SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
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
- --------------------------------------------------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Odell Plaza, Yonkers, New York 10701
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(914) 964-3000
- --------------------------------------------------------------------------------
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act.
Name of each exchange on
Title of each class: which registered
None None
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, .001 par value per share
- --------------------------------------------------------------------------------
(Title of class)
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
Registration Statement on Form 10-SB
TABLE OF CONTENTS
Page
GLOSSARY OF TERMS...........................................................iii
PART I
ITEM 1. BUSINESS.........................................................1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................15
ITEM 3. PROPERTIES, OFFICES AND FACILITIES..............................19
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT..................................................20
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS.................................................22
ITEM 6. EXECUTIVE COMPENSATION..........................................24
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................27
ITEM 8. DESCRIPTION OF SECURITIES.......................................28
PART II
ITEM 2. MARKET PRICE OF, AND DIVIDENDS ON, THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.....................29
ITEM 2. LEGAL PROCEEDINGS...............................................29
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS...................29
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.........................30
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.......................31
PART F/S
ITEM 1. AUDITED FINANCIAL STATEMENTS FOR THE COMPANY FOR
THE YEARS ENDED DECEMBER 31, 1998 AND 1997......................32
ITEM 2. UNAUDITED FINANCIAL STATEMENTS FOR THE COMPANY
FOR THE QUARTER ENDED MARCH 31, 1999............................52
ITEM 3. FINANCIAL STATEMENTS FOR WILLOW POND APARTMENTS.................59
ITEM 4. FINANCIAL STATEMENTS FOR PUTNAM SQUARE APARTMENTS...............74
PART III
ITEM 1. INDEX TO EXHIBITS...............................................88
SIGNATURE PAGE...............................................................90
Page - ii
<PAGE>
Glossary of Terms
Affordable Housing: any multi-family residential property in compliance
with the Restrictions of local, state or federal governmental agencies which are
designed to make the rental and occupancy affordable to Low Income Persons and,
in some cases, Moderate Income Persons. Affordable Housing, in accordance with
the Affordable Housing Act, must provide at least 20% of the apartments to
individuals or families whose incomes do not exceed 60% of the median income in
that particular census track.
Applicable Federal Rate or AFR: either the short term, medium term, or long
term interest rate for use in certain transactions as published monthly by the
Internal Revenue Service.
Area Median Income: the median income for any particular local area as
published by HUD.
Bonds or Municipal Bonds: obligations issued by state or local governmental
agencies which are generally sold to the public to raise capital for
governmental activities or governmentally approved projects. The income earned
on such Bonds may either be exempt from federal income taxation or be includable
in income for federal income tax purposes.
Compliance Period: the fifteen (15) year period commencing with the first
year in which a project actually uses Tax Credits.
Conversion: the rehabilitation of an existing Market Rate multi-family
residential Property, or the conversion to multi-family residential use through
redesign, reconstruction, and rehabilitation of a property not previously
utilized as a multi-family residential property.
Eligible Basis: the total amount of development, rehabilitation, and
construction costs which are allowed under the Internal Revenue Code in
determining the total amount of Low Income Housing Tax Credits to which an
Affordable Housing project will be entitled.
Extended Use Period: the fifteen (15) year period commencing in the first
year after the end of the Compliance Period.
HUD: the United States Department of Housing and Urban Development.
Inducement Resolution: the formal written action by the local or state
governmental agency approving the Affordable Housing project for which Tax
Exempt Bonds will be sought as part of the financing.
Low Income Housing Tax Credit or Tax Credit: a credit against federal
income tax provided by Section 42 of the Internal Revenue Code to qualified
Affordable Housing.
Page - iii
<PAGE>
Low Income Housing Tax Credit Restrictions: Restrictions imposed in
connection with the allocation of Low Income Housing Tax Credits and contained
in the agreement between the owner of an Affordable Housing project and the
state agency which allocates the Tax Credits.
Low Income Person: an individual whose annual income does not exceed 80% of
the Area Median Income.
Market Rate: a property which is not subject to Restrictions.
Moderate Income Person: an individual whose annual income does not exceed
120% of the Area Median Income.
Placed in Service: the date on which a multi-family residential property
can be lawfully occupied by tenants, which is contemporaneous with the issuance
of a certificate of occupancy by the building department of the local
jurisdiction in which the project is located.
Private Activity Bond: a Bond, the income from which is exempt from federal
income taxation because it meets the definitions set forth in Section 142(d) of
the Internal Revenue Code.
Qualified Allocation Plan or QAP: the annual housing plan adopted by each
state pursuant to Section 42 of the Internal Revenue Code, which details the
housing needs of the state and the manner in which the state will utilize its
portion of Low Income Housing Tax Credits.
Restrictions: the laws, ordinances, or regulations adopted, enacted, or
imposed by local, state or federal government agencies on, or restrictive
covenants and agreements entered into between such agencies and the owners of,
residential properties, which: (i) limits the amount of rent that may be charged
for a particular dwelling unit in a multi-family residential property; (ii)
restricts tenants to those whose annual income is less than a specified maximum,
or (iii) otherwise limits the use and/or availability of the dwelling units in a
residential project.
Set Aside: in a Low Income Housing Tax Credit Affordable Housing project,
the minimum number of units to be rented to tenants at the maximum allowable
rent which, at the owner's election, will be either: (i) 20% of the units rented
at a maximum rent of 50% of the Area Median Income; or (ii) 40% of the units
rented at a maximum of 60% of the Area Median Income.
Tax Exempt Bond: a Bond, including a Private Activity Bond, the income from
which is exempt from federal income taxation because the requirements of the
Internal Revenue Code are met.
Page - iv
<PAGE>
Tax Credit Period: the ten (10) year period commencing in the first year in
which a project actually uses Tax Credits.
Volume Cap: as it relates to Low Income Housing Tax Credits under Internal
Revenue Code Section 42(h)(3)(C), $1.25 per person resident in the state in
which the Low Income Housing Tax Credits are sought. As it relates to Private
Activity Bonds under Internal Revenue Code Section 142, for each state, the
greater of $150 million or $50 per person in such state.
Page - v
<PAGE>
PART I
ITEM 1. BUSINESS.
Introduction
Homes for America Holdings, Inc. was organized on January 9, 1996 as a
real estate operating company to acquire, develop, own, rehabilitate and manage
residential properties throughout the United States. Our objective is to
identify and purchase undervalued residential properties which we renovate,
operate and manage. We rely upon the expertise and experience of our executive
officers as well as unaffiliated real estate brokers, attorneys, bankers and
property owners throughout the United States to assist us in identifying
suitable multi-family residential properties throughout the United States. These
properties are purchased either through a variety of government-sponsored
financing arrangements exclusively available for properties qualifying as
Affordable Housing, or with traditional financing arrangements available for
Market Rate properties. In addition to the net rental income derived from our
portfolio of multi-family residential properties, we earn a portion of revenues
and profits from transactional fees associated with the acquisition, financing,
development and construction of Affordable Housing.
Our operations commenced in April, 1996. To date, we have purchased
five multi-family residential properties located in Dallas, Texas; Bridgeport,
Connecticut; Elkhart, Indiana and North Miami, Florida. In 1998, we purchased 17
acres of undeveloped land upon which we will develop 210 Market Rate units. We
have also contracted for the purchase of a second multi-family residential
property in Florida, expected to close in the third quarter of 1999.
