.
All annual meetings of shareholders and all other meetings of
shareholders shall be held either at the principal office or at any other place
within or without the State of Nevada which may be designated either by the
Board, pursuant to authority hereinafter granted, or by the written consent of
all shareholders entitled to vote, thereat, given either before or after the
meeting and filed with the secretary of the Corporation.
Section 2.02 - Annual Meetings
A. The annual meetings of shareholders shall be held on the
anniversary date of the date of incorporation at the hour of 2:00
o'clock p.m., commencing with the year 1996, provided, however,
that should the day of the annual meeting fall upon a legal
holiday, then any such annual meeting of shareholders shall be
held at the same time and place on the next business day
thereafter which is not a legal holiday.
B. Written notice of each annual meeting signed by the president or
vice president, or the secretary, or an assistant secretary, or by
such other person or persons as the Board may designate, shall be
given to each shareholder entitled to vote thereat, either
personally or by mail or other means of written communication,
charges prepaid, addressed to such shareholder at his address
appearing on the books of
Page I of 11
the Corporation or given by him to the Corporation for the purpose of
notice. If a shareholder gives no address, notice shall be deemed to
have been given to him if sent by mail or other means of written
communication addressed to the place where the principal office of the
Corporation is situated, or if published at least once in some
newspaper of general circulation in the county in which said office is
located. All such notices shall be sent to each shareholder entitled
thereto, or published, not less than ten (10) nor more than sixty (60)
days before each annual meeting, and shall specify the place, the day
and the hour of such meeting, and shall also state the purpose or
purposes for which the meeting is called.
C. Failure to hold the annual meeting shall not constitute
dissolution or forfeiture of the Corporation, and a special
meeting of the shareholders may take the place thereof.
Section 2.03 - Special Meetings.
Special meetings of the shareholders, for any purpose or
purposes whatsoever, may be called at any time by the president or by
the Board, or by one or more shareholders holding not less that ten
percent (10%) of the voting power of the Corporation. Except in special
cases where other express provision is made by statute, notice of such
special meetings shall be given in the same manner as for annual
meetings of shareholders. Notices of any special meeting shall specify
in addition to the place, day and hour of such meeting, the purpose or
purposes for which the meeting is called.
Section 2.04 - Adjourned Meetings And Notice Thereof.
A. Any shareholders'meeting, annual or special, whether or
not a quorurn is present, may be adjourned from time to
time by the vote of a majority of the shares, the holders
of which are either present in person or represented by
proxy thereat, but in the absence of a quorum, no other
business may be transacted at any such meeting.
B. When any shareholders' meeting, either annual or special,
is adjourned for thirty (30) days or more, notice of the
adjourned meeting shall be given as in the case of an
original meeting. Otherwise, it shall not be necessary to
give any notice of an adjournment or of the business to be
transacted at an adjourned meeting, other than by
announcement at the meeting at which such adjournment is
taken.
Section 2.05 - Entry Of Notice.
Whenever any shareholder entitled to vote has been absent from any
meeting of shareholders, whether annual or special, an entry in the
minutes to the effect that notice has been duly given shall be
conclusive and incontrovertible evidence that due notice of such
meeting was given to such shareholder, as required by law and these
bylaws.
Section 2.06 - Voting.
At all annual and special meetings of shareholders, each shareholder
entitled to vote thereat shall have one vote for each share of stock so
held and represented at such meetings, either in person or by written
proxy, unless the Corporation's articles of incorporation ("Articles")
provide otherwise, in which event, the voting rights, powers and
privileges prescribed in the Articles shall prevail. Voting for
directors and, upon demand of any shareholder, upon any question at any
meeting, shall be by ballot. If a quorum is present at a meeting of the
shareholders, the vote of a majority of the shares represented at such
meeting shall be sufficient to bind the corporation, unless otherwise
provided by law or the Articles.
Page 2 of I I
Section 2.07 - Quorum.
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote at any meeting shall constitute a quorum for
the transaction of business. The shareholders present at a duly called
or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 2.08 - Consent Of Absentees.
The transactions of any meeting of shareholders, either annual or
special, however called and notice given thereof, shall be as valid as
though done at a meeting duly held after regular call and notice, if a
quorum be present either in person or by proxy, and if, either before
of after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, sign a written Waiver of Notice, or a
consent to the holding of such meeting, or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of such meeting.
Section 2.09 - Proxies.
Every person entitled to vote or execute consents shall have the right
to do so either in person or by an agent or agents authorized by a
written proxy executed by such person or his duly authorized agent and
filed with the secretary of the Corporation; provided however, that no
such proxy shall be valid after the expiration of eleven (11) months
from the date of its execution, unless the shareholder executing it
specifies therein the length of time for which such proxy is to
continue in force, which in no case shall exceed seven (7) years from
the date of its execution.
Section 2.10 - Shareholder Action Without A Meeting.
Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if a written consent
thereto is signed by shareholders holding at least a majority of the
voting power, except that if a different proportion of voting power is
required for such an action at a meeting, then that proportion of
written consents is required. In no instance where action is authorized
by this written consent need a meeting of shareholders be called or
notice given. The written consent must be filed with the proceedings of
the shareholders.
ARTICLE 3
Board of Directors
Section 3.01 - Powers.
Subject to the limitations of the Articles, these bylaws, and the
provisions of Nevada corporate law as to action to be authorized or
approved by the shareholders, and subject to the duties of directors as
prescribed by these bylaws, all corporate powers shall be exercised by
or under the authority of, and the business and affairs of the
corporation shall be controlled by, the Board. Without prejudice to
such general powers, but subject to the same limitations, it is hereby
expressly declared that the directors shall have the Mowing powers.
A. To select and remove all the other officers, agents and employees
of the Corporation, prescribe such powers and duties for them as
are not inconsistent with law, with the Articles, or these bylaws,
fix their compensation, and require from them security for
faithful service.
B. To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefore not
inconsistent with the law, the Articles, or these bylaws, as they
may deem best.
C. To change the principal office for the transaction of the business
if such change becomes necessary or useful; to fix and locate from
time to time one or more subsidiary offices of the Corporation
within or without the State of Nevada, as provided in Section 1.02
of Article I hereof, to designate any place within or without the
State of Nevada for the holding of any shareholders' meeting or
meetings; and to adopt, make and use a corporate seal, and to
prescribe the forms of certificates of stock, and to alter the
form of such seal and of such certificates from time to time, as
in their judgment they may deem best, provided such seal and such
certificates shall at all times comply with the provisions of law.
D. To authorize the issuance of shares of stock of the Corporation
from time to time, upon such terms as may be lawful, in
consideration of money paid, labor done or services actually
rendered, debts or securities canceled, or tangible or intangible
property actually received, or in the case of shares issued as a
dividend, against amounts transferred from surplus to stated
capital.
E. To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefore,
in the corporate name, promissory notes, bonds, debentures, deeds
of trust, mortgages, pledges, hypothecation or other evidences of
debt and securities therefore.
F. To appoint an executive committee and other committees and to
delegate to the executive committee any of the powers and
authority of the Board in management of the business and affairs
of the Corporation, except the power to declare dividends and to
adopt, amend or repeal bylaws. The executive committee shall be
composed of one or more directors.
Section 3.02 - Number And Oualification Of Directors.
The authorized number of directors of the Corporation shall not be less
than one (1) nor more than twelve (12).
Section 3.03 - Election And Term Of Office.
The directors shall be elected at each annual meeting of shareholders,
but if any such annual meeting is not held, or the directors are not
elected thereat, the directors may be elected at any special meeting of
shareholders. All directors shall hold office until their respective
successors are elected.
Section 3.04 - Vacancies.
A. Vacancies in the Board may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining director,
and each director so elected or appointed shall hold office until his
successor is elected at an annual or a special meeting of the
shareholders.
Page 4 of 11
B. A vacancy or vacancies in the Board shall be deemed to exist in case
of the death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders
fail at any annual or special meeting of shareholders at which any
director or directors are elected to elect the full authorized number
of directors to be voted for at that meeting.
C. The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors.
D. No reduction of the authorized number of directors shall have the
effect of removing any director unless also authorized by a vote of the
shareholders.
ARTICLE 4
Meetings of the Board of Directors
Section 4.01 - Place Of Meetings.
Regular meetings of the Board shall be held at any place within or
without the State of Nevada which has been designated from time to time
by resolution of the Board or by written consent of all members of the
Board. In the absence of such designation, regular meetings shall be
held at the principal office of the Corporation. Special meetings of
the Board may be held either at a place so designated, or at the
principal office. Failure to hold an annual meeting of the Board shall
not constitute forfeiture or dissolution of the Corporation.
Section 4.02 - Organization Meeting.
Immediately following each annual meeting of shareholders, the Board
shall hold a regular meeting for the purpose of organization, election
of officers, and the transaction of other business. Notice of such
meeting is hereby dispensed with.
Section 4.03 - Other Regular Meetings.
Other regular meetings of the Board shall be held, whether monthly or
quarterly or by some other schedule, at a day and time as ' set by the
president; provided however, that should the day of the meeting fall
upon a legal holiday, then such meeting shall be held at the same time
on the next business day thereafter which is not a legal holiday.
Notice of all such regular meetings of the Board is hereby required.
Section 4.04 - Special Meetings.
A. Special meetings of the Board may be called at any time
for any purpose or purposes by the president, or, if he is
absent or unable or refuses to act, by any vice president
or by any two directors.
B. Written notice of the time and place of special meetings shall be
delivered personally to each director or sent to each director by mail
(including overnight delivery services such as Federal Express) or
telegraph, charges prepaid, addressed to him at his address as it is shown
upon the records of the Corporation, or if it is not shown upon such
records or is not readily ascertainable, at the place in which the regular
meetings of the directors are normally held. No such notice is valid unless
delivered to the director to whom it was addressed at least twenty-four
(24) hours prior to the time of the holding of the meeting. Page 5 of I I
However, such mailing, telegraphing, or delivery as above provided
herein shall constitute prima facie evidence that such director
received proper and timely notice.
Section 4.05 - Notice Of Adjournment.
Notice of the time and place of holding an adjourned meeting need not
be given to absent directors, if the time and place be fixed at the
meeting adjourned.
Section 4.06 - 'Waiver Of Notice.
The transactions of any meeting of the Board, however called and
noticed or wherever held, shall be as valid as though a meeting had
been duly held after regular call and notice, if a quorum be present,
and if, either before or after the meeting, each of the directors not
present sign a written waiver of notice or a consent to holding such
meeting or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made
a part of the minutes of the meeting.
Section 4.07 - Quorum.
If the Corporation has only one director, then the presence of that one
director constitutes a quorum. If the Corporation has only two
directors, then the presence of both such directors is necessary to
constitute a quorum. If the Corporation has three or more directors,
then a majority of those directors shall be necessary to constitute a
quorum for the transaction of business, except to adjourn as
hereinafter provided. A director may be present at a meeting either in
person or by telephone. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a
quorum is present, shall be regarded as the act of the Board, unless a
greater number be required by law or by the Articles.
Section 4.08 - Adjournment.
A quorum of the directors may adjourn any directors' meeting to meet
again at a stated day and hour; provided however, that in the absence
of a quorum, a majority of the directors present at any directors'
meeting, either regular or special, may adjourn such meeting only until
the time fixed for the next regular meeting of the Board.
Section 4.09 - Fees And Compensation.
Directors shall not receive any stated salary for their services as
directors, but by resolution of the Board, a fixed fee, with or without
expenses of attendance, may be allowed for attendance at each meeting.
Nothing stated herein shall be construed to preclude any director from
serving the Corporation in any other capacity as an officer, agent,
employee, or otherwise, and receiving compensation therefore.
Section 4.10 - Action Without A Meeting .
Any action required or permitted to be taken at a meeting of the Board,
or a committee thereof, may be taken without a meeting if, before or
after the action, a written consent thereto is signed by all the
members of the Board or of the committee. The written consent must be
filed with the proceedings of the Board or committee.
ARTICLE 5
Officers
Page 6 of 11
Section 5.01 - Executive Officers.
The executive officers of the Corporation shall be a president, a
secretary, and a treasurer/chief financial officer. The corporation may
also have, at the direction of the Board, a chairman of the Board, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.03 of this Article.
Officers other than the president and the chairman of the board need
not be directors. Any one person may hold two or more offices, unless
otherwise prohibited by the Articles or by law.
Section 5.02 - Appointment.
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.03 and 5.05
of this Article, shall be appointed by the Board, and each shall hold
his office until he resigns or is removed or otherwise disqualified to
serve, or his successor is appointed and qualified.
Section 5.03 - Subordinate Officers.
The Board may appoint such other officers as the business of the
Corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in
these bylaws or as the Board may from time to time determine.
Section 5.04 - Removal And Resignation.
A. Any officer may be removed, either with or without cause,
by a majority of the directors at the time in office, at
any regular or special meeting of the Board.
B. Any officer may resign at any time by giving written
notice to the Board or to the president or secretary. Any
such resignation shall take effect on the date such notice
is received or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5.05 - Vacancies.
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner
prescribed in these bylaws for regular appointments to such office.
Section 5.06 - Chairman Of The Board.
The Chairman of the Board, if there be such an officer, shall, if
present, preside at all meetings of the Board, and exercise and perform
such other powers and duties as may be from time to time assigned to
him by the Board or prescribed by these bylaws.
Section 5.07 - President.
Subject to such supervisory powers, if any, as may be given by the
Board to the Chairman of the Board (if there be such an officer), the
president shall be the chief executive officer of the Corporation and
shall, subject to the control of the Board, have general supervision,
direction and control of the business
Page 7 of I I
and officers of the Corporation. He shall preside at all meetings of
the shareholders and, in the absence of the Chairman of the Board, or
if there be none, at all meetings of the Board. He shall be an
ex-officio member of all the standing committees, including the
executive committee, if any, and shall have the general powers and
duties of management usually vested in the office of president of a
corporation, and shall have such other powers and duties as may be
prescribed by the Board or these bylaws.
Section 5.08 - Vice President.
In the absence or disability of the president, the vice presidents, in
order of their rank as fixed by the Board, or if not ranked, the vice
president designated by the Board, shall perform all the duties of the
president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties
as from time to. time may be prescribed for them respectively by the
Board or these bylaws.
Section 5.09 - Secretary.
A. The secretary shall keep, or cause to be kept, at the
principal office or such other place as the Board may
direct, a book of (i) minutes of all meetings of directors
and shareholders, with the time and place of holding,
whether regular or special, and if special, how
authorized, the notice thereof given, the names of those
present and absent at directors' meetings, the number of
shares present or represented at shareholders' meetings,
and the proceedings thereof; and (ii) any waivers,
consents, or approvals authorized to be given by law or
these bylaws.
B. The secretary shall keep, or cause to be kept, at the
principal office, a share register, or a duplicate share
register, showing (i) the name of each shareholder and his
or her address; (ii) the number and class or classes of
shares held by each, and the number and date of
certificates issued for the same; And (iii) the number and
date of cancellation of every certificate surrendered for
cancellation.
C. The secretary shall give, or cause to be given, notice of
all the meetings of the shareholders and of the Board
required by these bylaws or by law to be given, and he
shall keep the seal of the Corporation, if any, in safe
custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board or these
bylaws.
Section 5.10 - Treasurer/Chief Financial Officer.
A. The treasurer/chief financial officer shall keep and
maintain, or cause to be kept and maintained, adequate and
correct accounts of the properties and business
transactions of the Corporation, including accounts of its
assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares. Any surplus,
including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be
classified according to source and shown in a separate
account. The books of account shall at all times be open
to inspection by any director.
B. The treasurer/chief financial officer shall deposit all
monies and other valuables in the name and to the credit of
the Corporation with such depositories as may be designated by
the Board. He shall disburse the funds of the Corporation as
may be ordered by the Board, shall render to the president and
directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of
the Corporation, and shall have such other powers and perform
such other duties as may be prescribed by the Board or these
bylaws.
Page 8 of I I
ARTICLE 6
Miscellaneous
Section 6.01 - Record Date And Closing Stock Books.
The Board may fix a time in the future, for the payment of any dividend
or distribution, or for the allotment of rights, or when any change or
conversion or exchange of shares shall go into effect, as a record date
for the determination of the shareholders entitled to notice of and to
vote at any such meeting, or entitled to receive any such dividend or
distribution, or any such allotment of rights, or to exercise the
rights in respect to any such change, conversion or exchange of shares,
and in such case only shareholders of record on the date so fixed shall
be entitled to notice of and to vote at such meetings, or to receive
such dividend, distribution or allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any shares
on the books of the Corporation after any record date fixed as herein
set forth. The Board may close the books of the Corporation against
transfers of shares during the whole, or any part, of any such period.
Section 6.02 - Inspection Of Corporate Records.
The share register or duplicate share register, the books of account,
and records of proceedings of the shareholders and directors shall be
open to inspection upon the written demand of any shareholder or the
holder of a voting trust certificate, at any reasonable time, and for a
purpose reasonably related to his interests as a shareholder or as the
holder of a voting trust certificate, and shall be exhibited at any
time when required by the demand of ten percent (I 0%) of the shares
represented at any shareholders' meeting. Such inspection may be made
in person or by an agent or attorney, and shall include the right to
make extracts. Demand of inspection other than at a shareholder's
meeting shall be made in writing upon the president, secretary, or
assistant secretary, and shall state the reason for which inspection is
requested.
Section 6.03 - Checks, Drafts, Etc.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or persons and
in such manner as, from time to time, shall be determined by resolution
of the Board.
Section 6.04 - Annual Report.
The Board shall cause to be sent to the shareholders not later than one
hundred twenty (120) days after the close of the fiscal or calendar
year an annual report.
Section 6.05 - Contracts: How Executed.
The Board, except as otherwise provided in these bylaws, may authorize
any officer, officers, agent, or agents, to enter into any contract,
deed or lease, or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board, no officer,
agent, or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or
render it liable for any purpose or for any amount.
Section 6.06 - Certificates Of Stock.
Page 9 of I I
A certificate or certificates for shares of the capital stock
of the Corporation shall be issued to each shareholder when any such
shares are fully paid up. All such certificates shall be signed by the
president or a vice president and the secretary or an assistant
secretary, or be authenticated by facsimiles of the signature of the
president and secretary or by a facsimile of the signatures of the
president and the written signature of the secretary or an assistant
secretary. Every certificate authenticated by a facsimile of a
signature must be countersigned by a transfer agent or transfer clerk.
Section 6.07 - Representations Of Shares Of Other Corporations.
The president or any vice president and the secretary or assistant
secretary of this Corporation are authorized to vote, represent, and
exercise on behalf of this Corporation, all rights incident to any and
all shares of any other corporation or corporations standing in the
name of this Corporation. The authority herein granted to said officers
to vote or represent on behalf of this Corporation or corporations may
be exercised either by such officers in person or by any person
authorized so to do by proxy or power of attorney duly executed by said
officers.
Section 6.08 - Inspection Of Bylaws.
The Corporation shall keep in its principal office for the transaction
of business the original or a copy of these bylaws, as amended or
otherwise altered to date, certified by the secretary, which shall be
open to inspection by the shareholders at all reasonable times during
office hours.
Section 6.09 - Indemnification.
A. The Corporation shall indemnify its officers and directors
for any liability including reasonable costs of defense
arising out of any act or omission of any officer or
director on behalf of the Corporation to the full extent
allowed by the laws of the State of Nevada, if the officer
or director acted in good faith and in a manner the
officer or director reasonably believed to be in, or not
opposed to, the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful.
B. Any indemnification under this section (unless ordered by
a court) shall be make by the corporation only as
authorized in the specific case upon a determination that
indemnification of the director or officer is proper in
the circumstances because the officer or director has met
the applicable standard of conduct. Stich determination
shall be made by the board of directors by a majority vote
of a quorum consisting of directors who were not parties
to such action, suit or proceeding, or, regardless of
whether or not such a quorum is obtainable and a quorum of
disinterested directors so directs, by independent legal
counsel in a written opinion, or by the stockholders.
ARTICLE 7
Amendments
Section 7.01 - Power Of Shareholders.
New bylaws may be adopted, or these bylaws may be amended or repealed,
by the affirmative vote of the shareholders collectively having a majority of
the voting power or by the written assent of such shareholders.
Page 10 of I I
Section 7.02 - Power Of Directors.
Subject to the rights of the shareholders as provided in Section 7.01
of this Article, bylaws other than a bylaw, or amendment thereof, changing the
authorized number of directors, may also be adopted, amended, or repealed by the
Board.
Certification.
The undersigned does hereby certify that she is the Secretary of the
Corporation, which is a duly organized and existing Corporation under and by
virtue of the laws of the State of Nevada; that the above and foregoing bylaws
of said corporation were duly and regularly adopted as such by the board of
directors of the Corporation at a meeting of said Board, which was duly held on
the I 1st day of March 199 6 and that the above and foregoing bylaws are now in
full force and effect.
DATED this 15th day of -March '1996
- - ------------------------------
BonnieJean C. Tippetts, Secretary
Page 11 of 11
DALLAS/GLEN HILLS, L.P.
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
TABLE OF CONTENTS
ARTICLE I DEFINED TERMS
ARTICLE II GENERAL
2.1 Continuation of the Partnership
2.2 Principal Office
2.3 Principal Place of Business; Resident Agent
2.4 Term
2.5 Purpose
ARTICLE III CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions; General Partner
3.2 Withdrawal of Withdrawing Limited Partners; Admission of
Limited Partners
3.3 Special Limited Partner
3.4 Investor Limited Partner
3.5 [Reserved]
3.6 Treatment of Other Advances
3.7 Capital Accounts; No Interest; Withdrawal
3.8 Liability of Limited Partners
3.9 Provision of Other Amounts
3.10 Outside Activities of Limited Partners
ARTICLE IV COMPLIANCE WITH AUTHORITY REQUIREMENTS; PARTNERSHIP
BORROWINGS
4.1 Authority Requirements
4.2 Authorization to the General Partner
4.3 Right to Mortgage
4.4 Loans
ARTICLE V RIGHTS, POWERS AND OBLIGATIONS OF THE GENERAL PARTNER AND
LIMITATIONS THEREON; PARTNERS' ACTIVITIES
5.1 Exercise of Management
5.2 Duties and Authority of General Partner
5.3 Delegation of General Partner Authority; Tax Matters
Partner
5.4 Lease, Conveyance or Refinancing of Assets of the
Partnership
5.5 Restrictions on Authority
5.6 Activities of Partners
5.7 Dealing with Affiliates
5.8 Indemnification and Liability of the General Partners
5.9 Representations and Warranties
5.10 Additional Covenants of General Partner
5.11 Obligation to Repair and Rebuild Apartment Complex
ARTICLE VI CERTAIN PAYMENTS
6.1 Development Fee
6.2 Consulting Monitoring Fee
6.3 Annual Local Administrative Fee
6.4 Supervisory Management Fee
6.5 Asset Management Fee
6.6 Amounts Earned on $1,500,000 Escrow
6.7 Contractor Fee
ARTICLE VII ACCOUNTING, REPORTS, BOOKS, BANK ACCOUNTS AND FISCAL YEAR
7.1 Bank Accounts
7.2 Books of Account; Fiscal Year
7.3 Reports
7.4 Other Reports
7.5 Tax Returns and Tax Treatment
ARTICLE VIII MANAGEMENT AGENT
8.1 Management Agent and Management Fee
ARTICLE IX PROFITS AND LOSSES; DISTRIBUTIONS
9.1 Allocations of Profits and Losses
9.2 Distribution and Application of Cash Flow and Proceeds
From Sale or Refinancing Transactions
9.3 Overriding Allocations of Profits and Losses
ARTICLE X TRANSFER OF LIMITED PARTNER INTERESTS; SUBSTITUTED
PARTNERS; ASSIGNEES
10.1 Assignment of Limited Partner Interests
10.2 Substituted Partners; Admission
10.3 Assignees
ARTICLE XI WITHDRAWAL OF A GENERAL PARTNER; NEW GENERAL PARTNERS
11.1 Withdrawal
11.2 Effect of Withdrawal; Election to Continue Business
11.3 Formation of New Partnership
11.4 Special Removal Rights
11.5 Additional General Partners
11.6 Amendment of Schedule and Agreement
11.7 Survival of Liabilities
ARTICLE XII DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
12.1 Events Which Cause a Dissolution
12.2 Actions of Liquidating Agent Upon Dissolution
12.3 Statements on Termination
12.4 Priority on Liquidation; Distribution of Non-Liquid Assets
12.5 Orderly Liquidation
12.6 No Goodwill Value
ARTICLE XIII FOREIGN PARTNERS
13.1 Certification of Non-Foreign Status
13.2 Withholding of Certain Amounts Attributable to Interests
of Foreign Partners
ARTICLE XIV MISCELLANEOUS
14.1 Law Governing
14.2 Power of Attorney
14.3 Counterparts
14.4 Partners Independently Bound
14.5 Separability of Provisions
14.6 Address and Notice
14.7 Computation of Time
14.8 Titles and Captions
14.9 Entire Agreement
14.10 Agreement Binding
14.11 Parties in Interest
14.12 Amendments; Other Actions
14.13 Survival of Representations, Warranties and Agreements
14.14 Further Assurances
14.15 Remedies Cumulative
14.16 Meetings
14.17 Class Z General Partner
DALLAS/GLEN HILLS, L.P.
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement"),
dated as of the ____ day of March, 1997, by and among GLEN HILLS HOMES FOR
AMERICA, INC. as General Partner ("HOMES" or the "General Partner") DAVID
H. KORB ("Korb" or the "Class Z General Partner"), RELATED CORPORATE SLP
L.P., a Delaware limited partnership (the "Special Limited Partner"), and
RELATED CORPORATE PARTNERS V, L.P., a Delaware limited partnership (the
"Investor Limited Partner" and, together with the Special Limited Partner,
the "Limited Partners"), and CAL-TEX II - Glen Hills, LTD., a Texas limited
partnership, JOCK P.R. LIVING TRUST 3/28/89, 6003 ABRAMS ROAD, INC., a
Texas corporation and ANTHONY J. BARDER, as Withdrawing Limited Partners.
W I T N E S S E T H :
WHEREAS, the Partnership was formed as a limited partnership under the laws
of the State pursuant to the certificate of limited partnership ("Original
Certificate") by and among Korb, as general partner, and Cal-Tex II-Glen
Hills, Ltd., a Texas limited Partnership, Jock P.R. Living Trust 3/28/89,
6003 Abrams Road, Inc., a Texas corporation, and Anthony J. Barder, as
original limited partners. The Original Certificate was filed with the
Filing Office on October 18, 1995 and was amended on April 17, 1996;
WHEREAS, the Investor Limited Partner was admitted to the Partnership as a
limited partner as of the Admission Date (as hereinafter defined);
WHEREAS, the parties hereto desire to enter into this Agreement to provide
for, among other things, (i) the continuation of the Partnership, (ii) the
withdrawal of the Withdrawing Limited Partners from the Partnership, (iii)
the admission of the Limited Partners and HOMES into the Partnership, (iv)
the payment of Capital Contributions by the Investor Limited Partner to the
Partnership, (v) the reallocation of Profits, Losses, Credits and
distributions of Cash Flow and other proceeds of the Partnership among the
Partners, (vi) the respective rights, obligations and interests of the
parties hereto to each other and to the Partnership and (vii) certain other
matters;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree that the Initial Agreement
is hereby amended and restated in its entirety to read as follows:
ARTICLE I
DEFINED TERMS
Capitalized terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article I. Certain
additional defined terms are set forth elsewhere in this Agreement and,
where referenced, in the Contribution Agreement and in the Exhibits
thereto.
"Accountants" means such firm or firms of independent
certified public accountants as may be engaged by the General
Partners with the Consent of the Special Limited Partner from
time to time, and shall initially be Thomas V. Stephen & Company,
P.C., having an address at 222 West Las Colinas Blvd., Suite
1830, Irving, Texas 75039.
"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 any fiscal year of the
Partnership, after giving effect to the following adjustments:
credit to such Capital Account any amounts which such Partner is obligated
to restore thereto pursuant to any provision of this Agreement or is deemed
to be obligated to restore thereto pursuant to the penultimate sentences of
Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
debit to such Capital Account the items described in Section
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)
of the Regulations and shall be interpreted consistently therewith.
"Admission Date" means the day on which the Investor Limited Partner
acquires its Interest pursuant to the terms of the Contribution
Agreement.
"Affiliate" means, when used with reference to a specified Person, any
(i) Person that directly or indirectly controls or is controlled by or
is under common control with the specified Person, (ii) Person that is
an officer of, partner in or trustee of, or serves in a similar
capacity with respect to, the specified Person or of which the
specified Person is an officer, partner or trustee, or with respect to
which the specified Person serves in a similar capacity and (iii)
Person that, directly or indirectly, is the beneficial owner of 10% or
more of any class of equity securities of the specified Person or of
which the specified Person is directly or indirectly the owner of 10%
or more of any class of equity securities. "Affiliate" of the
Partnership or a General Partner does not include a Person who is a
partner in one or more partnerships or joint ventures with the
Partnership or any other Affiliate of the Partnership if such a Person
is not otherwise an Affiliate of the Partnership or such General
Partner.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as it may be amended from time to time.
"Apartment Complex" means the real property owned by the Partnership
located in Dallas, Texas as more fully described in the Title Policy
(the "Land"), together with (i) 41 buildings containing 386 apartments
and ancillary and appurtenant facilities (including those intended for
commercial use, if any) being constructed thereon and (ii) all
furnishings, equipment and personal property used in connection with
the operation thereof ((i) and (ii), collectively, the
"Improvements").
"Assignment" (including the verb form "Assign" and the adjectival form
"Assigned") means a valid sale, exchange, transfer or syndication or
other disposition of all or any portion of an Interest. "Assignor"
means a Partner who makes an Assignment and "Assignee" means a Person
who receives an Assignment.
"Authority" means any Government Agency, together with any applicable
housing finance authority, which is a public body corporate and
politic created by the State, or other agency authorized to issue
bonds or other evidence of indebtedness to finance residential housing
development. To the extent applicable, Authority shall also mean any
government mortgage insurance or co-insurance agency, or any other
governmental body or agency having jurisdiction over the operations of
the Apartment Complex or that provides assistance to the Partnership,
the Apartment Complex and/or its tenants and imposes requirements in
connection with such assistance.
"Bankruptcy" or "Bankrupt" means, with respect to any Partner, such
Partner making an assignment for the benefit of creditors, becoming a
party to any liquidation or dissolution action or proceeding with
respect to such Partner or any bankruptcy, reorganization, insolvency
or other proceeding for the relief of financially distressed debtors
with respect to such Partner, or a receiver, liquidator, custodian or
trustee being appointed for such Partner or a substantial part of such
Partner's assets and, if any of the same occur involuntarily, the same
not being dismissed, stayed or discharged within ninety (90) days; or
the entry of an order for relief against such Partner under Title 11
of the United States Code. A Partner shall be deemed Bankrupt if the
Bankruptcy of such Partner shall have occurred and be continuing.
"Capital Account" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following
provisions:
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
specially allocated pursuant to Article IX hereof, and the amount of
any Partnership liabilities assumed by such Partner or which are
secured by any property distributed to such Partner;
to each Partner's Capital Account there shall be debited the amount of
cash and the Gross Asset Value of any 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 Article IX 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 Interest is Assigned in accordance with the terms of
this Agreement, the Assignee shall succeed to the Capital Account of
the Assignor to the extent it relates to the Assigned Interest; and
in determining the amount of any liability for purposes of clauses (i)
and (ii) above, there shall be taken into account Section 752(c) of
the Code and any other applicable provisions of the Code and the
Regulations.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are
intended to comply with Section 1.704-1(b) of the Regulations,
and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the General Partners 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 Partners may
make such modification with the Consent of the Special Limited
Partner, provided that it is not likely to have a material effect
on the amounts distributable to any Partner pursuant to Section
12.4 hereof upon the dissolution of the Partnership. The General
Partners, with the Consent of the Special Limited Partner, also
shall (a) 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 Section 1.704-1(b)(2)(iv)(q) of
the Regulations, (b) make any appropriate modifications in the
event unanticipated events might otherwise cause this Agreement
not to comply with Section 1.704-1(b) of the Regulations, and (c)
make any appropriate modifications to the Capital Accounts of the
Partners to reflect revaluations of the Apartment Complex
pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations.
"Capital Contributions" means, with respect to any Partner,
the amount of money (other than any amounts contributed pursuant
to a Partner's obligations under the Development Deficit Guaranty
Agreement) and the initial Gross Asset Value of any property
(other than money) contributed to the Partnership with respect to
the Interest held by such Partner pursuant to the terms of this
Agreement in accordance with Schedule A attached hereto. Any
reference in this Agreement to the Capital Contribution of a then
Partner shall include the contributions to the capital of the
Partnership made by any predecessor in interest of such Partner
in respect of such Interest of such Partner.
"Capital Note" means the promissory note issued by the Investor Limited Partner
to the Partnership in the form annexed hereto as Exhibit B pursuant to Section
3.4 hereof.
"Cash Expenditures" means all disbursements of cash during the year (excluding
distributions to Partners), including, without limitation, payment of operating
expenses, payment of principal and interest on the Partnership's indebtedness
(excluding payments of principal and interest on Voluntary Loans and Operating
Loans), cost of repair and restoration of the Apartment Complex, amounts
allocated to reserves (including any amounts required to be funded as operating
reserves or replacement reserves) by the General Partner and the payment of the
fees set forth in Article VI hereof. In addition, the net increase during the
year in any escrow account or reserve maintained by or for the Partnership shall
be considered a cash expenditure during the year. Cash Expenditures payable to
Partners or Affiliates of Partners shall be paid after Cash Expenditures payable
to third parties.
"Cash Flow" means the excess of Cash Receipts over Cash Expenditures. Cash Flow
shall be determined separately for each fiscal year or portion thereof.
"Cash Receipts" means all cash receipts of the Partnership from whatever source
derived other than from a Sale or Refinancing Transaction, including, without
limitation, cash from operations, any amounts attributable to construction or
development savings, and Capital Contributions. In addition, the net reduction
in any year in the amount of any escrow account or reserve maintained by or for
the Partnership shall be considered a cash receipt of the Partnership for such
year. Notwithstanding the foregoing, at the election of the General Partners,
Cash Receipts received near the end of a fiscal year and intended for use in
meeting the Partnership's obligations (including the cost of acquiring assets or
paying debts or expenses) in the subsequent fiscal year shall not be deemed
received until such following year.
"Certificate" means the Original Certificate as amended by any amendments
thereto filed in the Filing Office in accordance with the Uniform Act.
"Class" means a specific class or grouping of Partners (i.e., the General
Partners or the Investor Limited Partner and the Special Limited Partner).
"Class Z General Partner" means Korb.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or
any successor statute.
"Compliance Period" shall have the meaning provided in Section 42(i)(1) of the
Code.
"Consent of the Special Limited Partner" means the prior written consent or
approval of the Special Limited Partner, which may be granted or withheld in its
sole discretion.
"Contractor" means KRR Construction, and its successors and assigns.
"Contribution Agreement" means the Contribution Agreement dated as of the date
hereof among the General Partner, the Partnership (as constituted immediately
prior to the execution of this Agreement) and the Investor Limited Partner.
"CPI" means the National Consumer Price Index for Urban Wage Earners and
Clerical Workers (1982 - 1984 = 100) published by the United States Department
of Labor, Bureau of Labor Statistics. If the described index shall no longer be
published, another generally recognized as authoritative shall be substituted
with the Consent of the Special Limited Partner.
"Credit" or "Credits" means the low income housing tax credit allowable under
Section 42 of the Code.
"Credit Agency" shall mean Texas Department of Housing and Community Affairs.
"Credit Amount" means $350,260 of Credits per annum.
"Credit Conditions" means, for the duration of the Compliance Period, any and
all restrictions including, but not limited to, applicable federal, state and
local laws, rules and regulations, which must be complied with in order to
qualify for the Credits or to avoid an event of recapture in respect of the
Credits.
"Credit Period" shall have the meaning specified in Section 42 of the Code.
"Credit Reduction Payments" shall mean an amount equal to the present value cost
to the Investor Limited Partner (assuming a 15% discount rate) of a difference
(a "Credit Reduction") between the amount of Credits received by the Partnership
and allocated to the Limited Partners and 99.99% of the amounts of Credits set
forth in Exhibit A to the Recapture Guaranty Agreement, as such amounts are
adjusted pursuant to Section 3.4.B(ii) hereof, which arises as a result of a
Credit Reduction other than in connection with a Tax Credit Recapture Event (as
such term is defined in the Recapture Guaranty Agreement), which occurs after
the last Note Payment Date (as such term is defined in the Contribution
Agreement). Credit Reduction Payments shall not be required to the extent
amounts equal to such payments have been paid previously to the Limited Partners
pursuant to the Recapture Guaranty Agreement or pursuant to Section 9.2.D
hereof. "Depreciation" means, for each fiscal year of the Partnership or other
period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such fiscal 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 fiscal
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 deduction for such fiscal 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
deduction for such fiscal year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the General Partners.
"Developer" means Korb.
"Development Deficit" shall have the meaning provided in the Development Deficit
Guaranty Agreement.
"Development Deficit Guaranty Agreement" means the agreement of the Guarantor to
fund "Development Deficits", which shall be substantially in the form of Exhibit
E annexed to the Contribution Agreement.
"Entity" means any general partnership, limited partnership, corporation, joint
venture, trust, business trust, cooperative or association.
"Filing Office" means the Office of the Secretary of State of the State.
"Foreign Partner" means a Partner who at the time of acquisition of such
Partner's interest is a United States citizen or a resident alien of the United
States and whose status subsequently changes to that of a non-resident alien of
the United States.
"Foreign Person" means a non-resident alien, foreign corporation,
foreign partnership, foreign trust or foreign estate, within the
meaning of Sections 897, 1445 and 1446 of the Code.
"General Partner" or "General Partners" means any or all Persons
designated as General Partners in Schedule A, including, without
limitation, the Managing General Partner, and any Person or Persons
who, at the time of reference thereto, have been admitted as
additional or successor General Partners, in each such Person's
capacity as a general partner of the Partnership. If there is only one
General Partner of the Partnership, the term "General Partners" shall
be deemed to refer to such General Partner. Notwithstanding anything
to the contrary herein, the term General Partner or General Partners
shall not include the Class Z General Partner.
"Government Agency" shall have the meaning set forth in the
Contribution Agreement.
"Governmental Agreements" shall have the meaning set forth in the
Contribution Agreement.
"Governmental Permits" shall have the meaning set forth in the
Contribution Agreement.
"Gross Asset Value" means, with respect to any asset owned by the
Partnership, the asset's adjusted basis for Federal income tax
purposes, except as follows:
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 Partners with
the Consent of the Special Limited Partner;
the Gross Asset Value of each asset shall be adjusted to equal its
gross fair market value, as determined by the General Partners with
the Consent of the Special Limited Partner, as of the following times:
(a) the acquisition of an additional Interest by any new or existing
Partner in exchange for more than a de minimis Capital Contribution;
(b) the distribution by the Partnership to a Partner of more than a de
minimis amount of property in respect of its Interest; and (c) the
liquidation of the Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations; provided, however, that
adjustments pursuant to clauses (a) and (b) above shall be made only
if the General Partners with the Consent of the Special Limited
Partner reasonably determine that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners
in the Partnership;
the Gross Asset Value of any asset distributed to any Partner shall be
the gross fair market value of such asset on the date of distribution;
and
the Gross Asset Value of each asset shall be increased (or decreased)
to reflect any adjustments to the adjusted basis of such asset
pursuant to Section 734(b) or Section 743(b) of the Code, but only to
the extent that such adjustment is taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations and Article IX hereof; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this clause (iv) to the
extent the General Partners determine that an adjustment pursuant to
clause (ii) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to
this clause (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to clause (i), (ii) or (iv) above, 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.
"Guarantor" means, collectively, the General Partner and Homes For
America Holdings, Inc., a Texas corporation.
"Guaranty Period" means the period during which Guarantor is obligated
to fund any Operating Deficit pursuant to the Operating Deficit
Guaranty Agreement.
"Housing Agency" means the Credit Agency.
"HUD" means the United States Department of Housing and Urban
Development, or any successor Federal agency.
"Improvements" has the meaning specified in the definition of
Apartment Complex.
"Initial Agreement" means the Agreement of Limited Partnership dated
February 9, 1996 among Korb as general partner and the Withdrawing
Limited Partner, as limited partner.
"Interest" means the entire ownership interest of a Partner in the
Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled as
provided in this Agreement, together with the obligations of such
Partner to comply with all terms and provisions of this Agreement.
"Investor Contributions" means $2,787,337 plus the amount of any
Capital Contributions made by or on behalf of the Investor Limited
Partner in addition to those provided for in Section 3.4.A hereof,
less the amount by which the Capital Contribution is reduced pursuant
to Section 3.4.B hereof.
"Investor Limited Partner" means Related Corporate Partners V, L.P., a
Delaware limited partnership, and any person who becomes a Substituted
Limited Partner in respect of any portion of the Interests of the
Investor Limited Partner as provided in Article X hereof. The term
"Investor Limited Partner" does not include the Special Limited
Partner.
"Involuntary Withdrawal" means any Withdrawal caused by the death,
adjudication of insanity or incompetence, or Bankruptcy of a General
Partner, or the removal of such General Partner pursuant to Section
11.4.C hereof.
"Land" has the meaning specified in the definition of Apartment
Complex.
"Lender" means any lender under any mortgage constituting the
Mortgage.
"Limited Partners" means the Investor Limited Partner and the Special
Limited Partner and any Substituted Limited Partner.
"Liquidating Agent" shall have the meaning provided in Section 12.2
hereof.