Background
One of our primary objectives is to develop multi-family residential
properties which will qualify as Affordable Housing. Such properties enable us
to apply for Tax Exempt Bond allocations, Low Income Housing Tax Credit
allocations, or both, which then can be used to provide capital and/or financing
for the purchase and rehabilitation of the property. In return for such
financing arrangements, we must limit tenants in the Affordable Housing projects
to those whose income are within the Restrictions. We anticipate that eventually
sixty percent of our portfolio will be Affordable Housing properties and the
remainder will be Market Rate properties which we have purchased and then either
rehabilitated or converted into residential units.
Market Rate multi-family residential properties will generally be
acquired using traditional methods of real estate financing. Residential
properties which may be reconverted are often: (i) Market Rate multi-use
properties that are purchased at a discount and then constructed or
substantially rehabilitated; (ii) non-residential properties that can be
converted to residential use, such as warehouses, industrial buildings, fire
houses and vacant office buildings that have unique architectural qualities; and
Page - 1
<PAGE>
(iii) existing residential properties where rehabilitation is extensive enough
to substantially alter the quality and character of the property. Such
conversions are currently popular in redeveloping urban areas and we expect them
to be a source of significant revenue in the future. Our Dallas/Briar Meadows
property is an example of a such a conversion.
Affordable Housing properties for potential acquisition are identified
by maintaining regular contact with real estate brokers throughout the United
States. We inform the brokers that we are interested in acquiring property in
certain locations within a designated state for which Tax Exempt Bond and Tax
Credit financing is available. Investment decisions are made by our executive
officers with the consent of the Board of Directors. In addition, we will often
utilize the knowledge and experience of outside consultants that we retain.
Affordable Housing
Affordable Housing properties are multi-family residential properties
in excess of four units for which government sponsored financing programs are
available. These properties are subject to Restrictions which govern, among
other things, the income of the tenants to which the units are rented.
Initially, we identify an area where Affordable Housing financing is
available. After we have located and entered into a contract to purchase a
property qualifying as Affordable Housing, we prepare and submit an application
for a Tax Exempt Bond allocation to the appropriate governmental agency. Once
the application for Tax Exempt Bonds is approved, we then prepare and submit an
application for an allocation of Low Income Housing Tax Credits. In connection
with these applications, we must, among other things, conduct a market study of
the property, provide an architectural analysis, obtain a property appraisal and
prepare an environmental study and analysis of the property. We also provide a
proposed cost of the entire project which includes fees and reimbursements that
we receive out of the funding of the project. We engage outside consultants and
professionals operating near the location of the subject property to assist in
obtaining the required information and in preparing these applications.
Each Affordable Housing property in which we have an interest is owned
by a separate limited partnership or limited liability company. After the Low
Income Housing Tax Credit allocation and if applicable, a Tax Exempt Bond
allocation, is received, the limited partnership acquires title to the
Affordable Housing property. We then offer and sell a limited partnership
interest to an investor. The investor usually acquires a "nominal" 99.9%
interest in the partnership for a purchase price of $.50 to $.80 per $1.00 of
Low Income Housing Tax Credits. (See "Low Income Housing Tax Credits -Value of
the Credits", and "Current Operations"). The agreement with the investor,
however, typically allows us to retain between 70% and 90% of the operating cash
flow from the property as well as 70% and 90% of the residual value of the real
estate. In addition, Tax Exempt Bonds are sold to various independent bond
houses. The investor who purchases the limited partnership interest from the
limited partnership is usually a limited partnership formed by an experienced
Low Income Housing Tax Credit syndicator. We are not involved in these
syndication efforts. The general partner for each limited partnership is a newly
formed, wholly-owned subsidiary of Homes for America Holdings, Inc.
Page - 2
<PAGE>
The issuer of the Tax Exempt Bonds, which is usually a local government
authority, issues and sells the Bonds to finance the project through investment
bankers such as CharterMac, The Sturges Company and Greenwich Partners. The
proceeds from the sale of the Tax Exempt Bonds can be used to provide funding
for the acquisition of the property, including either the construction loan, the
permanent loan, or both. After acquiring the property and finalizing the sale of
the limited partnership interests to the investor, we are entitled to receive
various transaction fees and expense reimbursements at the closing which is paid
out of the funding for the project. Transaction fees may include acquisition
fees, developer fees, rehabilitation fees, asset management fees, administrative
fees, general partner fees, and other fees associated with the acquisition,
financing, development, rehabilitation, construction, and operation of an
Affordable Housing project. 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, we rehabilitate the
property and lease the units.
In addition to the fees received at closing, we receive income from the
acquired property through management fees and participation in operating
profits. We also provide services to the properties including, but not limited
to, marketing, ownership property reviews, social service programs for parents,
and outreach programs for children. These may include computer learning
workshops, tutoring, and organized sports activities. Property services may be
included as a requirement to ensure municipal state or federal financing
approval. As each municipality, county or state applies a scale in determining
whether an applicant qualifies for Tax Exempt Bond financing and/or Tax Credits,
adding services to the property for the benefit of the tenants may significantly
improve an applicant's ability to obtain financing and/or credits. We believe
that the quality of tenancy increases with the amount of services offered, and
that providing these services reduces apartment turnover, helps maintain quality
of life, and thereby controls costs.
We believe a considerable need for quality Affordable Housing exists in
the United States. Historically, demand has exceeded supply. We also believe
that there is a strong market for 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, our founders are experienced in
these types of conversions. We believe, but cannot assure, that we will achieve
significant revenues from this area in the future.
As we have been in operation only since 1996, there can be no assurance
we will continue to be a commercially viable or profitable business. We have a
limited operating history to use to predict whether we will be successful in the
future.
Page - 3
<PAGE>
Current Operations
We manage, or oversee the management and operation, of each property
that we acquire. Accordingly, we have established our own on-site management in
areas where we have a substantial investment, such as Texas, Florida and the
Northeast. In other areas, we may utilize outside management firms to assist in
the operation of the properties.
Whether we are the on-site property manager or the off-site asset
manager, we maintain responsibility for the operation of each property. Every
property that we directly manage has one of our senior managers responsible for
the property's day to day operations. Every site that we operate through an
outside management firm has one of our officers directly responsible for the
property. In addition, we engage outside auditors to provide compliance audit
services to verify key financial information and tenant certification issues.
Further, each property is visited periodically by our officers.
We currently own properties in Texas, Connecticut, Indiana and Florida
with contracts pending for additional properties. The following is a description
of the properties under management as well as properties subject to purchase
agreements.
Willow Pond Apartments
Willow Pond Apartments, formerly known as Glen Hills Apartments,
located in Dallas, Texas, is a 386-unit Affordable Housing complex.
The Willow Pond complex was purchased for approximately $8,400,000, and
is owned by a limited partnership, of which we are the general partner with a
.01% interest in the partnership, approximately a 90% interest in cash flow and
an 80% interest in the residual value of the partnership.
Through the limited partnership formed to own Willow Pond, we sold a
limited partnership interest to an investor for $2,500,000 in exchange for a
nominal 99.99% interest in the limited partnership. Notwithstanding the limited
partner's 99.99% nominal interest in the limited partnership, the general
partner and the limited partner have varying interests in the items of tax
profit, tax losses, distributions of cash available from operations, and
distributions of cash available from refinancing of the limited partnership's
debt or upon sale of its asset. Since the limited partner's primary financial
motivation for purchasing an interest in the limited partnership was the
benefits it would derive from the Low Income Housing Tax Credits and other tax
losses, the limited partner has retained 99.99% of those items. Because this
allocation of Low Income Housing Tax Credits and losses met the limited
partner's yield requirements, we were able to obtain an aggregate interest of
approximately 90% in the cash available from operations, and an aggregate
interest of approximately 80% in the cash available from sale of the
partnership's asset or refinancing of its debt. The limited partner has a right
to the difference. The balance of the funding was obtained through mortgages on
the property.
Page - 4
<PAGE>
After we acquired the property, we renovated it and it is now 98%
occupied. In addition to the renovation, we established a computer learning
facility which provides tenants and their 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
to otherwise improve existing skills to aid them in the work place.
Putnam Square Apartments
Putnam Square Apartments ("Putnam Square") is an Affordable Housing
complex composed of 18 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, we succeeded to the
interests of the general partner of the partnership that originally owned the
property. We have substantially renovated the property and approximately 90% of
the units are currently rented.
As additional consideration for assuming the position of general
partner, the Company received a developer's note in the amount of $200,000, and
50% of a $400,000 first mortgage, or $200,000. Under the terms of the
partnership agreement, the developer's note has first priority on the property's
cash flow. In total, the Company received notes in the amount of $400,000 for
assuming the general partner position.
The partnership has one investor limited partner who made capital
contributions of $692,065 in exchange for a 99% interest in the partnership.
Under the terms of the agreement, the limited partner is allocated 99% of
partnership income or loss, and 99% of the tax credits earned annually. Cash
flow is distributed 75% to the general partner as payment of the development
note, and thereafter as payment of the partnership administration fee; and 25%
to the limited partner.
Prairie Village Apartments
Prairie Village Apartments ("Prairie Village"), a 120-unit Affordable
Housing project located in Elkhart, Indiana, was purchased on December 16, 1998
for approximately $804,000.The project costs totaled approximately $3,950,000,
which included the establishment of a $2,200,000 restricted cash fund for
current renovations from which we will draw during the construction period, and
the establishment of reserves in the amount of approximately $425,000 for future
renovations, repairs and maintenance. This transaction included the attainment
of a $2.4 million private activity cap for Tax Exempt Bonds, $600,000 of taxable
bonds and the sale of $1,000,000 of tax credits. This transaction provided us
with reimbursement of our pre-acquisition expenses of $250,000 and developer
fees of approximately $400,000. The transaction was financed with non-recourse
bonds bearing interest at 5.9% fixed for 30 years.
Page - 5
<PAGE>
Prairie Village Apartments is owned by a limited partnership in which
our wholly-owned subsidiary is the general partner. Through this limited
partnership, we sold a limited partnership interest to an investor for
$1,060,510 in exchange for a nominal 99.90% interest in the limited partnership.
Notwithstanding the limited partner's 99.90% nominal interest in the limited
partnership, the general partner and the limited partner have varying interests
in the items of tax profit, tax losses, distributions of cash available from
operations, and distributions of cash available from refinancing of the
partnership's debt or upon sale of its asset. Since the limited partner's
primary financial motivation for purchasing an interest in the partnership was
the benefits it would derive from the Low Income Housing Tax Credits and other
tax losses, the limited partner has retained 99.90 % of those items. Because
this allocation of Low Income Housing Tax Credits and losses met the limited
partner's yield requirements, we were able to obtain an aggregate interest of
approximately 80% in the cash available from operations, and an aggregate
interest of approximately 70% to 90% in the cash available from a future sale of
the limited partnership's asset or refinancing of its debt. The limited partner
has a right to the difference. The balance of the funding was obtained through
Tax Exempt and taxable bonds on the property.
Rehabilitation will consist of new facades and exteriors, new kitchens,
windows, insulation, air conditioning, carpeting, landscaping and noise
attenuation. This work will take approximately one year, and is currently
approximately 30% complete. During this period, existing tenants will be moved
from non-renovated units into fully renovated units at no additional cost.
Further, we will create a computer learning facility on the premises available
to all rent paying residents and their families. Classes in computer skills such
as word processing, spreadsheets and compiling databases will be offered free of
charge.
Briar Meadows Apartments
We purchased the Briar Meadows Apartments ("Briar Meadows"), a 118-unit
residential complex located in Dallas, Texas for $1,050,000 on December 18,
1998. The project has been financed with a first mortgage in the amount of
$840,000 and a second mortgage of $500,000. A rehabilitation escrow in the
amount of $250,000 has been established from the proceeds of the mortgages. We
have begun substantially rehabilitating the units. at an anticipated cost of
$400,000. This is a Market Rate transaction and we will not utilize any
government guarantee programs. This property is 100% owned by a wholly-owned
subsidiary of Homes for America.
Arlington - Royal Crest
On December 18, 1998, we purchased 17 acres of undeveloped land located
in Arlington, Texas for $1,200,000. The purchase was financed with a first
mortgage on the property in the amount of $1,200,000. We recognized transaction
fees of approximately $287,000 on this purchase.
We have received approval from HUD to file for a "fast-track"
commitment for insurance on a construction loan and permanent mortgage in the
amount of approximately $12,200,000. Closing on the loan and the commencement of
construction is expected to occur in October, 1999. Occupancy is anticipated to
begin in June, 2000.
We own 100% of the Arlington property and do not expect to sell any
partnership interests in it.
Page - 6
<PAGE>
Lake's Edge Apartments
On June 30, 1999, the Company acquired Lake's Edge Apartments, a 400
unit apartment complex located in North Miami, Fla., for $14,025,000. We will
commence approximately $1,400,000 of improvements to this property in the Fall
of 1999. Including project costs at closing, the total project cost is
approximately $16,500,000. Acquisition, including project costs and planned
improvements, has been completely financed with a combination of Tax Exempt and
taxable Bonds. Approximately $400,000 in transaction fees were realized on this
purchase, and gain on sale of Bonds totaled approximately $825,000, for a total
revenue gain of $1,200,000. We own 100% of the property and do not plan to sell
any partnership interests in it.
Proposed Properties:
Country Lake Apartments
We are presently under contract to purchase Country Lake Apartments, a
192 unit property located in West Palm Beach, Florida, for $10,055,000.
Including the payment of pre-acquisition costs at closing and planned
improvements in the approximate amount of $450,000, the total project cost will
be approximately $11,600,000. Tax Exempt and taxable bonds in the amount of
$8,750,000 will be used to finance the property. We will invest approximately
$2,850,000 in the property; however, we have not determined a source of these
funds at the present time.
Page - 7
<PAGE>
Financing:
Affordable Housing Financing
We purchase Affordable Housing properties through the use of relatively
small amounts of our own capital, the sale of Tax Credit benefits to Tax Credit
investors, conventional debt, government agency loans, and, in some cases, the
use of low-interest Tax Exempt and taxable Bonds. In addition, we often purchase
Affordable Housing properties with relatively small amounts of capital through
the use of low interest rate, non-recourse bonds, thereby preserving capital for
other transactions. Aside from the equity that we provide, the balance of the
equity for the purchase of an Affordable Housing property is obtained through
the sale of a limited partnership interest to an investor/limited partner
("Limited Partner") formed specifically to own the Affordable Housing property
for cash. The Limited Partner's interest entitles it to share in the tax credit
and cash benefits associated with the property. From the transaction, we may
receive: (i) reimbursement of expenses; (ii) BSPRA or developer's fee (up to
15%); (iii) acquisition fees (up to 5% of the acquisition); (iv) rehabilitation
fees (up to 10% of any rehabilitation or construction);(v) management fees (up
to 6% of total income); (vi) retention of approximately70% to 90% of all
operational cash flow; and (vii) 80-90% of the cash available for distribution
upon sale or refinancing.