"Management Agent" means Autumn Gate Properties, Inc. or its
successors or any other person approved by each Authority the approval
of which is required and selected to provide management services to
the Apartment Complex from time to time in accordance with Article
VIII hereof.
"Management Agreement" means the agreement between the Partnership and
the Management Agent for the management of the Apartment Complex
entered into pursuant to the authority granted by Article VIII hereof.
"Managing General Partner" means the General Partner, initially, and
its successors and assigns, as Managing General Partner pursuant to
the provisions of Section 5.3 hereof; provided, however, if there is
only one General Partner, such person shall be the Managing General
Partner.
"Mortgage" means any mortgage or deed of trust securing an
indebtedness of the Partnership and encumbering the Apartment Complex,
as such indebtedness may be increased, decreased or refinanced in
accordance with this Agreement and the Project Documents. Where the
context admits, the term "Mortgage" shall include any mortgage, deed,
deed of trust, note, regulatory agreement, security agreement,
assumption agreement or other instrument executed in connection with a
Mortgage Note which is binding on the Partnership; and in case any
Mortgage is replaced or supplemented by any subsequent mortgage or
mortgages, the term "Mortgage" shall refer to any such subsequent
mortgage or mortgages.
"Mortgage Note" means any promissory note held by a Lender evidencing
the indebtedness secured by the Mortgage. "Nonrecourse Deductions" has
the meaning set forth in Section 1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"Operating Deficit" shall have the meaning provided in the Operating
Deficit Guaranty Agreement.
"Operating Deficit Guaranty Agreement" means the agreement of the
Guarantor to fund Operating Deficits, which shall be substantially in
the form of Exhibit F annexed to the Contribution Agreement.
"Operating Loans" means loans made by the Guarantor to the Partnership
pursuant to the Operating Deficit Guaranty Agreement to fund Operating
Deficits occurring during the Guaranty Period, which loans do not bear
interest and are repayable only as provided in Article IX hereof.
"Other Guarantees" or "Guarantees" shall mean any guarantees made by
the Guarantor pursuant to the Contribution Agreement.
"Partner" or "Partners" means any or all of the General Partners and
the Limited Partners.
"Partner Nonrecourse Debt" has the meaning set forth in Section
1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Section 1.704-2(i)(2) of the Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(i)(1) of the Regulations.
"Partnership" means the limited partnership governed by this
Agreement, as such limited partnership may from time to time be
amended or reconstituted.
"Partnership Minimum Gain" shall have the meaning set forth in Section
1.704-2(b)(2) of the Regulations.
"Permanent Lender" shall have the meaning set forth in the
Contribution Agreement.
"Permanent Loan" shall have the meaning set forth in the Contribution
Agreement.
"Person" means any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such
Person as the context may require.
"Prime Rate" means the rate of interest publicly announced from time
to time by Chemical Bank, New York, New York, as its prime rate.
"Profits" and "Losses" means, for each fiscal year of the Partnership
or other period, an amount equal to the Partnership's taxable income
or loss for such year or period, determined in accordance with Section
703(a) of the Code (for this purpose, all items of income, gain, loss,
or deduction required to be stated separately pursuant to Section
703(a)(1) of the Code shall be included in taxable income or loss),
with the following adjustments: any income of the Partnership that is
exempt from Federal income tax and not otherwise taken into account in
computing Profits or Losses shall be added to such taxable income or
loss;
any expenditures of the Partnership described in Section 705(a)(2)(B)
of the Code or treated as Section 705(a)(2)(B) expenditures pursuant
to Section 1.704-1(b)(2)(iv)(i) of the Regulations and not otherwise
taken into account in computing Profits or Losses, shall be subtracted
from such taxable income or loss;
in the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to clause (ii) or (iii) of the definition thereof,
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 or Losses;
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;
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; and
notwithstanding any other provisions hereof, any items which are
specially allocated pursuant to Article IX hereof shall not be taken
into account in computing Profits or Losses.
"Project Documents" means the Contribution Agreement, the Construction
Contract, the Governmental Agreements, the Title Policy, the
Management Agreement, the Loan Documents (as such term is defined in
the Contribution Agreement), and any other document related to the
financing, development, construction, use or operation of the
Apartment Complex, as any such documents may be amended from time to
time.
"Regulations" means the Income Tax Regulations promulgated under the
Code.
"Regulatory Agreement" means that certain Declaration of Land Use
Restrictive Covenants For Low-Income Housing Credits entered into on
October 1, 1996 by and between the Credit Agency and the Partnership.
"Required Reserve Amount" means (i) $285 per unit per annum for years
one through three of the Compliance Period and (ii) $200 per unit per
annum for years four through fifteen of the Compliance Period.
"Return Amount" shall have the meaning ascribed to such term in
Section 9.2.D.
"Sale or Refinancing Transaction" means any of the following items or
transactions not in the ordinary course of business: a sale, transfer,
exchange or other disposition of all or substantially all of the
assets of the Partnership, a condemnation of, or a casualty at, the
Apartment Complex or any part thereof, a claim against a title
insurance company, the refinancing of any Mortgage Note or other
indebtedness of the Partnership and any similar item or transaction;
provided, however, that neither distributions which are deemed returns
of capital for Federal income tax purposes nor the payment of Capital
Contributions by the Partners shall be included within the meaning of
the term "Sale or Refinancing Transaction."
"Sale or Refinancing Transaction Proceeds" means all cash receipts of
the Partnership arising from a Sale or Refinancing Transaction
(including principal and interest received on a debt obligation
received as consideration, in whole or in part, on a Sale or
Refinancing Transaction) less any deductibles or expenses incurred in
connection therewith.
"Special Limited Partner" means Related Corporate SLP L.P., and its
successors and assigns.
"State" means the State of Texas.
"Substituted Partner" means any transferee of the Interest of a
Partner who is admitted to the Partnership as a successor partner in
respect of the Interest of such Partner in accordance with Article X.
"Tax Matters Partner" means the Partner designated from time to time
as the Tax Matters Partner of the Partnership pursuant to Section
5.3.D hereof.
"Title Policy" means the Policy of Title Insurance to be issued
pursuant to Title Commitment No. TC96-83715 of Security Union Title
Insurance Company and all the documents relating thereto.
"Total Credit Amount" means $3,473,412 of Credits.
"Unavoidable Events" means strikes, acts of God, governmental
restrictions (other than those contained in the Governmental
Agreements), severe and unusual shortages of labor or materials, enemy
action, riot, civil commotion, fire, unavoidable casualty or other
causes beyond the reasonable control of a party. Lack of funds shall
not be deemed a cause beyond the control of a party.
"Uniform Act" means the Uniform Limited Partnership Act, or its
equivalent, as it may be adopted or amended from time to time by the
State, or any successor statute governing the operation of limited
partnerships.
"United States Real Property Interest" means any direct or indirect
interest in United States real property as defined in Section 897(c)
of the Code and the Regulations promulgated thereunder.
"Voluntary Loan" means a voluntary, unsecured interest-bearing loan of
any Partner to the Partnership as described in Section 4.4 hereof.
"Withdrawing" or "Withdrawal" (including the verb form "Withdraw" and
the adjectival forms "Withdrawing" and "Withdrawn") means, as to a
General Partner, the occurrence of the death, adjudication of insanity
or incompetence, Bankruptcy, dissolution or liquidation of such
Partner, or the withdrawal, removal or retirement from the Partnership
of such Partner for any reason, including any Assignment of its
Interest and those situations when a General Partner may no longer
continue as a General Partner by reason of any law or pursuant to any
terms of this Agreement.
"Withdrawing Limited Partners" means Cal-Tex II-Glen Hills Apartments,
Ltd., a Texas limited partnership, Jock P.R. Living Trust 3/28/89 6003
Abrams Road, Inc., a Texas corporation and Anthony J. Barder.
* * * Each definition or pronoun herein shall be deemed to refer to
the singular, plural, masculine, feminine or neuter as the context
requires. Words such as "herein," "hereinafter," "hereof," "hereto"
and "hereunder," when used with reference to this Agreement, refer to
this Agreement as a whole, unless the context otherwise requires.
ARTICLE II
GENERAL
2.1 Continuation of the Partnership.
The Partnership shall be continued as a limited partnership pursuant
to this Agreement. The name of the Partnership shall continue to be
Dallas/Glen Hills, L.P. or such other name selected by the General
Partner with the Consent of the Special Limited Partner as may be
acceptable to the appropriate recording officials of the State.
As soon after the execution of this Agreement as is practicable, the
General Partner shall (if required by the Uniform Act) file this
Agreement in accordance with the Uniform Act and/or amend and file the
Certificate to reflect the matters set forth herein. The General
Partner shall from time to time take all such other actions as may be
deemed by them to be necessary or appropriate to (i) effectuate and
permit the continuation of the Partnership as a limited partnership
under the laws of the State, (ii) enable the Partnership to do
business in the state where the Apartment Complex is located and (iii)
protect the limited liability of the Limited Partners under the laws
of the State and of the state where the Apartment Complex is located,
including the preparation and filing of such amendments to this
Agreement and any other certificate, document or instrument as may be
required under the laws of the State and of the state where the
Apartment Complex is located. The Partners shall execute such
certificates, documents and instruments and take such other action as
may be necessary to enable the General Partner to fulfill its
responsibilities under this Section 2.1.B. The power of attorney
granted in Section 14.2 hereof may be exercised by the General Partner
to effect the provisions of this Section 2.1.B.
2.2 Principal Office. The principal office of the Partnership shall be
located at c/o Homes for America Holdings, Inc., 680-3 West 246th
Street, Riverdale, New York 10471. The General Partner may maintain
such other offices on behalf of the Partnership in the State as they
may from time to time deem advisable. The Partnership's books and
records will be made available to the Investor Limited Partner or its
representatives at its principal office at all times and for any
purpose. The principal office of the Partnership may be changed by the
General Partner, in which event written notice thereof shall be given
by the General Partner to all the other Partners.
2.3 Principal Place of Business; Resident Agent. The principal place
of business of the Partnership shall be c/o Homes for America
Holdings, Inc., 680-3 West 246th Street, Riverdale, New York 10471.
Ray T. Khirallah has been appointed the Partnership's resident agent
for the service of process in the State.
2.4 Term. The Partnership shall continue in full force and effect
until the dissolution and termination of the Partnership pursuant to
Article XII hereof.
2.5 Purpose. The specific business and purpose of the Partnership is
the application for and maintenance of the Credits, investment in real
property and the provision of low income housing through the
renovation, rehabilitation, operation (including conversion to
cooperative or condominium form of ownership and the sale of apartment
units, if such action would not cause the Credit to be reduced for any
year during the Credit Period or Compliance Period) and leasing of the
Apartment Complex and any commercial space located therein, and in
connection therewith, subject to and in accordance with the terms
hereof, the permission of each applicable Authority and all
Governmental Agreements, to make and perform contracts and other
undertakings and to engage in any and all activities and transactions
as may be necessary or advisable in connection therewith, including,
but not limited to, the purchase, transfer, mortgage, pledge and
exercise of all other rights, powers, privileges and other incidences
of ownership with respect to the Apartment Complex and to borrow or
raise money without limitation as to amount or manner and to carry on
any and all activities related to any of the foregoing, subject always
to the terms and conditions of this Agreement. The business of the
Partnership shall be limited to the rehabilitation, ownership,
financing, operation and disposition of the Apartment Complex.
In order to carry out its business and purpose under Section 2.5.A
hereof, subject to the terms and conditions hereof, the Partnership is
hereby authorized to:
acquire, own and lease real property, and to hold such property for
investment purposes;
renovate, rehabilitate, own, maintain and operate the Apartment
Complex;
mortgage, lease, transfer and exchange or otherwise convey and
encumber such property and the improvements thereon (including
conversion to cooperative or condominium form of ownership and the
sale of apartment units) in furtherance of any and all of the objects
of its business in connection with the Apartment Complex;
enter into, perform and carry out contracts of any kind necessary to,
or in connection with or incidental to, the construction, renovation,
rehabilitation, ownership, financing, maintenance and operation of the
Apartment Complex, including, but not by way of limitation, any
contracts with any Authority which may be desirable or necessary to
comply with the requirements of such Authority, including any
agreements relating to regulations or restrictions contained in any
mortgages as to rents, sales, charges, capital structure, rate of
return and methods of operation;
rent dwelling units and commercial space, if any, in the Apartment
Complex from time to time in accordance with applicable Federal, state
and local regulations, in such a manner so as to qualify for the
Credit, collect the rents therefrom, pay the expenses incurred in
connection therewith, and distribute the net proceeds to the Partners,
subject to any requirements which may be imposed by any Authority; and
purchase, transfer, mortgage, pledge and exercise all other rights,
powers, privileges and other incidences of ownership with respect to
the Apartment Complex and borrow or raise money without limitation as
to amount or manner and carry on any and all activities incidental and
appropriate to effectuate the purposes of the Partnership.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions; General Partner. The Capital
Contribution of the Partners as of the Admission Date are set forth in
Schedule A, and as follows:
Partner Capital Contribution
General Partner $1.00
Special Limited Partner $1.00
Investor Limited Partner $2,211,910
Class Z General Partner $1,500,000
The General Partner shall not be required to make any capital
contributions to the Partnership, except (i) to the extent provided in
Section 3.7.B and (ii) insofar as the same may be required pursuant to
the Development Deficit Guaranty Agreement in connection with the
completion of construction of the Apartment Complex (it being
understood that such contributions will be deemed to have been already
reflected in the Capital Account of the General Partner and will not
further increase the General Partner's Capital Account).
3.2 Withdrawal of Withdrawing Limited Partners; Admission of Limited
Partners. The Withdrawing Limited Partners hereby withdraw as Partners
of the Partnership. The Investor Limited Partner and the Special
Limited Partner are hereby admitted to the Partnership as the Limited
Partners. The Withdrawing Limited Partners acknowledge that they (i)
have no further interest as Partners in the Partnership as of the
Admission Date, (ii) have released all claims, if any, against the
Partnership arising out of their participation as Partners and (iii)
shall be deemed to have withdrawn as limited partners of the
Partnership as of such date.
3.3 Special Limited Partner. The Special Limited Partner shall be in a
different class from the Investor Limited Partner and, except as
otherwise expressly stated in this Agreement, shall not participate in
any rights allocable to or exercisable by the Investor Limited Partner
under this Agreement.
3.4 Investor Limited Partner.
Subject to compliance with the terms and conditions hereinafter set
forth, the Investor Limited Partner shall make Capital Contributions
to the Partnership in the amounts and as and when required pursuant to
the terms of the Contribution Agreement.
The amount of the Investor Limited Partner's Capital Contributions was
determined in part upon the amount of Credits that are expected to be
available to the Partnership, and was based upon the assumption that
the Partnership would be eligible to recognize Credits of no less than
the Total Credit Amount. The amount of the qualified basis of the
Apartment Complex and the annual rate of the Credits which the
Partnership will be able to claim with respect thereto will not be
known until the end of the first year of the Credit Period for the
Apartment Complex. Therefore, if the total amount of Credits which the
Partnership will be entitled to recognize and allocate to the Limited
Partners, as certified to the Investor Limited Partner by the
Accountants upon Completion, is (x) less than 99.99% of the Total
Credit Amount, then the amount of the Capital Contributions described
in Section 3.4.A hereof shall be reduced by $0.6830 for each $1.00 by
which 99.99% of the Total Credit Amount exceeds the total Credits
which the Accountants certify as aforesaid that the Partnership will
be entitled to claim and allocate to the Limited Partners or (y) more
than 99.99% of the Total Credit Amount, then the amount of the Capital
Note shall be increased (subject to the availability of funds) by
$0.6830 for each $1.00 by which 99.99% of the Total Credit Amount is
less than the total Credits which the Accountants certify as aforesaid
that the Partnership will be entitled to claim and allocate to the
Limited Partners.
The amounts set forth on Exhibit A to the Recapture Guaranty Agreement
shall be revised to reflect the total amount of Credits which the
Accountants certify pursuant to Section 3.4.B(i) hereof.
Notwithstanding the foregoing provisions of Section 3.4.B(i) hereof,
in the event that any installment of the Limited Partner's Capital
Contribution has not been paid to the Partnership at the time that the
Partnership files a Federal income tax return in which it claims
Credits with respect to the Apartment Complex, the calculation
required by Section 3.4.B(i) hereof (and the adjustment required by
Section 3.4.B(ii) hereof) shall be made by subtracting from the annual
amount of Credits certified by the Accountants to the Limited Partner
upon the Admission Date the portion of such annual Credits which
represents any apartment unit in the Apartment Complex with respect to
which Credits were not claimed on such Federal income tax return. For
these purposes, any Credits which the Partnership will be entitled to
claim in later taxable years as a result of Section 42(f)(3) of the
Code shall be ignored.
The Limited Partners' Capital Contributions shall first be applied to
the payment of the fee specified in Section 6.2.
The Investor Limited Partner's obligation to pay the Capital Note is
non-recourse to the Investor Limited Partner except to the extent of
the Investor Limited Partner's Interest, which shall be pledged as
security for such obligation pursuant to a Pledge Agreement in
substantially the form of Exhibit A attached hereto, and is subject to
satisfaction of the Note Payment Conditions (as such term is defined
in the Contribution Agreement).
3.5 [Reserved]
3.6 Treatment of Other Advances. If any Partner shall advance funds to
the Partnership other than the amount of its Capital Contribution, the
amount of such advance shall not be considered a contribution to the
capital of the Partnership, but shall be deemed either an Operating
Loan or a Voluntary Loan and shall be subject to the provisions of
Section 4.4 hereof.
3.7 Capital Accounts; No Interest; Withdrawal.
Capital Account balances shall be deemed to have already reflected any
contributions by the General Partner, the Class Z General Partner and
their Affiliates that are necessary to fund the completion of
rehabilitation of the Apartment Complex pursuant to the Development
Deficit Guaranty Agreement (i.e., such contributions will not increase
the Capital Account balance of the General Partner.)
No Partner shall have the right to demand a return of his Capital
Contribution, except as otherwise provided in this Agreement. No
Partner shall have priority over any other Partner, either as to
return of its Capital Contribution or as to profits, losses or
distributions, except as otherwise specifically provided herein.
Moreover, the General Partner shall not be personally liable for the
return of the Capital Contribution of any Limited Partner, or any
portion thereof, it being expressly understood that any such return
shall be made solely from assets of the Partnership, nor shall the
General Partner be required to pay the Partnership or any Partner any
deficit in its or any other Partner's Capital Account upon dissolution
or otherwise, it being understood and agreed that any deficit in any
Capital Account shall not be treated as asset of the Partnership;
provided, however, that if on final liquidation, the Capital Account
of the General Partner is negative, the General Partner shall make a
contribution to the capital of the Partnership in an amount equal to
the lesser of (A) the deficit balance in its Capital Account or (B) an
amount equal to the excess of (i) 1.01% of the Capital Contributions
of the Limited Partners over (ii) the Capital Contribution of the
General Partner. Upon dissolution of the Partnership, the Special
Limited Partner shall contribute to the Partnership an amount equal to
the lesser of (A) the deficit balance in the Special Limited Partner's
Capital Account and (B) the cumulative depreciation deductions
allocated to the Special Limited Partner by the Partnership. The
Investor Limited Partner shall not be required to pay to the
Partnership any deficit in its Capital Account upon dissolution or
otherwise, except as provided by law, with respect to third-party
creditors of the Partnership. No interest shall be paid on any Capital
Account or Capital Contribution. No Partner shall have the right to
demand or receive property other than cash for its Interest. Each of
the Partners does hereby agree to, and does hereby, waive any right
such Partner may otherwise have to cause any asset of the Partnership
to be partitioned or to file a complaint or institute any proceeding
at law or in equity seeking to have any such asset partitioned.
Subject to any adjustment in the amount of the Investor's Capital
Contribution pursuant to Section 3.4.B(i), immediately following the
date of this Agreement, the Capital Account of the General Partner
shall be $1.00, of the Investor Limited Partner shall be $2,211,910
(including the Consulting Monitoring Fee), of the Class Z General
Partner shall be $1,500,000 and of the Special Limited Partner shall
be $1.00. The Partnership assets shall be revalued for Capital Account
purposes to reflect such amounts.
3.8 Liability of Limited Partners. Neither the Special Limited Partner
nor the Investor Limited Partner shall be liable for any debts,
liabilities, contracts or obligations of the Partnership, except as
provided by law. Subject to Section 3.7, the Investor Limited Partner
and the Special Limited Partner shall be liable only to make payments
of their Capital Contributions as and when due under this Agreement.
3.9 Provision of Other Amounts. The Partners acknowledge that,
pursuant to the Contribution Agreement, the General Partner is
obligated to indemnify the Partnership against any and all liability
in respect of any and all transfer, gains, income, sales or other
taxes and transfer fees of any kind imposed or asserted with respect
to the acquisition by the Limited Partners of their Interest. No such
amounts shall be treated as loans or contributions to the Partnership,
and the provision of such amounts shall not affect the allocations and
distributions provided for in Article IX in any way whatsoever.
3.10 Outside Activities of Limited Partners. The Limited Partners may
engage or possess interests in other business ventures of every kind
and description for their own account, including, without limitation,
the ownership or management of other real estate projects,
developments or undertakings. Neither the Partnership nor any of the
other Partners shall have any rights by virtue of this Agreement in
such independent business ventures or to income or profits derived
therefrom.
ARTICLE IV
COMPLIANCE WITH AUTHORITY REQUIREMENTS;
PARTNERSHIP BORROWINGS
4.1 Authority Requirements.
During the Compliance Period, the following provisions shall apply:
(i) each of the provisions of this Agreement shall be subject to, and
the General Partner covenants to act in accordance with, the Credit
Conditions and all applicable federal, state and local laws and
regulations; (ii) the Credit Conditions and all such laws and
regulations, as amended or supplemented, shall govern the rights and
obligations of the Partners, their heirs, executors, administrators,
successors and assigns, and they shall control as to any terms in this
Agreement which are inconsistent therewith, and any such inconsistent
terms in this Agreement shall be unenforceable by or against any of
the Partners; (iii) upon any dissolution of the Partnership or any
transfer of the Apartment Complex, no title or right to the possession
and control of the Apartment Complex and no right to collect rent
therefrom shall pass to any person who is not, or does not become,
bound by the Credit Conditions in a manner that, in the opinion of
counsel to the Partnership, would not adversely affect the ability of
the owner(s) of the Apartment Complex to utilize the Credits or avoid
a recapture thereof; and (iv) any conveyance or transfer of title to
all or any portion of the Apartment Complex required or permitted
under this Agreement shall in all respects be subject to the Credit
Conditions and all conditions, approvals or other requirements of the
rules and regulations of any Authority applicable thereto.
4.2 Authorization to the General Partner.
Without in any way limiting the right or authority of the General
Partner under this Article IV or Article V hereof, the General Partner
is specifically authorized to execute all documents required by any
Authority or any Lender in connection with the acquisition,
construction or financing of the Apartment Complex; provided that the
terms and conditions of the related Governmental Agreement and/or
Mortgage and Mortgage Note were accurately and completely disclosed to
the Investor Limited Partner pursuant to the Contribution Agreement or
such requirement arises out of an amendment to such Governmental
Agreement, Mortgage or Mortgage Note made with the Consent of the
Special Limited Partner. Notwithstanding any other provision in this
Agreement, the General Partner is hereby authorized to amend this
Agreement without the consent of the Investor Limited Partner or the
Special Limited Partner to effectuate any amendments required by any
Authority or any Lender pursuant to applicable law and/or the terms
and conditions of a Governmental Agreement or Mortgage and Mortgage
Note, the terms and conditions whereof were accurately and completely
disclosed to the Investor Limited Partner pursuant to the Contribution
Agreement or such requirement arises out of an amendment to such
Governmental Agreement, Mortgage or Mortgage Note made with the
Consent of the Special Limited Partner. The General Partner may
exercise the power of attorney granted in Section 14.2 hereof to
effect the provisions of this Section 4.2.A.
The General Partner shall, at no time, do or cause to be done any act
directly or indirectly affecting the Apartment Complex except pursuant
to the requirements of each applicable Authority and Lender and (if
such approval is required) with the prior approval thereof.
4.3 Right to Mortgage.
The Partnership has obtained financing for the Apartment Complex from
the Lender and has secured the same by the Mortgage. Each and every
Mortgage provides and shall continue to provide that, except prior to
Completion, no Person, including, but not limited to, the Partnership,
any party holding a partnership interest in the Partnership, or any of
their Affiliates, shall have any personal liability for the payment of
all or any part of such Mortgage.
The execution by the General Partner or the Class Z General Partner on
behalf of the Partnership of the Project Documents is hereby ratified
provided that the terms and conditions thereof were accurately and
completely disclosed to the Investor Limited Partner pursuant to the
Contribution Agreement.
The Partners contemplate refinancing the Permanent Loan and the
General Partner will use its best efforts, at the General Partner's
expense, to refinance the Permanent Loan by February 28, 1999 (or, if
unsuccessful, by August 31, 1999) for purposes of making certain
distributions to Korb (the "Korb Refinancing"). If for any reason the
Korb Refinancing does not occur by August 31, 1999, the General
Partner will have a continuing obligation to use its best efforts to
refinance the Permanent Loan.
The General Partner may modify, refinance or repay the Mortgage with
the approval of each Lender and each Authority, if required, including
any required transfer or conveyance of Partnership assets for security
or mortgage purposes; provided, however, that the terms of any such
modification, refinancing or repayment must receive the Consent of the
Special Limited Partner before such transaction shall be binding on
the Partnership; it being agreed and understood that the consent of
the Special Limited Partner shall not be unreasonably withheld with
respect to the terms and conditions of the Korb Refinancing.
4.4 Loans. All borrowings by the Partnership shall be subject to the
terms of this Agreement, the Project Documents and applicable rules,
regulations and directives of any Authority. To the extent borrowings
are permitted, they may be made from any source, including any Partner
or an Affiliate thereof; provided, however, that any borrowings from
the General Partner or its Affiliates shall require the Consent of the
Special Limited Partner. Except as may be otherwise specifically set
forth in this Agreement, if any Partner or Affiliate thereof shall
lend any monies to the Partnership, such loan shall be unsecured and
the amount of any such loan shall not be an increase of such Partner's
Capital Contribution nor affect in any way such Partner's share of the
profits and losses or distributions of the Partnership. Any loan by a
Partner or its Affiliate, other than an Operating Loan, shall be a
Voluntary Loan, shall bear interest per annum at a rate equal to two
percent in excess of the Prime Rate (but not in excess of the lawful
maximum rate) and shall be repayable as set forth in Article IX hereof
(to the extent permitted by each Authority); provided, however, that
any Voluntary Loan shall be made solely for the benefit of the
Partnership. No Voluntary Loans by the General Partner or its
Affiliates may be made to the Partnership during the time that the
Guarantor is obligated to make Operating Loans to the Partnership.
ARTICLE V
RIGHTS, POWERS AND OBLIGATIONS OF THE
GENERAL PARTNER AND LIMITATIONS THEREON; PARTNERS' ACTIVITIES
5.1 Exercise of Management.
The overall management and control of the business, assets and affairs
of the Partnership shall be vested in the General Partner and, subject
to the specific limitations and restrictions set forth in this Article
V and in Article IV hereof, the General Partner, in extension of and
not in limitation of the powers given it by law, shall have full,
exclusive and complete charge of the management of the business of the
Partnership in accordance with its purpose stated in Section 2.5
hereof; provided, however, the General Partner shall not cause the
Partnership to enter into any contracts for services having a term in
excess of one year without the consent of the Special Limited Partner,
which consent shall not be unreasonably withheld. Neither the Special
Limited Partner nor any other Limited Partner shall take part in the
management or control of the business of the Partnership or have
authority to bind the Partnership. Notwithstanding the foregoing, the
provisions of this Section 5.1.A shall not limit the exercise by the
Special Limited Partner of any and all of the rights granted to it
under this Agreement.
The Managing General Partner (if at the time more than one Person
constitutes the Managing General Partner) shall act by vote of a
majority in interest of the Persons constituting the Managing General
Partner, except where otherwise specified herein. If at any time there
is no Managing General Partner, the General Partners shall act by vote
of a majority in interest of the General Partners, except where
otherwise specified herein.
Any General Partner, to the extent of its authorization, may from time
to time, by an instrument in writing delegate all or any of its powers
or duties hereunder to another General Partner. Such writing shall
fully authorize such other General Partner to act alone without
requirement of any other act or signature of the delegating General
Partner, to take any action of any type and to do anything and
everything which the delegating General Partner may be authorized to
take or do hereunder except insofar as said delegation may be limited
to certain acts or activities; provided, however, that any such
delegation shall not relieve the delegating General Partner of its
obligations or liabilities under its Agreement.
Each obligation of the General Partners under this Agreement shall be
the joint and several obligation of each General Partner and each such
obligation shall survive any withdrawal of a General Partner pursuant
to Article XI hereof.
5.2 Duties and Authority of General Partner.
The General Partner shall devote to the Partnership such time as may
be necessary for the proper performance of the duties of the General
Partner. The General Partner shall at all times exercise its
responsibilities as General Partner in a fiduciary manner. The
signature of a General Partner shall be required on any instrument,
document or agreement to bind the Partnership, and third parties may
rely fully on any such instrument, document or agreement signed by the
General Partner. Subject to the terms and conditions hereof, the
General Partner shall be obligated, and is hereby authorized and
directed, to:
Take all action that may be necessary or appropriate to carry out the
purposes of the Partnership as described in this Agreement;
Make inspections of the Apartment Complex and assure that the
Apartment Complex is being properly maintained in accordance therewith
and necessary repairs are being made;
Prepare or cause to be prepared in conformity with good business
practice all reports that are to be furnished to the Partners or that
are required by taxing bodies, any Authority or other governmental
agencies, including operations reports of the Apartment Complex or by
or on behalf of the General Partner, and the financial statements and
reports referred to in Section 7.3 hereof;
Cause the property of the Partnership at all times to be insured in a
manner similar to other property of like kind in the same locality and
in such amounts and on such terms as will fully and adequately protect
the Partnership (provided that such insurance shall be in an amount at
least sufficient to satisfy the provisions of Section 5.11 hereof);
Obtain and maintain in force or cause to be obtained and maintained in
force Worker's Compensation Insurance and such other insurance as may
be required by applicable law or governmental regulation;
Obtain and maintain in force or cause to be obtained and maintained in
force adequate public liability insurance;
Comply with any rehabilitation budget delivered pursuant to the
Contribution Agreement;
Enforce compliance with any construction agreements;
Provide an O&M Plan for the Apartment Complex acceptable to the
Special Limited Partner within fifteen (15) days of the date hereof.
Comply with all Governmental Agreements;
Promptly report to the Limited Partners any (I) material variance from
the qualification standards for Credits or (II) failure to comply with
the Governmental Agreements which would give rise to the Special
Removal Right under Section 11.4.A(ii); and
Do all other things (subject to the restrictions contained herein)
that may be necessary or desirable in order properly and efficiently
to administer and carry on the affairs, assets and business of the
Partnership.
The General Partner shall operate the Apartment Complex and shall
cause the Management Agent to manage the Apartment Complex in such a
manner that the Apartment Complex will be eligible to receive Credits
with respect to 100% of the apartment units in the Apartment Complex.
To that end, the General Partner agrees, without limitation, to make
all elections requested by the Special Limited Partner under Section
42 of the Code to allow the Partnership or its Partners to claim the
Credit; to file Form 8609 with respect to the Apartment Complex as
required; for at least the duration of the Compliance Period, to
operate the Apartment Complex and cause the Management Agent to manage
the Apartment Complex so as to comply with the requirements of
Sections 42(g) and (i)(3) of the Code; and to make all certifications
required by Section 42(1) of the Code.
The General Partner agrees that it shall prepare or cause to be
prepared an annual budget in connection with the operations of the
Apartment Complex for each succeeding fiscal year of the Partnership
and shall deliver the same to the Special Limited Partner not later
than November 1 of the fiscal year preceding the fiscal year to which
such budget relates. Each such budget shall contain an amount to be
added to separate reserves for payment of real estate taxes, insurance
and replacements in an amount with respect to each such reserve equal
to the greater of the amount required to be added to such reserve
during such year by any Lender or the amount that is reasonable in the
circumstances, which, in the case of the reserve for replacements,
shall be not less than an amount equal to the Required Reserve Amount.
Such budget shall not be adopted without the Consent of the Special
Limited Partner. The Partnership shall not make any expenditure of
funds, or commit to make any such expenditure, other than in response
to an Unavoidable Event, except as provided for in an annual budget so
approved by the Special Limited Partner.
If the General Partner and the Special Limited Partner agree that the
annual amount to be placed into a reserve for replacement and repairs,
as reflected in Section 5.2.C hereof (as such amount may be adjusted
from time to time by the General Partner with the Consent of the
Special Limited Partner), exceeds the amount which the Partnership is
required to place into such an account to be maintained by or under
the direction of the Lender or the Authority, the General Partner
shall each month cause the Partnership to pay one-twelfth (1/12th) of
such excess into an escrow account pursuant to the terms of the
Replacement Reserve Guaranty Agreement annexed to the Contribution
Agreement as Exhibit J.
5.3 Delegation of General Partner Authority; Tax Matters Partner.
The General Partners hereby delegate all their powers and duties
hereunder to the Managing General Partner. For all purposes of this
Agreement, including, without limitation, the delivery of certificates
and the granting of withholding of all consents and approvals, the
Managing General Partner shall have the sole right to act in the name
of and on behalf of the General Partners. On and subject to the terms
and conditions of this Agreement, the Managing General Partner is
hereby fully authorized, without the requirement of any act or
signature of the other General Partners, to take any action of any
type and to do anything and everything which a general partner of a
limited partnership organized under the Uniform Act may be authorized
to take or do thereunder, and specifically, without limitation of such
authority, to execute, sign, seal and deliver in the name and on
behalf of the Partnership:
any note, mortgage or other instrument or document in connection with
the Mortgage, the Mortgage Note or any Governmental Agreement, and all
other agreements, contracts, certificates, instruments or documents
required by any Authority and/or any Lender in connection therewith or
with the acquisition, development, construction, improvement,
operation or leasing of the Apartment Complex or otherwise required by
any Authority and/or any Lender under the Project Documents in
connection with the Apartment Complex;
any deed, lease, mortgage, mortgage note, bill of sale, contract or
any other instrument purporting to convey or encumber the real or
personal property of the Partnership; any rent supplement or leasing
or other contract or agreement providing for public or non-public
financial assistance, directly or indirectly, to tenants of the
Apartment Complex;
any and all agreements, contracts, documents, certificates and
instruments whatsoever involving the acquisition, development,
construction, improvement, management, maintenance, leasing and
operation of the Apartment Complex, including the employment of such
Persons as may be necessary therefor; and
any and all instruments, agreements, contracts, certificates or
documents requisite to carrying out the intention and purpose of this
Agreement, including, without limitation, the filing of all business
certificates, this Agreement and all amendments thereto, and documents
required pursuant to the Project Documents or by any Authority and/or
any Lender or deemed advisable by the Managing General Partners in
connection with any financing.
Every contract, agreement, certificate, document or other instrument
executed by the Managing General Partner shall be conclusive evidence
in favor of every person relying thereon or claiming thereunder that,
at the time of the delivery thereof, (i) the Partnership was in
existence, (ii) this Agreement had not been terminated or cancelled or
amended in any manner so as to restrict such authority (except as
shown in any instrument duly filed in the Filing Office) and (iii) the
execution and delivery thereof was duly authorized by the General
Partners. Any Person dealing with the Partnership or the Managing
General Partner may, absent actual knowledge to the contrary, rely on
a certificate signed by the Managing General Partner hereunder:
as to who are the Partners hereunder;
as to the existence or nonexistence of any fact or facts which
constitute conditions precedent to acts by any General Partner or are
in any other manner germane to the affairs of the Partnership;
as to who is authorized to execute and deliver any instrument,
contract, agreement, certificate or document for the Partnership;
as to the authenticity of any copy of this Agreement and amendments
thereto; or
as to any act or failure to act by the Partnership or as to any other
matter whatsoever involving the Partnership or the Apartment Complex.
The Partners hereby consent to the exercise by the Managing General
Partner of the powers conferred on it by this Agreement.
All of the Partners hereby agree that the Managing General Partner
shall be the "Tax Matters Partner" pursuant to the Code and in
connection with any audit of the Federal income tax returns of the
Partnership. In discharging its duties and responsibilities, the Tax
Matters Partner shall act as a fiduciary (i) to the Limited Partners
(to the exclusion of the other Partners) insofar as tax matters
related to Credits are concerned, and (ii) to the Partners in other
respects. In acting as tax matters partner, the Tax Matters Partner
shall consult with the Special Limited Partner.
5.4 Lease, Conveyance or Refinancing of Assets of the Partnership.
Except as may be otherwise expressly provided in Sections 4.1 and 4.3
hereof and elsewhere in this Agreement, the General Partner, with the
approval of each Authority (if required), is hereby authorized to
sell, lease, exchange, refinance or otherwise transfer, convey or
encumber all or substantially all of the assets of the Partnership;
provided, however, that the terms of any such sale, exchange,
refinancing or other transfer, conveyance or encumbrance must receive
the Consent of the Special Limited Partner before such transaction
shall be binding on the Partnership. Notwithstanding the foregoing, no
such consent shall be required for the leasing of apartments to
tenants in the normal course of operations, or leases or concessions
of facilities related to the operation of the Apartment Complex.
Notwithstanding any provision of this Agreement to the contrary, the
Special Limited Partner shall have the right at any time after the
fourteenth year of the Compliance Period (A) to require, by written
notice to the General Partner, that the General Partner promptly
submit a written request to the Credit Agency pursuant to Code Section
42(h)(6)(I) that the Credit Agency endeavor to locate within one year
from the date of such written request a buyer who will continue to
operate the Property as a qualified low-income building at a purchase
price that is not less than the debt encumbering the Property plus the
Partnership's equity in the Property (adjusted for cost-of-living
increases as permitted by Code Section 42(h)(6)(G)), and (B) in the
event the Credit Agency locates such a buyer, to compel the General
Partner to accept such buyer's offer to purchase the Property.
Subject to Section 5.4(B)(i) hereof and notwithstanding any other
provision of this Agreement to the contrary, the Special Limited
Partner shall have the right at any time after the end of the
Compliance Period to require, by written notice to the General Partner
(the "Required Sale Notice"), that the General Partner promptly use
its best efforts to obtain a buyer for the Apartment Complex on the
most favorable terms then obtainable. The General Partner shall submit
the terms of any proposed sale to the Special Limited Partner for its
approval as provided in Section 5.4.A hereof. If the General Partner
shall fail to so obtain a buyer for the Apartment Complex within six
months of the Required Sale Notice or if the Special Limited Partner
in its sole discretion shall withhold its consent to any proposed sale
to such buyer, then the Special Limited Partner shall have the right
at any time thereafter to obtain a buyer for the Apartment Complex on
terms acceptable to the Special Limited Partner (but not less
favorable to the Partnership than any proposed sale previously
rejected by the Special Limited Partner). In the event that the
Special Limited Partner so obtains a buyer, it shall notify the
General Partner in writing with respect to the terms and conditions of
the proposed sale and the General Partner shall cause the Partnership
promptly to sell the Apartment Complex to such buyer.
A sale of the Apartment Complex prior to the end of the Compliance
Period may only take place if the conditions of Section 42(j)(6) of
the Code will be satisfied upon such sale either (a) by having the
purchaser of the Apartment Complex post the required bond on behalf of
the Partnership or (b) with the Consent of the Special Limited
Partner, having the Partnership post such bond.
5.5 Restrictions on Authority. Notwithstanding any other provisions of
this Agreement:
No General Partner shall have authority to perform any act in
violation of any applicable laws or regulations, the Project Documents
or any agreement between the Partnership and any Authority or any
Lender, or to take any action which under the Uniform Act or this
Agreement requires the approval, ratification or consent of some or
all of the Partners without first obtaining such approval,
ratification or consent, as the case may be.
The General Partner shall not have authority to do any of the
following acts, except with the Consent of the Special Limited Partner
and the approval, to the extent required, of any Authority and any
Lender:
acquire any real or personal property (tangible or intangible) in
addition to the Apartment Complex, the aggregate value of which shall
exceed $10,000 (other than easements or similar rights necessary or
appropriate for the operation of the Apartment Complex);
become personally liable on or in respect of, or guarantee, a Mortgage
Note or a Mortgage or any other indebtedness of the Partnership;
pay any salary, fees or other compensation to a General Partner or any
Affiliate thereof, except as authorized by Section 5.7 or Articles VI,
VIII or IX hereof or specifically provided for in this Agreement;
sell all or any portion of the Apartment Complex or modify or
refinance the Mortgage or incur any indebtedness for borrowed money
except as specifically provided in this Agreement and subject to the
provisions contained in Section 5.4 hereof;
terminate the services of the Accountants, the Contractor or the
Management Agent, or terminate, amend or modify any Project Document
or grant any material waiver or consent thereunder;
engage a substitute Management Agent or approve the delegation by the
Management Agent of all or a substantial portion of its duties to a
third party;
amend or terminate the Operating Deficit Guaranty Agreement or any of
the Other Guarantees, or grant any waiver or consent thereunder;
cause the Partnership to redeem or repurchase all or any portion of
the Interest of a Partner;
accept additional Capital Contributions other than those expressly
provided for in this Agreement;
approve the Withdrawal of a General Partner or the admission of a
successor or additional General Partners or Limited Partners to the
Partnership except in accordance with the express terms hereof;
cause the Partnership to convert the Apartment Complex to cooperative
or condominium ownership;
cause or permit the Partnership to be merged with any other entity;
cause or permit the Partnership to make loans to the General Partner
or any of its Affiliates; grant any waivers or consents under any
Project Documents; or
cause or permit the Partnership to take or omit or suffer any action
that would result in a recapture of Credits previously recognized by
the Partnership or a reduction or disallowance of any Credits
anticipated to be recognized by the Partnership as contemplated by
Section 3.4.B hereof, other than an Unavoidable Event.
The enumeration of the foregoing rights shall not diminish or affect
the existence or exercise of other rights expressly granted to the
Special Limited Partner elsewhere herein.
5.6 Activities of Partners. It is understood that the General Partner
is and will be engaged in other activities and occupations unrelated
to the Partnership, and the General Partner shall be required to
devote only so much of its time as it in its sole discretion may deem
necessary to the affairs of the Partnership. Any Partner may engage in
and have an interest in other business ventures of every nature and
description, independently or with others, including, but not limited
to, the ownership, financing, leasing, operating, construction,
rehabilitation, renovation, improvement, management and development of
real property whether or not such real property is directly or
indirectly in competition with the Apartment Complex; provided,
however, that nothing herein shall be construed to relieve the General
Partner of any of its fiduciary obligations with respect to the
management, financing and disposition of the Apartment Complex.
Neither the Partnership nor any other Partner shall have any rights by
virtue of this Agreement in and to such independent ventures or the
income or profits derived therefrom, regardless of the location of
such real property and whether or not such venture was presented to
such Partner as a direct or indirect result of his connection with the
Partnership or the Apartment Complex.
5.7 Dealing with Affiliates. Subject to the restrictions contained in
this Agreement, the General Partner may, for, in the name and on
behalf of, the Partnership, enter into agreements or contracts for
performance of services for the Partnership as an independent
contractor with the General Partner or an Affiliate thereof and the
General Partner may obligate the Partnership to pay compensation for
and on account of any such services; provided, however, that unless
the terms of such compensation and/or services are specified in this
Agreement, (x) such compensation and services shall be on terms not
less favorable to the Partnership than if such compensation and
services were paid to and/or performed by a person who was not the
General Partner or an Affiliate thereof, and (y) after full and
accurate disclosure to the Special Limited Partner of the interest of
the General Partner, the Consent of the Special Limited Partner to the
provision of such services by such Affiliate shall have been obtained.
5.8 Indemnification and Liability of the General Partners.
To the maximum extent permitted by law and this Section 5.8, the
Partnership, its receiver or its trustee, shall indemnify and hold
harmless the General Partner and its Affiliates from and against any
liability, loss or damage incurred by them by reason of any act
performed or omitted to be performed by them pursuant to the authority
granted to them by this Agreement, including costs and reasonable
attorneys' fees and any amount expended in the settlement of any claim
of liability, loss or damage; provided, however, that (i) if such
liability, loss or damage arises out of any action or inaction of any
Affiliate, such action or inaction must have occurred while such party
was engaged in activities which could have been engaged in by a
General Partner in its capacity as such; (ii) if such liability, loss
or damage arises out of any action or inaction of the General Partner
or its Affiliates, (a) the General Partner or its Affiliates must have
determined, in good faith, that such course of conduct was in the best
interests of the Partnership and (b) such course of conduct did not
constitute fraud, negligence or misconduct by the General Partner or
its Affiliates; and (iii) any such indemnification shall be
recoverable only from the assets of the Partnership and not from the
assets of any Partner. All judgments against the Partnership and the
General Partner or its Affiliates, wherein the General Partner or its
Affiliates are entitled to indemnification, must first be satisfied
from Partnership assets before such General Partner or its Affiliates
are responsible for these obligations. The Partnership shall not pay
for any insurance covering liability of the General Partner or its
Affiliates for actions or omissions for which indemnification is not
permitted hereunder; provided, however, that nothing contained herein
shall preclude the Partnership from purchasing and paying for such
types of insurance, including extended coverage liability and casualty
and workers' compensation, as would be customary for any person owning
comparable assets and engaged in a similar business, or from naming
the General Partner or its Affiliates as additional insured parties
thereunder, if such addition does not add to the premiums payable by
the Partnership. Nothing contained herein shall constitute a waiver by
any Investor Limited Partner of any right which it may have against
any party under Federal or state securities laws nor shall an Investor
Limited Partner be permitted to contract away the fiduciary duty owed
to it by the General Partner or its Affiliates under common law. The
provision of advances from the Partnership to the General Partner or
its Affiliates for legal expenses and other costs incurred as a result
of a legal action is permissible if the following three conditions are
satisfied: (I) the legal action relates to the performance of duties
or services by General Partner or its Affiliates on behalf of the
Partnership; (II) the legal action is initiated by a third party who
is not an Investor Limited Partner of the Partnership or a beneficial
owner thereof; and (III) the General Partner or its Affiliates
undertake to repay to the Partnership the funds so advanced in cases
in which they would not be entitled to indemnification hereunder.
Notwithstanding anything to the contrary contained herein, in no event
shall any indemnity under this Section 5.8.A be applicable to any
expenditures or obligations of the General Partner or Affiliate
thereof which are the subject of a separate obligation or guaranty to
the Partnership or the Limited Partners by such General Partner or an
Affiliate thereof.
Notwithstanding the provisions of Section 5.8.A hereof, the General
Partner and its Affiliates shall not be indemnified or held harmless
pursuant to Section 5.8.A hereof from any liability, loss or damage
incurred by them in connection with, and shall indemnify and hold
harmless the Partnership and the other Partners from and against any
liability, loss or damage incurred by them by reason of, (i) any
liability imposed by law, including for fraud, negligence or
misconduct; or (ii) any claim or settlement involving allegations that
Federal or state securities laws associated with the offer and sale of
an Interest were violated by the General Partner or its Affiliates
unless: (a) the indemnitee is successful in defending such action on
the merits of each count involving securities laws violations and such
indemnification is specifically approved by a court of competent
jurisdiction; (b) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction and the court
specifically approves such indemnification; or (c) a court of
competent jurisdiction approves a settlement of the claims against the
entity seeking indemnification involving securities law violations and
finds that indemnification of the settlement and related costs should
be made. Any person seeking indemnification shall apprise the court of
the current position of the Securities and Exchange Commission, the
California Commissioner of Corporations, the Massachusetts Securities
Division and other applicable state securities administrators
regarding indemnification for violations of securities laws.
5.9 Representations and Warranties. The General Partner hereby
represents and warrants to each of the other Partners that the
following are true and accurate as of the date hereof and on the
Admission Date as if made on and as of such date and will be true and
accurate on the due date of any payment of Capital Contributions to
the Partnership:
The execution and delivery of all instruments and the performance of
all acts heretofore or hereafter made or taken pertaining to the
Partnership or the Apartment Complex by the General Partner which is a
corporation or a partnership or by each Affiliate of General Partner
which is a corporation or a partnership have been or will be duly
authorized by all necessary corporate or partnership actions, as the
case may be, or other action and the consummation of any such
transactions with or on behalf of the Partnership will not constitute
a breach or violation of, or a default under, the charter or by-laws,
or partnership agreement, of such General Partner or such Affiliate or
any agreement by which such General Partner or such Affiliate or any
of its properties is bound, nor constitute a violation of any law,
administrative regulation or court decree.
No Bankruptcy has occurred with respect to the General Partner or any
Affiliates thereof.
As of the Admission Date all accounts of the Partnership required to
be maintained under the terms of the Project Documents, including,
without limitation, any account for replacement reserves, are
currently funded to required levels, including levels required by any
Authority.
The General Partner has not lent or otherwise advanced any funds to
the Partnership other than its Capital Contribution and the
Partnership has no unsatisfied obligation to make any payments of any
kind to the General Partner or any Affiliate thereof outstanding as of
the Admission Date.
No event has occurred which with the giving of notice, the passage of
time, or both, would constitute a material default under any of the
Project Documents.
Each of the representations and warranties contained in the
Contribution Agreement is true and correct on the date hereof as if
made on and as of such date.
The Partnership is acquiring the Capital Note without a view to the
sale or distribution thereof and without any present intention of
distributing or selling the same. The Partnership agrees that it (and
any holder of any interest in the Capital Note) will not sell, assign
or otherwise transfer its interest in the Capital Note (or any
fraction thereof) without the Consent of the Special Limited Partner
and unless such transfer shall be in full compliance with all
applicable securities laws and regulations.
5.10 Additional Covenants of General Partner. The General Partner
shall permit, and shall cause the Management Agent to permit, the
Special Limited Partner and its representatives to have access to the
Apartment Complex and personnel employed by the Partnership and by the
Management Agent who are concerned with management of the Apartment
Complex at all reasonable times during normal business hours and to
examine all agreements and plans and specifications and shall deliver
to the Special Limited Partner such copies of such documents and such
reports as may reasonably be required by the Special Limited Partner.
The General Partner shall promptly upon transmission or receipt
provide the Special Limited Partner with copies of all correspondence,
notices and reports sent pursuant to and received under the Project
Documents or any Authority with respect to the Apartment Complex,
together with copies of all other correspondence relating to or
affecting the Credits or that a prudent investor in the position of
the Limited Partners might reasonably be expected to wish to examine
in connection with the transaction.
5.11 Obligation to Repair and Rebuild Apartment Complex. With the
approval of any Lender and any Authority, if such approval is
required, any insurance proceeds received by the Partnership due to
fire or other casualty affecting the Apartment Complex occurring
during the Compliance Period will be utilized to repair and rebuild
the Apartment Complex in satisfaction of the conditions contained in
Section 42(j)(4) of the Code and to the extent required by any Lender
and any Authority. Any such proceeds received in respect of such an
event occurring after the Compliance Period shall be so utilized or,
if permitted by the Project Documents and with the Consent of the
Special Limited Partner, treated as Sale or Refinancing Proceeds.
ARTICLE VI
CERTAIN PAYMENTS
6.1 Development Fee. As consideration for development and contracting
services provided to the Partnership, the Partnership shall pay the
Developer on the date hereof (i) a development fee of $507,623
("Development Fee") and (ii) a contractor fee of $96,500 ("Contractor
Fee"). The Development Fee and the Contractor Fee shall be taken into
income for Federal income tax purposes by the Developer in 1997. Upon
request, the Developer will submit to the Special Limited Partner such
evidence as may be required for the Special Limited Partner to confirm
that, for Federal income tax purposes, the Development Fee and the
Contractor Fee were taken into income as aforesaid. The Developer, by
his signature below, hereby acknowledges and agrees that the
Development Fee and the Contractor Fee have been paid in full and that
no further development or contractor fees are owing to him from the
Partnership.
6.2 Consulting Monitoring Fee. The Partnership shall pay to RCC Asset
Managers V L.L.C. a consulting monitoring fee in the amount of
$110,756 for its services in assisting the Partnership in acquiring
the Apartment Complex and in supervising the construction of the
Apartment Complex. This fee shall be payable on the Closing Date
pursuant to the Consultant Fee Agreement which agreement is annexed to
the Contribution Agreement as Exhibit R.
6.3 Annual Local Administrative Fee. For its services in monitoring
the operations of the Partnership, the Partnership shall pay to the
Special Limited Partner an Annual Local Administrative Fee in the
amount of $5000 per annum beginning on the Admission Date (and
increased each year thereafter (to a maximum of $12,000 per annum) by
the greater of (A) 5% or (B) the percentage increase in CPI) if there
is sufficient cash available to pay same provided that, if in any year
there are not sufficient funds to pay such fee after payment of all
operating expenses of the Project, then, in such event such fee shall
accrue and be payable out of available Cash Flow in subsequent years
or if there is no available Cash Flow, out of Sale or Refinancing
Transaction Proceeds but shall be a legal obligation only if paid to
the extent Cash Flow or Sale or Refinancing Transaction Proceeds are
available. Notwithstanding anything to the contrary contained herein,
proceeds of Operating Loans shall not be used to pay the Annual Local
Administrative Fee.
6.4 Supervisory Management Fee. For its services in supervising the
Management Agent, the Partnership shall pay the General Partner a
non-cumulative supervisory management fee (the "Supervisory Management
Fee") in an amount equal to 40% of available Cash Flow as set forth in
Section 9.2.A.
6.5 Asset Management Fee. For its services in monitoring the
operations of the Apartment Complex, the Partnership shall pay the
General Partner a non-cumulative asset management fee ("Asset
Management Fee") in an amount equal to the lesser of (A) available
Cash Flow as set forth in Section 9.2.A and (B) one (1%) percent of
net rental income for the Apartment Complex.
6.6 Amounts Earned on $1,500,000 Escrow. Any and all amounts earned
and paid to the Partnership on that certain escrow account held by
Wells Fargo Bank pursuant to that certain Escrow Agreement dated as of
December 29, 1996 and executed by Wells Fargo Bank (Texas), N.A., the
Credit Agency and the Partnership shall be paid to Korb within a
reasonable period after the Partnership's receipt thereof but in no
event later than sixty (60) days from such receipt. Any amounts
received by Korb pursuant to this Section 6.6 shall reduce any
payments of earnings required to be made to Korb pursuant to Sections
9.2.A and 9.2.B hereof.
6.7 Contractor Fee. As consideration for supervision and contracting
services provided to the Partnership, the Partnership shall pay the
General Partner a contractor fee in an amount equal to the lesser of
(A) $30,000 or (B) eight (8%) percent of the cost of the additional
construction work required to be performed with respect to the
Apartment Complex ("Contractor Fee"), which shall be paid by the
Partnership pursuant to a note ("Contractor Note") in substantially
the form annexed to the Contribution Agreement as Exhibit T to be
executed on the date hereof. If any or all of the Contractor Note
remains unpaid at the end of the Compliance Period, the General
Partner shall be obligated to contribute such unpaid amount to the
Partnership for payment thereof. If, in any fiscal year of the
Partnership, the Partnership's payments ("Contractor Note Payments")
in reduction of the Contractor Note (including principal and unpaid
interest thereon) are less than the depreciable portion of such fee
for such year then the full amount of such depreciable portion shall
be taken into income for Federal income tax purposes by the General
Partner in such year; in all other cases the actual amount of the
Contractor Note Payments made during such year shall be taken into
income for Federal income tax purposes by the General Partner upon
receipt thereof. Upon request, the General Partner will submit to the
Special Limited Partner such evidence as may be required for the
Special Limited Partner to confirm that, for Federal income tax
purposes, the Contractor Fee was taken into income as aforesaid.
ARTICLE VII
ACCOUNTING, REPORTS, BOOKS,
BANK ACCOUNTS AND FISCAL YEAR
7.1 Bank Accounts. The bank accounts of the Partnership shall be
maintained in such banking institutions authorized to do business in
the State or such other states as permitted by each Authority and as
the General Partners shall determine with the Consent of the Special
Limited Partner, and withdrawals shall be made on such signature or
signatures as the General Partners shall determine. The Partnership's
funds shall not be commingled with the funds of any other Person and
shall not be used except for the business of the Partnership. All
deposits (including security deposits and other funds required to be
placed in escrow by any Authority or any Lender and other funds not
needed in the operation of the Partnership's business) shall be
deposited, to the extent permitted by each Authority, in
interest-bearing accounts or invested in obligations of or guaranteed
by the United States, any state thereof, or any agency, municipality
or other political subdivision of any of the foregoing, commercial
paper (investment grade), certificates of deposit and time deposits in
commercial banks with capital in excess of $50,000,000 and in mutual
(money market) funds investing in any or all of the foregoing;
provided, however, that any funds required to be placed in escrow by
any Authority shall be controlled by such Authority, and the General
Partners shall not be permitted to make any withdrawal from such funds
without the express written consent of such Authority to the extent
required.
7.2 Books of Account; Fiscal Year. Complete and accurate books of
account, in which shall be entered, fully and accurately, each and
every transaction of the Partnership, shall be kept or caused to be
kept by the General Partner. The books shall be kept on an accrual
basis of accounting, and the fiscal year of the Partnership shall be
the calendar year. All of the Partnership's books of account, together
with an executed copy of this Agreement and all Project Documents and
copies of such other instruments as the General Partner may execute
hereunder, including amendments thereto, shall at all times be kept at
the principal office of the Partnership and shall be available during
normal business hours for inspection by any Partner or his duly
authorized representative or, at the expense of any Partner, for audit
by him or his duly authorized representative.
7.3 Reports.
Within 45 days after the end of each of the first three quarters of
each fiscal year, the General Partner shall have prepared and shall
deliver to the Limited Partners, commencing with the first quarterly
period ending after the Admission Date, (i) a balance sheet and
statements of income (or loss) and changes in financial position and
Cash Flow for, or as of the end of, such quarter in customary form and
substance (or in such form and substance as the Special Limited
Partner shall reasonably request so as to facilitate the Investor
Limited Partner's filings with the Securities and Exchange Commission
and any other filings required by law), none of which need be audited
unless required by law, together with a report of other pertinent
information regarding the Partnership and its activities during such
quarter, including, but not limited to, a statement of the amount of
all fees and other compensation paid by the Partnership during such
quarter to the General Partner or any of its Affiliates, and (ii) a
certificate of the General Partners that each of the apartment units
in the Apartment Complex which is then occupied qualifies as a "low
income unit" under Section 42 of the Code.
The General Partner shall send to each Investor Limited Partner such
tax information as shall be necessary for inclusion by each Investor
Limited Partner in its Federal income tax returns and required state
income tax and other tax returns. The General Partner shall send this
information within 45 days after the end of each fiscal year.
Within 60 days after the end of each fiscal year of the Partnership,
the General Partner shall send to the Limited Partners (i) the balance
sheet of the Partnership as of the end of such fiscal year and
statements of income (loss), Partners' equity and cash flows for such
fiscal year, all of which shall be prepared in accordance with
generally accepted accounting principles consistently applied and
shall be accompanied by a report of the audit of the Accountants for
the Partnership reflecting no limitations as to the scope of the
Accountant's audit of such statements, and (ii) a statement of Cash
Flow for such fiscal year (which need not be audited), showing
distributions in respect of such fiscal year, which statement shall
identify distributions from (a) Cash Flow generated during the fiscal
year, (b) Cash Flow generated during prior fiscal years, (c) proceeds
from the disposition of property and investments and (d) reserves and
other sources.
If the General Partner shall fail, for any reason, to deliver to the
Limited Partners when due any of the information or statements
required by this Section 7.3, the Partnership shall pay the Limited
Partners, as liquidated damages for such failure, an amount equal to
$300 for each day that elapses after the respective due date until
such information or statements have been delivered to the Limited
Partners. The General Partner hereby guarantees the payment of any
amount due to the Limited Partners by the Partnership under this
Section 7.3.D; provided, however, that such payments shall not be
deemed to be either a capital contribution or a loan from the General
Partner and that neither the Partnership nor any Investor Limited
Partner shall be under any obligation to repay any such amount paid by
the General Partner.
7.4 Other Reports. The General Partner shall from time to time submit
to the Partners such other written reports and information regarding
the operations of the Partnership as may be required by the Investor
Limited Partner to satisfy its reporting requirements to its partners
or governmental authorities. The General Partner shall provide to the
Partners by November 30 of each fiscal year an estimate of each
Partner's share of profits and losses for Federal and state income tax
purposes for such fiscal year.
7.5 Tax Returns and Tax Treatment. The General Partner shall, for each
fiscal year, file on behalf of the Partnership a United States
Partnership Return of Income within the time prescribed by law for
such filing. The General Partner shall also file on behalf of the
Partnership such other tax returns and other documents from time to
time as may be required by the Federal government or by any state or
any subdivision thereof. All tax returns shall be prepared by the
Accountants. The General Partner shall send a copy of Schedule K-1 or
any successor or replacement form thereof, and, upon request, such tax
return, to each Partner within 45 days after the expiration of each
fiscal year.
ARTICLE VIII
MANAGEMENT AGENT
8.1 Management Agent and Management Fee.
The General Partner shall have the responsibility for managing the
Apartment Complex and obtaining a management agent (the "Management
Agent"), the choice of which with respect to any successor to the
Management Agent at the Admission Date shall be made with the Consent
of the Special Limited Partner after accurate and complete disclosure
to the Special Limited Partner of any affiliation between the General
Partner and such successor. The Management Agent at the Admission Date
is Autumn Gate Properties, Inc., and is not an Affiliate of the
General Partners.
The Management Agent shall receive a management fee payable by the
Partnership on an annual basis in an amount not to exceed four (4%)
percent of the net rental income from the Apartment Complex for
management services in accordance with the Management Agreement as
approved by each Authority (if such approval is necessary) which is
intended to be executed by the Partnership. The term of any Management
Agreement shall not exceed one year without the Consent of the Special
Limited Partner, and no payment or penalty shall be payable by the
Partnership for failure to renew any such agreement. In the event that
the Management Agent is an Affiliate of the General Partner, the
Management Agreement will be amended to provide that forty (40%)
percent of such management fee with respect to any fiscal year of the
Partnership shall not become due and payable unless the Partnership
has positive Cash Flow with respect to that fiscal year, and any
unpaid portion of such management fee may be payable from positive
Cash Flow of the Partnership in future fiscal years of the Partnership
or from Sale or Refinancing Transaction Proceeds, as provided in
Sections 9.2.A and 9.2.B.
The General Partner will have the duty to manage the Apartment Complex
during any period when there is no Management Agent and the
Partnership will pay the General Partner for such services an annual
management fee equal to such amount as each Authority shall approve
(but not in excess of the fee set forth in Section 8.1.B hereof) from
time to time or, if no approval is required, a fee equal to the
amounts set forth in Section 8.1.B hereof. If at any time the present
Management Agent shall cease to act as the Management Agent, the
General Partner shall be authorized, subject to the Consent of the
Special Limited Partner and the approval of each Authority and Lender
(if required) to retain and to enter into a Management Agreement with
a different Management Agent on terms at least as favorable to the
Partnership as the terms and conditions of the Management Agreement
with the present Management Agent.
Subject to the approval of each Authority, if required, the Special
Limited Partner shall have the right, in the event the General Partner
is removed as General Partner pursuant to Section 11.4 hereof, to
terminate the Management Agreement and every other contract between
the Partnership and Affiliates of the General Partner so removed, upon
not less than 30 days' written notice to the party contracting with
the Partnership. All existing contracts between the Partnership and
Affiliates of the General Partner have been amended to contain this
right and the General Partner covenants not to enter any future
contract with any of their Affiliates which does not contain such
right.
ARTICLE IX
PROFITS AND LOSSES; DISTRIBUTIONS
9.1 Allocations of Profits and Losses.
For tax and accounting purposes, Profits and Losses of the Partnership
for each fiscal year shall be allocated to the respective classes of
Partners as follows:
Subject to Section 9.3 hereof, Profits other than those arising from a
Sale or Refinancing Transaction shall be allocated (i) first to the
extent of prior allocations of Losses (other than Nonrecourse
Deductions), in proportion to the amount of prior Losses allocated to
each Partner, then (ii) to each Partner until the Profits allocated to
such Partner equals the cash distributions made to such Partner
pursuant to Section 9.2.A (xi) hereof, and then (iii) to each Partner
in an amount equal to the cash distributions that would be made to
each Partner pursuant to Section 9.2.A (xi) if the Partnership had
cash available in an amount equal to such remaining Profits. Subject
to Section 9.3 hereof, Profits arising from a Sale or Refinancing
Transaction shall be allocated as follows:
First, to the Partners until each Partner has been allocated an amount
or Profits equal to the aggregate Losses previously allocated to such
Partner pursuant to Section 9.1.C hereof, to the extent such aggregate
Losses are more than the aggregate Profits allocated to such Partner
pursuant to Section 9.1.A(i) hereof and this Section 9.1.B(i);
Next, 99.98% to the Investor Limited Partner, .01% to the Special
Limited Partner and .01% to the General Partner until the Capital
Account of the Investor Limited Partner is equal to its Investor
Contributions;
Next, to the Special Limited Partner until the Capital Account of the
Special Limited Partner is equal to the amount distributable to it
pursuant to Section 9.2.B(x) and then to the General Partner until the
Capital Account of the General Partner is equal to the amount
distributable to it pursuant to Section 9.2.B(xi); and
Thereafter, 49.89% to the Investor Limited Partner, .01% to the
Special Limited Partner and 50.1% to the General Partner.
Subject to Section 9.3 hereof, Losses shall be allocated .01% to the
General Partner, 99.98% to the Investor Limited Partner and .01% to
the Special Limited Partner.
The Losses allocated pursuant to this Section 9.1.C shall not exceed
the maximum amount of Losses that can be so allocated without causing
any Investor Limited Partner to have an Adjusted Capital Account
Deficit at the end of any fiscal year of the Partnership. All Losses
in excess of the limitations set forth in this Section 9.1.C(ii) shall
be allocated to the General Partner.
Nonrecourse Liabilities of the Partnership shall be allocated among
the Partners in the same manner as Losses are allocated pursuant to
Section 9.1.C(i) hereof.
Nonrecourse Deductions for any fiscal year of the Partnership or other
period shall be specially allocated 99.98% to the Investor Limited
Partner, .01% to the Special Limited Partner and .01% to the General
Partner.
Any Partner Nonrecourse Deductions for any fiscal year of the
Partnership or other period shall be specially allocated to the
Partner who bears the risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable.
All Credits shall be allocated 99.98% to the Investor Limited Partner,
.01% to the Special Limited Partner and .01% to the General Partner.
Where a distribution of an asset is made in the manner described in
Section 734 of the Code, or where a transfer of an Interest permitted
by this Agreement is made in the manner described in Section 743 of
the Code, the Partnership shall file, upon the request of the Special
Limited Partner, an election under Section 754 of the Code, in
accordance with the procedures set forth in the applicable
Regulations. Subject to Section 5.2 hereof, all other elections
required or permitted to be made by the Partnership under the Code
shall be made in such manner as, in the opinion of the Special Limited
Partner with the advice of the Accountants and legal counsel for the
Partnership, will be most advantageous to the Investor Limited
Partner.
Except as otherwise provided herein, each Partner shall be allocated
Profits and Losses in accordance with this Section 9.1 from the date
on which it is admitted to the Partnership. 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, monthly, or other basis, as determined by the General
Partners using any permissible method under Section 706 of the Code
and the Regulations promulgated thereunder.
Notwithstanding the other provisions of this Section 9.1, if any of
the allocations provided in this Section 9.1 would not result in an
aggregate allocation of Profits, Losses and credits to the General
Partner in an amount equal to at least .01% of the Profits, Losses and
credits allocable to all Partners in any fiscal year, then the amounts
otherwise allocable to the Limited Partner and the Special Limited
Partner shall be reduced in order to assure that the General Partner
receives an aggregate allocation of at least .01% of all Profits,
Losses and credits allocable to all Partners in any fiscal year.
If any fee or other compensation payable from the Partnership to a
Partner or an Affiliate of a Partner is treated as a distribution for
income tax purposes, there shall be allocated to the recipient Partner
or Affiliate of a Partner an amount of income equal to the amount of
such payment in the year in which such payment is made or in the first
succeeding year in which the Partnership realizes income.
9.2 Distribution and Application of Cash Flow and Proceeds From Sale
or Refinancing Transactions. Except as otherwise provided by this
Agreement or required by law (including all applicable rules,
directives and regulations of each Authority), cash distributions
shall be made to the Partners on the following bases within 60 days
after the end of each calendar quarter:
Cash Flow shall be applied in the following order of priority:
To repay any loan payable to any Partner other than the General
Partner;
To the Limited Partners, an amount or amounts equal to the unpaid
balance of any Voluntary Loan made by them and to the General Partner,
to pay the difference, if positive, between an amount or amounts equal
to the unpaid balance of any Voluntary Loan made by it and an amount
equal to any accrued and unpaid Credit Reduction Payments;
In the event the Partnership is unsuccessful in refinancing the
Permanent Loan on February 28, 1999, Cash Flow will be paid to Korb as
follows:
(a) If the Permanent Lender agrees to reduce the principal of the
Permanent Loan to reflect the payment of $1,500,000 and to reamortize
the Permanent Loan with such new principal balance, until Korb has
received an amount equal to $1,500,000 plus a non-compounded return on
the unreturned portion of such amount equal to (i) 9% beginning on
February 28, 1999 until August 31, 1999 and (ii) 11% per annum after
August 31, 1999 until Korb has been repaid the $1,500,000, all Cash
Flow up to an amount equal to the difference between (1) the monthly
payment of principal and interest under the Permanent Loan prior to
the reduction of the principal amount and the reamortization and (2)
the monthly payment of principal and interest under the Permanent Loan
after the reduction of the principal and the reamortization will be
paid to Korb, or
(b) If the Permanent Lender does not agree to reduce the principal of
the Permanent Loan to reflect the payment of the $1,500,000 and to
reamortize the Permanent Loan with such new principal balance, until
Korb has received an amount equal to $1,500,000 plus a non-compounded
return on the unreturned portion of such amount equal to (i) 9% per
annum beginning on February 28, 1999, until August 31, 1999 and (ii)
11% per annum after August 31, 1999 until Korb has been repaid the
$1,500,000, all Cash Flow will be paid to Korb.
To pay the difference, if positive, between any accrued but unpaid
Management Fees (described in Section 8.1.B) and an amount equal to
any accrued and unpaid Credit Reduction Payments;
To the Special Limited Partner, an amount equal to any accrued Annual
Local Administrative Fees pursuant to the terms of Section 6.3 hereof;
To the General Partner to pay any principal and interest due and
payable under the Contractor Note (reduced by an amount equal to any
accrued and unpaid Credit Reduction Payments);
To the extent of 50% of the remaining Cash Flow, to the Guarantor, to
pay the difference, if positive, between an amount or amounts equal to
the unpaid balance of any Operating Loan made by it and an amount
equal to any accrued and unpaid Credit Reduction Payments;
To the General Partner to pay the difference if positive, between (A)
a non-cumulative, non-interest bearing priority return in the amount
of $50,000 and (B) an amount equal to any accrued and unpaid Credit
Reduction Payments;
To the General Partner, to pay the difference, if positive, between
the Asset Management Fee described in Section 6.5 and an amount equal
to any accrued and unpaid Credit Reduction Payments;
To the extent of 40% of the remaining Cash Flow, to the General
Partner, to pay the difference, if positive, between the Supervisory
Management Fee and an amount equal to any accrued and unpaid Credit
Reduction Payments; and
Of the remainder, 49.89% to the Investor Limited Partner, 50.1% to the
General Partner (reduced by an amount equal to any accrued and unpaid
Credit Reduction Payments, which amount shall be distributed 99% to
the Investor Limited Partner and 1% to the Special Limited Partner)
and .01% to the Special Limited Partner.
Subject to the provisions of Sections 9.2.D and 12.4 hereof, Sale or
Refinancing Transaction Proceeds shall be applied in the following
order of priority:
To the payment of all of the expenses of such Sale or Refinancing
Transaction, and, with regard to damage recoveries or insurance or
condemnation proceeds (other than for temporary loss of use), to the
payment of all repairs, replacements or renewals resulting from damage
to or partial condemnation of the affected property;
To Korb, in an amount equal to the excess of (I)(A) Korb's $1,500,000
Capital Account, plus (B) a return on Korb's Capital Account
calculated in the same manner as interest at a rate of 9% per annum,
beginning on February 28, 1999 until August 31, 1999 on which date
such 9% rate shall increase to 11% until paid over (II) amounts
previously distributed to Korb pursuant to this Section 9.2.B(ii) and
9.2.A(iii);
To establish such reserves as the General Partner in its sole
discretion determines to be reasonably necessary for any contingent or
foreseeable liability or obligation of the Partnership; provided,
however, that the balance of any such reserve remaining at such time
as the General Partner shall reasonably determine that such reserve is
no longer necessary shall be distributed in accordance with
subparagraphs (iv) through (xii) of this Section 9.2.B;
To repay any loan payable to any Partner other than the General
Partner;
To the Limited Partners, an amount or amounts equal to the unpaid
balance of any Voluntary Loan made by them and to the General Partner,
to pay the difference, if positive, between an amount or amounts equal
to the unpaid balance of any Voluntary Loan made by it and an amount
equal to any accrued and unpaid Credit Reduction Payments;
To the General Partner, to pay the difference, if positive, between
(A) a one-time disposition fee in an amount equal to the difference
between (x) six (6%) percent of the gross sales price of the Apartment
Complex and (y) all expenses (including all third-party commissions)
incurred with respect to such sale and (B) an amount equal to any
accrued and unpaid Credit Reduction Payments.
To the Special Limited Partner, an amount equal to any accrued Annual
Local Administrative Fees pursuant to the terms of Section 6.3 hereof;
To the Guarantor, to pay the difference, if any, between an amount or
amounts equal to the unpaid balance of any Operating Loan made by it
and an amount equal to any accrued and unpaid Credit Reduction
Payments;
To the Investor Limited Partner until the Investor Limited Partner has
received an amount equal to the aggregate of the Investor
Contributions, reduced by the amount of all prior distributions under
this Section 9.2.B(ix);
To the Special Limited Partner, an amount equal to its Capital
Contributions, reduced by the amount of all prior distributions under
this Section 9.2.B(x);
To the General Partner, an amount equal to the difference, if
positive, between (A) an amount equal to any distributions paid to the
Investor Limited Partner under Section 9.2.(B)(ix) and (B) an amount
equal to all accrued and unpaid Credit Reduction Payments; and
The balance, if any, 49.89% to the Investor Limited Partner, .01% to
the Special Limited Partner and 50.1% to the General Partner (reduced
by an amount equal to any accrued and unpaid Credit Reduction
Payments, which amount shall be distributed 99% to the Investor
Limited Partner and 1% to the Special Limited Partner.
Except as otherwise provided in this Section 9.2, each Partner shall
share in distributions in accordance with this Section 9.2 from the
date on which such Partner is admitted to the Partnership.
In the event that the amount of the Credits finally allowed to the
Partnership and allocated to the Limited Partners during any calendar
year during the Credit Period with respect thereto is less than 99.99%
of the amount specified on Exhibit A to the Recapture Guaranty
Agreement for such year for any reason other than a change in law,
including, without limitation, the failure of the Partnership to
operate the Apartment Complex so as to have 100% of the Apartment
Units therein eligible for Credits for any such year, the "Return
Amount" shall be calculated. The "Return Amount" shall be an amount
equal to the excess of (a)(I) the amount, if any, by which 99.99% of
the Credit Amount exceeds the amount of Credits finally allowed to the
Partnership and allocated to the Limited Partners with respect to any
such calendar year plus (II) 15% per annum thereon calculated from the
end of the calendar year in question until the Return Amount is paid
as provided herein, over (b)(I) the amount, if any, by which the
Credits finally allowed to the Partnership and allocated to the
Limited Partners with respect to any other calendar year during the
Credit Period exceeds 99.99% of the Credit Amount plus (II) 15% per
annum thereon calculated from the end of the calendar year in question
until the Return Amount is paid as provided herein. If the Partnership
claims Credits for less than 12 calendar months with respect to any
taxable year, then the calculation of the Return Amount with respect
to such taxable year shall be made by proportionally pro rating the
Credit Amount. At the time of distribution of any Sale or Refinancing
Transaction Proceeds pursuant to Section 9.2.B hereof, there shall be
distributed to the Investor Limited Partner, out of any Sale or
Refinancing Transaction Proceeds that would otherwise have been
distributed to the General Partner under such section, an amount equal
to the Return Amount, before the General Partner and the Guarantor
shall be distributed any such proceeds pursuant to such section, and
an appropriate adjustment to the allocation of Profits and Losses
shall be made. A distribution pursuant to the preceding sentence shall
not be required to the extent that it would duplicate an amount
previously paid to the Investor Limited Partner pursuant to the
Recapture Guaranty Agreement or as a Credit Reduction Payment
hereunder. For purposes of this Section 9.2.D, a Credit with respect
to a taxable year shall be deemed finally allowed upon the latest to
occur of the following: (I) the period for assessment of a deficiency
for such taxable year shall have expired without a deficiency being
assessed by the Internal Revenue Service against any Partner with
respect to the Credit claimed by the Partnership for such taxable
year; or (II) if such deficiency is so assessed, the determination by
the Internal Revenue Service as to the amount of the Credit for such
taxable year is no longer subject to petition to the United States Tax
Court; or (III) if a petition with respect to such determination is
filed with such court, a decision by such court as to the amount of
the Credit for such taxable year becomes final and not subject to
appeal; or (IV) if an appeal from such decision is filed, a decision
of a court upon such appeal becomes final and not subject to further
appeal. Any Credits which are recaptured pursuant to Section 42 of the
Code, other than due to an Assignment of an Interest or a disposition
of the Apartment Complex that occurs with the Consent of the Special
Limited Partner, shall be deemed not to have been finally allowed for
purposes of this Section 9.2.D.
9.3 Overriding Allocations of Profits and Losses.
Notwithstanding anything contained in Section 9.1 hereof or this
Section 9.3 to the contrary, if there is a net decrease in Partnership
Minimum Gain during any taxable year of the Partnership, except as
otherwise permitted by Sections 1.704-2(f)(2), (3), (4) and (5) of the
Regulations, items of Partnership income and gain for such taxable
year (and subsequent years, if necessary) in the order provided in
Section 1.704-2(j)(2)(i) of the Regulations shall be allocated among
all Partners whose shares of Partnership Minimum Gain decreased during
that year in proportion to and to the extent of such Partner's share
of the net decrease in Partnership Minimum Gain during such year. The
allocation contained in this Section 9.3.A(i) is intended to be a
minimum gain chargeback within the meaning of Section 1.704-2 of the
Regulations, and shall be interpreted consistently therewith.
Notwithstanding anything contained in Section 9.1 hereof or this
Section 9.3 to the contrary, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain, except as provided in Section
1.704-2(i) of the Regulations, items of Partnership income and gain
for such taxable year (and subsequent years, if necessary) in the
order provided in Section 1.704-2(j)(2)(ii) of the Regulations shall
be allocated among all Partners whose share of Partner Nonrecourse
Debt Minimum Gain decreased during that year in proportion to and to
the extent of such Partner's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain during such year. This Section 9.3.A(ii)
is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2 of the Regulations and shall be interpreted
consistently therewith.
Notwithstanding any provisions of Section 9.1 hereof or this Section
9.3 to the contrary, in the event any Partner unexpectedly receives
any adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Regulations, items of
Partnership income and gain (including gross income) 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, provided that an allocation pursuant to this Section 9.3.B
shall be made only if and to the extent that such Partner would have
an Adjusted Capital Account Deficit. In the event that any such
adjustments, allocations or distributions create an Adjusted Capital
Account Deficit for more than one Partner in any taxable year of the
Partnership, all such items of income and gain of the Partnership for
such taxable year and all subsequent taxable years shall be allocated
among all such Partners in proportion to their respective Adjusted
Capital Account Deficits in such amount and manner sufficient to
eliminate such Adjusted Capital Account Deficits as quickly as
possible. The allocation contained in this Section 9.3.B is intended
to be a "qualified income offset" within the meaning of Section
1.704-1(b)(2)(ii)(d) of the Regulations, and shall be subject thereto.
Sections 9.3.A and 9.3.B hereof shall be applied in the order provided
in Section 1.704-2 of the Regulations.
Notwithstanding any provisions of Section 9.1 hereof or this Section
9.3 to the contrary, but subject to the provisions of Sections 9.3.A,
9.3.B and 9.3.C hereof:
(a) in accordance with Section 704(c) of the Code and the Regulations
promulgated 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 as provided
in Section 704(c) of the Code 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; (b) in
the event the Gross Asset Value of any Partnership asset is adjusted
as provided herein, subsequent allocations of income, 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
Section 704(c) of the Code and the Regulations promulgated thereunder;
and (c) any elections or other decisions relating to the allocations
provided in this Section 9.3.D(i) shall be made by the General Partner
with the Consent of the Special Limited Partner as provided in Section
704(c) of the Code in any manner that reasonably reflects the purpose
and intention of this Agreement; allocations pursuant to this Section
9.3.D(i) 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 Partner's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement;
the General Partner shall be allocated an amount of deductions equal
to any interest expense allowed to the Partnership in connection with
any Operating Loans;
in the event that the General Partner is allocated more than .01% of
the Losses pursuant to Section 9.1.C(ii) hereof, the General Partner
shall thereafter be allocated all Profits to the extent that the
aggregate Losses theretofore allocated to the General Partner pursuant
to Section 9.1.C(ii) hereof shall have exceeded the Losses that would
have otherwise theretofore been allocated to the General Partner had
the provisions of Section 9.1.C(ii) hereof not been given effect;
in the event any Partner has a deficit Capital Account at the end of
any fiscal year of the Partnership that is in excess of the sum of (a)
the amount such Partner is obligated to restore to its Capital Account
(pursuant to the terms of such Partner's promissory note or otherwise)
and (b) the amount such Partner is deemed to be obligated to restore
to its Capital Account pursuant to the penultimate sentences of
Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such
Partner shall be specially allocated items of Partnership income and
gain in the amount of such excess as quickly as possible, provided
that an allocation pursuant to this Section 9.3.D(iv) shall be made if
and only to the extent that such Partner would have a deficit Capital
Account in excess of such sum after all other allocations provided for
in this Article IX have been tentatively made as if Section 9.3.B
hereof and this Section 9.3.D(iv) were not in this Agreement;
to the extent the Partnership has taxable interest income with respect
to any promissory note issued by a Partner pursuant to Section 483,
Sections 1271 through 1288 or Section 7872 of the Code:
(a) such interest income shall be specially allocated to the Partner
to whom such promissory note relates; and
(b) the amount of such interest income shall be excluded from the
Capital Contributions credited to such Partner's Capital Account in
connection with payments of principal with respect to such promissory
note; and
The Limited Partner shall be allocated an amount of Profits resulting
from a Sale or Refinancing Transaction equal to the Return Amount.
Korb shall be specially allocated an amount of gross income equal to
the amount distributed to Korb pursuant to Section 9.2.B(ii)(I)(B) and
any distributions pursuant to 9.2.A(iii) that represent the return on
the $1,500,000 payable to Korb and any payments to Korb made pursuant
to Section 6.6 hereof. The General Partner shall be specially
allocated an amount of gross income equal to the amount distributed to
the General Partner pursuant to Section 9.2.A (viii).