An Affordable Housing project's financing may consist of some or all of
the following: (i) equity, the majority of which is provided mainly through the
sale of Low Income Housing Tax Credits to a single outside investor and the
minority of which is provided by us as the developer, (ii) conventional debt,
which will consist of conventional loans provided by financial institutions such
as banks and insurance companies, (iii) government agency loans provided by
local government agencies at lower than market interest rate and repayable
solely out of a portion the project's available cash flow, if any, in lieu of a
fixed monthly payment, (iv) government agency grants awarded to the project
which do not need to be repaid, and (v) debt generated by the sale of Bonds (see
"Tax Exempt Bonds"). In general, the equity portion of an Affordable Housing
project's financing will be between one-third and one-half of the Affordable
Housing project's total financing with the balance consisting of one or more of
the types of debt described above. The amount of conventional debt available as
financing to an Affordable Housing project depends entirely upon the net
operating income available to make payments of principal and interest. Net
operating income is the amount of money available after the payment of operating
expenses. Conventional lenders require a ratio of net operating income to
principal and interest payments from as low as 1.10:1 to as high as 1.35:1.
Thus, the lower rents required by Restrictions reduce the availability of
conventional debt for Affordable Housing projects and increase the need for the
government financing described above.
In general, the Limited Partner investors in limited partnerships
owning Affordable Housing projects are primarily seeking the benefits generated
by the Low Income Housing Tax Credits and the other tax losses, and give less
consideration to cash distributions as a means of obtaining a desired yield from
an investment. Therefore, the limited partnerships typically grant the general
partner up to 90% of the cash flow from operations and up to 90% of residual
interest in the properties.
Page - 8
<PAGE>
Although approximately one-half of our business relies on HUD or other
government financing, once a transaction is closed, it is not subject to
re-negotiation or termination. Therefore, after closing, the government agency
may neither elect to renegotiate our agreed upon profits nor terminate our
contracts or subcontracts.
Conversions Financing
Market Rate purchases of undervalued residential or non-residential
property that we substantially rehabilitate or convert may be financed by a
capital investment of up to 10-20% of the project's costs, with the balance
furnished by debt financing. The Company believes that such level of financing
is generally available and was used for the purchase of Briar Meadows
Apartments. These properties are generally well situated and/or architecturally
unique, and can frequently be purchased at low prices due to the need for
significant rehabilitation. Unit costs will vary region by region. Replacement
costs are determined by regional industry standards and are supported by
appraisals and feasibility studies. We believe that this method of acquisition,
rehabilitation and financing is much more cost effective than the approximate
cost of up to $50,000 to construct comparable new units, although costs vary by
region.
Low Income Housing Tax Credits
A significant portion of the our 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 benefitting 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 an individual's or corporation's federal income tax
liability.
Page - 9
<PAGE>
State Allocation of Tax Credits
State housing agencies are responsible for the allocation of Low Income
Housing Tax Credits and for monitoring program compliance. Pursuant to the
Volume Cap applicable to Low Income Housing Tax Credits, each state annually may
allocate Low Income Housing Tax Credits to Affordable Housing projects up to an
amount equal to $1.25 per state resident. Without reducing the amount of Low
Income Housing Tax Credits that a state has available annually to allocate under
the Low Income Housing Tax Credit Volume Cap, a state may also allocate Tax
Credits to Affordable Housing projects financed with Bonds that are subject to
the separate Volume Cap applicable to Bonds. In other words, Low Income Housing
Tax Credits allocated to Affordable Housing Projects financed with Bonds do not
reduce the amount of Low Income Housing Tax Credits available to Affordable
Housing projects that are not financed with Bonds.
Qualifying for Tax Credits
Tax Credits are obtained through an application to the responsible
state agency, and 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 this 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 Tax Credits allocated for a new development will be the
equivalent of 70% of the present value of the eligible basis, which includes
costs of construction and other permissible fees and expenses, as provided by
Section 42(b)(2)(B) of the Internal Revenue Code. Ten percent of the Tax Credits
may be applied against tax liabilities each year for ten years. The amount of
Tax Credits 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 Tax Credits 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, with 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 new construction or
rehabilitation.
Page - 10
<PAGE>
The amount of Tax Credits allocated in Bond allocation developments is
the equivalent of 30% of the present value (determined over a ten-year period)
of the cost of 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 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 appropriate low
income rents. A development must elect a low income set aside test ("Set Aside")
which is (i) 40% of the units rented to tenants whose income is 60% of the area
median income, or (ii) 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 by 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, with the rental
amount adjusted for family size.
Utilization and Loss of Tax Credits
Tax Credits are taken over a period beginning in the year in which the
development is first 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 initial low income occupancy levels for a
minimum of 15 years ("Compliance Period"), but in order to qualify for Tax
Credits in the first instance, developments must agree to remain in compliance
with rent levels and low income occupancy levels for an additional 15 years
beyond the Compliance Period agreement (the "Extended Use Agreement"). The
additional time period contemplated thereby is referred to as the Extended Use
Period.
The Extended Use Agreement extends the Compliance Period for an
additional 15 years, making the Affordable Housing Project subject to the Low
Income Housing Tax Credit Restrictions for a total of 30 years (the initial 15
years of the Compliance Period plus the 15 years of the Extended Use Period).
The Extended Use Agreement does not alter the owner's ability to operate the
property, since the owner must contemplate the 30 year period of restrictions
when the investment is initially acquired. Only if, under circumstances
contemplated by Section 42(h)(6)(E) of the Internal Revenue Code, the 30 year
period is reduced to 15 years, will the operation of the property be affected.
If the 30 year period is reduced so that there are no Low Income Housing Tax
Credit Restrictions applicable to the project, and if no other Restrictions
exist which limit the rents and the tenant's income, the project can then be
operated as a Market Rate residential project, with the likelihood that it could
generate higher operating income.
Page - 11
<PAGE>
Developments are subject to tax credit recapture during the Compliance
Period if: (i) they fall below the required number of low income units; (ii) the
rental amounts exceed the required rates; (iii) units are rented to tenants
whose incomes exceed the maximum allowed; or (iv) they are transferred to third
parties. In years 1-11 of the Compliance Period the amount of the recapture is
equal to one-third of all prior Tax Credits claimed by the taxpayer. In years
12-15 of the Compliance Period the amount of the recapture is one-fifteenth of
all 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
Tax Credits result in a dollar for dollar reduction of a taxpayer's
federal tax liability. They represent the equivalent of cash in the amount of
the tax savings. The market for Tax Credits enables owners of Affordable Housing
projects which have received an allocation of Low Income Housing Tax Credits to
sell the credits as interests in limited partnerships for cash. There is no
secondary market, or after-market, for the limited partnership interests. Tax
Credit purchasers and investors in this market are long term. 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. The range of Tax Credit prices we receive is between fifty cents and
eighty cents per Low Income Housing Tax Credit dollar.
Every Tax Credit purchaser has different investment criteria, required
rates of return, and exit strategies. Generally, we 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 us and the Tax Credit
purchaser will contain many provisions which govern the operation of the
development, including: (i) regular periodic reporting; (ii) providing the Tax
Credit purchaser with certain remedies if the development falls out of Tax
Credit compliance; and (iii) providing the Tax Credit purchaser with an exit
strategy after 15 years.
We do not sell Tax Credits to individual purchasers. The Tax Credits
are purchased by institutions such as The Related Capital Company, Inc., The
Sturges Company and Greenwich Partners. These institutions are specialists in
the purchase of Tax Credits.