ARTICLE X
TRANSFER OF LIMITED PARTNER INTERESTS; SUBSTITUTED PARTNERS; ASSIGNEES
10.1 Assignment of Limited Partner Interests. The Investor Limited
Partner and the Special Limited Partner shall have the right at any
time to make an Assignment of their Interests without the consent or
approval of the General Partner or any other Partner. The General
Partner shall cooperate with the Investor Limited Partner and the
Special Limited Partner in facilitating such Assignment by promptly
furnishing complete and accurate financial and other relevant data
regarding the Partnership, the Apartment Complex, the General Partners
and the Affiliates of the General Partner and any other matters
reasonably necessary in the judgment of the Special Limited Partner to
facilitate and effect such Assignment. Each Assignee of an Interest
transferred in accordance with this Section 10.1 shall be
automatically admitted to the Partnership as a Substituted Partner
without necessity of General Partners approval; provided, however,
that each Substituted Limited Partner shall execute such instrument or
instruments as shall be required by the General Partners to signify
its agreement to be bound by all the provisions of this Agreement, the
Project Documents, if required, and shall pay reasonable legal fees
and filing costs in connection with its substitution as a limited
partner hereunder. The Investor Limited Partner and the Special
Limited Partner shall notify the General Partner as to any proposed
Assignment of their Interests.
10.2 Substituted Partners; Admission.
The General Partner may not admit any additional partners to the
Partnership without the Consent of the Special Limited Partner.
Any Assignee shall not be admitted as a Substituted Partner unless (i)
the Assignee expressly agrees to be bound, to the same extent as the
Assignor, by the provisions of this Agreement, the Project Documents
and any other documents required in connection therewith and to assume
the obligations of the Assignor hereunder and (ii) the Assignee shall
have agreed to pay all reasonable expenses and legal fees relating to
the Assignment and its admission as a Substituted Partner.
Upon the admission of a Substituted Partner, Schedule A shall be
amended to reflect the name and address of such Substituted Partner
and to eliminate the name and address of the Assignor, and an
amendment to this Agreement reflecting such admission shall be filed
in accordance with the Uniform Act. No consent or approval of the
Investor Limited Partner or Special Limited Partner (other than the
Assignor and the Assignee) shall be required and the General Partner
may exercise the power of attorney granted in Section 14.2 hereof to
effect the provisions of this Article X.
10.3 Assignees.
Any Person who acquires in any manner whatsoever any Interest,
irrespective of whether such Person has accepted and adopted in
writing the terms and provisions of this Agreement, shall be deemed by
the acceptance of the benefit of the acquisition thereof to have
agreed to be subject to and bound by all the obligations of this
Agreement that any predecessor in interest of such Person was subject
to or bound by. A Person acquiring an Interest, including the personal
representatives and heirs of a deceased Partner, shall have only such
rights, and shall be subject to all the obligations, as are set forth
in this Agreement; and, without limiting the generality of the
foregoing, such Person shall not have any right to have the value of
his Interest ascertained or receive the value of such Interest or, in
lieu thereof, profits attributable to any right in the Partnership,
except as herein set forth.
Any Assignee of an Interest pursuant to an Assignment satisfying the
conditions of this Article X who does not become a Substituted Partner
in accordance with this Article X shall have the right to receive the
same share of the Profits and Losses and distributions of the
Partnership to which his Assignor would have been entitled. If such
Assignee desires to make an Assignment of his Interest, he shall be
subject to all the provisions of this Article X to the same extent and
in the same manner as any Partner desiring to make an Assignment.
Any Partner who shall Assign all of his Interest shall cease to be a
Partner and shall no longer have any rights or privileges of a Partner
except that, unless and until his Assignee is admitted to the
Partnership as a Substituted Partner in accordance with this Article
X, such Assignor shall retain all rights and be subject to all
obligations under the Uniform Act.
In the event of an Assignment, the obligation of the Assignor to make
Capital Contributions hereunder shall be extinguished only by and to
the extent of Capital Contributions made by him or his Assignee.
In the event that an Assignment shall be made, there shall be filed
with the Partnership a duly executed and acknowledged counterpart of
the instrument making such Assignment. Such instrument must evidence
the written acceptance of the Assignee to all the terms and provisions
of this Agreement. If such an instrument is not so filed, the
Partnership need not recognize any such purported Assignment for any
purpose.
ARTICLE XI
WITHDRAWAL OF A GENERAL PARTNER; NEW GENERAL PARTNERS
11.1 Withdrawal.
A General Partner may not Withdraw (other than an
Involuntary Withdrawal) from the Partnership or Assign,
pledge or encumber all or any part of its General Partner
Interest (except for that certain pledge of Cash Flow by
HOMES to Korb to the extent the Special Limited Partner has
reviewed and approved same) without the Consent of the
Special Limited Partner, and, to the extent required, of
each Authority and each Lender. The consent of the Investor
Limited Partner shall not be required. For purposes of this
Agreement, the sale, transfer, or other conveyance, or the
pledge or encumbering, of any share of capital stock of a
General Partner shall be deemed an Assignment by that
General Partner of its General Partner Interest. Each
General Partner shall indemnify and hold harmless the
Partnership and all Partners from any Withdrawal or
Assignment in violation of Section 11.1.A hereof or in
violation of any of the Project Documents. In the event of a
Withdrawal of a General Partner (other than an Involuntary
Withdrawal) or the Assignment, pledge or encumbrance of any
part of its General Partner Interest in violation of Section
11.1.A hereof, the Interest of the General Partner who so
Withdrew, Assigned, pledged or encumbered any part of its
Interest shall immediately and automatically terminate on
the effective date of such Withdrawal (or the effective date
of such Assignment, pledge or encumbrance) and such General
Partner shall have no further right to participate in the
management or operation of the Partnership or to receive any
future allocations of Profits and Losses, any distributions
from the Partnership or any other funds or assets of the
Partnership, nor shall it be entitled to receive or to be
paid by the Partnership any further payments of fees
(including fees which have been earned but are unpaid) or to
be repaid any outstanding advances or loans made by it to
the Partnership. From and after the effective date of such
Withdrawal, Assignment, pledge or encumbrance, the rights of
the Withdrawing General Partner to receive or to be paid
such allocations, distributions, funds, assets, fees or
repayments shall be reallocated to the other General Partner
or General Partners, or if the Special Limited Partner
becomes a general partner of the Partnership at that time,
to the Special Limited Partner. Notwithstanding such
Withdrawal, Assignment, pledge or encumbrance, and loss of
any right to receive such allocations, distributions, funds,
assets, fees and repayments, the Withdrawing General Partner
shall remain liable to the Partnership and the other
Partners for only those obligations incurred by it while it
was General Partner under this Agreement. Notwithstanding
anything herein to the contrary, any remaining Partner shall
have all other rights and remedies against the Withdrawing
General Partner as provided by law.
Upon the Involuntary Withdrawal of the General Partner, the
General Partner's Interest shall automatically become an
Interest of a Class B Limited Partner. Until the purchase of
such Class B Limited Partner Interest shall occur pursuant
to the provisions of Section 11.3.B hereof, the Class B
Limited Partner shall be entitled to receive the fees
payable to the Withdrawing General Partner set forth in
Article VI hereof accrued to the date of such Withdrawal, to
be repaid any outstanding advances or loans made by the
Withdrawing General Partner to the Partnership and to share
in the Profits and Losses and distributions at the same
times and in the same manner as the Withdrawing General
Partner would have otherwise received as a General Partner,
but shall not be entitled to participate in the management
of the Partnership's business or to participate in any
allocation of profits and losses and distributions payable
to the Investor Limited Partner or the Special Limited
Partner.
11.2 Effect of Withdrawal; Election to Continue Business.
Upon the occurrence of an event giving rise to a Withdrawal
of a General Partner, (A) any remaining General Partner, if
any, or, if there be no remaining General Partner, the
Withdrawing General Partner or its legal representative
shall promptly notify the Limited Partners of such
Withdrawal (the "Withdrawal Notice"), (B) the Special
Limited Partner shall have the right to become an additional
General Partner (and to become the Managing General Partner
if the Withdrawing General Partner was previously the
Managing General Partner) and (C) the Partnership shall
continue; provided, however, the Partnership shall be
dissolved and terminated if there is no General Partner (and
the Special Limited Partner does not exercise its right to
become an additional General Partner). The Withdrawal of a
General Partner shall not be deemed to be effective until
the expiration of 90 days from the day on which the
Withdrawal Notice has been mailed to the Limited Partners. A
Withdrawn General Partner shall remain liable for
obligations incurred by it under this Agreement through the
effective date of its Withdrawal, whether or not such
Withdrawal shall be an Involuntary Withdrawal and in
compliance with or in violation of this Agreement.
11.3 Formation of New Partnership.
Subject to the provisions of Section 11.1.A hereof, upon the
occurrence of an event giving rise to the Withdrawal of a
General Partner, if there is then no other General Partner
(and the Special Limited Partner does not elect to become a
General Partner), the Limited Partners may unanimously elect
within 120 days thereafter to form a new partnership on
substantially identical terms to those of this Agreement to
carry on the business of the Partnership. In so doing, the
Limited Partners shall designate a successor general partner
to serve in place of the Withdrawing General Partner with
the approval of each Authority and each Lender, if such
approval is required; provided, however, that no Person
shall be designated or admitted as a successor general
partner if he is below the age of majority in the State or
has theretofore been adjudged insane or incompetent, and
unless, in the opinion of the Partnership's counsel, such
Person has a financial net worth to assure that he shall
satisfy the financial net worth requirements of the Internal
Revenue Service for the Partnership to continue to be
treated as a partnership for Federal income tax purposes.
If the Limited Partners shall designate a successor general
partner and obtain all necessary approvals therefor, the
Class B Limited Partner Interest of the Withdrawing General
Partner where the Withdrawal was Involuntary shall be
transferred to the successor general partner upon its
written assumption of the obligations of the Withdrawing
General Partner under this Agreement (except for any
obligations of the Withdrawing General Partner under this
Agreement specifically excepted by the Special Limited
Partner). In such event, the successor general partner shall
pay to the Withdrawing General Partner or its legal
representative as the purchase price for its Class B Limited
Partner Interest an amount to be agreed upon between them.
If no agreement can be reached as to the amount of the
purchase price for the Class B Limited Partner Interest of
the Withdrawing General Partner under Section 11.3(B)(i)
hereof and if the successor general partner does not own a
.01% interest in all material items of profits and losses
and distributions of the Partnership, each limited partner
of the Partnership (including the Person succeeding to the
Interest of the Withdrawing General Partner as a Class B
Limited Partner and any other Class B Limited Partner) shall
transfer a pro rata portion of his Interest to the successor
general partner in an amount sufficient to give the
successor general partner such .01% interest and the
successor general partner shall pay to each limited partner
of the Partnership (including the Person succeeding to the
Interest of the Withdrawing General Partner as a Class B
Limited Partner and any other Class B Limited Partner) as
the purchase price for his Interest, an amount determined by
the Special Limited Partner.
In exercising the election permitted under Section 11.3.A
hereof, the successor general partner and all the limited
partners of the Partnership agree to be bound by the
provisions of this Agreement; provided, however, that if
this Agreement is amended by them, no amendment shall be
made without the Consent of the Special Limited Partner and
unless counsel to the Partnership shall issue an opinion
that the Partnership shall continue to be treated as a
partnership for Federal income tax purposes; provided,
further, however, that the amended agreement shall be as
similar in form and substance to this Agreement as
practicable and the successor partnership shall engage in
the same business as the Partnership employing the assets
and name of the Partnership to the extent possible.
Any new limited partnership formed pursuant to this Section
11.3 shall succeed to all rights and assets of the
Partnership subject to all liabilities of the Partnership.
Each limited partner of the Partnership shall be a limited
partner of any limited partnership formed pursuant to this
Section 11.3 and agrees to execute all documents and take
such further action as may be necessary in connection
therewith. Until such time as the new limited partnership
agreement is executed by all of the Partners, this Agreement
shall continue to be binding on all of the partners of the
Partnership. Upon execution of a declaration to be bound by
the terms of this Agreement and delivery of such declaration
to any Partner of the Partnership, the general partner of
such new limited partnership shall succeed to all the rights
and liabilities of the then general partners of the
Partnership under this Agreement.
11.4 Special Removal Rights.
Notwithstanding any other provision of this Agreement to the
contrary, in the event that
the General Partner or Guarantor shall:
(a) materially violate its fiduciary responsibilities as a
General Partner or as a Guarantor of the Partnership;
(b) be in material breach of this Agreement or the
Contribution Agreement or any of the Other Guaranties for
ten days after notice thereof has been given by the Special
Limited Partner; provided, however, that if such breach is
of the type that cannot reasonably be cured within ten days,
the Special Limited Partner shall not have the right to
remove a General Partner under this Section 11.4.A(i)(b)
with respect to such breach for a 60-day period after such
notice is given so long as the General Partners are
diligently pursuing a cure of such breach at all times
during such 60-day period;
(c) willfully violate any law, regulation or order
applicable to the Partnership which has a material adverse
financial impact on the Partnership or the Apartment
Complex; or
(d) become Bankrupt;
the Partnership shall:
(a) be in material breach of or have suffered a material
event of default to occur under any Project Document (other
than the Contribution Agreement) or any other material
agreement or document affecting the Partnership or the
Limited Partners to which it is a party; or
(b) (I) at any time (v) prior to the commencement of the
Guaranty Period, if the Guarantor is at such time in default
of its obligations under the Development Deficit Guaranty
Agreement, or (w) during the Guaranty Period if the
Guarantor is at such time in default of its obligations
under the Operating Deficit Guaranty Agreement, or (x) after
termination of the Guaranty, have realized a deficit in Cash
Flow in each calendar month for a period of six consecutive
months (provided that (y) unless such deficit has been
funded by Voluntary Loans by the General Partners, the
number "six" in this clause (I) shall be replaced by "one",
and (z) if such deficit in any calendar month shall exceed
$10,000 (unless such deficit has been funded with Voluntary
Loans), such month shall be deemed to be the last month in a
period of six consecutive months in which the Partnership
shall have realized a deficit in Cash Flow, (II) have had
less than 100% of the apartment units in the Apartment
Complex eligible to receive the Credit in any month, (III)
have had the qualified basis (as defined in Section 42 of
the Code) of the Apartment Complex at the end of any taxable
year prior to the taxable year starting January 1, 2012 be
less than the amount of such basis at the close of the
preceding tax year, or (IV) otherwise be in any situation,
except where such situation is due to a change in law, where
the amount of the Credits which the Partnership is entitled
to claim under Section 42 of the Code be less than the
Credit Amount (as provided in Exhibit A to the Recapture
Guaranty Agreement and as such number is adjusted pursuant
to Section 3.4.B(ii) hereof) in any year during the Credit
Period of the Partnership (other than any year therein in
which Credits may not be claimed for 12 months because the
first day of the Compliance Period was other than the first
day of a calendar year); or
(a) an uncured default exists under any agreement or
commitment entered into by the Partnership or binding
thereon, or any such agreement or commitment shall have
expired or shall have been terminated by any of the parties
thereto and shall not have been extended, or (b) any Lender
shall have commenced foreclosure proceedings against the
Apartment Complex and such proceedings shall not have been
stayed or dismissed within 30 days unless the Interest of
the Investor Limited Partner is purchased by the General
Partners under the Development Deficit Guaranty Agreement;
then, in any such event (a "Major Default") the Special
Limited Partner shall have the right, but not the
obligation, in its sole discretion, (y) in the case of the
occurrence of an event specified in clause (i) of this
Section 11.4.A, to remove such General Partner and all of
such General Partner's Affiliates as General Partner of the
Partnership and to appoint itself or any of its Affiliates
to succeed such General Partner as a General Partner of the
Partnership in accordance with the provisions of Section
11.2 hereof, and (z) upon fifteen (15) days' prior written
notice to the General Partner, in the case of the occurrence
of an event specified in clauses (ii) or (iii) of this
Section 11.4.A, to remove the General Partner as General
Partner of the Partnership and to appoint itself or any of
its Affiliates to succeed such General Partner as a General
Partner of the Partnership in accordance with the provisions
of Section 11.2 hereof. Each Partner hereby irrevocably
constitutes and appoints the Special Limited Partner as its
true and lawful attorney-in-fact and agent with full power
and authority to act in its name, place and stead to
execute, acknowledge, swear to, deliver, file, record and
publish any documents which the Special Limited Partner
reasonably deems necessary or appropriate to confirm and/or
effect (x) the removal of the General Partner as General
Partner of the Partnership and (y) the appointment of the
Special Limited Partner or its designee as a General Partner
of the Partnership including, without limitation, to:
(i) To qualify or continue the Partnership as a limited
partnership;
(ii) To reflect a modification of the Partnership or an
amendment of this Agreement or the Certificate of Limited
Partnership of the Partnership in accordance with the terms
hereof; and
(iii) To effect transfers, admissions, withdrawals and
substitutions of Partners as provided under the terms of
this Agreement.
The General Partner and the Guarantor agree to indemnify and
hold the Limited Partners harmless from and against all
losses, costs and expenses incurred in connection with a
Major Default (other than pursuant to Section 11.4.A(ii)(b)
hereof) and the exercise of any of the remedies provided
above, including, without limitation, all legal fees and
other expenses of the Limited Partners in connection with
the transaction.
The removal of the General Partner pursuant to Section
11.4.A hereof (other than Section 11.4.A(i)(d) hereof) shall
be treated for purposes of this Agreement as a voluntary
Withdrawal of such General Partner from the Partnership. The
removal of the General Partner pursuant to Section
11.4.A(i)(d) shall be treated for purposes of this Agreement
as an Involuntary Withdrawal of such General Partners from
the Partnership.
11.5 Additional General Partners. At any time, the General
Partner, with the Consent of the Special Limited Partner and
subject to any applicable approvals of each Authority and
each Lender, may admit an additional general partner to the
Partnership with such share of the aggregate General
Partner's Interest as shall be agreed upon between the
General Partners and the additional general partner. Any
additional general partner, as a condition of receiving any
Interest, shall agree to be bound by the Project Documents
and any other document required in connection therewith and
by the provisions of this Agreement to the same extent and
on the same terms as the General Partner.
11.6 Amendment of Schedule and Agreement. Upon the admission
of a successor or additional general partner or the
Withdrawal of a General Partner in accordance with the terms
and conditions hereof, Schedule A attached hereto shall be
amended to reflect such admission or Withdrawal and such
amendment shall be filed as required by the Uniform Act. The
General Partner may exercise the power of attorney granted
in Section 14.2 hereof and the Special Limited Partner may
exercise the power of attorney granted in Section 11.4
hereof to effect the provisions of this Section 11.6.
11.7 Survival of Liabilities. It is expressly understood
that no Withdrawal, Assignment, pledge or encumbrance of a
General Partners's Interest, even if it results in the
substitution of the Assignee as a Partner, shall release the
Withdrawing General Partners from any liability to the
Partnership which shall survive such Withdrawal, Assignment,
pledge or encumbrance, including those set forth in the
Uniform Act.
ARTICLE XII
DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
12.1 Events Which Cause a Dissolution. The Partnership shall
continue in full force and effect until December 31, 2037,
except that the Partnership shall be dissolved prior thereto
upon the happening of any of the following events:
An election to dissolve the Partnership made in writing by
the General Partner, with the Consent of the Special Limited
Partner;
The Withdrawal of the General Partner if the Partnership is
not continued in accordance with Section 11.2 hereof;
Any event which shall make it unlawful for the existence of
the Partnership to be continued; or
The sale or other disposition of all or substantially all of
the assets of the Partnership.
12.2 Actions of Liquidating Agent Upon Dissolution. Upon the
dissolution of the Partnership, the Partnership shall be
liquidated in accordance with this Article XII and the
Uniform Act. The liquidation shall be conducted and
supervised by the General Partner or, if there is no
remaining general partner, by a person who shall be
designated for such purpose by the Special Limited Partner
(the General Partner, or such person so designated, being
hereinafter referred to as the "Liquidating Agent"). The
Liquidating Agent shall have all of the rights in connection
with the liquidation and termination of the Partnership that
a general partner would have with respect to the assets and
liabilities of the Partnership during the term of the
Partnership, and the Liquidating Agent is hereby expressly
authorized and empowered to effectuate the liquidation and
termination of the Partnership and the transfer of any
assets and liabilities of the Partnership. The Liquidating
Agent shall have the right from time to time, by revocable
powers of attorney, to delegate to one or more persons any
or all of such rights and powers and the authority and power
to execute documents in connection therewith, and to fix the
reasonable compensation of each such person, which
compensation shall be charged as an expense of liquidation.
The Liquidating Agent is also expressly authorized to
distribute the Partnership's property to the Partners
subject to liens.
12.3 Statements on Termination. Each Partner shall be
furnished with a statement prepared by the Liquidating Agent
which shall set forth the assets and liabilities of the
Partnership as at the date of complete liquidation, and each
Partner's share thereof. Upon compliance with the
distribution plan set forth in Section 12.4 hereof, the
Investor Limited Partner and the Special Limited Partner
shall each cease to be a partner of the Partnership, and the
Liquidating Agent shall execute, acknowledge and cause to be
filed a certificate of termination of the Partnership.
12.4 Priority on Liquidation; Distribution of Non-Liquid
Assets.
The Liquidating Agent shall, to the extent feasible,
liquidate the assets of the Partnership as promptly as shall
be practicable. To the extent the proceeds are sufficient
therefor, as the Liquidating Agent shall deem appropriate,
the proceeds of such liquidation shall be applied in
accordance with the provisions of Section 9.2.B(i) through
(viii) hereof, and the balance of such proceeds shall be
distributed by the Liquidating Agent to the Partners pro
rata in accordance with their respective Capital Accounts,
as such accounts are determined after all adjustments are
made as required herein to such accounts for the taxable
year of the Partnership during which the liquidation occurs.
If the Liquidating Agent shall determine with the Consent of
the Special Limited Partner that it is not feasible to
liquidate all or part of the assets of the Partnership or
that an immediate sale of all or part of such assets would
cause an undue loss to the Partners, the Liquidating Agent
shall cause the fair market value of the assets not so
liquidated to be determined by independent appraisal. Such
assets, as so appraised, shall be retained or distributed by
the Liquidating Agent as follows (it being understood that
the allocation of specific assets pursuant to this Section
12.4 shall require the Consent of the Special Limited
Partner):
The Liquidating Agent shall retain assets having a value
(which value shall be equal to the fair market value of such
assets less the amount of any liability related thereto)
equal to the amount by which the net proceeds of the
liquidated assets are insufficient to satisfy the
requirements of subparagraphs (i) through (viii) of Section
9.2.B hereof; and
Thereafter to the Partners pro rata in accordance with their
respective Capital Accounts, as such accounts are determined
after all adjustments are made as required herein to such
accounts for the taxable year of the Partnership during
which the liquidation occurs.
Any distribution of assets in kind shall be distributed on
the basis of the fair market value thereof and any Partner
entitled to any interest in such assets shall receive such
interest therein as a tenant-in-common with all other
Partners so entitled. If the Liquidating Agent, with the
Consent of the Special Limited Partner, deems it not
feasible to distribute to each Partner an aliquot share of
each asset, the Liquidating Agent may allocate and
distribute specific assets to one or more Partners as
tenants-in-common as the Liquidating Agent shall determine
with the Consent of the Special Limited Partner, taking into
consideration, inter alia, the basis for tax purposes of
each asset distributed and the effect of crediting or
charging the Capital Accounts for any unrealized
appreciation or unrealized depreciation.
Notwithstanding any other provision of this Article XII, in
the event the Partnership is liquidated within the meaning
of Section 1.704-1(b)(2)(ii)(g) of the Regulations but no
Event specified in Section 12.1 hereof has occurred, the
property of the Partnership shall not be liquidated, the
Partnership's liabilities shall not be paid or discharged,
and the Partnership's affairs shall not be wound up.
Instead, the Partnership shall be deemed to have distributed
its property in kind to the Partners, who shall be deemed to
have assumed and taken subject to all Partnership
liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the Partners shall be
deemed to have recontributed such property in kind to the
Partnership, which shall be deemed to have assumed and taken
subject to all such liabilities.
12.5 Orderly Liquidation. A reasonable time shall be allowed
for the orderly liquidation of the assets of the Partnership
and the discharge of liabilities so as to minimize the
losses normally attendant upon a liquidation.
12.6 No Goodwill Value. At no time during continuation of
the Partnership shall any value ever be placed on the
Partnership name, or the right to its use, or to the
goodwill appertaining to the Partnership or its business,
either as among the Partners or for the purpose of
determining the value of any Interest, nor shall the legal
representatives of any Partner have any right to claim any
such value. In the event of a termination and dissolution of
the Partnership as provided in this Agreement, neither the
Partnership name, nor the right to its use, nor the same
goodwill, if any, shall be considered as an asset of the
Partnership, and no valuation shall be put thereon for the
purpose of liquidation or distribution, or for any other
purpose whatsoever; nor shall any value ever be placed
thereon as between the remaining or surviving Partners and
the legal representatives of the estate of any deceased,
insane, incompetent, dissolved, liquidated or Bankrupt
Partner.
ARTICLE XIII
FOREIGN PARTNERS
13.1 Certification of Non-Foreign Status.
Each Partner shall upon acquiring a Partnership Interest
certify that he is not a Foreign Person on forms to be
provided by the General Partners at the time of
subscription. At any time that an Interest is transferred or
assigned, the transferee shall certify to non-foreign status
prior to the transfer or assignment of such Interest. Such
certifications shall be made on a form to be provided by the
General Partners.
Each Partner shall notify the General Partners if he becomes
a Foreign Person within 30 days of such change.
Prior to a disposition of a United States Real Property
Interest, a distribution attributable to a disposition of a
United States Real Property Interest or any other
distribution by the Partnership, each Partner may be
required to certify to non-foreign status.
13.2 Withholding of Certain Amounts Attributable to
Interests of Foreign Partners.
In the event that either (y) the Partnership's actual or
deemed amount realized upon disposition of any United States
Real Property Interest is attributed to a Foreign Partner or
(z) the Partnership has effectively connected taxable income
for any taxable year:
any tax required to be withheld under Sections 1445 or 1446
of the Code shall be charged to that Foreign Partner's
Capital Account as if the amount of such tax had been
distributed to such Partner;
the General Partner shall have the right to make a loan to
the Partnership in an amount equal to the amount of tax
required to be withheld pursuant to Sections 1445 or 1446 of
the Code to the extent that cash is needed to make the
Sections 1445 or 1446 withholding payment attributable to
that Foreign Partner; and
the General Partner may retain appropriate portions of a
Foreign Partner's distributions until any withholding
obligations relating to that Foreign Partner are satisfied
and may apply such distributions to repay any loan made
pursuant to Section 13.2.A(ii) hereof.
For purposes of this Section 13.2, any person who fails to
provide a certification of a non-foreign status when
requested to do so by the General Partners shall be treated
as a Foreign Person.
ARTICLE XIV
MISCELLANEOUS
14.1 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State
applicable to contracts made and to be performed entirely
therein.
14.2 Power of Attorney. Each Partner hereby irrevocably
constitutes and appoints each General Partner who is an
individual, each general partner of any General Partner
which is a partnership and each of the President, each Vice
President and the Secretary of any corporate General
Partners, his true and lawful attorney-in-fact and agent
with full power and authority to act in his name, place and
stead to execute, acknowledge, swear to, deliver, file,
record and publish any documents which such persons
reasonably deem necessary or appropriate:
To qualify or continue the Partnership as a limited
partnership;
To reflect a modification of the Partnership or an amendment
of this Agreement in accordance with the terms hereof;
To reflect the dissolution and termination of the
Partnership in accordance with the terms hereof; or
To effect transfers, admissions, withdrawals and
substitutions of Partners as specifically provided under the
terms of this Agreement.
No person shall take any action as an attorney-in-fact of
the Investor Limited Partner or any Special Limited Partner
which is not authorized by the terms of this Agreement or
would in any way increase the liability of such Partner
beyond the liability expressly set forth in this Agreement.
This power of attorney may be revoked by any Partner by
written notice of revocation (the "Notice of Revocation") to
the General Partners. Upon receipt by the General Partners
of a Notice of Revocation, the General Partners shall file
with the appropriate office or agency an amendment to this
Agreement reflecting any such revocation, provided, however,
that until such amendment is filed, any party may rely upon
this power of attorney as being valid.
14.3 Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original
for all purposes, but all of which taken together shall
constitute only one agreement. The production of any
executed counterpart of this Agreement shall be sufficient
for all purposes without producing or accounting for any
other counterpart thereof.
14.4 Partners Independently Bound. The General Partner, the
Special Limited Partner and the Investor Limited Partner
shall become bound by this Agreement upon execution thereof
by all Partners.
14.5 Separability of Provisions. Each provision of this
Agreement shall be considered separable and if for any
reason any provision or provisions herein (A) are determined
to be invalid or contrary to any existing or future law,
such invalidity shall not impair the operation of or affect
those portions of this Agreement which are valid or (B)
would cause any of the Limited Partners to be bound by the
obligations of the Partnership (other than under the rules,
directives and regulations of any Authority) under the laws
of the State as the same may now or hereafter exist, such
provision or provisions shall be deemed void and of no
effect.
14.6 Address and Notice. All notices, demands, solicitations
of consent or approval, and other communications hereunder
required or permitted shall be in writing and shall be
deemed to have been given when personally delivered or five
days after the date when deposited in the United States mail
and sent postage prepaid by registered or certified mail,
return receipt requested, addressed as follows: if intended
for (A) the Partnership, to its principal place of business
or (B) the Partners, to their respective addresses set forth
on Schedule A, or to such other address which any Partner
shall have given to the Partnership for such purpose by
notice hereunder; provided, however, that copies of all such
items (which shall not constitute notice hereunder) shall
also be sent to Battle Fowler LLP, 75 East 55th Street, New
York, New York 10022; Attention: Eric R. Landau, Esq.
14.7 Computation of Time. In computing any period of time
pursuant to this Agreement, the day of the act, event or
default from which the designated period of time begins to
run shall not be included.
14.8 Titles and Captions. All article and section titles or
captions contained in this Agreement are for convenience
only and shall not be deemed part of the text of this
Agreement.
14.9 Entire Agreement. This Agreement and all agreements
referenced herein and entered into by and among the parties
hereto constitute the entire understanding between and among
the parties and supersedes any prior understandings and
agreements between and among them respecting the subject
matter of this Agreement. It is expressly agreed that,
unless expressly approved by the Special Limited Partner in
writing, any and all agreements previously entered into
among Korb, the Partnership, the General Partner or any of
their Affiliates with respect to the subject matter of this
Agreement or the Apartment Complex are deemed null and void
except for the following: (i) Agreement of Purchase and Sale
of Partnership Interests in Dallas/Glen Hills, L.P., dated
as of September 16, 1996, as amended, together with all
contracts, agreements and documents signed or executed in
connection therewith (to the extent same have been approved
in writing by the Special Limited Partner); (ii) Promissory
Note in the amount of $400,000 issued to Korb by the General
Partner and guaranteed by the Guarantor; (iii) Collateral
Assignment of Rights in Partnership Interests entered into
by and between the General Partner and Korb; and (iv) that
certain Indemnity Agreement entered into by and between
Homes For America Holdings, Inc. and Korb. Notwithstanding
anything to the contrary in this Section 14.9, to the extent
that any of the provisions of the agreements listed as items
(i) through (iv) in the preceding sentence are inconsistent
with the provisions of this Agreement, the provisions of
this Agreement shall control.
14.10 Agreement Binding. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors,
administrators, legal representatives and permitted
successors and assigns of the parties hereto.
14.11 Parties in Interest. Nothing herein shall be construed
to be to the benefit of or enforceable by any third party
including, but not limited to, any creditor of the
Partnership.
14.12 Amendments; Other Actions.
This Agreement may not be amended or modified except by the
General Partner with the Consent of the Special Limited
Partner and the approval, if required, of each Authority;
provided, however, that the prior written consent of all
Partners is required to any amendment which would (i) extend
the term of the Partnership as set forth in Section 12.1
hereof, (ii) amend this Section 14.12, (iii) increase or
extend the liability or obligation of the Investor Limited
Partner or any limited partner, (iv) increase the amount of
Capital Contributions payable by the Investor Limited
Partner or any limited partner, (v) accelerate the date of
payment of any installment or (vi) alter the distribution or
allocation to the Partners of any profits and losses and
distributions of the Partnership; provided, further,
however, that the Limited Partners may, without the consent
of the General Partners, amend or modify this Agreement in
any manner which does not modify in any manner or to any
extent the rights, privileges or liabilities of the General
Partners hereunder or items (i) through (vi) in the first
proviso to this Section 14.12.A.
Notwithstanding any other provision of this Agreement, no
action may be taken under this Agreement unless such action
is taken in compliance with the provisions of the Uniform
Act.
C. The General Partners acknowledge and agree that upon
receipt of written notice from the Investor Limited Partner
that it desires to exercise the right(s) of the Special
Limited Partner (a) to consent to the actions specified in
Sections 5.5B(iv), (x), (xi) and (xii) hereof, (b) to
receive information and/or reports with regard to the
physical and financial condition of the Apartment Complex
and/or (c) under Section 11.4 hereof (including the right to
appoint a successor General Partner upon the removal of a
General Partner), such rights shall be exercisable
exclusively by the Investor Limited Partner and this
Agreement shall be deemed to have been so amended to reflect
that such rights are to be exercised exclusively by the
Investor Limited Partner.
14.13 Survival of Representations, Warranties and
Agreements. All representations, warranties and agreements
shall survive until the dissolution and termination of the
Partnership, except to the extent that a representation,
warranty or agreement expressly provides otherwise.
14.14 Further Assurances. The Partners will execute and
deliver such further instruments and do such further acts
and things as may be required to carry out the intent and
purposes of this Agreement.
14.15 Remedies Cumulative. No remedy conferred upon or
reserved to the Partnership or any Partner by this Agreement
is intended to be exclusive of any other remedy. Each and
every such remedy shall be cumulative and shall be in
addition to any other remedy given to the Partnership or any
Partner hereunder or now or hereafter existing at law or in
equity or by statute.
14.16 Meetings. Meetings of the Partnership may be called by
the General Partner or by the Special Limited Partner for
any matters for which the Partners may vote as set forth in
this Agreement or to obtain information concerning the
Partnership. A list of names and addresses of all Partners
shall be maintained as part of the books and records of the
Partnership and shall be made available upon request to any
Partner or its representative at cost. Upon receipt of a
request either in person or by registered mail stating the
purposes of the meeting, the General Partner shall provide
the Partners, within ten days after receipt of such request,
written notice of a meeting and the purpose of such meeting
to be held on a date not less than 15 nor more than 30 days
after receipt of such request, at a time and place within or
without the State convenient to the Partners.
14.17 Class Z General Partner. The parties hereto
acknowledge and agree that upon the Partnership's receipt of
a form 8609 for each building in the Apartment Complex,
Korb's interest as a Class Z General Partner shall be
automatically converted to an interest as a Class Z Limited
Partner; all other provisions relating to Korb shall remain
unchanged.
IN WITNESS WHEREOF, this Agreement has been duly executed on
the day and year first above written.
GENERAL PARTNER
GLEN HILLS HOMES FOR AMERICA, INC.
By: /s/ Robert A. MacFarlane
----------------------------
Name: Robert A. MacFarlane
----------------------------
Title: President/Director
----------------------------
CLASS Z GENERAL PARTNER
-------------------------------
DAVID H. KORB
SPECIAL LIMITED PARTNER
RELATED CORPORATE SLP L.P.
By: RCC Asset ManAgers, L.P.,
General Partner
By: RCC General Corporation,
General Partner
By: /s/ Marc D. Schnitzer
-----------------------------
Name: Marc D. Schnitzer
Title: Executive Vice President
LIMITED PARTER
RELATED CORPORATE PARTNERS V, L.P.
By: RCC Asset Managers V. L.L.C.,
Its General Partner
By: /s/ Marc D. Schnitzer
--------------------------------------
Marc D. Schnitzer
Member
WITHDRAWING LIMITED PARTERS
CAL-TEX II-GLEN HILLS, LTD.,
A Texas limited partnership
By: /s/ David Korb
- - ----------------------------
David Korb
JOCK P.R. CAMPBELL LIVING
TRUST 3/28/89
By: /s/ David Korb (for Jock P.R. Cambell Living Trust 3/28/89)
- - ----------------------------------------------------------------
Name:
6003 ABRAMS ROAD, INC.,
a Texas Corporation
By: /s/ David Korb
- - -------------------------------------
Name:
/s/ David Korb (for Anthony J. Barder)
- - --------------------------------------
ANTHONY J. BARDER
SCHEDULE A TO
THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
DALLAS/GLEN HILLS, L.P.
dated as of ----------------, 1997
General Partner Capital Contribution
Glen Hills Homes For America, Inc. $1.00
1725 DeSales Street, NW
Suite 300 Washington, D.C. 20036
Attention: Robert Kohn
Special Limited Partner
Related Corporate SLP L.P. $1.00
625 Madison Avenue
New York, New York 10022
Investor Limited Partner
Related Corporate Partners V, L.P. $2,211,910
625 Madison Avenue
New York, New York 10022
Class Z General Partner
David H. Korb $1,500,000
6727 Lookout Bend
San Jose, California 91520
CAPITAL NOTE
For value received, RELATED CORPORATE PARTNERS V, L.P., a Delaware limited
partnership (the "Investor Limited Partner"), promises to pay to DALLAS/GLEN
HILLS, L.P., a Texas limited partnership (the "Payee") at c/o Homes for America
Holdings, Inc., 1725 DeSales Street, NW, Suite 300, Washington D.C. 20036,
Attention: Robert Kohn, or at such other address as the Payee shall in writing
direct, the principal sum of Two Hundred Seventy Thousand Eight Hundred
Forty-Six Dollars ($270,846) (the "Principal"), without interest, as follows:
(i) $270,846 (the "Second Payment") shall be payable within twenty (20) days
after satisfaction of the Second Payment Conditions; provided, however, the
Second Payment and/or the Third Payment may be increased or reduced as and to
the extent provided in the Contribution Agreement and the Partnership Agreement.
This Note evidences the obligation of the Investor Limited Partner to pay a
portion of any capital contributions for its Interest in the Payee as provided
in the Amended and Restated Agreement of Limited Partnership of the Payee dated
the date hereof (the "Partnership Agreement") and shall be subject to the
provisions of Section 3.4 of that agreement and to the terms and conditions
contained in Section 5 of that certain Contribution Agreement dated as of the
date hereof, among the Payee, Payee's general partner and the Investor Limited
Partner (the "Contribution Agreement"). Capitalized terms not defined herein
shall have the meaning provided in the Partnership Agreement or in the
Contribution Agreement.
Subject to the provisions of Section 3.4 of the Partnership Agreement and the
Contribution Agreement, payment of the Principal shall be due hereunder within
twenty (20) days after all of the conditions to payment of this Capital Note
contained in Section 5 of the Contribution Agreement have been satisfied and
Payee has delivered written notice evidencing same to the Investor Limited
Partner, in form and substance satisfactory to the Investor Limited Partner. If
the Investor Limited Partner disputes the occurrence of any event or
satisfaction of any condition entitling the Payee to payment, payments hereunder
shall be deferred until the resolution of such dispute; provided, however, that
if the Investor Limited Partner fails to contest the matter in good faith and it
is subsequently determined that the Payee was so entitled to such payment, the
Investor Limited Partner shall pay interest on the payment at the Penalty Rate
(as hereinafter defined) from the end of the 20-day period to the date of
payment.
Neither the Investor Limited Partner nor any Partner thereof (whether a General
Partner or a Limited Partner) nor any Person shall have any personal liability
for payment of any amount due under this Note, or the performance of any
obligation under or arising pursuant to this Note and, in the event of any
default hereunder, the Payee (and its successors and assigns) shall look only to
the Interest for performance hereunder. If, pursuant to the Partnership
Agreement or any instrument executed or delivered incident thereto, the Investor
Limited Partner shall be entitled to any right of indemnification, then ,
without limiting any other right of the Investor Limited Partner as provided in
the Partnership Agreement or any other instrument, the Investor Limited Partner
shall have the right to set off against its payment obligations under this Note
the sum of (i) the amount of the obligations for which the Investor Limited
Partner is entitled to indemnification, and (ii) interest on such amount, from
the date on which such right of set-off arises until the date of receipt of the
payment in connection with which the right of set-off is asserted, computed at
the rate per annum (the "Penalty Rate") which is the lesser of (i) 2% over the
Prime Rate, or (ii) the maximum rate permitted by the law of the State.
The debt evidenced by this Note shall be prepayable, in whole or in part, at any
time, without penalty.
This note shall be governed, construed and enforced in all respects in
accordance with the laws of the State applicable to contracts made and to be
performed entirely therein.
Signed and delivered as of the 27th day of March, 1997.
------ -------
RELATED CORPORATE PARTNERS V, L.P.
By: RCC Asset Managers V, L.L.C.,
Its General Partner
By: /s/ Marc D. Schnitzer
--------------------------
Marc D. Schnitzer, Member
PROMISSORY NOTE
$400,000 March 21, 1997
For VALUE RECEIVED the undersigned promises to pay the order of DAVID KORB
the principal sum of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00) with interest
from the date hereof on the unpaid balance hereof on the following rates of
interest during the following periods of time: (i) eight and one-half percent
(8-1/2%) per annum for the period commencing on the date hereof and ending on
March 20, 1998; and (ii) nine percent (9%) per annum commencing on March 21,
1998 and continuing thereafter until paid or until default, both principal and
interest payable in lawful money of the United States of America, at the office
of the holder at 6727 Lockout Road, San Jose, California 91520 or at such place
as the legal holder hereof may designate in writing. The principal and interest
shall be due and payable follows:
Installments of principal, based upon a eighty-four (84) month amortization
schedule, together with all accrued and unpaid interest thereon, shall be due
and payable monthly commencing on July 1, 1997 and continuing on the first day
of each calendar month thereafter until March 20, 2004 when all unpaid principal
and interest shall be fully due and payable.
Each, such installment shall, unless otherwise provided, be applied first
to payment of interest then accrued and due on the unpaid principal balance,
with the reminder applied to the unpaid principal.
Unless otherwise provided, this Note may be prepaid in full or in part at
any time without penalty or premium. Partial prepayments shall be applied to
installments due in revenue order of their maturity.
In the event of (a) default in payment of any installment of principal or
interest hereof as the same becomes due and such default is not cured within
twenty (20) days after written notice to maker, or (b) default under the terms
of any instrument securing this Note, and such default is not cured within
thirty (30) days after written notice to maker, then in either such event
(herein, an "Event of Default") the holder may without further notice, declare
the remainder of the principal sum, together with all interest accrued thereon
at once due and payable. Failure to exercise this option shall not constitute a
waiver of the right to exercise the same at any other time. After the occurrence
and during the existence of an Event of Default, the unpaid principal of this
Note and any part thereof, accrued interest and all other sums due under this
Note shall bear interest at lesser of (i) the rate of twelve percent (12%) per
annum or (ii) the Maximum Rate (as hereinafter defined) until paid.
Except for the notice and cure provisions set fourth specifically herein,
maker hereby waives demand, protest, presentment, notice of dishonor, notice of
intent to accelerate, and notice of acceleration of maturity and agrees to
continue to remain bound for the payment of principal, interest and all other
sums due under this Note.
Upon the occurrence of an Event of Default, the holder of this Note may
employ an attorney to enforce the holder's rights and remedies and maker hereby
agrees to pay to the holder reasonable attorney's fees plus all other reasonable
expenses incurred by the holder in enforcing any of the holder's rights and
remedies upon an Event of Default. The rights and remedies of the holder an
provided in this Note and may instrument securing this Note shall be cumulative
and may be pursued singly, successively, or together against the property
described in any instrument securing this Note or any other funds, property or
security held by the holder for payment or security, in the sole discretion of
the holder. The failure to exercise any such right or remedy shall not be a
waiver of release of such rights or remedies or the right to exercise any of
them at another time.
All agreements between the maker and the holder, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand or acceleration of the maturity hereof
or otherwise, shall the interest contracted for, charged, received, paid or
agreed to be paid to the holder exceed interest computed at the highest lawful
rate of interest applicable to this Note (the "Maximum Rate"). In determining
the Maximum Rate, due regard shall be given to all payments, fees, charges,
deposits, balances and agreements which may constitute interest or be deducted
from principal when calculating interest. If, from any circumstance whatsoever,
interest would otherwise be payable to the holder in excess of interest computed
at the Maximum Rate, the interest payable to the holder shall be reduced to
interest computed at the Maximum Rate, the interest payable to the holder shall
be reduced to interest computed at the Maximum Rate and if from any circumstance
the holder shall ever receive anything of value deemed interest by applicable
law in excess of interest computed at the Maximum Rate, an amount equal to any
excessive interest shall be applied to the reduction of the principal hereof and
not to the payment of interest, or if such excessive interest exceeds the unpaid
balance of principal hereof, such excess shall be refunded to the maker. All
interest paid or agreed to be paid to the holder shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full period until payment in full of the principal (including the period of any
removal or extension hereof) so that the interest herein for such full period
shall not exceed interest computed at the Maximum Rate. This paragraph shall
control all agreements between the maker and the holder. For purposes of
determining the Maximum Rate, the Indicated Rate Ceiling specified in Texas
Revised Civil Statutes, Article 5069-1.04 shall be used; however, if permitted
by applicable law, the holder may implement any ceiling under applicable law
used to compute the rate of interest hereunder by notice to the maker, to the
extent and as required by such law. In no event shall the provisions of Chapter
15 of the Texas Credit Code, Texas Revised Civil Statutes, Article 5069-15.01,
et seq. be applicable to the indebtedness evidenced by this Note.
Notwithstanding the foregoing sentences, if either Section 501 or 511 of the
Depository Institutions Deregulation and Monetary Control Act of 1980 (as
amended) permit a higher Maximum Rate that Article 5069-1.04, such higher
Maximum Rate shall apply.
This Note shall be construed in accordance with the laws of the State of
Texas and the laws of the United States applicable to transactions in Texas.
Maker hereby agrees that Dallas County, Texas is the proper place for venue for
any proceedings regarding this Note or the indebtedness evidenced hereby and
that any legal proceedings regarding this Note shall be brought in the district
courts of Dallas County, Texas.
This Note is given for commercial business purposes.
This Note is secured by a certain Collateral Assignment of Rights in
Partnership Interest (the "Collateral Assignment") of even date herewith
executed by maker. Reference is hereby made to the Collateral Assignment for a
description of the security for this Note and the rights of the maker and the
holder with respect to such security.
THIS PROMISSORY NOTE AND THE OTHER DOCUMENTS DELIVERED IN CONNECTION
HEREWITH CONSTITUTE PART OF A "LOAN AGREEMENT" FOR THE PURPOSES OF SECTION
36.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND, TOGETHER WITH THE
SECURITY INSTRUMENTS REFERRED TO HEREIN, REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN
THE PARTIES.
GLEN HILLS HOMES FOR AMERICA, INC.,
A Texas Corporation
By: /s/ Robert MacFarlane
-------------------------------------
Robert MacFarlane
President
PROMISSORY NOTE
(Fixed Rate)
Loan No. 7171 $5,350,000.00
February 8, 1996
Dallas, Texas
FOR VALUE RECEIVED, the undersigned, DALLAS/GLEN HILLS, L.P., a Texas
limited partnership ("Borrower"), jointly and severally, if more than one,
promises to pay to the order of MANOVER CAPITAL MORTGAGE CORPORATION, a Missouri
corporation ("Lender"), at the office of Lender at 7700 Bonhomme, Suite 475, St.
Louis, Missouri 63105, or at such other place as Lender may designate to
Borrower in writing from time to time, the principal sum of Five Million Three
Hundred Fifty Thousand and No/100 Dollars ($5,350,000.00), together with
interest on so much thereof as in from time to time outstanding and unpaid, at
the rate of Eight and One-Fourth percent (8.25%) per annum (the "Note Rate"), in
lawful money of the United States of America, which shall at the time of payment
be legal tender in payment of all debts and dues, public and private.
ARTICLE I - TERMS AND CONDITIONS
1.01 Payment of principal and Interest. Said interest shall be computed
hereunder based on a 360-day year and based on twelve (12) 30-day months for
each full calendar month and on the actual number of days elapsed for any
partial month in which interest is being calculated. In computing the number of
days during which interest accrues, the day on which funds are initially
advanced shall be included regardless of the time of day such advance is made,
and the day on which funds are repaid shall be included unless repayment is
credited prior to close of business. Payment in federal funds immediately
available in the palace designated for payment received by Lender prior to 2:00
p.m. local time at said place of payment shall be credited prior to close of
business, while other payments may, at the option of Lender, not be credited
until immediately available to Lender in federal funds in the place designated
for payment prior to 2:00 p.m. local time at said place of payment on a day on
which Lender is open for business. Such principal and interest shall be payable
in equal consecutive monthly installments of $42,182.08 each, beginning on the
first day of the second full calendar month following the date of this Note (or
on the first day of the first full calendar month following the date hereof, in
the event the advance of the principal amount evidenced by this Note is the
first day of a calendar month), and continuing on the first day of each and
every month thereafter through and including February 1, 2011, and on March 1,
2011 (the "Maturity Date"), at which time the entire outstanding principal
balance hereof, together with all accrued but unpaid interest thereon, shall be
due and payable in full. Each such monthly installment shall be applied first to
the payment of accrued interest and then to reduction of principal. If the
advance of the principal amount evidenced by this Note is made on a date other
than the first day of a calendar month, then Borrower shall pay to Lender
contemporaneously with the execution hereof interest at the Note Rate for a
period from the date hereof through and including the first day of the next
succeeding calendar month.
1.02 Prepayment.
a) This Note may be prepaid in whole but not in part (except as otherwise
specifically provided herein) at any time after the third (3rd) anniversary of
this Note provided (i) written notice of such prepayment is received by Lender
not more than sixty (60) days and not less than thirty (30) days prior to the
date of such prepayment, (ii) such prepayment is accompanied by all interest
accrued hereunder and all other sums due hereunder or under the other Loan
Documents, and (iii) if such prepayment occurs prior to the date that is six (6)
months prior to the Maturity Date, Lender is paid a prepayment fee in an amount
equal to the greater of (A) one percent (1.0%) of the principal amount being
prepaid, and (B) the positive excess of (1) the present value ("PV") of all
future installments of principal and interest due under this Note including the
principal amount due at maturity (collectively, "All Future Payments"),
discounted at on interest rate per annum equal to the sum of (a) the Treasury
Constant Maturity Yield Index published during the second full week preceding
the date on which such premium is payable for instruments having a maturity
coterminous with the remaining term of this Note, and (b) fifty (50) basis
points over (ii) the principal amount of this Note outstanding immediately
before such prepayment ((PV of All Future Payments) (principal balance at time
of prepayment) = prepayment fee). "Treasury Constant Maturity Yield Index" shall
mean the average yield for "This Week" as reported by the Federal Reserve Board
in Federal Reserve Statistical Release H.15 (519). If there is no Treasury
Constant Maturity Yield Index for instruments having a maturity coterminous with
the remaining term of this Note, then the index shall be equal to the weighted
average yield to maturity of the Treasury Constant Maturity Yield Indices with
maturities next longer and shorter than such remaining average life to maturity,
calculated by averaging (and rounding upward to the nearest whole multiple of
1/100 of 1% per annum, if the average is not such a multiple) the yields of the
relevant Treasury Constant Maturity Yield indices (rounded, if necessary, to the
nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward). In
the event that any prepayment fee is due hereunder, Lender shall deliver to
Borrower a statement setting forth the amount and determination of the
prepayment fee, and, provided that Lender shall have in good faith applied the
formula described above, Borrower shall not have the right to challenge the
calculation or the method of calculation set forth in any such statement in the
absence of manifest error, which calculation may be made by Lender on any day
during the thirty (30) day period preceding the date of such prepayment. Lender
shall not be obligated or required to have actually reinvested the prepaid
principal balance at the Treasury Constant Maturity Yield or otherwise as a
condition to receiving the prepayment fee. No prepayment fee or premium shall be
due or payable in connection with any prepayment of the indebtedness evidenced
by this Note made on or after the date that is six (6) months prior to the
Maturity Date. In addition to the aforesaid prepayment fee if, upon any such
prepayment (whether prior to or after the date that is six (6) months prior to
the Maturity Date), the aforesaid prior written notice has not been received by
Lender, the prepayment fee shall be increased by an amount equal to the lesser
of (i) thirty (30) days' unearned interest computed on the outstanding principal
balance of this Note so prepaid and (ii) unearned interest computed on the
outstanding principal balance of this Note so prepaid for the period from, and
including, the date of prepayment through the otherwise stated maturity date of
this Note.
b) Partial prepayments of this Note shall not be permitted, except partial
prepayments resulting from Lender applying insurance or condemnation proceeds to
reduce the outstanding principal balance of this Note as provided in the
Security Instrument (as hereinafter defined), in which event no prepayment fee
or premium shall be due. No notice of prepayment shall be required under the
circumstance specified in the preceding sentence. No principal amount repaid may
be reborrowed. Partial payments of principal shall be applied to the unpaid
principal balance evidenced hereby but such application shall not reduce the
amount of the fixed monthly installments required to be paid pursuant to Section
1.01 above.
c) Except as otherwise expressly provided in Section 1.02(b) above, the
prepayment fees provided above shall be due, to the extent permitted by
applicable law, under any and all circumstances where all or any portion of this
Note is paid prior to the Maturity Date, whether such prepayment is voluntary or
involuntary, even if such prepayment results from Lender's exercise of its
rights upon Borrower's default and acceleration of the maturity date of this
Note (irrespective of whether foreclosure proceedings have been commenced), and
shall be in addition to any other sums due hereunder or under any of the other
Loan Documents (as hereinafter defined). No tender of a prepayment of this Note
with respect to which a prepayment fee is due shall be effective unless such
prepayment is accompanied by the prepayment fee. If the indebtedness of this
Note shall have been declared due and payable by Lender pursuant to Section 1.04
hereof due to a default by Borrower, then any tender of payment of such
indebtedness made prior to the first anniversary date hereof must include a
prepayment fee computed as provided in Section 1.02(a) above plus an additional
prepayment fee of one percent (1%) of the principal balance of this Note.
1.03 Security. The indebtedness evidenced by this note and the obligations
created hereby are secured by that certain Mortgage and Security Agreement (the
"Security Instrument") from Borrower to Lender, dated as of February 9, 1996,
concerning property located in Dallas County, Texas. The Security Instrument
together with this Note and all other documents to or of which Lender is a party
or beneficiary now or hereafter evidencing, securing, quarantying, modifying or
otherwise relating to the indebtedness evidenced hereby, are herein referred to
collectively as the "Loan Documents". All of the terms and provisions of the
Loan Documents are incorporated herein by reference. Some of the Loan Documents
are to be filed for record on or about the date hereof in the appropriate public
records.
1.04 Default. It is hereby expressly agreed that should any default occur in the
payment of principal or interest as stipulated above and such payment is not
made wihtin five (5) days of the date such payment is due (provided that no
grace period is provided for the payment of principal and interest due on the
Maturity Date), or should any other default occur under any of the Loan
Documents which is not cured within any applicable grace or cure period, then a
default shall exist hereunder, and in such event the indebtedness evidenced
hereby, including all sums advanced or accrued hereunder or under any other Loan
Document, and all unpaid interest accrued thereon, shall, at the option of
Lender and without notice to Borrower, at once become due and payable and may be
collected forthwith, whether or not there has been a prior demand for payment
and regardless of the stipulated date of maturity. In the event that any payment
is not received by Lender on the date when due (subject to the applicable grace
period), then in addition to any default interest payments due hereunder,
Borrower shall also pay to Lender a late charge in an amount equal to five
percent (5.0%) of the amount of such overdue payment. So long as any default
exists hereunder, regardless of whether or not there has been an acceleration of
the indebtedness evidenced hereby, and at all times after maturity of the
indebtedness evidenced hereby (whether by acceleration or otherwise), interest
shall accrue on the outstanding principal balance of this Note at a rate per
annum equal to four percent (4.0%) plus the interest rate which would be in
effect hereunder absent such default or maturity, or if such increased rate of
interest may not be collected under applicable law, then the maximum rate or
interest, if any, which may be collected from Borrower under applicable law (the
"Default Interest Rate"), and such default interest shall be immediately due and
payable. Borrower acknowledges that it would be extremely difficult or
impracticable to determine Lender's actual damages resulting from any late
payment or default, and such late charges and default interest are reasonable
estimates of those damages and do not constitute a penalty. The remedies of
Lender in this Note or in the Loan Documents, or at law or in equity, shall be
cumulative and concurrent, and may be pursued singly, successively or together
in Lender's discretion. Time is of the essence of this Note. In the event this
Note, or any part hereof, is collected by or through an attorney-at-law,
Borrower agrees to pay all costs of collection including, but not limited to,
reasonable attorneys' fees.
1.05 Exculpation. Notwithstanding anything in the Loan Documents to the
contrary, but subject to the qualifications hereinbelow set forth, Lender agrees
that (i) Borrower shall be liable upon the indebtedness evidenced hereby and for
the other obligations arising under the Loan Documents to the full extent (but
only to the extent) of the security therefor, the same being all properties
(whether real or personal), rights, estates and interests now or at any time
hereafter securing the payment of this Note and/or the other obligations of
Borrower under the Loan Documents (collectively, the "Security Property"), (ii)
if default occurs in the timely and proper payment of all or any part of such
indebtedness evidenced hereby or in the timely and proper performance of the
other obligations of Borrower under the Loan Documents, any judicial proceedings
brought by Lender against Borrower shall be limited to the preservation,
enforcement and foreclosure, or any thereof, of the liens, security titles,
estates, assignments, rights and security interest now or at any time hereafter
securing the payment of this Note and/or the other obligations of Borrower under
the Loan Documents, and no attachment, execution or other writ of process shall
be sought, issued or levied upon any assets, properties or funds of Borrower
other than the Security Property except with respect to the liability described
below in this section, and (iii) in the event of a foreclosure of such liens,
security titles the payment assignments, rights or security interests securing
the payment of this Note and/or the other obligations of Borrower under the Loan
Documents, no judgment for any deficiency upon the indebtedness evidenced hereby
shall be sought or obtained by Lender against Borrower, except with respect to
the liability described below in this section; provided, however, that,
notwithstanding the foregoing provisions of this section, Borrower shall be
fully and personally liable and subject to legal action (a) for proceeds paid
under any insurance policies (or paid as a result of any other claim or cause of
action against any person or entity) by reason of damage, loss or destruction to
all or any portion of the Security Property, to the full extent of such proceeds
not previously delivered to Lender, but which, under the terms of the Loan
Documents, should have been delivered to Lender; (b) for proceeds or awards
resulting from the condemnation or other taking in lieu of condemnation of all
or any portion of the Security Property, or any of them, to the full extent of
such proceeds or awards not previously delivered to Lender, but which, under the
term of the Loan Documents, should have been delivered to Lender; (c) for all
tenant security deposits or other refundable deposits paid to or held by
Borrower or any other person or entity in connection with leases of all or any
portion of the Security Property which are not applied in accordance with the
terms of the applicable lease or other agreement; (d) for rent and other
payments received from tenants under leases of all or any portion of the
Security Property paid more than one month in advance; (e) for rents, issues,
profits and revenues of all or any portion of the Security Property received or
applicable to a period after any notice of default from Lender hereunder or
under the Loan Documents in the event of any default by Borrower hereunder or
thereunder which are not either applied to the ordinary and necessary expenses
of owning and operating the Security Property or paid to Lender; (f) for waste
committed on the Security Property, Damage to the Security Property at a result
of the intentional misconduct or gross negligence of Borrower or any of its
principals, officers or general partners, or any agent or employee of any such
persons, or any removal of the Security Property in violation of the terms of
the Loan Documents, to the full extent of the losses or damages incurred by
Lender on account of such failure, (g) for failure to pay any valid taxes,
assessments, mechanic's liens, materialmen's liens or other liens which could
create liens on any portion of the Security Property which would be superior to
the lien or security title of the Security Instrument or the other Loan
Documents, to the full extent of the amount claimed by any such lien claimant,
(h) for all obligations and indemnities of Borrower under the Loan Documents
relating to hazardous or toxic substances or compliance with environmental laws
and regulations to the full extent of any losses or damages (including those
resulting from diminution in value of any Security Property) incurred by Lender
as a result of the existence of such hazardous or toxic substances or failure to
comply with environmental laws or regulations, and (i) for fraud or material
misrepresentation by Borrower or any of its principals, officers, or general
partners, any guarantor, any indemnitor or any agent, employee or other person
authorized or apparently authorized to make statements or representations on
behalf of Borrower, any principal, officer or partner of Borrower, any guarantor
or any indemnitor, to the full extent of any losses, damages and expenses of
Lender on account thereof. References herein to particular sections of the Loan
Documents shall be deemed references to such sections as affected by other
provision of the Loan Documents relating thereto. Nothing contained in this
section shall (1) be deemed to be a release or impairment of the indebtedness
evidenced by this Note or the other obligations of Borrower under the Loan
Documents or the lien of the Loan documents upon the Security Property, or (2)
preclude Lender from foreclosing the Loan Documents in case of any default or
from enforcing any of the other rights of Lender except as stated in this
section, or (3) limit or impair in any way whatever the indemnity and Guaranty
Agreement of even date executed and delivered in connection with the
indebtedness evidenced by this Note or release, relieve, reduce, waive or impair
in any way whatsoever, any obligation of any party to such Indemnity Agreement.
ARTICLES II - GENERAL CONDITIONS
2.01 No waiver; Amendment. No failure to accelerate the debt evidenced hereby by
reason of default hereunder, acceptance of a partial or past due payment, or
indulgences granted from time to time shall be construed (i) as a novation of
this Note or as a reinstatement of the indebtedness evidenced hereby or as a
waiver of such right of acceleration or of the right of Lender thereafter to
insist upon strict compliance with the terms of this Note, or (ii) to prevent
the exercise of such right of acceleration or any other right granted hereunder
or by any applicable laws; and Borrower hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing. No extension of the time for the payment of this Note or any
installment due hereunder, made by agreement with any person now or hereafter
liable for the payment of this Note shall operate to release, discharge, modify,
change or affect the original liability of Borrower under this Note, either in
whole or in part unless Lender agrees otherwise in writing. This Note may not be
changed orally, but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.
2.02 Waivers. Presentment for payment, demand, protest and notice of demand,
protest and nonpayment and all other notices are hereby waived by Borrower.
Borrower hereby further waives and renounces, to the fullest extent permitted by
law, all rights to the benefits of any moratorium, reinstatement, marshalling,
forbearance, valuation, stay, extension, redemption, appraisement, exemption and
homestead now or hereafter provided by the Constitution and laws of the United
States of America and of each state thereof, both as to itself and in and to all
of its property, real and personal, against the enforcement and collection of
the obligations evidenced by this Note or the other Loan Documents.
2.03 Limit of Validity. The provisions of this Note and of all agreements
between Borrower and Lender, whether now or existing or hereafter arising and
whether written or oral, are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of demand or acceleration of the maturity
of this Note or otherwise, shall the amount paid, or agreed to be paid
("Interest"), to Lender for the use, forbearance or retention of the money
loaned under this Note exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, performance or fulfillment of any
provision hereof or any agreement between Borrower and Lender shall, at the time
performance or fulfillment of such provision shall be due, exceed the limit for
Interest prescribed by law or otherwise transcend the limit of validity
prescribed by applicable law, then ipso facto the obligation to be performed or
fulfilled shall be reduced to such limit and if, from circumstance whatsoever,
Lender shall ever receive anything of value deemed Interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive Interest
shall be applied to the reduction of the principal balance owing under this Note
in the inverse order of its maturity (whether or not then due) or at the option
of Lender be paid over to Borrower, and not to the payment of Interest. All
Interest (including any amounts or payments deemed to be Interest) paid or
agreed to be paid to Lender shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full or the principal balance of this Note so that the Interest
thereof for such full period will not exceed the maximum amount permitted by
applicable law. This Section 2.03 will control all agreements between Borrower
and Lender.
2.04 Use of Funds. Borrower hereby warrants, represents and covenants that no
funds disbursed shall be used for personal, family or household purposes.
2.05 Unconditional Payment. Borrower is and shall be obligated to pay principal,
interest and any and all other amounts which become payable hereunder or under
the other Loan Documents absolutely and unconditionally and without any
abatement, postponement, diminution or deduction and without any reduction for
counterclaim or setoff. In the event that at any time any payment received by
Lender hereunder shall be deemed by a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to make such payment
shall survive any cancellation or satisfaction of this Note or return thereof to
Borrower and shall not be discharged or satisfied with any prior payment thereof
or cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand.
2.06 Miscellaneous. This Note shall be interpreted, construed and enforced
according to the laws of the State of Texas. The terms and provisions hereof
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether by voluntary action of the parties or
by operation of law. As used herein, the terms "Borrower" and "Lender" shall be
deemed to include their respective heirs, executors, legal representatives,
successors, successors-in-title, and assigns, whether by voluntary action of the
parties or by operation of law. If Borrower consists of more than one person or
entity, each shall be jointly and severally liable to perform the obligations of
Borrower under this Note. All personal pronouns used herein, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of articles and
sections are for convenience only and in no way define, limit, amplify or
describe the scope or intent of any provisions hereof. Time is of the essence
with respect to all provisions of this Note. This Note and the other Loan
Documents contain the entire Agreements between the parties hereto relating to
the subject matter hereof and thereof and all prior agreements relative hereto
and thereto which are not contained herein or therein are terminated.
Borrower's Tax Identification No.:74-2769573
IN WITNESS WHEREOF, Borrower has executed this note under seal as of
the date first above written.
DALLAS/GLEN HILLS, L.P.,
A Texas limited partnership
By 6003 Abrams Road, Inc.,
a Texas corporation
General Partner
By: /s/ Anthony J. Barder
- - ----------------------------------
Anthony J. Barder, President
[CORPORATE SEAL]
Pay to the order of---------------------------, without recourse.
HANOVER CAPITAL MORTGAGE CORPORATION,
a Missouri corporation
By: /s/ Donna M. Switzer
- - -------------------------------
Donna M. Switzer, Vice President
DALLAS/GLEN HILLS, L.P.
FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this
"Agreement"), dated as of the -------day of -----------, 1998, by and among GLEN
HILLS HOMES FOR AMERICA, INC., as General Partner (the "General Partner"),
RELATED CORPORATE V SLP L.P., a Delaware limited partnership (the "Special
Limited Partner"), and RELATED CORPORATE PARTNERS V, L.P., a Delaware limited
partnership (the "Investor Limited Partner" and, together with the Special
Limited Partner, the "Limited Partners") and DAVID H. KORB.
W I T N E S S E T H:
WHEREAS, the parties hereto entered into that certain Amended and
Restated Agreement of Limited Partnership of the Partnership dated as
of March 27, 1997 (the "Original Amended Agreement"); capitalized
terms used but undefined herein shall have the meanings set forth in
the Original Amended Agreement.
WHEREAS, the parties hereto desire to enter into this Agreement
to provide for certain amendments to the Original Amended Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. Section 9.2.A(viii) of the Original Amended Agreement which
states:
"To the General Partner, to pay the difference, if positive,
between (A) a non-cumulative, non-interest bearing priority
return in the amount of $50,000 and (B) an amount equal to any
accrued and unpaid Credit Reduction Payments"
is hereby amended to read as follows:
"To the General Partner, to pay the difference, if positive,
between (A) a non-cumulative incentive management fee in an
amount equal to $88,614 and (B) an amount equal to any accrued
and unpaid Credit Reduction Payments"
2. The Original Amended Agreement is hereby modified to add the
following new Section 6.8:
6.8 Oversight Fee. As consideration for the services provided
by Homes For America Holdings, Inc.("HOMES") in overseeing the
operations of the Partnership during 1998, the Partnership
shall pay HOMES an oversight fee ("Oversight Fee") in an
amount equal to $140,846. The Oversight Fee shall be paid in
1998 (for services rendered in 1998).
3. The amount of Investor Limited Partner's Capital Contribution
is hereby decreased by an amount equal to $130,000. Accordingly, the
amount of the Second Payment (as such term is defined in the
Contribution Agreement) and as set forth in the Contribution Agreement
and in the Capital Note is hereby reduced from $270,846 to $140,846
and upon payment by the Investor Limited Partner of $140,846 of its
Capital Contribution, the Capital Note will be paid in full.
4. Except as modified hereby, the Original Amended Agreement
remains unmodified and in full force and effect.
5. This Agreement may be executed in one or more counterparts
which together shall constitute one and the same instrument.
(Signatures on next page)
IN WITNESS WHEREOF, this Agreement has been duly executed on the
day and year first above written.
GENERAL PARTNER
GLEN HILLS HOMES FOR AMERICA, INC.
By: s/s Robert A. MacFarlane
-----------------------------
Name: Robert A. MacFarlane
-----------------------------
Title:President/Director
-----------------------------
CLASS Z GENERAL PARTNER
-----------------------------
David H. Korb
SPECIAL LIMITED PARTNER
RELATED CORPORATE SLP L.P.
By: RCC Asset Managers, L.P.,
General Partner
By: RCC General Corporation,
General Partner
By: s/s Marc D. Schnitzer
------------------------------
Name: Marc D. Schnitzer
Title: Executive Vice President
LIMITED PARTNER
RELATED CORPORATE PARTNERS V, L.P.
By: RCC Asset Managers V. L.L.C.,
Its General Partner
By: s/s Marc D. Schnitzer
----------------------------
Marc D. Schnitzer,
Member
WITHDRAWING LIMITED PARTNERS
CAL-TEX II - GLEN HILLS, LTD.,
a Texas limited partnership
By: s/s David Korb
----------------------------
David Korb
JOCK P.R. CAMPBELL LIVING TRUST 3/28/89
By: s/s David Korb (for Jock P.R. Campbell Living Trust)
----------------------------------------------------
Name: 3/28/89
6003 ABRAMS ROAD, INC.,
a Texas Corporation
By: s/s David Korb
-----------------------------
Name:
s/s David Korb (for Anthony J. Barder)
-----------------------------------------------------
Anthony J. Barder
FIRST AMENDMENT TO TVMJG 1996-PUTNAM SQUARE LIMITED PARTNERSHIP SECOND
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
THIS FIRST AMENDMENT TO TVMJG 1996-PUTNAM SQUARE LIMITED PARTNERSHIP SECOND
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, (the "Amendment"), is
made this 29 day of September 1997 by and among Donald H. Snyder, as
"Withdrawing General Partner", U.S.A. Institutional Tax Credit Fund IV L.P. as
"Limited Partner" and Putnam Homes For America Holdings, Inc. a Nevada
Corporation as "Newly Admitted General Partner."
WITNESSETH
WHEREAS, the Withdrawing General Partner and the Limited Partner
entered into TVMJG 1996-Putnam Square Limited Partnership Second Amended and
Restated Agreement of Limited Partnership dated April 26, 1996 (the Partnership
Agreement");
WHEREAS, the parties hereto desire to amend the Partnership Agreement
to withdraw the Withdrawing General Partner pursuant to Section 6.01 of the
Partnership Agreement and admit the Newly Admitted General Partner pursuant to
Section 6.02 of the Partnership Agreement, as more fully set forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which have been hereby acknowledged, the parties hereto agree as
follows:
1. Recitals. The recitals stated above are incorporated herein as if
they were restated in their entirety.
2. Defined Terms. All capitalized terms shall have the same meanings
attributed to them in the Partnership Agreement, unless otherwise defined
herein.
3. Withdrawal of the Withdrawing General Partner and Admission of the
Newly Admitted General Partner. The Withdrawing General Partner hereby
withdraws from the Partnership and the Newly Admitted Partner is hereby
admitted as the General Partner to the Partnership. All references in the
Partnership Agreement to "General Partner" shall be references to the Newly
Admitted General Partner.
4. Release. The Withdrawing General Partner hereby releases the
Partnership, its Partners, their affiliates, officers, members, employees
and agents, from any and all claims which he may have against them arising
from his participation in the Partnership and/or the Project.
5. Assumption of Obligations. The Newly Admitted General Partner
hereby assumes the obligations of the General Partner under the Partnership
Agreement, as amended hereby, and the obligations of the General Partner in
the collateral documents executed in connection with the Partnership
Agreement. Notwithstanding the above, the Newly Admitted General Partner
shall not be liable for any claim which may result from any action or
inaction by the General Partner which occurred prior to the execution of
this Amendment.
6. Amended Schedule A. Schedule A of the Partnership Agreement is
hereby amended by deleting the name and address of Withdrawing General
Partner and inserting the following:
Putnam Homes for America Holdings, Inc.
680-3 West 246th Street
Riverdale, NY 10471
Fax (718) 601-3420
7. Registered Agent. Section 1.03 of the Partnership Agreement shall
be deleted in its entirety and replaced with the following:
1.3 Principal Executive Offices; Agent for Service of Process. The
principal executive office of the Partnership shall be -----------------.
The Partnership may change the locations of its
principal executive office to such other place or places as
may hereafter be determined by the General Partner. The
General Partner shall promptly notify all other Partners of
any change in the principal executive office. The Partnership
may maintain such other offices at such other places as the
General Partner may from time to time deem advisable.
The name and address of the Agent for service of process is
----------------.
8. Operating Deficits. Section 8.09 (b) shall be amended by deleting
"$100,000" from the seventh line and replacing "$60,000."
9. Certificate of Limited Partnership. Upon the execution of this
Amendment by the parties hereto, the General Partner shall take all actions
necessary to assure the prompt recording of an amendment to the
Partnership's Certificate of Limited Partnership to reflect the withdrawal
of the Withdrawing General Partner from the Partnership and the admission
of the Newly Admitted General Partner to the Partnership. All fees for
filing shall be paid out of the Partnership's assets.
10. Guarantor. The definition of "Guarantor" shall be deleted in its
entirety and replaced with the following:
"Guarantor" means Homes for America Holdings, Inc., a
Nevada corporation, in its capacity as guarantor pursuant to
the Guaranty.
11. Development Fee. The parties hereto acknowledge that any portion
of the Development Fee which was due and owing to the Withdrawing General
Partner for services performed by the Withdrawing General Partner in his
capacity as developer under the Development Agreement has been paid in full
and that such debt to the Withdrawing General Partner has been satisfied.
The Promissory Note which was executed by the Partnership and delivered to
the Withdrawing General Partner shall be endorsed and delivered by the
Withdrawing General Partner to the Newly Admitted General Partner. Such
endorsement and delivery to the Newly Admitted General Partner shall be in
consideration of the assumption by the Newly Admitted General Partner of
the future obligations of the Withdrawing General partner under the
Partnership Agreement.
12. Tax Matters Partner. Section 11.07 of the Partnership Agreement is
amended by deleting the reference to Donald H. Snyder in the first line of
the Section and replacing it with Putnam Homes for America Holdings, Inc.,
a Nevada Corporation.
13. Capital Contribution of Limited Partner. Simultaneous with the
execution of this Amendment, the Limited Partner shall make an advance
payment of a portion of the Third Installment of Capital Contribution to
the Partnership in the amount of Forty Thousand Dollars ($40.000) to be
spent by the Partnership in accordance with the Schedule of Expenses
attached hereto as Exhibit A.
14. Titles and Captions. All captions in this Amendment are for
convenience only, and shall not be deemed to be apart of this Amendment and
in no way define, limit or describe the scope or intent of any provisions.
15. Severability. The invalidity, in whole or in part of any provision
of this Amendment shall not affect or invalidate any remaining provisions.
16. Governing Law. This Amendment shall be construed in accordance
with and governed by the laws of the State of Connecticut.
17. Further Assurances. The parties hereto shall execute and deliver
all other documents, provide all information and take or forbear from all
such action as may be necessary or appropriate to achieve the purposes of
this Amendment.
18. Partnership Agreement. The terms and provisions of the Partnership
Agreement shall continue in full force and effect except as expressly
modified herein. Conflicts between this Amendment and the Partnership
Agreement shall be resolved in favor of this Amendment.
IN WITNESS WHEREOF, this First Amendment to TVMJG 1996-Putnam Square
Limited Partnership Second Amended and Restated Agreement of Limited Partnership
was executed by the parties on the date first above mentioned.
WITHDRAWING PARTNER:
/s/ Donald H. Snyder
-------------------------
Donald H. Snyder
LIMITED PARTNER:
U.S.A. INSTITUTIONAL TAX CREDIT
FUND IV L.P.
By: Richman U.S.A. Tax Credit L.P. its
general partner
By: Richman U.S.A. L.L.C., its general
partner
By:
-------------------------
Name: Philip F. Corbett
Title: Vice President
NEWLY ADMITTED GENERAL PARTNER:
PUTNAM HOMES FOR AMERICA
HOLDINGS, INC.
By: /s/ Robert A. MacFarlane
-------------------------
Name: Robert MacFarlane
Title:President
FIRST AMENDMENT TO CERTIFICATION AND AGREEMENT
THIS FIRST AMENDMENT TO CERTIFICATION AND AGREEMENT (The "Amendment")
is made this 29 day of September 1997 by and among TVMJG 1996-Putnam Square
Limited Partnership, A Connecticut Limited Partnership (the "Operating
Partnership"), Putnam Homes for America Holdings, Inc., a Nevada corporation
("Homes"), U.S.A. Institutional Tax Credit Fund IV L.P. (the "Investor"),
Richman U.S.A. Tax Credit L.P. ("Richman") and Donald H. Snyder (the
"Withdrawing Operating General Partner").
WITNESSETH
WHEREAS, the Investor and Donald H. Snyder entered into TVMJG
1996-Putnam Square Limited Partnership Second Amended and Restated Agreement of
Limited Partnership dated April 26, 1996, (the "Partnership Agreement");
WHEREAS, in connection with the execution of the Partnership Agreement,
the Partnership, the Investor and Donald H. Snyder entered into the
Certification and Agreement date as of April 1, 1996 (the "Agreement");
WHEREAS, The Partnership Agreement was amended by the First Amendment
to TVMJG 1996-Putman Squared Limited Partnership Second Amended and Restated
Agreement of Limited Partnership dated even date herewith, pursuant to which
Donald H. Snyder withdrew from the Partnership and Homes was admitted as the
Newly Admitted General Partner;
WHEREAS, the parties to the Agreement desire to amend the Agreement to
reflect Donald H. Snyder's withdrawal from the Partnership and the admission of
Homes to the Partnership as more fully set forth below;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which have been hereby acknowledged, the parties hereto agree as
follows:
1. Recitals. The Recitals stated above are incorporated herein as if
they are restated in their entirety.
2. Defined Terms. All capitalized terms shall have the same meanings
attributed to them in the Agreement unless otherwise defined herein.
3. References to Operating General Partner. All references to
"Operating General Partner" in the Agreement shall be to "Putnam Homes for
Americas Holding Inc., a Nevada corporation." Donald H. Snyder shall no
longer be the Operating General Partner under the Agreement.
4. Assumptions of Obligations. Homes hereby assumes the obligations of
the Operating General Partner under the Agreement.
5. Titles and Captions. All captions in this Amendment are for
convenience only and shall not be deemed to be a part of this Amendment and
in no way define, limited or describe the scope or intent of any
provisions.
6. Severability. The invalidity, in whole or in part of any provision
of this Amendment shall not affect or invalidate any remaining provisions.
7. Governing Law. This Amendment shall be construed in accordance with
and governed by the laws of the State of Connecticut.
8. Further Assurances. The parties hereto shall execute and deliver
all other documents, provide all information and take or forbear from all
such action as may be necessary or appropriate to achieve the purposes of
this Amendment.
9. Certification and Agreement. The terms and provisions of the
Certification and Agreement shall continue in full force and effect except
as expressly modified herein. Conflicts between this Amendment and the
Certification and Agreement shall be resolved in favor of this Amendment.
IN WITNESS WHEREOF, this First Amendment to Certification and Agreement
was executed by the parties on the date first above mentioned.
WITHDRAWING OPERATING
GENERAL PARTNER:
/s/ Donald H. Snyder
-------------------------------------------
Donald H. Snyder
LIMITED PARTNER:
U.S.A. INSTITUTIONAL TAX CREDIT
FUND IV L.P.
By: Richman U.S.A., Tax Credit L.P., its
general partner
By: Richman U.S.A., L.L.C., its general
Partner
By:---------------------------------
Name: Philip F. Corbett
Title: Authorized Representative
FIRST AMENDMENT TO PARTNERSHIP
ADMINISTRATION SERVICES AGREEMENT
THIS FIRST AMENDMENT TO PARTNERSHIP ADMINISTRATION SERVICES AGREEMENT
(the "Amendment") is made this 29 day of September, 1997 by and between TVMJG
1996-Putnam Square Limited Partnership, a Connecticut limited partnership (the
"Partnership"), Donald H. Snyder ("Snyder") and Putnam Homes for America
Holdings, Inc., a Nevada corporation, (the "Homes").
WITNESSETH
WHEREAS, Snyder and the Partnership entered in a Partnership
Administration Services Agreement dated April 18, 1996 (the "Agreement")
pursuant to which Mr. Snyder was to provide certain services and receive a fee;
WHEREAS, pursuant to the First Amendment to TVMJG 1996-Putnam Square
Limited Partnership Second Amended and Restated Agreement of Limited Partnership
dated even date herewith, Snyder has withdrawn as general partner from the
Partnership and Homes has been admitted to the Partnership as the General
Partner; and
WHEREAS, the parties hereto desire to replace Snyder with Homes in the
Agreement more fully set forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which have been hereby acknowledge, the parties hereto agree as
follows:
1. Recitals. The Recitals stated above are incorporated herein as if
they are restated in their entirety.
2. Defined Terms. All capitalized terms shall have the same meanings
attributed to them in the Agreement unless otherwise defined herein.
3. References to General Partner. All references to "General Partner"
in the Agreement shall be to "Homes for America Holdings, Inc., a Nevada
corporation."
4. Assumption of Obligations. Homes hereby assumes the obligations of
the General Partner under the Agreement.
5. Release. Snyder hereby releases the Partnership, its Partners and
their affiliates, partners, members, officers, directors, employees and
agents from any claim it may have against them arising from the Agreement.
Any monies which may be due and owing to Snyder pursuant to the Agreement
have been paid in full and there exists no further obligation of the
Partnership to Snyder.
6. Titles and Captions. All captions in this Amendment are for
convenience only and shall not be deemed to be part of this Amendment and
in no way define, limited or describe the scope or intent of any
provisions.
7. Severability. The invalidity, in whole or in part of any provision
of this Amendment shall not affect or invalidate any remaining provisions.
7. Governing Law. This Amendment shall be construed in accordance with
and governed by the laws of the State of Connecticut.
8. Further Assurances. The parties hereto shall execute and deliver
all other documents, provide all information and take or forbear from all
such action as may he necessary or appropriate to achieve the purposes of
this Amendment.
9. Partnership Administration Services Agreement. The terms and
provisions of the Agreement shall continue in full force and effect except
as expressly modified herein. Conflicts between this Amendment and the
Partnership Administration Services Agreement shall be resolved in favor of
this Amendment.
IN WITNESS WHEREOF, this First Amendment to Partnership Administration
Services Agreement was executed by the parties on the date first above
mentioned.