Page - 12
<PAGE>
Tax-Exempt Bonds
Of the three types of Tax Exempt Bonds available for Affordable
Housing, we generally employ Private Activity Bonds issued under Section 142(d)
of the Internal Revenue Code. Private Activity Bonds are subject to a Volume Cap
for each state equal to the greater of $150 million or $50 per person, whichever
is higher. 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 (the "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 may apply
for a credit enhancement that guarantees repayment of the bonds to the
bondholders. In addition, HUD can provide credit enhancement guaranteeing
repayment of bonds, enabling the issuer of the Bonds to charge a lower rate of
interest on the loan. Once the credit enhancement is obtained, the issuer can
sell its bonds and lend the money to the development. The bonds are sold by
specialty bond houses such as CharterMac, The Sturges Company and Greenwich
Partners. 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 requires compliance with
Internal Revenue Service regulations in order to maintain the Bonds' Tax Exempt
status. In all other respects, the employment of Tax Exempt Bonds to provide
debt financing differs little from the use of conventional mortgage financing.
Government Regulations
In addition to the government financing requirements referred to above,
we are subject to environmental and other governmental regulations. Compliance
with laws and regulations governing our business can be complicated, expensive,
and time-consuming and may require significant managerial and legal supervision.
Failure to comply with such laws and regulations could have a materially adverse
effect on our business. Further, any changes in any of these laws and
regulations could materially and adversely affect our business. There is no
assurance that we will be able to secure on a timely basis, or at all, 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 municipal agencies and the
continued availability of HUD insurance where necessary. In addition, we are
often dependent on Bond ratings offered to finance real estate purchases.
Page - 13
<PAGE>
Environmental compliance issues do not have a material effect on the
management and earnings of our properties. However, we cannot obtain financing
or close a transaction without certifying that there are no environmental
hazards present on the property.
The primary costs relating to the environmental compliance are
pre-acquisition inspections. These costs typically range from $5,000 to $20,000
per project. In the event that there is an environmental problem, mortgage
financing would be obstructed and we would be unable to acquire the property
The compliance and costs associated with the Americans with Disability
Act ("ADA") are always included in the cost of renovating a residential
property. In many cases, if little or no renovation is required, the new owner
is not required to meet current ADA requirements. This is referred to as being
"grandfathered" under a previous set of rules or housing codes. All of our
ventures are done with proper zoning in place or are "as of right," which means
that there is either no need for a zoning change or that there is no zoning in
place.
Competition
All of our currently owned properties, or properties under agreement to
be purchased, 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 us within the market area of each of these
properties, and which will compete with us 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) our
ability to rent the apartments; (ii) the rents charged; and (iii) development
and acquisition opportunities. The activities of these competitors could cause
us to pay a higher price for a new property than we otherwise would have paid,
or may prevent us from purchasing a desired property at all, which could have a
material adverse effect on our business. 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
do we. Accordingly, there can be no assurance that we will be able to
successfully compete in the future.
Employees
We employ approximately 25 full-time employees including executive
officers. No employees are covered by a collective bargaining agreement. We
believe that our relations with our employees are satisfactory.
Page - 14
<PAGE>
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, 1998 AND MARCH 31, 1999
Overview
Homes for America Holdings, Inc. is a real estate investment,
development and operations company owning and operating a portfolio of apartment
complexes located throughout the United States. Homes was originally
incorporated on January 9, 1996 as GELT Enterprises, Inc and on February 26,
1996 the name of the corporation was changed to Homes For America Holdings, Inc.
In addition to net rental income derived from the operation of these properties,
we earn a significant portion of our revenues and profits from transactional
fees associated with the acquisition and financing of our properties.
Presently, our portfolio consists primarily of Affordable Housing
acquisitions generally financed through Low Income Housing Tax Credit (LIHTC)
partnerships and the use of Tax Exempt Bonds. Investors in these partnerships
gain various tax benefits, including Tax Credits, as provided for in the
Internal Revenue Code. In turn, we act as the general partner in the various
partnerships and receive most or all of the operating cash flow and residual
value. In addition, we provide certain guarantees to the lenders, all of which
are typical of those generally provided by general partners. We have also
completed acquisition and are currently developing our first Market Rate
properties. We expect to complete a sufficient number of acquisitions during
1999 and 2000 to attain a portfolio diversity approximating 60% Affordable
Housing and 40% Market Rate properties. We plan to continue to own and operate
our apartment complexes. Accordingly, we do not anticipate cash flow from
dispositions nor gains or losses from the sale of operating assets.
Our revenue is generated primarily in two ways: from rental and related
income and from transaction fees earned in accordance with certain property
purchase and finance agreements. Rental income and related revenues (vending,
parking, late fees, etc.) result from the ongoing operation of our rental
properties. Cash receipts from these sources occur on a relatively even basis
throughout the year, though fluctuations resulting from seasonal changes in
occupancy levels can occur. Transaction fees are separate from the reimbursement
of costs. Both fees and costs are part of the property basis.
Our strategic plan encompasses the acquisition of up to $80 million of
additional properties in 1999. We recently closed on a $14 million property in
Florida, and presently have agreements or are in contract to purchase over $24
million worth of property located in the Southeast and Southwest. We will
continue to utilize Tax Exempt Bonds and regulatory financing to finance
purchases where appropriate.
Page - 15
<PAGE>
Homes for America was formed in 1996, and had no revenues that year.
Accordingly, a net loss of $324,800 was posted for 1996. Expenses were limited
to administrative costs related to formation and start-up. In 1997, we acquired
a 386-unit affordable housing property, Willow Pond, in Dallas, Texas. Tax
benefits associated with the property were sold for $2.5 million. In November,
1997, the Putnam Square apartment complex in Bridgeport, Connecticut was
acquired, though operations there did not actually begin until January, 1998. In
December, 1998, we acquired three additional properties: the 118-unit Briar
Meadows apartments in Dallas, Texas; a 120-unit affordable housing property in
Elkhart, Indiana for which the sale of Tax Credits was $1,060,506; and the 17.7
acre Arlington site, where approval to go to firm commitment with HUD has been
received for construction of 210 market-rate townhouse units.
Results of Operations
For the twelve months ended December 31, 1998
Revenues
Revenues of $2,608,713 in 1997 reflected the two properties owned and
operated in that year. Revenues did not reflect a full year's activity because
of the dates of acquisition. We owned Dallas/Willow Pond for nine months in
1997. During that period the property generated rental and related incomes of
$1,526,634. Putnam Square shows no business activity in 1997 other than
acquisition of the property. Actual revenues for all properties are indicated in
the table below.
Revenues in 1998 are for combined activities of five properties. Two of
these, Dallas/Willow Pond and Putnam Square, reflect a full 12 months of
activity. The remaining three, Dallas/Briar Meadows, Elkhart/Prairie Village and
Arlington, Texas were acquired in the month of December. Revenues from these
three properties are primarily transactional.
Transaction fees that we earn may include acquisition fees,
rehabilitation fees, general partner fees, and other fees associated with the
financing and purchase of a property. The transaction fee is determined by a
buy-sell agreement on the partnership agreement governing a particular
transaction. It is the result of arms-length negotiation between the parties and
varies from transaction to transaction. In 1997, these fees were $1,082,079, and
in 1998 totaled $1,722,211, as per the breakdowns indicated below:
1998 1997
- ------------------------------------ ------------------- -------------------
General Partner Fees - Putnam $138,500 $400,000
- ------------------------------------ ------------------- -------------------
Acquisition Fees - Willow Pond 362,000
- ------------------------------------ ------------------- -------------------
Development Note - Willow Pond 270,079
- ------------------------------------ ------------------- -------------------
Developer Fee - Reliance Capital - 50,000
Willow Pond
- ------------------------------------ ------------------- -------------------
Development Fee - Arlington 287,498
- ------------------------------------ ------------------- -------------------
BSPRA - Prairie Village 235,707
- ------------------------------------ ------------------- -------------------
Tax Credit Sale - Prairie Village 1,060,506
- ------------------------------------ ------------------- -------------------
- ------------------------------------ ------------------- -------------------
$1,722,211 $1,082,079
- ------------------------------------ ------------------- -------------------
Page - 16
<PAGE>
Expenses
Expenses of $1,796,004 for 1997 include nine months of operating costs
for the Dallas/Willow Pond property, as well as corporate administrative
expenses. Expenses of $3,290,747 for 1998 include a full twelve months of
operating costs for both Dallas/Willow Pond and Bridgeport/Putnam Square
properties, as well as corporate administrative expenses. Inasmuch as the
Dallas/Briar Meadows, Elkhart/Prairie Village and Arlington, Texas properties
were all acquired in the final month of 1998, any expenses incurred in the
operation of these sites is minimal, reflecting less than one month's activity.