WITHDRAWING GENERAL PARTNER:
/s/ Donald H. Snyder
------------------------------------
Donald H. Snyder
DEVELOPER:
PUTNAM HOMES FOR AMERICA
HOLDINGS INC.
By: /s/ Robert MacFarlane
------------------------------------
Name: Robert Macfarlane
Title: President
PROMISSORY NOTE
$200,000.00 April 26 1996
FOR VALUE RECEIVED, the undersigned, TVMJG 1996-Putnam Square Limited
Partnership (whether one or more hereinafter called the "Maker"), promises to
pay to the order of Donald H. Snyder (the "Developer"), at 190 Forest Road,
Milford, Connecticut 06460, or at such other place as the holder hereof may from
time to time designate in writing, the principal sum of Two Hundred Thousand
Dollars ($200,000.00), plus interest on the principal balance thereof from time
to time outstanding at the rate of seven percent (7%) per annum from date until
paid, payable from "Cash Flow" as set forth in Section 11.01 in TVMJG
1996-Putnam Square Limited Partnership Second Amended and Restated Agreement of
Limited Partnership, dated even date herewith, commencing one (1) month after
the date hereof and continuing on the same day of each succeeding month
thereafter until December 31, 2006, after the date hereof, the maturity date
hereof, when the entire principal balance hereof, all accrued and unpaid
interest thereon, and all other applicable fees, costs and charges, if any,
shall be due and payable in full. Interest hereon shall be calculated on the
basis of the actual number of days elapsed in a 360-day year. All payments of
principal and/or interest hereon shall be payable in lawful money of the United
States and in immediately available funds.
If default be made in the payment of any installment due under this
Note, whether now existing or hereafter created or arising, direct or indirect,
matured or immatured, and whether absolute or contingent, joint, several or
joint and several and howsoever owned, held or acquired, then, in such event,
the entire principal balance hereof, all accrued and unpaid interest thereon,
and all other applicable fees, costs and charges, if any, shall at once become
due and payable at the option of the holder of this Note. Failure to exercise
this option shall not constitute a waiver of the right to exercise the same in
the event of any subsequent default.
This Note may be prepaid, in hold or in part, at any time without
penalty. Any partial prepayments shall not, however, relieve the Maker of the
obligation to pay periodic installments of principal and/or interest hereunder
as and when the same would otherwise fall due.
Each party liable here on in any capacity, whether as maker, endorser,
surety, guarantor or otherwise, (i) waives presentment, demand, protest and
notice of presentment, notice of protest and notice of dishonor of this debt and
each and every other notice of any kind respecting this Note (except as
otherwise expressly provided for herein), (ii) agrees that the holder hereof, at
any time or times, without notice to it or its consent, may grant extensions of
time, without limit as to the number or the aggregate period of such extensions,
for the payment of any principal and/or interest due hereon, and (iii) to the
extent not prohibited by law, waives the benefit of any law or rule of law
intended for its advantage or protection as an obligor hereunder or providing
for its release or discharge from liability hereon, in whole or in part, on
account of any facts of circumstances other than full and complete payment of
all amounts due hereunder.
THE DEVELOPER AND THE MAKER, EACH WAIVES TRIAL BY JURY WITH RESPECT TO
ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THE LOAN
EVIDENCED HEREBY AND/OR THE CONDUCT OF THE RELATIONSHIP BETWEEN THE DEVELOPER
AND THE MAKER.
The Maker promises to pay all costs of collection, including reasonable
attorneys' fees, upon default in the payment of the principal of this Note or
interest hereon when due, whether at maturity, as herein provided, or by reason
of acceleration of maturity under the terms hereof, whether suit be brought or
not.
In the event any one or more of the provisions contained in this Note shall
for any reason be held to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Note, but this Note shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
This note shall not be changed orally, but only by an agreement in writing
signed by the parties against whom enforcement of any waiver, change,
modification or discharge is sought.
The Maker warrants and represents that the loan evidenced hereby is being
made for business or investment purposes.
This Note shall be governed in all respects by the laws of Connecticut and
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, personal representatives,
successors and assigns. This Note evidences the obligation of Maker to pay the
Development Fee pursuant to that certain Development Agreement by and between
Maker and Developer dated even date herewith, the terms of which are
incorporated by this reference. This Note is non-negotiable and may not be sold,
assigned, endorsed or otherwise transferred by the Developer without the prior
written consent of the Maker.
WITNESS: TVMJG 1996-PUTNAM SQUARE LIMITED
PARTNERSHIP, a Connecticut limited partnership
s/s David Ahern
- - ------------------------ By: /s/ Donald H. Snyder (Seal)
---------------------------------
Donald H. Snyder, General Partner
ASSIGNED TO HOMES FOR AMERICA HOLDINGS
/s/ Donald H. Snyder Dated: 10/15/97
- - --------------------------------------------
Donald H. Snyder
FIRST AMENDMENT TO
COMMERCIAL PROMISSORY NOTE
This First Amendment ("First Amendment") to Commercial Promissory Note is
made this ---- day of March, 1997, by and between Joseph Gall ("Lender") and
TVMJG 1996-PUTNAM SQUARE LIMITED PARTNERSHIP ("Borrower") with respect to the
following facts:
RECITALS
A. The Commercial Promissory Note ("Note") which is the subject of his
First Amendment is by and between Lender and Borrower and is dated April 26,
1995.
B. The parties desire to modify certain of the terms of the Note.
NOW, THEREFORE, with respect to the foregoing facts and in
consideration of the promises and undertakings herein contained, the parties
agree as follows:
1. Line 4 of the paragraph entitled "Principal and Interest" on page 1 of
the Note is amended by inserting the term 50% of in front of the term "the" in
such line.
2. All other provision of the Note remain unchanged and in full force and
effect.
Executed and effective as of the date first above written:
BORROWER: LENDER:
TVMJG 1996-PUTNAM SQUARE
LIMITED PARTNERSHIP
By: Homes for America Holdings, Inc.
Its General Partner
By: /s/ Robert A. MacFarlane /s/ Joseph Gall POA s/s Bonnie Gall
- - ------------------------------- ------------------------------------
Joseph Gall
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made and
entered into as of this the twenty eighth day of March, 1997, by and between
Prairie-Middlebury Associates, an Indiana general partnership (the "Seller"),
and Homes for America Holdings, Inc., a Nevada corporation (the "Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is the fee simple owner of all of that certain parcel
of real property consisting of approximately ninety eight thousand one hundred
eighty (98,180) square feet located at 740 Prairie / 304 Middlebury, Elkhart,
Indiana 46516, identified as Census Tract No. 0019.10, and as more particularly
described on Exhibit A attached hereto and incorporated herein, together with
all buildings and improvements situated thereon, including without limitation
the one hundred twenty (120) apartment units in the buildings known as "Prairie
Village Apartments", all right, title, and interest of Seller in and to any land
lying in the bed of any existing dedicated street, road, or alley adjoining
thereto, all strips and gores adjoining thereto, and all rights, ways,
easements, privileges, and appurtenances thereunto belonging (the "Property");
and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the
Property on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Seller and Purchaser
hereby agree as follows:
Section 1. Agreement to Sell and Purchase. Seller agrees
to sell and Purchaser agrees to purchase the Property on the terms and
conditions hereinafter set forth.
Section 2. Purchase Price and Terms. The Purchase Price of the Property
shall be eight hundred four thousand dollars ($804,000)(the "Purchase
Price").
The Purchase Price shall be payable as follows:
a. Deposit.
(1) Initial Amount. Immediately upon the full execution and
acceptance of this Agreement by both Seller and Purchaser (the "Effective
Date"), Purchaser shall deposit in escrow with York Title & Escrow of Elkhart,
Inc., Elkhart, Indiana (the "Escrow Agent"), cash in the amount of ten thousand
dollars ($10,000)(the "Deposit").
(2) Investment of Deposit. The Escrow Agent shall invest
such cash in such obligations or accounts as Purchaser may from time to time
direct, with the reasonable approval of Seller. Any and all income earned on
such investments shall be and become part of the Deposit.
(3) Release of Deposit. The Deposit shall (i) be returned to
Purchaser at closing hereunder or, at Purchaser's option, be applied at closing
to the purchase price of the Property, (ii) be paid to Purchaser upon
termination by Purchaser under Section 3c after five (5) business days advance
written notice from the Escrow Agent to Seller, (iii) be returned to Purchaser
prior to closing hereunder in the event this Agreement terminates in accordance
with its terms other than Section 3c, or (iv) be released to Seller upon
presentation to Escrow Agent of a written certification, executed by Seller,
stating that Purchaser has defaulted hereunder, that Seller has given Purchaser
written notice of such default and five (5) business days from receipt of such
notice to cure such default, and that such default has not been cured within
that five (5) business day period.
b. Cash at Closing. At Closing hereunder, Purchaser shall pay in
cash or by wire transfer of federal funds an amount equal to the Purchase Price,
of which sum the Deposit, at Purchaser's option, shall be a part.
Section 3. Investigation of Property.
a. Delivery of Documents. To the extent not already delivered,
within seven (7) days after the Effective Date, Seller shall deliver to
Purchaser copies of all documents relating to the Property that exist in the
care, custody, or control of Seller (or its management agent) or that can be
prepared readily from such documents: [for items (i) - (iv) include previous two
fiscal years and year to date] (i) actual operating statements; (ii) rent roll
showing actual collections and vacancies; (iii) itemized list of capital
expenditures; (iv) real property assessment notices and tax bills; (v) mortgage
and mortgage note for any financing secured by the Property; (vi) surveys and
title insurance reports and policies; (vii) environmental, engineering,
architectural or zoning documents, tests, or reports; (viii) contracts having a
value as an annual expense in excess of $2,500 or continuing for a term in
excess of one year or not terminable at will of Seller; (ix) all permits,
certificates of occupancy, or licenses, agreements; and (x) for the residential
leases on the Property (the "Tenant Leases") the form lease(s) used by Seller.
b. Inspection of Property. Purchaser and its agents and
representatives shall have the right to enter onto the Property at all
reasonable times prior to Closing hereunder for purposes of conducting surveys,
soil tests, market studies, engineering tests, and such other tests,
investigations, studies, and inspections as Purchaser reasonably deems necessary
or desirable to evaluate the Property, provided that (i) all such tests,
investigations, studies, and inspections shall be conducted at Purchaser's sole
risk and expense, (ii) Purchaser shall give Seller reasonable prior notice of
its entry onto the Property, and (iii) Purchaser shall indemnify and hold Seller
harmless from and against any losses, liabilities, costs, or expenses (including
reasonable attorney's fees) arising out of Purchaser's entry onto the Property.
Purchaser shall return the Property to the condition it was in prior to the
performance of such tests. No investigation pursuant to this Section 3 shall be
deemed a waiver of Seller's representations set forth in Section 7 hereof,
except to the extent that Purchaser learns information contrary to a
representation of Seller.
c. Feasibility Period. In the event that Purchaser is not
satisfied, in its sole and unreviewable judgment and discretion, with the
feasibility of Purchaser's acquisition, financing, and development of the
Property, Purchaser shall have the right to terminate this Agreement. Unless
Purchaser provides written notice to the contrary to Seller and the Escrow Agent
within sixty (60) days after the Effective Date (the "Feasibility Period"),
Purchaser shall be deemed to have elected to exercise that right to terminate.
Upon any such termination the Deposit shall be promptly paid to Purchaser,
Purchaser shall return to Seller all items received by Purchaser pursuant to
Section 3a hereof, and except for the indemnity by Purchaser under Section 3b
hereinabove the parties hereto shall be released from any further liabilities or
obligations hereunder.
Section 4. Title.
a. Condition of Title. At Closing hereunder, Seller shall
convey fee simple title to the Property, marketable, indefeasible, and good of
record and in fact, and insurable as such in an amount equal to the Purchase
Price by such reputable title insurance company as Purchaser may choose, at
regular rates, on an ALTA Form 1990 Owner's Policy, free and clear of any and
all liens, defects, encumbrances, occupancies, leases, easements, covenants,
restrictions, or other matters whatsoever, whether recorded or unrecorded,
except for (i) the Tenant Leases, (ii) the lien of real estate taxes, water
rents, and sewer charges not yet due and payable, (iii) the "Permitted
Exceptions" approved in accordance with Section 4b, and (iv) Title Objections
approved by Purchaser pursuant to Section 4b hereof.
b. Title Objections. Purchaser shall promptly review any title
report or title policy provided by Seller under Section 3a hereinabove
("Seller's Title Report"). Purchaser shall also cause a search of title to the
Property to be made and a survey of the Property to be performed not later than
twenty (20) days after the termination of the Feasibility Period. If Purchaser
shall determine that any matter or matters affecting the Property are
unacceptable, Purchaser shall notify Seller in writing of such matter or matters
(the "Title Objections") within ten (10) business days of Purchaser's receipt of
the respective title report or survey. Within seven (7) days of receipt of such
notification, Seller shall notify Purchaser either that (i) Seller shall correct
such Title Objections, or (ii) Seller shall not correct such Title Objections.
In the event that Seller shall elect to correct such Title Objections, Seller
shall correct such Title Obligations at or prior to Closing hereunder. In the
event that Seller shall elect not to correct such Title Objections, Purchaser
shall have the right, in its sole discretion, either to (i) accept title as is,
or (ii) terminate this Agreement, in which event the Deposit shall be promptly
returned to Purchaser and the parties hereto released from any further
liabilities or obligations hereunder, except that Seller shall pay the
reasonable costs of the title examination ordered by the Purchaser for any
matter not disclosed by the Seller's Title Report. Any matters to which
Purchaser does not object on or before the day thirty (30) days after the
expiration of the Feasibility Period shall be deemed acceptable to Purchaser. In
the event Purchaser notifies Seller of any Title Objections, and Seller fails to
notify Purchaser within the period set forth above of its election to cure or
not cure such Title Objections, Seller shall be deemed to have elected not to
cure such Title Objections. Notwithstanding the provisions of this Section 4b,
Seller shall release at or prior to closing all monetary liens and encumbrances
encumbering the Property.
c. Further Assurances. The Seller covenants that it will, at any
time and from time to time after Closing hereunder for a period not to exceed
one hundred twenty (120) days, upon request of the Purchaser and at the expense
of Purchaser, do, execute, acknowledge, and deliver, or will cause to be done,
executed, acknowledged, or delivered, all such further acts, deeds, conveyances,
and assurances as may reasonably be required for the better conveying,
transferring, assuring, and confirming the conveyance of title to the Property
to the Purchaser in accordance with Section 4a hereof.
Section 5.Closing.
a. Time and Place. Closing under this Agreement ("Closing") shall
be held on the day designated by Purchaser to be no later than the last to occur
of (i) the day sixty (60) days after the expiration of the Feasibility Period
and (ii) June 1, 1997. By mutual agreement the parties may designate another
date for Closing. Closing shall be held at the offices of Escrow Agent or the
attorney conducting settlement. Purchaser may, by written notice to Seller,
designate another title company or an attorney admitted to the bar of the State
of Indiana to conduct Closing hereunder.
b. Closing Documents. Deposit with Escrow Agent or the attorney
conducting settlement of the cash payments, the deed of conveyance, and such
other papers as are required of either party by the terms hereof shall be
considered valid tender and delivery of the same.
(1) By Seller. At Closing hereunder, Seller shall certify,
execute, acknowledge, and deliver:
(a) A customary general warranty deed in the name of the
person or entity designated by Purchaser for the
Property.
(b) An assignment of the Tenant Leases and the security
deposits therefor, indemnifying Purchaser for costs
and liabilities thereunder before Closing, and a bill
of sale transferring title to the personalty,
including right, title, and interest in licenses,
permits, trade-name, operating contracts, and the
like owned by Seller and used in the operation of the
Property;
(c) A certificate, in form and substance reasonably
acceptable to the parties, stating that the
representations and warranties of Seller set forth
herein are true and correct as of Closing.
(d) A Non-Foreign Affidavit as required under Section 9b
hereof.
(e) A settlement statement reflecting adjustments
pursuant to Sections 5c and 5d below.
(f) An affidavit executed by Seller stating that there
are no mechanics liens, tax liens, unpaid claims
for labor, services or material, chattel liens, or
similar liens against or with respect to the
Property, nor does any person have a right to place
such a lien against or with respect to the
Property.
(g) Such additional documents as may be necessary or
customary to consummate the transactions contemplated
herein.
(2) By Purchaser. At Closing hereunder, Purchaser
shall:
(a) Pay the Purchase Price in accordance with Section 2
hereof.
(b) Execute, acknowledge, and deliver a certificate
stating that the representations and warranties of
Purchaser set forth herein are true and correct as of
Closing.
(c) Execute, acknowledge, and deliver an assumption of
the Tenant Leases and the security deposits therefor,
indemnifying Seller for costs and liabilities
thereunder after Closing.
(d) Execute, acknowledge, and deliver such additional
documents as may be necessary or customary to
consummate the transactions contemplated herein.
c. Closing Adjustments. The following items of income and
expenses on a per diem basis shall be prorated and adjusted to the date of
Closing hereunder: (i) rents under the Tenant Leases and laundry income; (ii)
water rents, sewer charges, fuel charges, fuel, gas, electricity, telephone, and
other utility charges; and (iii) all taxes relating to the Property. Taxes, real
and personal, general and special, shall be adjusted in accordance with the
latest tax bills issued by the taxing authorities. Any special assessments
imposed by any governmental agency or authority which are pending, noted, or
levied, or which may be levied, noted, or ordered prior to Closing, on a per
diem basis shall be prorated and adjusted to the date of Closing hereunder.
d. Closing Costs. Seller shall pay Seller's attorney fees and
any grantor tax, agricultural tax, forest transfer tax, or rollback tax.
Purchaser shall pay documentary deed stamps, all state and county recordation
fees and charges, the costs of examination of title and preparation of a survey,
the premium of any title insurance policy purchased by Purchaser, and
Purchaser's attorney fees. All other costs of settlement not otherwise expressly
provided for in this Agreement shall be paid by the Purchaser.
e. Possession. Subject to the rights of the tenants under the
Tenant Leases, Seller shall give possession and occupancy of the Property to
Purchaser at Closing hereunder. In the event Seller shall fail to do so, Seller
shall become and thereafter be a tenant at sufferance of Purchaser and Seller
hereby waives all notices to quit provided by the laws of the State of Indiana.
f. Notice of Violations. All written notices of violations of
orders or requirements issued by any governmental agency or authority, or
actions in any court on account thereof, arising prior to the Effective Date and
against or affecting the Property at the date of Closing hereunder of which
Seller has notice, shall be complied with by Seller and the Property conveyed
free thereof. If the Property is not free thereof, the Purchaser shall have the
right, at Purchaser's option, either to (i) terminate this Agreement, in which
event the Deposit, together with all interest earned thereon, shall be returned
to the Purchaser, and the Purchaser and the Seller shall thereafter have no
further obligations hereunder, or (ii) proceed with the Closing subject to such
violations.
Section 6. Conditions to Closing. The obligation of Purchaser to close
hereunder is subject to the satisfaction, at or prior to Closing, of each of the
following conditions, any of which may be waived, in whole or in part, in
writing by Purchaser at or prior to Closing:
a. Representations and Warranties. The representations and
warranties of Seller set forth herein shall be true and correct in all material
respects.
b. Title. Title to the Property shall be in the condition
required by Section 4 hereof.
c. Compliance by Seller. Seller shall have performed and
complied with all of the covenants and conditions required by this Agreement to
be performed or complied with at or prior to Closing and shall deliver all
Closing Documents.
d. No Adverse Matters. No material portion of the Property
shall have been adversely affected as a result of earthquake, disaster, any
action by governmental authority, flood, riot, civil disturbance, or act of God
or public enemy.
e. Financing. Purchaser shall have obtained the financing
described in Section 8d herein below as and when required therein.
If any of the foregoing conditions have not been satisfied as of the
date of Closing or at such other time as may be specified above (as the same may
be extended from time to time), Purchaser shall have the right to (i) waive such
conditions and proceed to Closing, or (ii) terminate this Agreement whereupon
the Deposit, together with all interest earned thereon, will be returned to
Purchaser and neither party will have any further liability to the other. Seller
hereby covenants and agrees it will not enter into a sale contract for the
Property with any other person or entity unless this Agreement has been
terminated according to its terms or the outside date for Closing hereunder has
occurred without settlement.
Section 7. Condition of Property. At Closing hereunder, Purchaser shall
take the Property in "as is" condition as on the date of expiration of the
Feasibility Period, reasonable wear and tear excepted. Seller assumes all risk
of loss or damage to the Property by fire or other casualty until Closing.
Section 8. Obligations Pending Closing.
a. Title to and Condition of Property. Except as may be
necessary to cure Title Objections, from the Effective Date hereof to the
Closing Seller shall not cause or permit any change in the status of title to
the Property or the physical condition of the Property except for customary
maintenance and operations. Seller shall not cause or permit any adverse change
in the condition of the Property, reasonable wear and tear and damage by fire or
the elements excepted. Seller shall not enter into any leases or other occupancy
agreements with respect to all or any portion of the Property, or amend, modify,
or extend existing leases except in the ordinary course of business without the
prior written consent of Purchaser.
b. Condemnation. In the event any governmental agency should
notify Seller, or Seller should become aware, of any permanent or temporary
actual or threatened taking of all or any portion of the Property, Seller shall
promptly notify Purchaser of the same.
c. Casualty. The risk of loss or damage to the Property caused
by fire or other casualty prior to Closing hereunder shall be borne by the
Seller. The Seller shall notify the Purchaser promptly of any damage to the
Property, and give the Purchaser a right to inspect such damage. If the damage
is in excess of fifty thousand dollars ($50,000), the Purchaser shall have the
right, at Purchaser's option, either to (i) terminate this Agreement, in which
event the Deposit, together with all interest earned thereon, will be returned
to the Purchaser, and Purchaser and the Seller shall thereafter have no further
obligations hereunder, or (ii) proceed with the Closing and accept title to the
Property without any reduction in the Purchase Price, and the Seller shall
deliver or assign to the Purchaser any insurance awards paid or due Seller with
respect to such damage and lost revenues for the period after Closing.
d. Financing. Promptly after the Effective Date Purchaser
shall prepare, submit, and diligently prosecute an application for acquisition
and rehabilitation financing in an amount of one million eight hundred thousand
dollars ($1,800,000) with the Indiana Development Finance Authority ("IDFA") or
any other applicable bond issuance agencies of the Property jurisdiction, such
financing to be secured by a first mortgage lien on the Property and otherwise
on terms and conditions acceptable to the Purchaser and the mortgage lender and
bond issuer. Purchaser shall provide Seller from time to time reports on the
progress of the application for financing and shall advise Seller promptly upon
any final determination by IDFA.
e. Seller Cooperation. Seller shall provide upon request of
Purchaser from time to time, Seller, at no cost or expense to Seller, shall
execute, join in, consent to and/or support any requests, applications,
proposals or hearings file, initiated or prosecuted by Purchaser with respect to
(i) the zoning or rezoning of all or any portion of the Property, (ii) the
subdivision of all or any portion of the Property into one or more record lots,
(iii) the procurement of building permits with respect to the development of the
Property, (iv) the granting of easements and rights of way for water, sewer,
gas, electricity, telephone and other utilities, and (v) the procurement of any
governmental or quasi-governmental approval of any aspect of the development of
the Property reasonably required by Purchaser in connection therewith. Seller's
obligation to execute, join in, consent to, and support any of the foregoing
matters shall be conditioned on such matters having no binding effect on the
Property until after closing hereunder.
Section 9. Representations and Warranties of Seller. Seller represents
and warrants to Purchaser as follows, all of which representations and
warranties are true and correct as of the date hereof and shall be true and
correct as of Closing hereunder:
a. Seller (i) has full power and authority to sell the
Property to Purchaser without the consent of any other person or entity,
(ii) has authorized the execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby, and
(iii) is the sole legal and equitable owner of record and in fact of good
and marketable fee simple title to the Property, subject to the exceptions
described in Section 4a.
b. Seller is not a "foreign person" as that term is
defined in Section 1445 of the Internal Revenue Code, and Seller shall
execute an affidavit to such effect in the form to be provided by
Purchaser. Seller shall indemnify Purchaser and its agents against any
liability or cost, including reasonable attorneys' fees, in the event that
this representation is false or Seller fails to execute such affidavit at
Closing hereunder.
c. No taking by power or eminent domain or condemnation
proceedings have been instituted or, to the best of Seller's knowledge,
threatened for the permanent or temporary taking or condemnation of all or
any portion of the Property.
d. There is not pending or, to Seller's
knowledge, threatened, any litigation, proceeding or investigation relating
to the Property or Seller's title thereto, nor does Seller have reasonable
grounds to know of any basis for such litigation, proceedings, or
investigations.
e. To the best knowledge of Seller there exists no
violation of any law, regulation, orders, or requirements issued by
any governmental agency or authority, or action in any court on
account thereof, against or affecting the Property.
f. Except for current obligations shown on its
operating statements, Seller has not made, and prior to Closing
hereunder will not make, any commitments to any governmental authority
or agency, utility company, school board, church or other religious
body, or to any other organization, group, or individual, relating to
the Property which would impose on Purchaser the obligation to make
any contributions of money, dedication of land, or grants of easements
or rights-of-way, or to construct, install, or maintain any
improvements, public or private, on or off the Property except as
currently installed at the Property.
g. All services performed or materials provided in
connection with the construction of improvements on the Property have
been paid or will be paid before Closing. Seller shall certify the
same to the title insurance company insuring Purchaser's title to the
Property.
h. To the best knowledge of Seller there are in existence at
the Property no "hazardous wastes" as that term is defined in the
Resource Conservation and Recovery Act, the Comprehensive
Environmental Resources, the Compensation and Liability Act, or the
regulations issued pursuant thereto by either the Federal
Environmental Protection Agency. Seller is not a generator of any such
hazardous wastes, and is in full compliance with all hazardous waste
emissions, reporting, and removal requirements imposed by applicable
law. To the best knowledge of Seller and disclosed to Purchaser, there
is in existence at the Property some "asbestos" as that term is
defined in regulations promulgated by the Federal Environmental
Protection Agency or the Occupational Safety and Health
Administration.
i. To the best knowledge of Seller the zoning
classification of the Property under the zoning regulations of the
Property jurisdiction permits the use of the Property, as a matter of
right and without issuance of any special use permit or other special
exception, for its current use. There is not pending or, to Seller's
knowledge, threatened, any proceedings to change or down-zone the
existing classification applicable to any portion of the Property.
j. To the best knowledge of Seller the sale of the
Property pursuant to this Agreement shall not violate any law,
ordinance, or governmental regulation regulating the character,
dimensions, or location of any improvements existing on the Property,
or prohibiting a separation in ownership or a change in the dimensions
or area of the Property or any parcel of which the Property is or was
a part.
k. To the best knowledge of Seller there are in existence
water, storm sewer, sanitary sewer, electricity, and telephone service
serving the Property having adequate capacity for the current use of
the Property as residential rental housing. To the best knowledge of
Seller such utility services are available at the Property over duly
dedicated streets or perpetual easements of record. To the best
knowledge of Seller there exists no restriction, prohibition, or
moratorium on the right of the Purchaser to access all such utilities,
nor any condition that Purchaser construct or improve utility
facilities or lines not on the Property.
l. Seller has no knowledge of any change
contemplated in any applicable laws, ordinances, or regulations, any
judicial or administrative action, proceeding, or investigation, any
action by owners of land adjoining the Property, or natural or
artificial conditions upon the Property, which would restrict or
prohibit Purchaser's use of the Property. There is no moratorium on
development applicable to the Property or to the issuance of building
permits for dwelling units in the jurisdiction.
m. Other than the tenants under the Tenant Leases, there
are no parties in possession of any portion of the Property as
lessees, tenants at sufferance, or trespassers. No person, firm,
corporation, partnership, or other entity, has any right or option to
acquire the Property or any portion thereof.
n. All documents and other information provided by Seller
to Purchaser pursuant to this Agreement shall be true and complete in
all material respects.
o. The person executing this Agreement on behalf of Seller
represents and warrant that he or she is an officer, representative,
or partner of Seller, has been duly authorized by Seller to execute
this Agreement, and has full power and authority to execute the same
on behalf of Seller.
p. At Closing, there will be no management, service,
maintenance, employment, or other similar contracts affecting the
Property which are not terminable at will without penalty except those
contracts described and provided under Section 3a(viii) hereinabove.
Section 10. Representations and Warranties of Purchaser.
Purchaser represents and warrants to Seller as follows, all of which
representations and warranties are true and correct as of the date thereof and
shall be true and correct as of Closing hereunder:
a. Purchaser (i) is a stock corporation duly organized,
validly existing, authorized to transact business, and in good
standing under the laws of the State of Nevada, (ii) has full power
and authority to purchase the Property from Seller without the consent
of any person or entity, and (iii) has authorized the execution,
delivery, and performance of this Agreement and the consummation of
the transactions contemplated hereby.
b. The person executing this Agreement on behalf of
Purchaser represents and warrants that he is a managing member of
Purchaser, has been duly authorized by Purchaser to execute this
Agreement, and has full power and authority to execute the same on
behalf of Purchaser.
Section 11. Default. If Purchaser shall fail to complete
settlement as herein provided, the entire Deposit shall be paid in accordance
with the terms of Section 2a hereof to Seller as liquidated damages and not as a
penalty, as Seller's sole remedy, and the parties hereto shall be relieved from
any further liabilities or obligations hereunder. If Seller shall fail to
complete settlement as herein provided, or default in any manner under this
Agreement, Purchaser, in addition to obtaining a refund of the Deposit, shall be
paid by Seller a sum equal to the Deposit then held under Section 2a hereof as
liquidated damages and not as a penalty, as Purchaser's sole remedy, and the
parties hereto shall be relieved from any further liabilities or obligations
hereunder.
Section 12. Brokers. Seller and Purchaser each represents and
warrants to the other that other than Creek House Real Estate, Inc. (the
"Broker"), no real estate agent, broker, or finder have acted for it in
connection with this Agreement and the transactions contemplated hereby, and
each shall indemnify and save the other harmless from the claim of any such
persons claiming by or through it for commissions or fees by reason of this
Agreement or the transaction contemplated hereby. Seller shall pay Broker a
brokerage commission under a separate agreement.
Section 13. Notices. Any notice required or permitted to be given
hereunder shall be in writing and shall be hand-delivered, delivered by
overnight courier, sent by facsimile transmission followed by mail copy, or
mailed by certified or registered mail, postage prepaid, return receipt
requested, to the parties hereto at their respective addresses set forth below,
or at such other addresses of which either party shall notify the other party in
accordance with the provisions hereof, and shall be deemed given as of the time
of such mailing or delivery, as applicable:
If to the Seller:
Mr. Harry Kennerk
General Partner
Prairie-Middlebury Associates
18 Boon Woods
Zionsville, Indiana 40677;
(317) 873-9500
Fax (317) 873-9180; and
If to the Purchaser:
Mr. Robert A. MacFarlane
President
Homes for America Holdings, Inc. c/o
The MacFarlane Company, Inc.
680-3 West 246th Street
Riverdale, New York 10471
(718) 543-4024
Fax (718) 601-3420.
Section 14. Binding Effect and Assignment. Seller and Purchaser
agree that the terms and conditions of this Agreement shall be binding upon, and
shall inure to the benefit of, their respective heirs, legal representatives,
successors, and assigns. Purchaser shall have no right to assign this Agreement
without the prior express written approval of the Seller, which approval shall
not be unreasonably withheld by the Seller; provided that Purchaser may with
advance notice to Seller designate a limited liability company or partnership
controlled by Purchaser to receive title to the Property at Closing with
Purchaser retaining all of its obligations under this Agreement.
Section 15. Escrow Agent. Escrow Agent may act upon any
instrument or writing believed by it in good faith to be genuine and executed by
the proper person, and shall not be liable in connection with the performance of
its duties hereunder except for its own willful misconduct or gross negligence.
In the event of any dispute or litigation hereunder concerning the disposition
of the Deposit, Escrow Agent shall have the right to pay the same and all
interest thereon into the registry of any court of competent jurisdiction, and
Escrow Agent shall hereupon be released from any further liabilities with
respect to the Deposit except as aforesaid.
Section 16. Miscellaneous. This Agreement contains the entire
understanding between the parties hereto with respect to the Property and is
intended to be an integration of all prior or contemporaneous agreements,
conditions, or undertakings between the parties hereto; and are no promises,
agreements, conditions, undertakings, warranties, or representations, oral or
written, express or implied, between and among the parties hereto with respect
to the Property other than as set forth herein. No changes or modifications of
this Agreement shall be valid unless the same is in writing and signed by Seller
and Purchaser. No purported or alleged waiver of any of the provisions of this
Agreement shall be valid or effective unless in writing signed by the party
against whom it is sought to be enforced. All representations, warranties, and
covenants herein shall survive Closing hereunder and shall not be merged in the
deed of conveyance for a period of one hundred twenty (120) days but no party
shall maintain an action or recover for any breach or default known by it at
Closing and in any event no recovery for any such claim after Closing for a
breach or default shall be limited to and not exceed twenty five thousand
dollars ($25,000). It is agreed that time is of the essence in the performance
of the terms of this Agreement.
Section 17. Interpretation. This Agreement shall be governed by
and construed in accordance with the laws of the State of Indiana. Captions
herein are for convenience of reference only and in no way define, limit, or
expand the scope or intent of this Agreement. Whenever the context hereof shall
so require, the singular shall include the plural, the male gender shall include
the female, and vice versa. This Agreement may be executed in two (2) or more
counterparts, all of which together shall constitute but one and the same
Agreement. In the event that one or more of the provisions hereof shall be held
to be illegal, invalid, or unenforceable, such provisions shall be deemed
severable and the remaining provisions hereof shall continue in full force and
effect.
Section 18. 1031 Exchange. Seller hereunder desires to exchange,
for other property of like kind and qualifying use within the meaning of Section
1031 of the Internal Revenue Code of 1986, as amended, and the Regulations
promulgated thereunder, fee title in the Property which is the subject of this
Purchase Agreement. Seller expressly reserves the right to assign its rights,
but not its obligations, hereunder to a Qualified Intermediary as provided in
IRC Reg. 1.1031(k)-1(g)(4) on or before the closing date.
Section 19. Expiration of Offer. Execution of this Agreement by
Purchaser shall constitute an offer to purchase the Property on the terms and
conditions set forth herein. In the event this Agreement shall not have been
fully executed by Seller and returned to Purchaser on or before March 31, 1997,
such offer shall expire and be of no further force or effect.
[Signatures of parties appear on next succeeding page.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal on the date first above written.
SELLER
Prairie-Middlebury Associates
WITNESS:
_________________________ By:____________________________________
Harry Kennerk, General Partner
Date: _________________, 1997
PURCHASER:
Homes for America Holdings, Inc.,
a Nevada corporation
WITNESS/ATTEST:
_________________________ By: ___________________________________
Robert A. MacFarlane, President
Date: _________________, 1997
ESCROW AGENT:
For purposes of Sections 2a and 15 only:
York Title & Escrow of Elkhart, Inc. hereby acknowledges receipt
of the Deposit referred to in the foregoing Agreement of Purchase and Sale and
agrees to accept, hold and return such Deposit and disburse any funds received
thereunder, in accordance with the provisions of such Agreement of Purchase and
Sale.
York Title & Escrow of Elkhart, Inc.
Suite 107
1600 West Beardsley
Elkhart, Indiana 46514
(219) 293-3428
Fax (219) 293-3428
By: _____________________________
Its: _____________________________
Date: ______________________________
EXHIBIT A
Description of Property
[Legal description of Property at 740 Prairie / 304 Middlebury,
Elkhart, Indiana 46516, identified as Census Tract No. 0019.10, to be
attached by Seller]
ASSIGNMENT OF AGREEMENT OF PURCHASE AND SALE
THIS ASSIGNMENT OF AGREEMENT OF PURCHASE AND SALE dated as of the
twenty-fourth day of July, 1997 (this "Assignment"), by HOMES FOR AMERICA
HOLDINGS, INC., a Nevada corporation (the "Assignor"), to MIDDLEBURY ELKHART,
L.P., an Indiana limited partnership (the "Assignee"), regarding that certain
Agreement of Purchase and Sale dated March 28, 1997, as amended on July 23, 1997
(as amended, the "Purchase Agreement"), by and between Prairie-Middlebury
Associates, as "Seller", and Homes for America Holdings, Inc., as "Purchaser",
regarding the purchase of that certain property therein described as "Prairie
Village Apartments", 740 Prairie / 304 Middlebury, Elkhart, Indiana 46516 -
Census Tract No. 0019.10 - (the "Property").
IN CONSIDERATION of the covenants, warranties, indemnities, releases,
payments, and other good and valuable consideration, the receipt and sufficiency
of which are acknowledged and accepted by the Assignor, as described in that
certain Agreement of Limited Partnership dated as of July 21, 1997, by and
between Prairie Village - Homes for America, Inc., an Indiana corporation and
wholly owned subsidiary of the Assignor, as the sole general partner of the
Assignee, and the Assignor as sole limited partner of the Assignee, the Assignor
hereby ASSIGNS, TRANSFERS, CONVEYS, and DELIVERS, and the Assignee hereby
accepts, the entire right, title, and interest of the Assignor in the Purchase
Agreement and the Property therein defined (provided that as required by the
Purchase Agreement the Assignor shall remain liable for Purchaser's obligations
thereunder), and their related claims, and its proceeds (together the "Assigned
Property") TO HAVE AND TO HOLD unto the Assignee, its successors and assigns, to
WARRANT and TO FOREVER DEFEND, all and singular, title to the Assigned Property,
unto the Assignee, its successors and assigns, against each and every person
whomsoever lawfully claiming or to claim the Assigned Property, or any part
thereof, by, through, or under the Assignor.
PROVIDED that the Assignor covenants that it will upon request of
Assignee do, execute, acknowledge, and deliver, or will cause to be done,
executed, acknowledged, or delivered, all such further acts, deeds, conveyances,
and assurances as may reasonably be required for the better conveying,
transferring, assuring, and confirming the return of the Assigned Property to
the Assignee.
PROVIDED FURTHER the Assignor represents and warrants to the Assignee
that Assignor (i) has full power and authority to execute, deliver, and perform
its obligations under this Assignment without the consent of any other person or
entity, (ii) its board of directors or corporate governing body has authorized
the execution, delivery, and performance of this Assignment and the consummation
of the transactions contemplated hereby, and (iii) the person executing and
delivering this instrument and any instrument required or contemplated hereby is
and a duly authorized corporate officer or representative with the requisite
power therefor.
IN WITNESS WHEREOF the undersigned authorized representative has
executed and delivered this Assignment intending the Assignor to be legally
bound hereby as and for the day and year first set forth above.
HOMES FOR AMERICA HOLDINGS, INC.
WITNESS:
s/s Robert A. MacFarlane By: s/s Robert A. MacFarlane
- - --------------------------- Robert A. MacFarlane
Its: President
ACCEPTED BY ASSIGNEE:
MIDDLEBURY ELKHART, L.P.
WITNESS:
By: Prairie Village - Homes for
America, Inc., general partner
s/s Robert A. MacFarlane
s/s Robert A. MacFarlane
- - --------------------------
By: s/s Robert A. MacFarlane
Robert A. MacFarlane
Its: President
AGREEMENT OF PURCHASE AND SALE
BY AND BETWEEN
BRE-N, INC.
AND
HOMES FOR AMERICA HOLDINGS, INC.
TABLE OF CONTENTS
ARTICLE I - PURCHASE AND SALE OF PROPERTY.......................................
Section 1.1 Sale.................................................
Section 1.2 The Property.........................................
Section 1.3 Purchase Price and Deposit...........................
Section 1.4 Title to the Property................................
ARTICLE II - CONDITIONS.........................................................
Section 2.1 Conditions Period....................................
Section 2.2 Seller's Deliveries..................................
ARTICLE III - TITLE.............................................................
Section 3.1 Preliminary Title Report and Survey..................
Section 3.2 Owner's Title Insurance Policy for the Property......
ARTICLE IV - REPRESENTATIONS AND WARRANTIES, COVENANTS,
AND INDEMNIFICATIONS..........................................
Section 4.1 Representations and Warranties of Seller.............
Section 4.2 Representations and Warranties of Buyer..............
Section 4.3 Survival of Representations and Warranties...........
Section 4.4 Buyer's Covenants and Seller's Condition.............
Section 4.5 Seller's Covenants and Buyer's Condition.............
ARTICLE V - DAMAGE..............................................................
Section 5.1 Damage...............................................
ARTICLE VI - BROKERS AND EXPENSES...............................................
Section 6.1 Broker...............................................
Section 6.2 Expenses.............................................
ARTICLE VII - LEASES AND OTHER AGREEMENTS.......................................
Section 7.1 Leasing Costs........................................
Section 7.2 Seller's Pre-Closing Operations......................
ARTICLE VIII - CLOSING AND ESCROW...............................................
Section 8.1 Escrow Instructions..................................
Section 8.2 Closing..............................................
Section 8.3 Deposit of Documents.................................
Section 8.4 Prorations...........................................
ARTICLE IX - PROVISIONS WITH RESPECT TO DEFAULT.................................
Section 9.1 Default by Seller....................................
Section 9.2 Default by Buyer.....................................
ARTICLE X - MISCELLANEOUS.......................................................
Section 10.1 Notices..............................................
Section 10.2 Entire Agreement.....................................
Section 10.3 Time.................................................
Section 10.4 Attorneys' Fees......................................
Section 10.5 No Merger............................................
Section 10.6 Assignment...........................................
Section 10.7 Counterparts.........................................
Section 10.8 Governing Law........................................
Section 10.9 Interpretation of Agreement..........................
Section 10.10 Amendments...........................................
Section 10.11 Drafts Not an Offer to Enter into a Legally Binding
Contract.............................................
Section 10.12 No Partnership.......................................
Section 10.13 No Third Party Beneficiary...........................
Section 10.14 Exhibits.............................................
EXHIBITS:
Exhibit "A" The Land
Exhibit "B" The Deed
Exhibit "C" The Bill of Sale
Exhibit "D" The Lease Assignment
Exhibit "E" The Designation Agreement
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (the "Agreement") dated June ___,
1998 is made and entered into by and between BRE-N, INC., a Texas Corporation
("Seller"), and HOMES FOR AMERICA HOLDINGS, INC. ("Buyer").
RECITAL
Seller is the owner of the Property (as defined in Section1.2 below).
Seller desires to sell the Property to Buyer, and Buyer desires to purchase the
Property from Seller, all on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, Seller and Buyer hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF PROPERTY
Section 1.1. Sale. Seller agrees to sell to Buyer, and Buyer agrees to
purchase from Seller, subject to the terms, covenants and conditions
set forth herein, that certain tract or parcel of land situated in the
City of Dallas, County of Dallas, State of Texas, as more particularly
described in Exhibit "A" attached hereto and made a part hereof for
all purposes (the "Land"), together with the following:
(a) all rights, privileges and easements appurtenant to
Seller's interest in the Land, including, without limitation, (i) all
minerals, oil, gas and other hydrocarbon substances on and under the
Land, (ii) any and all development rights, air rights, sewer rights and
permits, water, water rights, riparian rights and water stock relating
to the Land and (iii) any easements, licenses, covenants and other
rights-of-way or other appurtenances used in connection with the
beneficial use and enjoyment of the Land and all of Seller's right,
title and interest, if any, in and to all roads and alleys adjoining or
servicing the Land (collectively, the "Appurtenances");
(b) all improvements and fixtures located on the Land, as well
as all buildings and structures presently located on the Land,
including without limitation, all apparatus, equipment and appliances
used in connection with the operation or occupancy of the Land or any
of the foregoing improvements, such as heating and air conditioning
systems and facilities used to provide any utility, refrigeration,
ventilation, garbage disposal or other services, and all on-site
parking (collectively, the "Improvements");
(c) all furniture, equipment, machinery and other tangible
personal property (the "Personal Property") owned by Seller located on
and used in connection with the Land or the Improvements as of the date
hereof or as of the Closing Date, as defined in Section 8.2 below; and
(d) all right, title and interest of Seller in and to any
intangible personal property, to the extent assignable, now or
hereafter owned by Seller and used in the ownership, use or operation
of the Land, Improvements, or Personal Property, including, without
limitation, (i) the right, if any, to use any trade name now used in
connection with the Property, as defined below, (ii) any and all lease
rights, including, without limitation, the lessor's interest in and to
all leases of spaces in the Property (the "Leases"), the lessor's
interest in all security deposits, prepaid rent, charges and other
sums, if any, under the Leases, and any and all guaranties of the
Leases, (iii) any and all utility contracts or other service,
maintenance and utility agreements or rights relating to the ownership,
use or operation of the Property approved by Buyer in writing (the
"Contracts"), (iv) licenses, permits, approvals, certificates of
occupancy, development rights, zoning rights and other approvals
necessary for the current ownership, use and operation of the Land and
the other Property, and (v) all warranties relating to the Property
(collectively, the "Intangible Property").
Section 1.2 The Property. The Land and all of Seller's right, title
and interest in and to the items referred to in subparagraphs (a)
through (d) above are collectively referred to herein as the
"Property."
Section 1.3 Purchase Price and Deposit.
(a) The purchase price of the Property is One Million Fifty Thousand
and No/100 Dollars ($1,050,000.00) (the "Purchase Price") and shall be paid by
Buyer to Seller by wire transfer in immediately available funds at the closing
of the purchase and sale contemplated hereunder (the "Closing").
(b) On or before the expiration of the second business day following
the date of execution of this Agreement by Buyer and Seller, Buyer shall deposit
in escrow with Safeco Land Title, 8080 N. Central Expressway, Suite 500, Dallas,
Texas 75206, Attn.: Ms. Maggie Fielding, (214) 360-3600 (the "Title Company"), a
cash deposit in the amount of Twenty-Five Thousand and No/100 Dollars
($25,000.00) (such deposit and any interest thereon, the "Deposit"). The Deposit
shall be held by the Title Company in an interest bearing account and all
interest accruing thereon shall be deemed a part of the Deposit. If the sale of
the Property as contemplated hereunder is consummated, then the Deposit shall be
paid to Seller as a credit to the Purchase Price. If this Agreement is
terminated (for reasons other than default of Buyer hereunder), the Deposit
shall be returned to Buyer; provided, however, if termination of this Agreement
is due to Buyer's default hereunder, the Deposit shall be delivered to Seller
pursuant to the terms of Section 9.2 below. In consideration for the provisions
continued in Section 2.1 herein, Buyer agrees to deposit an additional One
Hundred and No/100 Dollars with the Title Company, which additional deposit
shall be non-refundable to Buyer in any circumstances.
Section 1.4 Title to the Property.
(a) At the Closing, Seller shall convey, transfer and assign to Buyer
fee simple title to the Land, subject to the Permitted Exceptions, as defined
below, by a duly executed and acknowledged Special Warranty Deed in the form
attached hereto as Exhibit "B" and made a part hereof for all purposes (the
"Deed").
(b) At the Closing, Seller shall transfer title to property other than
the Land, including the Personal Property and the Improvements, subject to the
Permitted Exceptions, by a Bill of Sale (the "Bill of Sale") and an Assignment
of Leases, Service Contracts and Warranties (the "Lease Assignment") in the
forms attached hereto as Exhibits "C" and "D", respectively.
ARTICLE II
CONDITIONS
Section 2.1 Conditions Period Buyer, or its consultants, shall
commence due diligence with respect to the Property upon Buyer's and
Seller's execution hereof, and the due diligence period shall expire
at 5:00 p.m. (Dallas, Texas time) on the date that is forty-five (45)
days following the date of execution hereof (the "Conditions Period").
During the Conditions Period, Seller shall make the Property available
to Buyer and its agents, consultants and engineers for such
inspections and tests as Buyer deems appropriate. Buyer, its agents,
consultants and engineers, shall have the right to conduct engineering
and environmental inspections and surveys of the Property, including
environment studies, soils/boring tests, removal of small samples of
soil, carpet or similar samples, air tests or other tests as Buyer may
reasonably deem necessary. Buyer, its agents and consultants, shall
also have the right to inspect all books and records maintained by the
Seller in connection with the Property, including, without limitation,
all Leases, agreements, surveys, title insurance policies, letters and
proposals relating to the utilization of the Property. Due to the
confidential nature of the sale transaction contemplated hereby, Buyer
must notify Seller at least 24 hours before entering the Property and
(i) if Seller reasonably objects to such entry at the time requested
by Buyer, Buyer and Seller will agree on a mutually acceptable time
for such entry, and (ii) Seller shall have the right to accompany or
have a representative of Seller accompany Buyer (at no cost to Buyer)
on each such entry upon the Property. Buyer hereby agrees to (a)
restore the Property to its previous condition promptly following the
completion of each such inspection, and (b) indemnify and hold Seller
harmless from and against all loss, cost or damage actually incurred
by Seller arising out of actions taken at or in regard to the Property
by Buyer or its agents, engineers or consultants. Notwithstanding
anything to the contrary contained in this Agreement, Seller
acknowledges that Buyer shall have the right, in its sole and absolute
discretion, to terminate this Agreement on or before the expiration of
the Conditions Period. In the event Buyer shall deliver to Seller on
or before the end of the Conditions Period written notice of Buyer's
election to terminate this Agreement pursuant to this Section 2.1, the
Deposit will be immediately returned to Buyer by the Title Company and
neither party shall have any further rights or obligations hereunder,
except as provided in this Section 2.1 and Section 6.1 below.
Section 2.2 Seller's Deliveries. Not later than seven (7) days after
Buyer's and Seller's execution hereof, Seller shall deliver or
otherwise make available to Buyer and Buyer's agents, consultants and
engineers, to the extent in Seller's actual possession, all books and
records maintained by Seller in connection with the Property, which
shall include, without limitation, the following documents:
(1) copies of the 1995, 1996 and 1997 property tax bills and any
tax statements or notices relating to 1998 taxes or appraised
value;
(2) an inventory of the Personal Property, if any, to be conveyed
to Buyer;
(3) copies of all the Leases, including any and all modifications,
supplements or amendments thereto;
(4) a true and correct current rent roll for the Property showing
the total leasable area within the Property, the name of each
tenant and containing information relating to each Lease
including (i) the commencement date and scheduled expiration
date thereof; (ii) the rental paid by the tenant thereunder;
(iii) the amount of the security deposit and any other
deposits paid by the tenant thereunder; (iv) the square
footage leased thereunder (the "Rent Roll");
(5) a complete list of, and copies of, all management contracts,
laundry leases, telephone or cable t.v. agreements and other
contracts or agreements, if any currently existing with
respect to all or any part of the Property;
(6) books, records and financial information on the Property,
including without limitation bank statements for the Property
for the 6-month period preceding the date of this Agreement
and operating statements for the years 1996 and 1997 plus all
year-to-date operating information, if available;
(7) reports, tests and studies, including engineering and
environmental matters; prepared or generated within the 12
month period preceding the date of this Agreement and copies
of all other reports, tests and studies, environmental
inspection/testing reports, engineering reports, soils
reports, and site plans currently in Seller's possession with
respect to all or any portion of the Property;
(8) warranties relating to any portion of the Property;
(9) plans and specifications for the Property;
(10) any title insurance policies or surveys of the Property;
(11) copies of all utility bills for the 12 month period preceding
the date of this Agreement; and
(12) a list of any capital repairs made to the Property within the
previous 12 month period
preceding the date of this Agreement.
Failure of Seller to deliver the foregoing within the time specified above shall
not constitute a Seller default hereunder.
ARTICLE III TITLE
Section 3.1 Preliminary Title Report and Survey. Within fifteen (15)
days of complete execution hereof, Seller shall cause the Title Company to
provide Buyer a commitment of title insurance (the "Title Commitment"),
with respect to the Property, together with copies of the documents
creating exceptions to title to the Property as shown thereon and a current
survey of each tract or parcel comprising the Property, certified to
Seller, Buyer and the Title Company (the "Survey").
Buyer shall have a period (the "Title Period") expiring on ten (10)
days following the date that the later of the Title Commitment, the
underlying documents or the Survey is delivered to it in which to advise
Seller in writing of its objections to the exceptions to title to the
Property as shown on the Title Commitment and/or the Survey. Any such
exception to title shown in the Title Commitment and/or the Survey to which
Buyer does not specifically object (by delivering written notice to Seller
within such Title Period specifying the objected to exception) shall be
deemed to have been approved by Buyer. Seller shall have no obligation to
cure or attempt to cure any of Buyer's objections to the Title Commitment
or the Survey. In the event Seller is unable or unwilling to so cure
Buyer's title or Survey objections, if any, within five (5) days following
the timely delivery to Seller of Buyer's list of objections to the title to
the Property, Seller shall so notify Buyer in writing of Seller's inability
or unwillingness to cure such objections. Thereafter, Buyer may, at its
option, exercised by delivering written notice to Seller within five (5)
days following the date Seller delivers written notice to Buyer that Seller
is so unable or unwilling to cure such title objections, (i) accept title
to the Property subject to the uncured objections raised by Buyer as
permitted hereby, without an adjustment in the Purchase Price, in which
event said uncured objections shall be deemed to be waived for all purposes
and such uncured items as to which Buyer had an objection shall be deemed
approved by Buyer, or (ii) terminate this Agreement, in which event the
Deposit shall be immediately returned to Buyer by the Title Company and
this Agreement shall be of no further force or effect. If Buyer fails to
give such written notice to Seller within such five (5) day period, Buyer
shall be deemed to have elected option (i) above. All matters disclosed by
the Title Commitment and/or the Survey which Buyer either approves or is
deemed to have approved are herein referred to as the "Permitted
Exceptions."
Section 3.2 Owner's Title Insurance Policy for the Property. At or
promptly after the Closing, Seller will cause the Title Company to
deliver to Buyer an Owner Policy of Title Insurance (the "Title
Policy") in the full amount of the Purchase Price, insuring Buyer's
fee simple title to the Property, subject only to the Permitted
Exceptions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES,COVENANTS, AND INDEMNIFICATIONS
Section 4.1 Representations and Warranties of Seller. Seller
hereby makes the following representations and warranties, which representations
and warranties shall be true and correct as of the date of execution of this
Agreement and as of the Closing Date:
(a) Seller has not (i) made a general assignment for the
benefit of creditors, (ii) filed any voluntary petition in bankruptcy
or suffered the filing of an involuntary petition by Seller's
creditors, (iii) suffered the appointment of a receiver to take
possession of all, or substantially all, of Seller's assets, (iv)
suffered the attachment or other judicial seizure of all, or
substantially all, of Seller's assets, (v) admitted in writing its
inability to pay its debts as they come due or (vi) made an offer of
settlement, extension or composition to its creditors generally.
(b) Seller is not a "foreign person" as defined in Section
1445 of the Internal Revenue Code of 1986, as amended (the "Code") and
any related regulations.
(c) This Agreement (i) has been duly executed and delivered by
Seller, (ii) is the legal, valid and binding obligation of Seller, and
(iii) does not violate any provision of any agreement or judicial order
to which Seller is a party or to which Seller is subject. All documents
to be executed by Seller which are to be delivered to Buyer at Closing
(iv) at the time of Closing will be duly executed and delivered by
Seller, (v) at the time of Closing will be legal, valid and binding
obligations of Seller, and (vi) at the time of closing will not violate
any provision of any agreement or judicial order to which Seller is a
party or to which Seller is subject.
(d) To Seller's knowledge, there is no condemnation proceeding
affecting the Property or any portion thereof currently pending nor, to
Seller's knowledge, is any such proceeding threatened.
(e) Seller has received no notice of and has no knowledge of
any violations or investigations of violations or alleged violations of
any applicable governmental requirements in respect of the use,
occupation and construction of the Property, including but not limited
to environmental, zoning, platting and other land use requirements, and
any violations thereof that occur before Closing, whether now noted or
issued, shall be complied with by Seller, so that the Property shall be
conveyed free of the same at Closing.
(f) Seller has received no notice of and has no knowledge of
any default or breach by Seller or any previous owner of the Property
under any covenants, conditions, restrictions, rights-of-way, or
easements which may affect the Property or any portion thereof. Seller
has received no notice of and has no knowledge of any condition which
would result in the termination or impairment of access to the Property
or discontinuation of necessary sewer, water, electric, gas, telephone,
or other utilities.
(g) No work has been performed or is in progress at, and no
materials have been furnished to, the Property which have not been paid
for or will not be paid for in full by Seller prior to the Closing
Date. All bills and other payments due with respect to the ownership,
operation and maintenance of the Property have been paid or will be
paid prior to Closing in the ordinary course of business.
(h) To Seller's knowledge, no special or general assessments
have been levied, other than as shown in the Title Commitment, or are
threatened against all or any part of the Property.
(i) To Seller's knowledge, there are no defaults under any
management agreements, service contracts or other agreements affecting
the Property or the operation or maintenance thereof.
(j) To Seller's knowledge, the rent-roll as provided pursuant
to Section 2.2 herein is true and correct as of the date hereof.
SELLER'S PREDECESSOR IN INTEREST ACQUIRED THE PROPERTY THROUGH
FORECLOSURE AND CONSEQUENTLY SELLER HAS LITTLE, IF ANY, KNOWLEDGE OF THE
PHYSICAL OR ECONOMIC CHARACTERISTICS OF THE PROPERTY. ACCORDINGLY, EXCEPT AS
EXPRESSLY SET FORTH HEREIN AND IN THE DEED, SELLER IS NOT MAKING AND HAS NOT AT
ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO,
ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN SELLER'S WARRANTY OF TITLE TO BE SET
FORTH IN THE DEED), ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL
CONDITION, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS,
GOVERNMENTAL REGULATIONS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE ITEMS OR
ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF SELLER TO BUYER OR ANY OTHER
MATTER OR THING REGARDING THE PROPERTY. UPON CLOSING SELLER SHALL SELL AND
CONVEY TO BUYER AND BUYER SHALL ACCEPT THE PROPERTY "AS IS, WHERE IS, WITH ALL
FAULTS." BUYER HAS NOT RELIED UPON AND WILL NOT RELY UPON, EITHER DIRECTLY OR
INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF SELLER WITH RESPECT TO THE
PROPERTY. BUYER WILL CONDUCT SUCH INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT
NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS BUYER
DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE PROPERTY AND WILL
RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF
SELLER. UPON CLOSING, BUYER SHALL ASSUME THE RISK THAT ADVERSE MATTERS,
INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND
ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY BUYER'S INVESTIGATIONS.
EXCEPT AS OTHERWISE PROVIDED HEREIN, BUYER, UPON CLOSING, HEREBY WAIVES,
RELINQUISHES AND RELEASES SELLER FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS,
CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT (I.E., NEGLIGENCE AND
STRICT LIABILITY), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING
REASONABLE ATTORNEYS' FEES AND COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER,
KNOWN OR UNKNOWN, WHICH BUYER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER AT
ANY TIME BY REASON OF OR ARISING OUT OF ANY CONSTRUCTION DEFECTS, PHYSICAL AND
ENVIRONMENTAL CONDITIONS, THE VIOLATION OF ANY APPLICABLE LAWS AND ANY AND ALL
OTHER MATTERS REGARDING THE PROPERTY THAT ACCRUE FROM AND AFTER THE DATE OF
CLOSING. BUYER, UPON CLOSING, SHALL AUTOMATICALLY INDEMNIFY AND HOLD SELLER
HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION
(INCLUDING CAUSES OF ACTION IN TORT (I.E., NEGLIGENCE AND STRICT LIABILITY)),
LOSS, DAMAGE, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND
COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, FIXED OR
CONTINGENT, ASSERTED AGAINST OR INCURRED BY SELLER BY REASON OF OR ARISING OUT
OF THE VIOLATION OF ANY APPLICABLE LAWS PERTAINING TO ANY ADVERSE PHYSICAL OR
ENVIRONMENTAL CONDITION PLACED OR OCCURRING ON THE PROPERTY ON OR AFTER THE
CLOSING DATE. SHOULD ANY CLEAN-UP, REMEDIATION OR REMOVAL OF HAZARDOUS
SUBSTANCES OR OTHER ENVIRONMENTAL CONDITIONS ON THE PROPERTY BE REQUIRED FOR ANY
ACTIVITY OCCURRING ON THE PROPERTY AFTER THE DATE OF CLOSING, IT IS HEREBY
UNDERSTOOD AND AGREED THAT SUCH CLEAN-UP, REMOVAL OR REMEDIATION SHALL BE THE
RESPONSIBILITY OF AND SHALL BE PERFORMED AT THE SOLE COST AND EXPENSE OF BUYER.
THE TERMS, CONDITIONS, OBLIGATIONS AND INDEMNITIES OF THIS SECTION 3.1 SHALL
EXPRESSLY SURVIVE THE CLOSING AND NOT MERGE THEREIN.
BUYER REPRESENTS AND WARRANTS TO SELLER THAT BUYER HAS KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE BUYER TO EVALUATE THE
MERITS AND RISKS OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT. FURTHER,
BUYER ACKNOWLEDGES THAT IT IS NOT IN A DISPARATE BARGAINING POSITION RELATIVE TO
SELLER WITH RESPECT TO THIS AGREEMENT. TO THE EXTENT APPLICABLE AND PERMITTED BY
LAW (AND WITHOUT ADMITTING SUCH APPLICABILITY), BUYER HEREBY WAIVES THE
PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,
CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN
SECTION 17.55, WHICH IS NOT WAIVED).
Section 4.2 Representations and Warranties of Buyer. Buyer
hereby makes the following representations and warranties, which representations
and warranties shall be true and correct as of the date of execution of this
Agreement and as of the Closing Date:
(a) Buyer has not (i) made a general assignment for the benefit of
creditors, (ii) filed any voluntary petition in bankruptcy or suffered
the filing of an involuntary petition by Buyer's creditors, (iii)
suffered the appointment of a receiver to take possession of all, or
substantially all, of Buyer's assets, (iv) suffered the attachment or
other judicial seizure of all, or substantially all, of Buyer's
assets, (v) admitted in writing its inability to pay its debts as they
come due or (vi) made an offer of settlement, extension or composition
to its creditors generally.
(b) This Agreement (i) has been duly executed and delivered by Buyer,
(ii) is the legal, valid and binding obligation of Buyer, and (iii)
does not violate any provision of any agreement or judicial order to
which Buyer is a party or to which Buyer is subject. All documents to
be executed by Buyer which are to be delivered to Seller at Closing
(iv) at the time of Closing will be duly executed and delivered by
Buyer, (v) at the time of Closing will be legal, valid and binding
obligations of Buyer, and (vi) at the time of Closing will not violate
any provision of any agreement or judicial order to which Buyer is a
party or to which Buyer is subject.
Section 4.3 Survival of Representations and Warranties. The
representations and warranties of Seller and Buyer contained herein
shall survive the Closing for a period of one (1) year after the
Closing; provided, that if a party notifies the other party during
such one-year period that any representation or warranty of such other
party has been breached during such one-year period, then the
notifying party shall have until the later of (a) a period of six (6)
months following the date of such notification of the notifying party
and (b) the expiration of such one-year period in which to initiate a
lawsuit against the other party with respect to such a breach. Any
claim that a party may have at any time against the other party for
breach of any such representation or warranty, whether known or
unknown, which is not asserted by written notice to the breaching
party within such one-year period shall not be valid or effective, and
the breaching party shall have no liability with respect thereto.
Section 4.4 Buyer's Covenants and Seller's ConditionSection 4.4
Buyer's Covenants and Seller's ConditionSection 4.4 Buyer's Covenants
and Seller's ConditionSection 4.4 Buyer's Covenants and Seller's
Condition.
(a) Buyer shall promptly notify Seller in writing of any event or
circumstance of which Buyer actually becomes aware that materially
affects the truth of any of Buyer's representations and warranties
herein.
(b) It shall be a condition to Seller's obligation to sell the
Property that as of the date of Closing there shall be no material
breach by Buyer of any of the covenants, undertakings or agreements to
be performed by Buyer prior to or at Closing pursuant to the terms of
this Agreement other than such matters as shall have been cured by
Buyer; and that each representation and warranty made in this
Agreement by Buyer shall be true in all material respects both at the
time made and as of the date of Closing. If any of the foregoing
conditions is not satisfied or waived as of the date of Closing,
Seller may, by written notice given to Buyer at or before the Closing,
elect either to (i) terminate this Agreement or (ii) waive such
condition. If Seller elects to terminate this Agreement, the Deposit
shall be promptly paid to Seller by the Title Company and neither
party shall have any further rights or obligations hereunder, except
as set forth in Sections 2.1 and 6.1 hereof.
Section 4.5 S Seller=s Covenants and Buyer's Condition.
(a) Seller shall promptly notify Buyer in writing of any event or
circumstance of which Seller actually becomes aware that materially affects the
truth of any of Seller's representations and warranties herein.
(b) It shall be a condition to Buyer's obligations to purchase the
Property that as of the date of Closing there shall be no material breach by
Seller of any of the covenants, undertakings or agreements to be performed by
Seller prior to or at Closing pursuant to the terms of this Agreement other than
such matters as shall have been cured by Seller; and that each representation
and warranty made in this Agreement by Seller shall be true in all material
respects both at the time made and as of the date of Closing. If any of the
foregoing conditions is not satisfied or waived as of the date of Closing, Buyer
may, by written notice given to Seller at or before the Closing, elect either to
(i) terminate this Agreement or (ii) waive such condition. If Buyer elects to
terminate this Agreement, the Deposit shall be promptly paid to Buyer by the
Title Company and neither party shall have any further rights or obligations
hereunder, except as set forth in Sections 2.1 and 6.1 hereof.
ARTICLE V
DAMAGE
Section 5.1 Damage. Seller agrees to give Buyer prompt written notice
of any fire or other casualty affecting the Property occurring during
the term of this Agreement or of any actual or threatened taking or
condemnation of all or any portion of the Property which occurs during
the term of this Agreement and of which Seller has actual knowledge.
If prior to the Closing, there shall occur:
(a) damage to the Property caused by fire or other casualty which
Seller's insurer reasonably estimates would cost $100,000.00
or more to repair; or
(b) the taking or condemnation of all or any portion of the
Property as would materially interfere with Buyer's proposed
use thereof;
then, in either of such events, Buyer may terminate this Agreement by written
notice given to Seller within five (5) days after Buyer has received the notice
referred to above or at the Closing, whichever is earlier. If Buyer does not
elect to so terminate this Agreement, then the Closing shall take place as
provided herein, except that the Purchase Price shall be reduced by the amount
of any deductible, and there shall be assigned to Buyer at the Closing all
right, title and interest of Seller in and to all insurance proceeds or
condemnation awards which may be payable on account of such occurrence, less
such amounts as are paid by Seller to pay costs related to the collection of
such proceeds and/or the repair of the damage, which shall be retained by or
paid to Seller.
If prior to the Closing there shall occur:
(i) damage to the Property caused by fire or other casualty which
Seller's insurer reasonably estimates would cost less than
$100,000.00 to repair; or
(ii) the taking or condemnation of a portion of the Property which
is not material to Buyer's proposed use thereof;
then, and in such event, Buyer shall not have any right to terminate this
Agreement pursuant to this Section 5.1 as a result of such damage, taking or
condemnation, except that the Purchase Price shall be reduced by the amount of
any deductible, but there shall be assigned to Buyer at the Closing all right,
title and interest of Seller in and to all insurance proceeds or condemnation
awards which may be payable on account of any such occurrence, less such amounts
as are paid by Seller to pay costs related to the collection of such proceeds
and/or the repair of the damage, which shall be retained by or paid to Seller.
ARTICLE VI
BROKERS AND EXPENSES
Section 6.1 Broker. The parties represent and warrant to each other
that, with the exception of a commission in the amount of Thirty-One
Thousand Five Hundred and No/100 Dollars ($31,500.00) (which amount
represents 3% of the Purchase Price, as previously agreed by the
parties hereto) to be paid by Seller to Pinnacle Realty -- Tom Flood
("Broker"), such commission being due and payable only in the event
the sale of the Property pursuant to this Agreement actually closes in
accordance with the terms hereof and the Purchase Price is
unconditionally paid to Seller, no broker or finder was instrumental
in arranging or bringing about this transaction and that there are no
claims or rights for brokerage commissions or finder's fees in
connection with the transaction contemplated by this Agreement. If any
person (other than Broker) brings a claim for a commission or finder's
fee based upon any contact, dealings or communication with Buyer or
Seller, then the party through whom such person makes his claim shall
defend the other party (the "Indemnified Party") from such claim, and
shall indemnify the Indemnified Party and hold the Indemnified Party
harmless from any and all costs, damages, claims, liabilities or
expenses (including, without limitation, reasonable attorneys' fees
and disbursements) incurred by the Indemnified Party in defending
against the claim. The provisions of this Section 6.1 shall survive
the Closing or, if the purchase and sale is not consummated, any
termination of this Agreement.
Section 6.2 Expenses. Except as provided in Section 8.4(b) below or
elsewhere in this Agreement, each party hereto shall pay its own
expenses incurred in connection with this Agreement and the
transactions contemplated hereby.
ARTICLE VII
LEASES AND OTHER AGREEMENTS
Section 7.1 Leasing Costs. Subject to the terms and provisions herein
and of Section 8.4 below, Seller shall be responsible for all costs
which are payable prior to Closing with respect to Leases of space in
the Property, and Buyer shall be responsible for all costs which are
payable after Closing with respect to Leases of space in the Property.
Section 7.2..Seller's Pre-Closing Operations. Seller will continue to
manage, or cause to be managed, the Property in accordance with
Seller's current practice. After expiration of the Conditions Period,
Seller will not enter into any new service contracts that are not
terminable with thirty (30) days' notice or lease any space, other
than in the ordinary course of business, in the Property without the
written consent of Buyer, which consent shall not be unreasonably
withheld, conditioned or delayed.
ARTICLE VIII
CLOSING AND ESCROW
Section 8.1 Escrow Instructions. Seller and Buyer agree to execute
such escrow instructions as may be appropriate to enable the Title
Company to comply with the terms of this Agreement.
Section 8.2 Closing. The Closing hereunder shall be held (either by
mail or in person), and delivery of all items to be made at the
Closing under the terms of this Agreement shall be made (either by
mail or in person), at the offices of the Title Company, or such other
place mutually agreed to by the parties, at 5:00 p.m. Dallas, Texas
time on the date which is thirty (30) days after expiration of the
Conditions Period, or on such other date and time as Buyer and Seller
may mutually agree upon in writing (the "Closing Date"). Such date and
time may not be extended without the written approval of both Seller
and Buyer. Notwithstanding the above, upon five (5) days' written
notice to Seller and the payment of a non-refundable extension fee in
the amount of Five Thousand Dollars ($5,000.00) paid to Seller by
Buyer, Buyer may elect to extend the Closing Date for up to thirty
(30) days from the scheduled Closing Date.
Section 8.3 Deposit of Documents
(a) At or before the Closing, Seller shall deposit into escrow with the
Title Company the following items:
(i) one (1) duly executed and acknowledged original Deed;
(ii) three (3) duly executed counterparts of the Bill of Sale;
(iii) three (3) duly executed counterparts of the Lease
Assignment;
(iv) an affidavit pursuant to Section 1445(b)(2) of the
Internal Revenue Code (the "Code") in a form
complying with the requirements of the Code, and on
which Buyer is entitled to rely, that Seller is not a
"foreign person" within the meaning of Section
1445(f)(3) of the Code;
(v) with respect to any service contract to be assumed by
Buyer, to the extent in Seller's actual possession,
the original of each service contract relating to the
Property;
(vi) all original licenses, permits and certificates of
occupancy relating to the Property in Seller's actual
possession, if any;
(vii) all original as-built plans and specifications
relating to the Property in Seller's actual
possession, if any; and
(viii) all keys to the Improvements in Seller's actual
possession.
(b) At or before Closing, Buyer shall deposit into escrow with the
Title Company and/or cause the Title Company to issue and deliver to
Seller the following items:
(i) funds necessary to close this transaction, subject to
any adjustments to be made pursuant to the terms and
provisions of this Agreement;
(ii) three (3) duly executed counterparts of the Bill of Sale; and
(iii) three (3) duly executed counterparts of the Lease
Assignment.
(c) Buyer and Seller shall each deposit such other instruments as are
reasonably required by the Title Company, including evidence of organization and
authorization, required to close the purchase and sale of the Property in
accordance with the terms hereof, including, without limitation, an agreement
(the "Designation Agreement") designating the Title Company as the "Reporting
Person" for the transaction pursuant to Section 6045(e) of the Code and the
regulations promulgated thereunder, and executed by Seller, Buyer and the Title
Company. The Designation Agreement shall be substantially in the form attached
hereto as Exhibit "E" and, in any event, shall comply with the requirements of
Section 6045(e) of the Code and the regulations promulgated thereunder.
Section 8.4 Prorations
(a) The following shall all be prorated as of 12:01 a.m. on the date of
Closing, on the basis of a 365-day year: (i) rents, and all other income from
the Property, if any, including, without limitation, any additional charges and
expenses payable under the Leases, if any, all as and when actually collected
(whether such collection occurs prior to, on, or after the Closing Date); (ii)
real property taxes and assessments for the year in which the Closing occurs,
(iii) water, sewer and utility charges, (iv) amounts payable under any service
contracts Buyer assumes at Closing for the month in which the Closing occurs and
prior months, (v) annual permits (to the extent same are assigned to Buyer at
Closing) and/or inspection fees (calculated on the basis of the period covered),
and (vi) any other expenses relating to the operation and maintenance of the
Property. Buyer shall include all rent arrearages, if any, on Buyer's monthly
invoices or billings to tenants and promptly deliver to Seller any such rent
arrearages that relate to periods prior to the Closing if and when collected by
Buyer; provided, however, that rents received from delinquent tenants after the
Closing Date that are designated for periods after Closing shall be applied
first against tenant's current rent due and then against any delinquent rents.
The amount of any security or other deposits required to be returned to tenant's
under the Leases by Seller, if any, shall be credited against the cash portion
of the Purchase Price; accordingly, Seller shall retain the deposits and Buyer
shall be responsible for handling such deposits in accordance with the Leases
and applicable law. Seller shall retain all utility deposits, if any. Seller and
Buyer hereby agree that if any of the aforesaid prorations cannot be calculated
accurately on the Closing Date, then the same shall be calculated within thirty
(30) days after the Closing Date, or as soon as sufficient information is
available to permit the parties to accurately calculate such proration(s), and
either party owing the other party a sum of money based on such subsequent
proration(s) shall pay said sum to the other party within ten (10) days after
such calculation is made; provided, however, that the tax proration referenced
in Section (ii) herein shall be final as of the date of Closing. Seller shall be
responsible for payment in full of all real estate taxes and assessments for
years prior to the Closing.
(b) Seller shall pay the premium for the Title Policy except for that
portion to delete the so-called "survey exception." Buyer shall pay all expenses
associated with the performance of Buyer's due diligence pursuant to Section 2.1
above. Escrow fees and recording charges and any other expenses of the escrow
for the sale shall be split equally between Buyer and Seller. Buyer shall pay
the costs of the execution and filing of the Deed. All costs and charges
described in this paragraph shall be paid at Closing. Any bills received after
the Closing and not previously prorated in escrow shall be divided as provided
herein, and shall be paid promptly upon receipt of a bill therefor, and any and
all other costs and expenses relating to the purchase and sale transaction
contemplated hereby shall be paid by the party incurring same.
ARTICLE IX
PROVISIONS WITH RESPECT TO DEFAULT
Section 9.1 Default by Seller. In the event Seller fails to consummate
the transactions contemplated herein for any reason (except in the
event of a breach or violation by Buyer of any representation or
warranty of Buyer set forth herein, a failure by Buyer to perform its
obligations hereunder or to consummate the transactions contemplated
herein or the termination hereof pursuant to a right granted to Buyer
or Seller hereunder to do so) or if Seller has materially breached a
representation or warranty, Buyer may either (i) terminate this
Agreement by notifying Seller thereof, and thereupon shall be entitled
to a return of the Deposit, as its sole and exclusive remedy and
relief hereunder, or (ii) enforce specific performance of this
Agreement, as its sole and exclusive remedy and relief hereunder.
Seller shall not be liable to Buyer for any actual, punitive,
speculative, consequential or other damages; provided, however, that
if specific performance is not available Buyer shall be entitled to
its reasonable, out of pocket expenses associated with this Agreement
in lieu thereof. Buyer hereby waives any and all remedies and relief.
Section 9.2 Default by Buyer. If the sale and purchase of the Property
contemplated by this Agreement is not consummated because of Buyer's
default, Seller, as its sole and exclusive remedy, shall terminate
this Agreement by notifying Buyer thereof, and thereupon shall be
entitled to the Deposit. It is hereby agreed that Seller's damages in
the event of a default by Buyer hereunder are uncertain and impossible
to ascertain, and that the Deposit constitutes a reasonable
pre-estimate of such damages and Seller's retention thereof is
intended not as a penalty, but as full liquidated damages. The right
to retain the Deposit as full liquidated damages is Seller's sole and
exclusive remedy in the event of default hereunder by Buyer, except,
however, for the indemnification obligations of Buyer under this
Agreement, for the breach of which Seller may exercise any and all
rights or remedies available at law or in equity.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices. Any notices required or permitted to be given
hereunder shall be given in writing and shall be delivered (i) in
person, including, without limitation, delivery by a courier that
provides a receipt, (ii) by certified mail, postage prepaid, return
receipt requested, (iii) by a commercial overnight courier that
guarantees next day delivery and provides a receipt or (iv) by
telefacsimile, provided such notice is also given in one of the
methods described in clauses (i)-(iii) above, and such notices shall
be addressed as follows:
To Seller: BRE-N, Inc.
15770 N. Dallas Parkway, Suite 300
Dallas, Texas 75248
Attention: Mr. David Alexander
Fax No.: (972) 404-4002
Tel. No.: (972) 404 4000
with a copy to: Jenkens & Gilchrist, A Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Attention: T. Mitchell Dooley
Fax No.: (214) 855-4300
Tel. No.: (214) 855-4359
To Buyer: Homes For America Holdings, Inc.
6003 Abrams Road
Dallas, Texas 75231
Attention: Mark MacFarlane
Fax No.: (___) ___-____
Tel. No.: (___) ___-____
with a copy to: Ray Khirallah
Donohoe, Jameson & Carroll
3400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Fax No.: (214) 744-9700
Tel. No.: (214) 698-3881
or to such other address as either party may from time to time specify in
writing to the other party. Any notice shall be effective only upon delivery.
Section 10.2 Entire Agreement. This Agreement, together with the
Exhibits and Schedules hereto, contains all representations,
warranties and covenants made by Buyer and Seller and constitutes the
entire understanding between the parties hereto with respect to the
subject matter hereof. Any prior correspondence, memoranda, letters of
intent or agreements are replaced in total by this Agreement together
with the Exhibits and Schedules hereto.
Section 10.3 Time. Time is of the essence in the performance by each
of the parties of their respective obligations contained herein. In
the event that a date for performance of any obligation under this
Agreement or expiration of any time period falls on a Saturday, Sunday
or a holiday on which national banks are required to be closed, the
date for performance of such obligation or expiration of such time
period shall be adjusted to be the next occurring calendar day which
is not a Saturday, Sunday or bank holiday.
Section 10.4 Attorneys' Fees. If either party hereto fails to perform
any of its obligations under this Agreement or if any dispute arises
between the parties hereto concerning the meaning or interpretation of
any provision of this Agreement, then the defaulting party or the
party not prevailing in such dispute, as the case may be, shall pay
any and all reasonable costs and expenses incurred by the other party
on account of such default and/or in enforcing or establishing its
rights hereunder, including, without limitation, court costs and
reasonable attorneys' fees and disbursements. Any such attorneys' fees
and other expenses incurred by either party in enforcing a judgment in
its favor under this Agreement shall be recoverable separately from
and in addition to any other amount included in such judgment, and
such attorneys' fees obligation is intended to be severable from the
other provisions of this Agreement and to survive and not be merged
into any such judgment. The provisions of this Section shall control
over any conflicting provision contained in this Agreement.
Section 10.5 No Merger. The obligations contained herein shall not
merge with the transfer of title to the Property but shall remain in
effect until fulfilled in accordance with the terms hereof.
Section 10.6 Assignment. Buyer's rights and obligations hereunder
shall not be assignable without the prior written consent of Seller,
which consent may be given or withheld in Seller's sole and absolute
discretion; provided, however, that Buyer may assign its rights and
obligations hereunder to an entity controlled by or affiliated with
Buyer with five (5) days prior, written notice to Seller.
Section 10.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.
Section 10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 10.9 Interpretation of Agreement. The article, section and
other headings of this Agreement are for convenience of reference only
and shall not be construed to affect the meaning of any provision
contained herein. Where the context so requires, the use of the
singular shall include the plural and vice versa and the use of the
masculine shall include the feminine and the neuter. The term "Person"
shall include any individual, partnership, joint venture, corporation,
trust, unincorporated association, any other entity and any government
or any department or agency thereof, whether acting in an individual,
fiduciary or other capacity.
Section 10.10 Amendments. This Agreement may be amended or modified
only by a written instrument signed by Buyer and Seller.
Section 10.11 Drafts Not an Offer to Enter into a Legally Binding
Contract. The parties hereto agree that the submission of a draft of
this Agreement by one party to another is not intended by either party
to be an offer to enter into a legally binding contract with respect
to the purchase and sale of the Property. The parties shall be legally
bound with respect to the purchase and sale of the Property pursuant
to the terms of this Agreement only if and when the parties have been
able to negotiate all of the terms and provisions of this Agreement in
a manner acceptable to each of the parties in their respective sole
discretions, including, without limitation, all of the Exhibits and
Schedules hereto, and both Seller and Buyer have fully executed and
delivered to each other a counterpart of this Agreement, including,
without limitation, all Exhibits and Schedules hereto.
Section 10.12 No Partnership The relationship of the parties hereto is
solely that of seller and buyer with respect to the Property and no
joint venture or other partnership exists between the parties hereto.
Neither party has any fiduciary relationship hereunder to the other.
Section 10.14 Exhibits. The Exhibits and Schedules specified in
the Table of Contents are attached to this Agreement and by this
reference made a part hereof.
The parties hereto have executed this Agreement as of the date first
written above.
SELLER:
BRE-N, INC.,
a Texas corporation
By: s/s David Alexander
-----------------------------
Name: David Alexander
-----------------------------
Title:Vice President
-----------------------------
BUYER:
HOMES FOR AMERICA HOLDINGS, INC.
By: s/s Robert A. MacFarlane
-----------------------------
Name: Robert A. MacFarlane
-----------------------------
Title:Chief Executive Officer
-----------------------------
7-13-98
JOINDER OF THE TITLE COMPANY
The Title Company joins in the execution of this Agreement for the sole
purpose of acknowledging the Title Company's receipt of (i) an executed copy of
this Agreement and (ii) the Deposit.
SAFECO LAND TITLE
By: s/s Maggie Fielding
7-14-98 -----------------------------
Name: Maggie Fielding
-----------------------------
Title: Executive Vice President
-----------------------------
JOINDER OF THE BROKER
The Brokers joins in the execution of this Agreement for the sole
purpose of evidencing its agreement with the provisions of Section 6.1 herein.