We remain committed to reducing expenses through effective management practices
at our present sites, and to extending those practices to future acquisitions.
Administrative expenses include corporate overhead of the parent
company as well as administrative expenses at each property. Expenses at the
corporate level include items such as executive and corporate administrative
salaries, taxes and benefits, travel expenses, professional fees, telephone and
other office expenses, including rent, and other administrative costs.
Administrative expenses at the property level include salaries for property
management personnel, various office and overhead expenditures such as
advertising, professional fees, tenant screening and other expenses.
Administrative expenses increased by over $800,000, or over 200%, from the year
ended December 31, 1997 to the year ended December 31, 1998. The following items
contributed to the increase. In 1998, we wrote off approximately $85,000 of
previously capitalized pre-acquisition costs related to projects that were
judged by management to be no longer viable. Amortization of previously
non-amortized organization costs related to Willow Pond in the amount of
$179,000 were incurred, and legal and professional expenses in the approximate
amount of $160,000 were incurred in 1998, as opposed to approximately $42,000 in
1997. In addition, corporate staff was increased to accommodate our growth, and
the acquisition of three additional properties each contributed to additional
administrative expenses.
Expenses in the classifications of maintenance and operating costs,
utilities, and taxes and insurance all represent property level expenses only,
and do not include any corporate items. For the year ended December 31, 1997,
property operations reflected only the Dallas/Willow Pond site, which was only
owned for nine months that year. The increases in these items reflect the
ownership of Willow Pond for twelve months in 1998 versus nine months in 1997,
the addition of the Putnam Square property for twelve months of 1998, and the
addition of two additional operating properties at the end of 1998. In general,
price increases have not been a material factor in property expenses.
Page - 17
<PAGE>
Interest expense for the year ended December 31, 1997 of $371,883
consisted solely of the interest on the Willow Pond mortgage for a period of
only nine months. Interest for the year ended December 31, 1998 included
$427,915 for Willow Pond for twelve months; $43,837 for the mortgage on the
Putnam Square property; and $86,541 incurred at the corporate level.
Depreciation of $273,754 in 1997 reflects the expense on the
Dallas/Willow Pond property for the nine months the Company owned it.
Depreciation of $415,665 in 1998 reflects a full year's expenses on both
Dallas/Willow Pond and Bridgeport/Putnam Square. Realty is depreciated by the
straight-line method over lives ranging from 25 to 27.5 years.
For the three months ended March 31, 1999
Revenues
Revenues for the three months ended March 31, 1999 are indicated in the
table below, and reflect rental and other operating income from all properties.
There was no rental activity in Arlington during this period.
Expenses
Expenses for the three months ended March 31, 1999, include the costs
of operating Dallas/Willow Pond, Bridgeport/Putnam Square, Dallas/Briar Meadows
and Elkhart/Prairie Village properties, as well as corporate administrative
expenses. The increase in administrative expenses for the three months ended
march 31, 1999 over the three months ended March 31, 1998 arise from the
additional corporate personnel in place in 1999, and from the administrative
expenses incurred at three properties owned in 1999 that were not owned in the
first three months of 1998. The composition of administrative expenses remains
the same as previously described.
Year to year changes in expenses in the classifications of maintenance
and operating, utilities, taxes and insurance and depreciation and amortization
all result primarily from acquisitions of properties made at the end of 1998,
whose expenses are included in 1999 results and that were not owned by the
company during the first three months of 1998. As indicated previously, price
increases are not a material factor in year to year variances.
Interest expense for the first three months of 1998 consisted of the
interest incurred only on the Willow Pond and Putnam Square mortgages. Interest
expense for the first three months of 1999 include interest related to the
mortgages on all five of our properties, and interest incurred on debt at the
corporate level.
Page - 18
<PAGE>
Depreciation, similarly, reflects four operating properties in the
first three months of 1999, as opposed to depreciation on only two properties
for the first three months of 1998.
Revenues Expenses
- --------------------------------------------------------------------------------
Dallas/Willow Pond $ 604,078 $ 570,743
Bridgeport/Putnam Square 30,460 62,181
Dallas/Briar Meadows 145,315 136,661
Elkhart/Prairie Village 127,091 125,203
Corporate 240,744
----------- -----------
$ 906,944 $ 1,135,532
Liquidity and Capital Resources
Unrestricted cash on hand was $766,293 at December 31, 1998 and
$280,839 at March 31, 1999. The decrease of $485,454 is directly attributable to
our efforts to acquire two major properties in West Palm Beach and North Miami,
Florida, and reflects expenses related to due diligence and pre-acquisition
costs as discussed in ensuing paragraph(s).
The properties are generating positive cash flow to us. Accordingly, we
do not anticipate any difficulties in continuing to meet our operating cash
requirements. We believe we will be able to meet all of our debt obligations
from property cash flow.
Short-term liquidity fluctuates with our acquisition cycles. Typically,
as we proceed to acquire new properties, significant expenditures related to due
diligence and pre-acquisition costs are incurred. These costs may require the
use of material amounts of our working capital up to and through the close of
the purchase. Subsequently, we receive fees and reimbursements earned at
closing, and working capital is replenished.
Long-term liquidity needs include sufficient working capital to develop
and support the infrastructure necessary to continue our growth. Also, as we
undertake the execution of multiple simultaneous transactions, need for
additional working capital will increase. We will attempt to meet these needs
through some form of equity investment. Future growth depends upon our ability
to secure adequate capital to consummate acquisitions. While there can be no
guarantee that these capital needs will be met, it is reasonable to believe that
bond financing, sale of Tax Credits and traditional sources of equity and debt
financing will adequately meet requirements.
ITEM 3. PROPERTIES, OFFICES AND FACILITIES
In New York, we entered into a 3-year lease with Mack-Cali Realty, 100
Clearbrook Road, Elmsford, New York, 10523, commencing in April, 1999 for 2200
square feet of executive office space located at One Odell Plaza in Yonkers, New
York, 10701. The rent for these premises is $3,009 per month.
At 1725 DeSales Street, N.W., Suite 300, in Washington, DC, 20036, we
rent 800 square feet where property operations and acquisitions offices are
located. This lease provides for a monthly base rent of $1500, and may be
terminated at our option. This Washington, DC office affords convenient access
to legislators and attorneys drafting the legislative programs under which we
obtain financing for Affordable Housing, and provides a central location along
the Eastern Seaboard, where we plan to expand.
We also maintain an office at 6003 Abrams Road, Dallas, Texas, 75231,
located on property which we own and manage.
Page - 19
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of March 31, 1999 by: (i) each person who we
know to own beneficially more than 5% of our outstanding Common Stock; (ii) each
of our directors and officers; and (iii) all of our directors and officers as a
group. As of March 31, 1999, there were 8,374,000 shares of Common Stock issued
and outstanding.
OWNER SHARES OWNED PERCENTAGE
- ---------------------------- --------------- ------------------------
Robert MacFarlane 1,818,930 21.7%
c/o Daniel Hayes, Esq.
83 Boutwell Trust (1)
8779 Mathis
Manassas, VA 20110
- ---------------------------- --------------- ------------------------
Robert M. Kohn (2) 1,612,000 19.3%
1725 DeSales Street, NW
Washington, DC 20036
- ---------------------------- --------------- ------------------------
Richard Weiss (3) 0 0
One Odell Plaza
Yonkers, NY 10701
- ---------------------------- --------------- ------------------------
Joel Hefron 200,000 2.4%
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
One Odell Plaza
Yonkers, NY 10701
- ---------------------------- --------------- ------------------------
Robert Pozner 650,000 7.8%
454 Stevens Avenue
Ridgewood, NJ 07450
- ---------------------------- --------------- ------------------------
Officers and Directors Group 4,280,930 51.1%
Total (6 persons)
- ---------------------------- --------------- ------------------------
Page - 20
<PAGE>
Notes
(1) 83 Boutwell Trust is an irrevocable trust in which Robert MacFarlane, the
Chief Executive Officer of Homes for America Holdings, Inc., retains voting
control.
(2) Mr. Kohn disclaims beneficial interest in shares indicated which are owned
by International Business and Realty Consultants, LLC, (IBRC) at which he
is an officer and which is solely owned by Mr. Kohn's spouse, Ms.
Christiane Kohn. Robert Kohn is the President of IBRC, and IBRC, in turn,
does work for Homes For America Holdings.
(3) Excludes options to purchase 100,000 shares of Common Stock vesting
quarterly over the first year of employment.
Page - 21
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our executive officers and directors are as follows:
NAME AGE OFFICE
- --------------------------------------------------------------------------------
Robert A. MacFarlane 55 President, Chief Executive Officer &
Chairman of the Board
Richard J. Weiss 47 Chief Financial Officer
Robert M. Kohn 48 Director & Chief Acquisition Officer
David Harwell 53 Director, Secretary & Operations Manager
Joel Heffron 54 Director
Daniel Hayes 41 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 of our officers or directors.
Robert A. MacFarlane has served as the Company's Chief Executive
Officer and Chairman of the Board since 1996. From 1989 to 1991, Mr. MacFarlane
was an independent tax-exempt bond and tax credit consultant. From 1992 to 1996,
he was Senior Property Acquisitions Officer of the Boutwell Company, a company
representing a Rockefeller Family Trust, and receiving all of its funds from
that Trust. In this capacity, Mr. MacFarlane was responsible for the acquisition
of residential and commercial properties. Mr. MacFarlane was directly
responsible for the closing of more than one half-billion dollars worth of real
estate transactions in Texas alone, two of which were turnaround, value-added
acquisitions totaling $300 million.
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 Corporation. During that time,
he also founded and served as President of Playgrounds, USA of America, Inc.
From 1982 to 1994, Mr. Weiss served as Chief Financial Officer of the Rayel
Hotels Group, and from 1976 to 1982, he was an accountant with the firm of
Siskin, Shapiro & Company. Mr. Weiss holds a B.A. in psychology from American
International College, and a B.S. in accounting from the University of
Massachusetts, Amherst, where he graduated magna cum laude. He is a certified
public accountant.
Page - 22
<PAGE>
Robert M. Kohn has been a director of the Company since 1998. From 1979
to 1996, he was the President of Alfred Kohn Realty Corporation and Schuyler
Realty. He has orchestrated the financing and acquisition of thousands of
multi-family housing units, converted rental properties and warehouses into
residential lofts, and managed more than 22,000 apartments in the New York
metropolitan area. 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 General Counsel to the Rojac Group, Inc., a real estate
development company. He is admitted to the bars of Virginia, the District of
Columbia, and Illinois, and holds a J.D. from Cornell Law School.
David Harwell has been Corporate Secretary, director and Operations Manager
since 1996. Previously, he was corporate controller for ABC Air Freight, Inc.,
for more than six years. Prior to 1990, he was an accountant in independent
practice. Mr. Harwell holds a B.B.A. in finance from Baruch College.
Joel Heffron, Esq., has been President of Risk Management Corporation,
a company assisting businesses in conversion and disposal of assets, since 1994.
From 1987 to 1994, he was President of Westminster Equities, and from 1983 to
1987, he was President of Whitney Stores, Inc. From 1966 to 1983, Mr. Heffron
was a partner in the law firm of Sohn, Gross, Findlay & Heffron in New York.
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.
Members of the Audit Committee are Daniel Hayes and Joel Heffron. The
Audit Committee acts to: i) acquire a complete understanding of our audit
functions; ii) review with management our finances, financial condition and
interim financial statements; iii) review with our independent auditors the
year-end financial statements; and iv) review implementation, with the
independent auditors and management, any action recommended by the independent
auditors.
Members of the Compensation Committee are Daniel Hayes and Joel
Heffron. Compensation Committee functions include administration of our 1998
Employee Stock Option Plan and Non-Executive Director Stock Option Plan, as well
as negotiation and review of all our employment agreements with our executive
officers.
Meetings of the Board of Directors
During the fiscal year ended December 31, 1998, our Board of Directors
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.
Page - 23
<PAGE>
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
that we awarded, granted, or paid during the Year ended December 31, 1998 to
each of our named executive officers.
SUMMARY COMPENSATION TABLE
Annual Compensation
Long Term Compensation Awards For Fiscal Year 1998
- ------------------------- ----------- ------------- ------------ ------------
No. of
Securities
Underlying
Salary/ Other Annual Restricted Options
Name/Principal Bonus Compensation Stock Awards
- ------------------------- ----------- ------------- ------------ ------------
Robert A. MacFarlane 0 $156,000(1) 0 0
Chairman, President &
Chief Executive Officer
- ------------------------- ----------- ------------- ------------ ------------
Richard J. Weiss $34,200(2) 0 0 0
Chief Financial Officer
- ------------------------- ----------- ------------- ------------ ------------
Robert M. Kohn 0 $277,500(3) 0 0
Chief Acquisition Officer
& Director
- ------------------------- ----------- ------------- ------------ ------------
(1) Compensation received for providing consulting services to us. During
fiscal 1998, Mr. MacFarlane received consultant fees of $156,000.
(2) Richard J. Weiss commenced employment with us in August 1998. Compensation
reflects salary earned for the period August, 1998 through December, 1998.
(3) Compensation received includes commissions and fees earned for providing
consulting services to us. During fiscal 1998, Mr. Kohn received
commissions of $145,000 and consulting fees of $132,500.
Page - 24
<PAGE>
Stock Option Grants
No stock options were granted during the year ended December 31, 1998.
Employment Agreements
The Company has employment contracts with certain of its employees.
Following is a brief description of each of these contracts.
Robert A. MacFarlane
In August, 1998, we entered into a five-year employment agreement with
Mr. MacFarlane providing for a base salary at the rate of $186,000 per year for
a period covering August, 1998 through December, 1998. Thereafter, Mr.
MacFarlane's base salary will be determined annually by the our Board of
Director's, with a minimum annual increase in base salary of 5%. The contract
provides for the reimbursement of all reasonable expenses incurred by Mr.
MacFarlane on our behalf. The contract is subject to termination provisions, and
includes a two year non-competition provision.