PINNACLE REALTY
By: s/s Tom Hood
--------------------------
Name: Tom Hood
--------------------------
Title: Vice President
--------------------------
PURCHASE AND SALE AGREEMENT
This agreement to purchase and sell real property is made by and between:
SELLER - William C. Mannix DBA Lawrence R. Mannix Inc. ("Seller") of 202 North
Ivy Street, Branford, Connecticut 06405.
BUYER - Homes For America Holdings, Inc. ("Buyer") of 680-3 West 246th Street,
Riverdale, New York 10471.
PROPERTY DESCRIPTION
Property consists of approximately 39 1/2 acres, with improvements thereon,
located at Ivy Street and Brushy Plain Road, in Branford, CT, as shown on a map
prepared by Stephen A. Hanchuruck, Jr., Surveyor, entitled "Map Showing Mannix
Property" dated April 14, 1998, and includes both property presently owned by
Seller, as listed in part on Schedule A, attached, and additional property, n/f
Michael Kinney, to be purchased by Seller and then included as part of the
property to be transferred under this agreement. If Seller fails to purchase
such additional property, this agreement shall apply to property presently owned
by Seller, and Purchase Price shall be reduced by twenty thousand dollars
($20,000).
PARTIES INTENT
It is the intention of the parties that Buyer shall, at Buyer's sole expense,
prepare architectural and engineering drawings, together with such wetland
studies, traffic studies, drainage studies, environmental studies and the like
as may be required by governmental authorities, so as to gain approvals for the
construction of an assisted living facility, and/or other improvements as may be
of the highest and best use for the property.
PURCHASE PRICE:ORIGINAL TYPE CROSSED OUT - $1,150,000 (One million one hundred
fifty thousand dollars)
HANDWRITTEN REVISION - $1,050,000 (One million fifty thousand dollars)
s/s W.C.M.
--------------
--------------
HANDWRITTEN REVISION - Both parties agree to reduce purchase
price by 100,000 - in consideration William Mannix will retain
ownership of 15A and 31A Brushy Plain Road.
s/s William Mannix
--------------------
--------------------
TERMS OF PAYMENT
1. Initial deposit: 10,000 shares of stock in Homes For America
Holdings, Inc.
2. At closing: $640,000 (Sic hundred forty thousand dollars)
3. Balance of five hundred thousand dollars ($500,000.00) to be
secured by a first mortgage on the property, and to be paid within one
year of closing, or upon any change of title to the property, or upon
any construction financing on the property, whichever occurs earlier.
4. Pro-rata portion of any Markup upon receipt of same by Buyer.
TERMS AND CONDITIONS
1. Zoning and Building Permit - This agreement is subject to Buyer obtaining
approvals for construction as above, and a finding by Buyer of no hazardous
substances on the premises.
2. Buyer agrees to proceed diligently to make any surveys, maps, environmental
services, architectural and engineering drawings, Zoning and/or Wetland
Applications and the like as maybe required to expeditiously obtain
approvals as above from the town of Branford.
3. Closing - to be within 60 days of Buyers obtaining approvals as above.
4. Time is not of the essence in this agreement.
5. If Buyer is unable to obtain the above approvals, Buyer shall have the
option to close without the approvals, or to forfeit the deposit, and
neither party shall then have further claim against the other.
6. If so terminated by Buyer, Buyer shall forfeit deposit and turn over to
Seller reproducible copies of all maps, surveys, drawings, studies and the
like prepared to obtain the approvals as above, and neither party shall
then have further claim against the other.
7. Seller agrees to cooperate in Buyer's efforts to gain approvals, and to
execute such documents as may be required of Seller in such approval
procedures, and allow Buyer's agents to enter onto property at reasonable
times and intervals to make measurements or tests.
8. If Seller fails to close through no fault of Buyer, Seller shall be
subject to demand for specific performance.
ASSIGNMENT - This agreement is assignable by either party.
s/s William C. Mannix
- - --------------------------- -------------------------
TITLE - Seller shall provide a fee simple title by general warranty deed in
marketable form.
PRORATION - Taxes, assessments shall be adjusted and prorated at closing(s) in
accordance with local custom
BROKER - Seller shall pay any real estate brokerage commissions as he may have
agreed to:
$50,000 (Fifty thousand dollars) due to: John Giuliano
Berman Associates
60 Washington Place
Hamden, Connecticut
Agreed as above
BUYER SELLER
Robert A. MacFarlane William C. Mannix
By: s/s Robert A. MacFarlane By: s/s William C. Mannix 8/31/98
-------------------------------- --------------------------------
C.E.O. Date President Date
Homes For America Holdings, Inc. Laurence R. Mannix, Inc.
s/s Laurence R. Inc.
s/s William C. Mannix - Pres.
8/31/98
WITNESS FOR SELLER
s/s John Giuliano 8/31/98
----------------------------------
John Giuliano Date
----------------------------------
Schedule A
As part of Purchase and Sale Agreement by and between:
SELLER - Laurence R. Mannix, Inc., of 202 North Ivy Street, Branford, 06405
BUYER - Aztec Realty LLC of 60 Washington Avenue, Hamden, CT 0651
Properties to be sold and purchased under this agreement are included in, but
not limited to, the following list:
5 Brushy Plain Road
169 Ivy Street
27 Brushy Plain Road
7 Brushy Plain Road
177 Ivy Street
173 Ivy Street
181 Ivy Street
185 Ivy Street
11 Brushy Plain Road
ORIGINAL TYPE CROSSED OUT - 15 Brushy Plain Road
31 Brushy Plain Road
HANDWRITTEN REVISION - Both parties agree to delete these two properties for
consideration of a one hundred thousand reduction in sales price (from
$1,150,000 to $1,050,000)
s/s William C. Mannix
- - ------------------------
William C. Mannix
- - ------------------------
PROMISSORY NOTE
Page 3
PROMISSORY NOTE
FOR VALUE RECEIVED, Homes For America Holdings, Inc., a Nevada
corporation ("Maker") promises to pay to the order of William Koplovitz, Jr.,
("Holder"), the following cash sum with an equity incentive, as so determined by
this Promissory Note ("Note").
I. INDEBTEDNESS. The Maker shall pay the Holder Two Hundred,
Fifty-Thousand Dollars ($250,000.00) being the amount advanced
by Holder as a loan to the Company (the "Loan").
II. INTEREST CHARGES. An interest rate of nine percent (9%) per
annum has been agreed upon between Maker and Holder.
III. PAYMENTS.
The Principal portion of the obligation as evidenced by this
Note shall be repaid in two (2) equal payments of One Hundred
Twenty-Five Thousand Dollars ($125,000.00), on the following
dates January 27, 1999 ("First Due Date") and July 27, 1999
("Second Due Date").
The Interest portion of the obligation evidenced by the Note
shall be paid monthly on the last Friday of every month
commencing Friday, August 28, 1998.
IV. COLLATERALIZATION. The Loan shall be collateralized by the
Promissory Note on the Putnam Square Apartments in Bridgeport,
Connecticut (the "Putnam Note") between the Company and
TVMJG-Putnam Square Limited Partnership. In order to ensure the
collateralization of the Promissory Note, the Maker shall file a
Universal Commercial Code Form with the State of Virginia, the
State in which the Putnam Note is held, and send copies to the
Holder. The Putnam Note is a senior debt that totals Two Hundred
Thousand Dollars ($200,000.00) and precedes the first mortgage
on the property. The Putnam Note is payable from "Cash Flow" as
set forth in Section 11.01 of the TVMJG-Putnam Square Limited
Partnership Second Amendment and Restated Agreement.
V. EQUITY INCENTIVE. The Maker shall grant the Holder Twenty-Five
Thousand (25,000) shares (the "Incentive") of common,
unrestricted shares of common stock of Homes For America
Holdings, Inc., (the "Company"). The Incentive shall be released
to the Holder upon funding of the Loan.
VI. ADDITIONAL INCENTIVE. The Maker shall grant the Holder an
additional incentive of Thirty Thousand (30,000) warrants (the
"Warrants") of the Company. The Warrants shall have a term of
twenty-four (24) months and shall be priced fifty percent (50%)
below the opening stock price of the Company upon its listing on
a domestic stock exchange. The Additional Incentive shall be
released on March 15, 1999.
In the event the Company is not publicly traded on an accredited
domestic exchange within six (6) months of the Note, the Holder
shall have two options:
Have the term of the Warrants extended by an additional
twenty-four (24) months.
Receive Thirty Thousand (30,000) non-restricted shares of common
stock and surrender the remaining warrants to the Maker.
VII. GRACE PERIOD. This Holder will grant the Maker a ten-day
(10) grace period after each monthly Interest due date and each
semi-annual Due Date.
VIII. PURPOSE. The Maker's obligation hereunder is based upon the
advance of the Loan as delineated in this document. The Loan is
made for business purposes of the Company.
IX. PENALTY. In an act of good faith, the Maker will deposit One
Hundred Fifty Thousand (150,000) shares of common, unrestricted
stock (the "Escrowed Shares") in an custodial escrow account in
the care of Mr. Daniel G. Hayes, Esq. (the "Agent")
collateralizing the aforementioned Loan. (The rules governing
the abilities and powers of the Agent are set forth in the
Escrow Agreement.)
If the Maker adheres to all the rules and stipulations of the
Note, the shares will be returned to the Maker thus bringing
closure to the Note and Loan. Further, if the Maker has been in
compliance with all Principal and Interest obligations up to and
including the First Due Date and the rules and stipulations set
forth in this Note, the Escrowed Shares shall be reduced to One
Hundred Thousand Shares (100,000). At such time, the Agent will
return the reduced shares (50,000) to the Maker, within seven
(7) business days after having received written notice by Maker.
For each of the ensuing six (6) months thereafter where Maker
pays the required interest payment in a timely manner the
Escrowed Shares shall be reduced at a rate of Four Thousand
(4,000) shares a month. When the Maker shall have made all
required Principal & Interest payments to Holder, any and all
remaining Escrowed Shares will released to the Maker thus
bringing closure to the Note and Loan.
However, if the Maker does not adhere to the rules and
stipulations of the Note and Loan whereby the Maker:
(a) exceeds the allotted grace period(s), and / or
(b) defaults on any two (2) consecutive monthly payments,
by such default, the Maker shall be deemed to have surrendered
and assigned from the Escrowed Shares (150,000 shares) to the
Holder the portion equal to Four Thousand (4,000) shares of
non-restricted common stock for each monthly interest payment(s)
missed and an additional Five Hundred (500) shares per day, from
the Escrowed Shares, for each day past the grace period for the
Principal Payments due in Section III, Paragraph 1 until such
Principal payments are made.
In such case that the Maker is in breach of contract pursuant to
the items delineated in above, in addition to the aforementioned
penalties, the Maker will still be obligated to pay the
indebtedness in full and will be legally bound until the Holder
has received all remaining payment(s).
X. PREPAYMENT. Advanced payment or payments may be made on any
amounts adhering to the following stipulations:
If the pre-payment occurs before the First Due Date, the Maker
shall be entitled to the remaining interest payments for the
first six (6) months of the term of the Note.
If the prepayment occurs after the First Due Date but before
the Second Due Date, the Maker shall be entitled to the
remaining interest payments that span the second six (6)
months of the term of the Note.
XI. TYPES AND PLACE OF PAYMENTS. The payments contemplated in the
Note shall be made in lawful currency of the United States of
America to the order of Holder, at any reasonable location
designated by Holder.
XII. FEES. If this Note be contested or placed with an attorney for
breach of contract, the prevailing party or parties shall be
paid all reasonable costs of such legal proceedings, including
but not limited to, attorney's fees by the other party or
parties.
XIII. NON-DISCLOSURE. The terms of the Note are to remain confidential
and private among, and limited to, the Maker, Holder, and Escrow
Custodian.
XIV. CONSTRUCTION. This Note shall be governed by and construed in accordance
with the laws of the State of New York.
Dated this 29th day of July 1998.
MAKER HOLDER
- - ----------------------------------------------------------------------------
Robert A. MacFarlane, President William Koplovitz, Jr.
Homes For America Holdings, Inc.
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement"), made as of the first day
of August, 1998, is entered into by Homes for America Holdings, Inc., a Nevada
corporation with its principal business office at 680-3 West 246th Street,
Riverdale, New York 10471 (the "Company"), and International Business & Realty
Consultants, L.L.C., a Virginia limited liability company with a business office
at 1725 DeSales Street, N.W., Suite 300, Washington, D.C. 20036 (the
"Consultant" or "IB&R"), for services to be rendered by an IB&R employee, Robert
M. Kohn ("Kohn"), through the Consultant to the Company.
The Company has embarked upon a national program to acquire and
rehabilitate high quality apartment projects and other multifamily or multiple
unit residential projects, using where available tax-exempt or subsidized
financing and tax credits available to such projects, especially for what is
known in the industry as "affordable housing", and the Consultant, represented
by its key employee Kohn who has an established network of brokers, financial
institutions, and property owners operating in this industry.
The Company desires to engage the Consultant, and the Consultant
desires to contract with and provide consulting services to the Company. In
consideration of the mutual covenants and promises contained herein, and other
good and valuable consideration, including the previous performance by each
party from the Commencement Date (described below), now ratified and accepted,
the receipt and sufficiency of which are hereby acknowledged by the parties
hereto, the parties agree as follows:
1. Term of Engagement.
The Company hereby agrees to engage the Consultant, and the Consultant
hereby accepts engagement to work with the Company, to provide the Consulting
Services (described hereinbelow) upon the terms set forth in this Agreement, for
the period that commenced on August 1, 1998 (the "Commencement Date"), and
continuing to and including July 31, 2003, renewable thereafter for successive
twelve (12) month periods, unless sooner terminated in accordance with the
provisions of Section 4 (the "Engagement Period"). Unless either party shall
notify the other of its intention not to renew this Agreement before the day
sixty (60) days prior to the last day of the then current term, it shall
automatically renew for another twelve (12) month period on the same terms as
then in effect.
2. Consulting Services; Officer; Responsibility. (a) The Consultant
hereby agrees to provide real estate acquisition and development services,
including the preparation and implementation of the Company's business plan, the
identification in the national market of prospective acquisitions, the review
and due diligence investigation of prospective properties (including the
supervision of professional firms therefor), the negotiation and representation
of the Company in the acquisitions and the related applications for financing
(whether tax-exempt, government-subsidized, conventional, or other) therefor and
property fundings, including equity and tax credit sales or joint ventures
related to such acquisitions, the development of operation and management plans
for acquired properties, and related matters as the business plan of the Company
is implemented.
(b) The Consultant's key employee Kohn shall serve as Director or in
such other position as the Company or its Board of Directors (the "Board") may
determine from time to time; provided however that his duties, obligations, and
responsibilities shall not be materially changed without the written consent of
the Consultant and Kohn. Kohn is also referred to herein as an "Officer".
(c) The Officer is serving in these offices to demonstrate the real
estate credentials of the Company and not to perform any services for the
Company. The Officers will serve in the designated capacity only during the
Engagement Period and only to facilitate the delivery of the Consulting
Services. To the extent an Officer receives Proprietary Information in this
capacity he shall be governed by the provisions of Section 7 herein below.
(d) Neither the Officer nor the Consultant is being engaged by this
Agreement to be, nor shall either of them be by virtue of the terms of or in
consideration of the consulting fees hereunder, responsible for the securities
and other compliance related to the raising of capital. An Officer may have the
duties customarily assigned to the office designated under Section 2(b) above
except where the Board either discharges such duties as a collective body
directly or through other designees, as the Company does for example in raising
capital, preparing securities disclosures, marketing therefor, and the like, in
which instance the Officer shall restrict his presentation and oversight to
matters related to the real estate transactions of the Company.
(e) The Consultant's employee Kohn shall operate out of the Company's
business office in Washington, D.C., and shall not be transferred without his
written consent. Kohn shall be subject to the supervision of, and shall have
such authority as is delegated to him by the Board or such other officer of the
Company as may be designated by the Board or the bylaws of the Company. Subject
to the terms of this Section 2 Kohn shall cooperate fully with the executive
officers of the Company and the Board on all matters affecting the business of
the Company. By endorsement the Kohn hereby accepts such office and agrees to
undertake the duties and responsibilities inherent in such position and such
other duties and responsibilities as the Board or its designee shall from time
to time reasonably assign to him.
(f) At all times during the performance of services under this
Agreement the Company shall indemnify and hold harmless Kohn, the Officer, and
the Consultant against any claim, liability, expense, and charge therefor and
shall defend it or him at Company expense in any proceeding related thereto
(except for gross negligence or wilful misconduct of the indemnified person).
This indemnification right shall survive termination of services under this
Agreement.
3. Payments.
3.1 Consulting Fee.
(a) Beginning on the Commencement Date and thereafter for so long as
the Consultant shall continue to be engaged hereunder by the Company pursuant to
the terms of this Agreement, the Company shall pay the Consultant, in monthly
installments, paid in advance on or before the tenth (10th) day of each month,
for the period of engagement a monthly consulting fee as follows:
(1) For the period from July 1998 to December 1998:
the sum of Fifteen Thousand Dollars ($15,000);
(2) For the period from January to December in each succeeding year
during the Term of this Agreement, the sum determined by the Board of Directors
of the Company but in no event less than one hundred five per cent (105%) of the
monthly consulting fee of the immediately preceding period.
3.2 Reimbursement of Expenses. The Company shall reimburse the
Consultant for all reasonable travel, entertainment, and other expenses incurred
or paid by the Consultant in connection with, or related to, the performance of
its duties, responsibilities, or services under this Agreement, upon
presentation by the Consultant of documentation, expense statements, vouchers,
and such other supporting information as the Company may request, provided,
however, that the amount available for such travel, entertainment, and other
expenses may be fixed in advance, but not retroactively, by the Board.
3.3 Indemnification. At all times during the performance of services
by the Consultant under this Agreement the Company shall indemnify and hold
harmless the Consultant and the Officer against any claim, liability, expense,
and charge therefor and shall defend Consultant and the Officers at Company
expense in any proceeding related thereto (except for gross negligence or wilful
misconduct of Consultant or the Officers). This indemnification right shall
survive termination of services under this Agreement.
3.4 Unrelated Tax Credit Fees and Expense Reimbursement.
(a) The parties understand and agree that Kohn or an affiliate thereof
may receive (i) separate compensation as consulting or brokerage fees or (ii)
separate compensation as consulting or brokerage fees for sales of tax credits
for Company transactions supervised or conducted by the Consultant or Kohn and
subject hereto. Such tax credit fees or commissions and real estate commissions
due to Kohn, his affiliate, or to the Consultant for any acquisition, transfer,
or sale by the Company or any of its affiliates are separate from monies due
under this Agreement and no credit or set-off is allowed for such fees or
commissions against obligations of the Company hereunder.
4. Engagement Termination. The engagement of the Consultant by the
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
4.1 Thirty (30) days after the death or disability of Kohn. As used in
this Agreement, the term "disability" shall mean the inability of Kohn, due to a
physical or mental disability, for either (a) a period of one hundred twenty
(120) days, whether or not consecutive, during any 360-day period, or (b) a
period of ninety (90) consecutive days to perform the services contemplated
under this Agreement. A determination of disability shall be made by a physician
satisfactory to both the Consultant and the Company, provided that if the
Consultant and the Company do not agree on a physician, the Consultant and the
Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties.
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Consultant. For the purposes of this
Section 4.1, cause for termination shall be deemed to exist upon (a) the willful
engaging by the Consultant in gross misconduct resulting in material injury to
the Company or willful breach of fiduciary duty, or (b) the nonappealable
conviction of the Consultant or of Kohn of, or the entry of a pleading of guilty
or nolo contendere by the Consultant or Kohn, to any crime involving moral
turpitude or fraud. For purposes of this paragraph, no act, or failure to act,
on the Consultant's part shall be considered "willful" unless done, or omitted
to be done, by it not in good faith and without reasonable belief that its act
or omission was in the best interest of the Company or otherwise not likely to
result in material injury thereto.
4.3 At the election of the Company, in its sole discretion, upon not
less than sixty (60) days prior written notice of termination.
4.4 At the election of the Consultant, in its sole discretion, upon
not less than sixty (60) days prior written notice of termination.
4.5 At the election of the Consultant, upon failure of the Company to
perform or observe any of the material terms or provisions of this Agreement,
and the failure of the Company to cure such failure within fifteen (15) days
after written notice of such failure and demand for performance has been given
to the Company by the Consultant, which notice and demand shall describe
specifically in detail the nature of such alleged failure to perform or observe
such material term or provision, provided that if cure is not possible within
such fifteen (15) day period it shall suffice for the Company to commence and
diligently pursue thereafter the cure within the shortest reasonable time.
5. Effect of Termination.
5.1 Termination for Death or Disability. If the Consultant's
engagement is terminated by death or because of death or disability pursuant to
Section 4.1, the Company shall pay to the Consultant the compensation which
would otherwise be payable to the Consultant up to the end of the month in which
the termination of its engagement because of death or disability occurs.
5.2 Termination for Cause. In the event the Consultant's engagement is
terminated for cause pursuant to Section 4.2 the Company shall pay to the
Consultant the compensation and benefits otherwise payable to it under Section 3
through the last day of its actual engagement by the Company.
5.3 Termination for Cause or at Election of Either Party. In the event
the Consultant's engagement is terminated by the Company pursuant to Section 4.3
the Company shall remain liable to the Consultant for the amount of compensation
otherwise due under Section 3.1 through the end of the then current term (either
through July 31, 2003, or the current renewal period thereafter) but without
liability for costs or reimbursements for any costs incurred after the
termination (other than indemnification pursuant to Section 3.3). In the event
the Consultant's engagement is terminated at the election of the Consultant
pursuant to Section 4.4, the Company shall pay to the Consultant the
compensation and benefits otherwise payable to it under Section 3 through the
last day of its actual engagement by the Company.
5.4 No Additional Compensation upon Termination. Even if the
Consultant's engagement hereunder is terminated under paragraphs 4.3 or 4.5, the
Company shall not be obligated to pay the Consultant any additional severance
compensation other than the consulting fees through the date of termination of
this agreement.
5.5 Survival. The provisions of Sections 2(e), 3.3, 5.3, 6, and
7 shall survive the termination of this Agreement.
6. Non-Compete. (a) During the Engagement Period and for a period of
Two (2) Years after the termination or expiration thereof, or until the date (if
earlier) Two (2) Years from the last day on which the Consultant received
compensation from the Company hereunder, neither the Consultant nor any Officer
will directly or indirectly:
(i) as an individual proprietor, partner, stockholder, officer, employee,
director, joint venture, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than one percent (1%)
of the total outstanding stock of a publicly held company), engage in
the business of developing, producing, marketing, or selling products
or services of the kind or type developed or being developed, produced,
marketed, or sold by the Company while the Consultant (or IB&R or
Officer, as applicable) was employed by the Company; provided that the
limitations in this subsection 6(a)(i) shall not apply in the event the
Consultant is terminated pursuant to Section 4.3 or 4.5; or
(ii) recruit, solicit, or induce, or attempt to, induce, any employee or
employees of the Company to terminate their engagement with, or
otherwise cease their relationship with, the Company; or
(iii) solicit, divert, or take away, or attempt to divert or to take away,
the business or patronage of any of the clients, customers, or
accounts, or prospective clients, customers or accounts, of the Company
which were contacted, solicited or served by the Consultant (or
Officer, as applicable) while employed by the Company.
(b) If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
or time, range of activities, or geographic area as to which it may be
enforceable.
(c) The restrictions contained in this Section 6 are necessary for the
protection of the business and goodwill of the Company and are considered by the
Consultant (and Kohn and the Officers) to be reasonable for such purpose. The
Consultant agrees that any breach of this Section 6 will cause the Company
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Company
shall have the right to seek specific performance and injunctive relief. The
Company agrees and understands that the restrictions of this Section 6 do not
apply to any commercial real estate brokerage activities of the Consultant or
Kohn, whether now in process or later undertaken.
7. Proprietary Information.
7.1 Proprietary Information.
(a) Consultant agrees that all information and know-how, whether or not
in writing, of a private, secret, or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and shall be exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, and member, customer, and
supplier lists. Consultant will not disclose any Proprietary Information to
others outside the Company or use the same for any unauthorized purposes without
written approval by an officer of the Company, either during or after its
engagement, unless and until such Proprietary Information has become public
knowledge without fault by the Consultant, or to comply with the order of a
court exercising jurisdiction of the matter.
(b) Consultant agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, notebooks, program listings, or other
written, photographic, or other tangible material containing Proprietary
Information, whether created by the Consultant or others, which shall come into
its custody or possession, shall be and are the exclusive property of the
Company to be used by the Consultant only in the performance of its duties for
the Company.
(c) Consultant agrees that its obligation not to disclose or use
information, know-how, and records of the types set forth in paragraphs (a) and
(b) above, also extends to such types of information, know-how, records, and
tangible property of members of the Company or customers of the Company or
suppliers to the Company or other third parties who may have disclosed or
entrusted the same to the Company or to the Consultant in the course of the
Company's business.
7.2 Other Agreements. Consultant hereby represents that it is not
bound by the terms of any agreement with any previous employer or other party to
refrain from using or disclosing any trade secret or confidential or proprietary
information in the course of this engagement with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or any other party. Consultant further represents that its performance of all
the terms of this Agreement and as an employee of the Company does not and will
not breach any agreement to keep in confidence proprietary information,
knowledge, or data acquired by it in confidence or in trust prior to its
engagement with the Company.
8. Notice. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 8.
9. Pronouns. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
11. Amendment. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Consultant.
12. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of the State of Nevada.
13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company or the
Consultant may be merged or which may succeed to its assets or business.
14. General Provisions.
14.1 No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver or
consent given by the Company on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on any other
occasion.
14.2 The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit, or affect the scope or substance
of any section of this Agreement.
14.3 In case any provision of this Agreement shall be invalid, illegal,
or otherwise unenforceable, the validity, legality, and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
14.4 This Agreement shall be executed in two (2) counterparts each of
which shall be deemed an original hereof and both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parites hereto have executed this Agreement as of the
day and year set forth above intending to be legally bound thereby.
COMPANY:
HOMES FOR AMERICA HOLDINGS, INC.
By: /s/ Robert A. MacFarlane ATTEST:
---------------------------- [Corporate Seal]
TItle: Chief Executive Officer
By: -------------------------------
Its: (Assistant) Secretary
CONSULTANT:
INTERNATIONAL BUSINESS AND ATTEST:
REALTY CONSULTANTS, L.L.C. [Corporate Seal]
By: s/s Robert Kohn
---------------------------- By: -------------------------------
Title: President Its: (Assistant) Secretary
ROBERT M. KOHN WITNESS
s/s Robert Kohn s/s Megan C. Duke
- - ------------------------------- -----------------------------------
Robert M. Kohn
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made as of the first day
of August, 1998, is entered into by Homes for America Holdings, Inc., a Nevada
corporation with its principal business office at 680-3 West 246th Street,
Riverdale, New York 10471 (the "Company"), and Mr. Robert A. MacFarlane, c/o The
MacFarlane Company, Inc., a New York corporation with its principal business
office at 680-3 West 246th Street, Riverdale, New York 10471 (the "Employee" or
"MacFarlane"), replacing that certain Restated Consulting Agreement dated as of
October 31, 1996, as amended and restated as of January 1, 1997, as of January
1, 1998, and again on July 1, 1998 (as in effect on the date hereof, the
"Original Agreement"), by and between the Company and the Employee's controlled
company, The MacFarlane Company, Inc. (the "Original Consultant"), which has
assigned and surrendered its interest in the Original Agreement to the Employee
directly.
The Company has embarked upon a national program to acquire and
rehabilitate high quality apartment projects and other multifamily or multiple
unit residential projects, using where available tax-exempt or subsidized
financing and tax credits available to such projects, especially for what is
known in the industry as "affordable housing", and the Employee has an
established working history in affordable housing and the multifamily real
estate market and has represented some of the largest property owners operating
in this industry.
The Company desires to engage the Employee, and the Employee desires to
be employed by and provide services to the Company. In consideration of the
mutual covenants and promises contained herein, and other good and valuable
consideration, including the previous performance by each party (or its
predecessor) from the Commencement Date (described below), now ratified and
accepted, the receipt and sufficiency of which are hereby acknowledged by the
parties hereto, the parties agree as follows:
1. TERM OF EMPLOYMENT.
The Company hereby agrees to engage and employ the Employee, and the
Employee hereby accepts employment with the Company, to provide the Services
(described in Section 2 hereinbelow) upon the terms set forth in this Agreement,
for the period that commenced on August 1, 1998 (the "Commencement Date"), and
continuing to and including July 31, 2003, renewable thereafter for successive
twelve (12) month periods, unless sooner terminated in accordance with the
provisions of Section 4 (the "Employment Period"). Unless either party shall
notify the other of its intention not to renew this Agreement before the day
sixty (60) days prior to the last day of the then current term, it shall
automatically renew for another twelve (12) month period on the same terms as
then in effect.
2. SERVICES; OFFICES; RESPONSIBILITY. (a) The Employee hereby agrees
to provide real estate acquisition and development services, including the
preparation and implementation of the Company's business plan, the
identification in the national market of prospective acquisitions, the review
and due diligence investigation of prospective properties (including the
supervision of professional firms therefor), the negotiation and representation
of the Company in the acquisitions and the related applications for financing
(whether tax-exempt, government-subsidized, conventional, or other) therefor and
property fundings, including equity and tax credit sales or joint ventures
related to such acquisitions, the development of operation and management plans
for acquired properties, and related matters as the business plan of the Company
is implemented.
(b) The Employee shall serve as President or Chief Executive Officer
and as Director or in such other position as the Company or its Board of
Directors (the "Board") may determine from time to time; provided however that
his duties, obligations, and responsibilities shall not be materially changed
without the written consent of the Employee.
(c) The Officer is serving in these offices to demonstrate the real
estate credentials of the Company and not to perform any services for the
Company. The Officers will serve in the designated capacity only during the
Employment Period and only to facilitate the delivery of the Services. To the
extent an Officer receives Proprietary Information in this capacity he shall be
governed by the provisions of Section 7 herein below.
(d) The Employee shall operate out of the Company's business office in
New York, New York, and shall not be transferred without his written consent.
The Employee shall be subject to the supervision of, and shall have such
authority as is delegated to him by the Board or such other officer of the
Company as may be designated by the Board or the bylaws of the Company. Subject
to the terms of this Section 2 the Employee shall cooperate fully with the
executive officers of the Company and the Board on all matters affecting the
business of the Company. By endorsement the Employee hereby accepts such office
and agrees to undertake the duties and responsibilities inherent in such
position and such other duties and responsibilities as the Board or its designee
shall from time to time reasonably assign to him.
(e) At all times during the performance of services under this
Agreement the Company shall indemnify and hold harmless the Officer and the
Employee against any claim, liability, expense, and charge therefor and shall
defend him at Company expense in any proceeding related thereto (except for
gross negligence or wilful misconduct of the indemnified person). This
indemnification right shall survive termination of services under this
Agreement.
3. PAYMENTS.
3.1 BASE SALARY.
(a) Beginning on the Commencement Date and thereafter for so long as
the Employee shall continue to be engaged hereunder by the Company pursuant to
the terms of this Agreement, the Company shall pay the Employee, in monthly
installments, paid in advance on or before the tenth (10th) day of each month,
for the period of engagement a monthly base salary (the "Base Salary") as
follows:
(1) For the period from August 1998 to December 1998: the sum of
Fifteen Thousand Five Hundred Dollars ($15,500).
(2) For the period from January to December in each succeeding year
during the Term of this Agreement, the sum determined by the Board of Directors
of the Company but in no event less than one hundred five per cent (105%) of the
monthly Base Salary of the immediately preceding period.
3.2 REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Employee for all reasonable travel, entertainment, and other expenses incurred
or paid by the Employee in connection with, or related to, the performance of
its duties, responsibilities, or services under this Agreement, upon
presentation by the Employee of documentation, expense statements, vouchers, and
such other supporting information as the Company may request, provided, however,
that the amount available for such travel, entertainment, and other expenses may
be fixed in advance, but not retroactively, by the Board.
3.3 INDEMNIFICATION. At all times during the performance of services
by the Employee under this Agreement the Company shall indemnify and hold
harmless the Employee and the Officer against any claim, liability, expense, and
charge therefor and shall defend Employee and the Officers at Company expense in
any proceeding related thereto (except for gross negligence or wilful misconduct
of Employee or the Officers). This indemnification right shall survive
termination of services under this Agreement.
3.4 UNRELATED TAX CREDIT FEES AND EXPENSE REIMBURSEMENT.
The parties understand and agree that the Employee is the principal
owner for the Original Consultant and that the Employee or the Original
Consultant or an affiliate thereof may receive separate compensation as
consulting or brokerage fees for sales of tax credits for Company transactions
supervised or conducted by the Employee or the Original Consultant and subject
hereto. Such tax credit fees or commissions due to the Employee or to the
Original Consultant for any acquisition, transfer, or sale by the Company or any
of its affiliates, as well as the one-time expense reimbursement to F.C.
Partners, an affiliate of the Employee, and described in Note 5 to the May 31,
1996, financial statements of the Company, are separate from monies due under
this Agreement and no credit or set-off is allowed for such fees, commissions,
or reimbursements against obligations of the Company hereunder.
4. ENGAGEMENT TERMINATION. The engagement of the Employee by the
Company pursuant to this Agreement shall terminate upon the occurrence of any of
the following:
4.1 Thirty (30) days after the death or disability of MacFarlane. As
used in this Agreement, the term "disability" shall mean the inability of
MacFarlane, due to a physical or mental disability, for either (a) a period of
one hundred twenty (120) days, whether or not consecutive, during any 360-day
period, or (b) a period of ninety (90) consecutive days to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician satisfactory to both the Employee and the Company, provided that
if the Employee and the Company do not agree on a physician, the Employee and
the Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties.
4.2 At the election of the Company, for cause, immediately upon
written notice by the Company to the Employee. For the purposes of this Section
4.2, cause for termination shall be deemed to exist upon (a) the willful
engaging by the Employee in gross misconduct resulting in material injury to the
Company or willful breach of fiduciary duty, or (b) the nonappealable conviction
of the Employee of, or the entry of a pleading of guilty or nolo contendere by
the Employee, to any crime involving moral turpitude or fraud. For purposes of
this paragraph, no act, or failure to act, on the Employee's part shall be
considered "willful" unless done, or omitted to be done, by it not in good faith
and without reasonable belief that its act or omission was in the best interest
of the Company or otherwise not likely to result in material injury thereto.
4.3 At the election of the Company, in its sole discretion, upon not
less than sixty (60) days prior written notice of termination.
4.4 At the election of the Employee, in his sole discretion, upon not
less than sixty (60) days prior written notice of termination.
4.5 At the election of the Employee, upon failure of the Company to
perform or observe any of the material terms or provisions of this Agreement,
and the failure of the Company to cure such failure within fifteen (15) days
after written notice of such failure and demand for performance has been given
to the Company by the Employee, which notice and demand shall describe
specifically in detail the nature of such alleged failure to perform or observe
such material term or provision, provided that if cure is not possible within
such fifteen (15) day period it shall suffice for the Company to commence and
diligently pursue thereafter the cure within the shortest reasonable time.
5. EFFECT OF TERMINATION.
5.1 TERMINATION FOR DEATH OR DISABILITY. If the Employee's engagement
is terminated by death or because of death or disability pursuant to Section
4.1, the Company shall pay to the Employee the compensation which would
otherwise be payable to the Employee up to the end of the month in which the
termination of its engagement because of death or disability occurs.
5.2 TERMINATION FOR CAUSE. In the event the Employee's engagement is
terminated for cause pursuant to Section 4.2 the Company shall pay to the
Employee the compensation and benefits otherwise payable to him under Section 3
through the last day of its actual engagement by the Company.
5.3 TERMINATION FOR CAUSE OR AT ELECTION OF EITHER PARTY. In the event
the Employee's engagement is terminated by the Company pursuant to Section 4.3
the Company shall remain liable to the Employee for the amount of compensation
otherwise due under Section 3.1 through the end of the then current term (either
through July 31, 2003, or the current renewal period thereafter) but without
liability for costs or reimbursements for any costs incurred after the
termination (other than indemnification pursuant to Section 3.3). In the event
the Employee's employment is terminated at the election of the Employee pursuant
to Section 4.4 or 4.5, the Company shall pay to the Employee the compensation
and benefits otherwise payable to him under Section 3 through the last day of
his actual employment by the Company.
5.4 NO ADDITIONAL COMPENSATION UPON TERMINATION. Even if the
Employee's employment hereunder is terminated under paragraphs 4.3 or 4.5, the
Company shall not be obligated to pay the Employee any additional severance
compensation other than the Base Salary and reimbursements through the date of
termination.
5.5 SURVIVAL. The provisions of Sections 2(e), 3.3, 5.3, 6, and 7
shall survive the termination of this Agreement.
6. NON-COMPETE. (a) During the Employment Period and for a period of
Two (2) Years after the termination or expiration thereof, or until the date (if
earlier) Two (2) Years from the last day on which the Employee received
compensation from the Company hereunder, the Employee (as employee or as
Officer) will not directly or indirectly:
(i) as an individual proprietor, partner, stockholder, officer, employee,
director, joint venture, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than one percent (1%)
of the total outstanding stock of a publicly held company), engage in
the business of developing, producing, marketing, or selling products
or services of the kind or type developed or being developed, produced,
marketed, or sold by the Company while the Employee (or the Officer, if
applicable) was employed by the Company; provided that the limitations
in this subsection 6(a)(i) shall not apply in the event the Employee is
terminated pursuant to Section 4.3 or 4.5; or
(ii) recruit, solicit, or induce, or attempt to, induce, any employee or
employees of the Company to terminate their engagement with, or
otherwise cease their relationship with, the Company; or
(iii) solicit, divert, or take away, or attempt to divert or to take away,
the business or patronage of any of the clients, customers, or
accounts, or prospective clients, customers or accounts, of the Company
which were contacted, solicited or served by the Employee (or Officer,
as applicable) while employed by the Company.
(b) If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
or time, range of activities, or geographic area as to which it may be
enforceable.
(c) The restrictions contained in this Section 6 are necessary for the
protection of the business and goodwill of the Company and are considered by the
Employee (and the Officers) to be reasonable for such purpose. The Employee
agrees that any breach of this Section 6 will cause the Company substantial and
irrevocable damage and therefore, in the event of any such breach, in addition
to such other remedies which may be available, the Company shall have the right
to seek specific performance and injunctive relief. The Company agrees and
understands that the restrictions of this Section 6 do not apply to any
commercial real estate brokerage activities of the Employee or the Original
Consultant, whether now in process or later undertaken.
7. PROPRIETARY INFORMATION.
7.1 PROPRIETARY INFORMATION.
(a) Employee agrees that all information and know-how, whether or not
in writing, of a private, secret, or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and shall be exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, and member, customer, and
supplier lists. Employee will not disclose any Proprietary Information to others
outside the Company or use the same for any unauthorized purposes without
written approval by an officer of the Company, either during or after its
engagement, unless and until such Proprietary Information has become public
knowledge without fault by the Employee, or to comply with the order of a court
exercising jurisdiction of the matter.
(b) Employee agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, notebooks, program listings, or other
written, photographic, or other tangible material containing Proprietary
Information, whether created by the Employee or others, which shall come into
its custody or possession, shall be and are the exclusive property of the
Company to be used by the Employee only in the performance of its duties for the
Company.
(c) Employee agrees that its obligation not to disclose or use
information, know- how, and records of the types set forth in paragraphs (a) and
(b) above, also extends to such types of information, know-how, records, and
tangible property of members of the Company or customers of the Company or
suppliers to the Company or other third parties who may have disclosed or
entrusted the same to the Company or to the Employee in the course of the
Company's business.
7.2 OTHER AGREEMENTS. Employee hereby represents that he is not bound
by the terms of any agreement with any previous employer or other party to
refrain from using or disclosing any trade secret or confidential or proprietary
information in the course of this engagement with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or any other party. Employee further represents that his performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence proprietary information, knowledge,
or data acquired by him in confidence or in trust prior to his engagement with
the Company.
8. NOTICE. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 8.
9. PRONOUNS. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
11. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.
12. GOVERNING LAW. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of the State of Nevada.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company or the
Employee may be merged or which may succeed to its assets or business.
14. GENERAL PROVISIONS.
14.1 No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver or
consent given by the Company on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on any other
occasion.
14.2 The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit, or affect the scope or substance
of any section of this Agreement.
14.3 In case any provision of this Agreement shall be invalid, illegal,
or otherwise unenforceable, the validity, legality, and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
14.4 This Agreement shall be executed in two (2) counterparts each of
which shall be deemed an original hereof and both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year set forth above intending to be legally bound hereby.
COMPANY:
HOMES FOR AMERICA
HOLDINGS, INC.
By: s/s Robert MacFarlane ATTEST:
- - ---------------------------- [Corporate Seal]
Robert A. MacFarlane
Title: President By: s/s Richard J. Weiss
--------------------- -------------------------------
Its: (Assistant) Secretary
EMPLOYEE: WITNESS:
ROBERT A. MACFARLANE
s/s Robert A. MacFarlane s/s Richard J. Weiss
- - ---------------------------- -----------------------------------
Robert A. MacFarlane Richard J. Weiss
Homes For America Holdings, Inc.
Item 21 - List of Subsidiaries
1. Putnam Homes For America, Inc.
24 Naugatuck St.
Milford, CT
Tax payer ID # 06-1496997
Percentage Owned - 100%
2. Prairie Village Homes For America, Inc.
1725 DeSales Street NW
Washington, DC
Taxpayer ID # 52-2074336
Percentage Owned - 100%
3. Glen Hills Homes For America, Inc.
6003 Abrams Road Dallas, TX Taxpayer ID # 52-2079776 Percentage
Owned - 100%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001011417
<NAME> Homes For America Holdings, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001011417
<NAME> Homes For America Holdings, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
</TABLE>