Mr. MacFarlane (or an affiliated entity) is entitled to receive
separate compensation in the form of consulting and/or broker fees for sales of
Tax Credits in the execution of our transactions. We have 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 we subsequently 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 of our
stock 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, we adopted the 1998 Employee Stock Option Plan (the
"Plan"), which provided for the grant of options to purchase up to 750,000
shares of the our Common Stock. Under the terms of the 1998 Plan, options
granted thereunder may be designated as options which qualify for incentive
stock option ("ISO") treatment under Section 422A of the Code, or as options
which do not qualify ("Non ISO").
Page - 25
<PAGE>
The 1998 Plan is administered by the Compensation Committee designated
by the Board of Directors. The Compensation Committee has the discretion to
determine 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 shall 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 pertaining thereto.
Under the 1998 Plan, the exercise price of an option designated 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 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 ISO
options may be less than such fair market value. The aggregate value of shares
subject to options designated ISO and granted to a participant, that become
exercisable in any calendar year shall not exceed $100,000. "Fair market value"
will be the closing Nasdaq bid price or, if our Common Stock is not quoted by
Nasdaq, will be as reported by the National Quotation Bureau, Inc., or a market
maker of the our 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, at 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 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 until April,
2008, to: i) non-executive directors as defined and; ii) members of any advisory
board we establish who are not full-time employees of us or any of our
subsidiaries. The Director Plan provides that each non-executive director will
automatically be granted an option to purchase 15,000 shares of our Common Stock
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 an option to purchase 10,000 shares of our Common Stock upon
joining the advisory board, and on each September 1st thereafter, provided such
person has served as a director of the advisory board for the preceding 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 our Common
Stock is not quoted by Nasdaq, the price as reported by the National Quotation
Bureau, Inc., or a market maker of our Common Stock or, if the Common Stock is
not quoted by any of the above, by the Board of Directors acting in good faith.
Unless and 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 or by delivery of shares of our Common Stock, or by equivalent
combination of both. 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 our officers (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, or 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.
Page - 26
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January, 1997, we entered into a settlement agreement (the
"Settlement Agreement") with Canton Financial Services, a former financial
consultant (the "Former Consultant") to us and Homes For America, L.C., a
Virginia Corporation which is an affiliate of ours and is principally owned by
our President, Chief Executive Officer and Chairman of the Board, Mr. Robert A.
MacFarlane. Among other things, the Settlement Agreement provided for the
termination of a consulting agreement, and any other relationship, between the
us and the Former Consultant. Pursuant to the Settlement Agreement, we agreed to
pay the Former Consultant the sum of $89,096.88, and to 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 it owned to Homes For
America, L.C. By unanimous written consent dated February, 1997, for various
financial and consulting services, we transferred the 2,000,000 shares of our
Common Stock, represented by the Former Consultant's surrendered shares to Homes
for America, L.C. A subsequent agreement reached in March 1999 further reduced
Home for America's obligation for fees and expenses to $99,000.
We have an agreement with Mr. Robert A. MacFarlane, our 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 our Chief
Executive Officer. All commissions, if any, paid to Mr. MacFarlane are for
amounts consistent with industry standards for transactions of this type. Since
inception, and through March 31, 1999, Mr. MacFarlane has been paid $62,500 in
commissions. We have 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 we subsequently chose not to
pursue.
We engage one of our shareholders, International Business Realty and
Consultants, LLC ("IBRC) to perform various consulting services related to the
purchase, acquisition and management of our properties. Mr. Robert M. Kohn, one
of our Directors, is also an officer of IBRC and actually performs services for
us on behalf of IBRC. IBRC is wholly owned by Mr. Kohn's spouse, Ms. Christiane
Kohn. Since inception and through March 31, 1999, we have paid $329,000 to IBRC
for consulting services. We believes that all such fees, if any, paid to Mr.
Kohn are for amounts consistent with industry standards for transactions of this
type.
Page - 27
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIESITEM 8. DESCRIPTION OF SECURITIES
We are authorized to issue 25,000,000 shares of Common Stock, par value
$.001 per share. As of March 31, 1999, there were 8,374,000 shares of Common
Stock issued and outstanding.
Common Stock
Holders of shares of our Common Stock 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 our 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 therefore.
Upon liquidation or dissolution, each outstanding share of Common Stock will be
entitled to share equally in our assets that are 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 preemptive rights. There are no conversions 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.
Page - 28
<PAGE>
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 our Common Stock. We have
not paid any cash dividends and do not anticipate that we will pay cash
dividends in the foreseeable future. Payment of dividends is within the
discretion of our Board of Directors, and will depend, among other factors, upon
our earnings, financial condition and capital requirements. The Company has
approximately 374 record holders of its Common Stock.
ITEM 2. LEGAL PROCEEDINGS
We are not a party to any legal proceedings that could have a
materially adverse effect on our business.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
In December, 1998, our Board of Directors determined that it would be
in our best interests to cease our relationship with our independent accountant
and auditors, Rappaport, Steele & Company, P.C., which acted as our independent
accountant and auditors with respect to our financial statements for the
previous two fiscal years ended December 31, 1997.
The replacement of Rappaport, Steele & Company, P.C. was recommended
and approved by our Board of Directors and is not the result of any disagreement
with Rappaport, Steele & Company, P.C. on any matter of accounting principles or
practice, financial statement disclosure or auditing scope or procedure.
During the last two fiscal years no report issued by Rappaport, Steele
& Company, P.C. contained any adverse opinion or a disclaimer of opinion, or was
qualified or modified as to uncertainty, audit scope, or accounting principles.
In addition, during the last two fiscal years and subsequent periods, there were
no disagreements with Rappaport, Steele & Company, P.C. regarding accounting
principles, or practices, financial statement disclosure, or auditing scope or
procedure nor any dispute between us and Rappaport, Steele & Company, P.C. with
respect to our status as a "going concern."
Effective December, 1998, our Board of Directors determined that it
would be in our best interests to retain the services of Lazar Levine & Felix,
LLP to replace Rappaport, Steele & Company, P.C. as our independent accountant
and auditors. The firm has audited our financial statements to be included in
our Form 10-SB to be filed with the Securities and Exchange Commission.
We intend to have Lazar Levine & Felix, LLP continue to serve as our
accountant and auditors for the fiscal year ending December 31, 1999.
During the last two fiscal years and subsequent periods, we did not
consult with Lazar, Levine & Felix, LLP regarding accounting principles or
practices, financial statement disclosure, auditing scope or procedure or
accounting principles applicable to any specific transaction.
Page - 29
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, we have 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 our establishment, we 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 this transaction.
During the period April, 1996 through January, 1997, we sold 370,000
shares of Common Stock at an offering price of $2.00 per share. In addition, in
connection with this transaction, we 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 regulations promulgated thereunder.
In July, 1998, we 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 this transaction.
Page - 30
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of Nevada provides 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
judgement in its favor, by reason of the fact that he is or was a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorney's fees) and, in
a proceeding not by or in the right of the corporation, judgements, 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. Nevada 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.
Our By-Laws provide for indemnification of our officers and directors
to the greatest extent permitted by Nevada Law (as per Eighth Article of
Incorporation, "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") 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 us,
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
authorize the Board to enter into an indemnification agreement with each officer
or director.
In accordance with Nevada law, our Certificate of Incorporation
contains provisions eliminating the personal liability of directors, except for
breach of a director's fiduciary duty of loyalty to us or to our stockholders,
acts or omissions 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
Homes for America nor our stockholders may be able to recover monetary damages
against directors for actions taken by them which are ultimately found to have
constituted 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 us pursuant
to the foregoing provisions, we have 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.
Page - 31
<PAGE>
PART F/S
ITEM 1.
AUDITED FINANCIAL STATEMENTS FOR
HOMES FOR AMERICA HOLDINGS, INC.
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Page - 32
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Homes For America Holdings, Inc.
We have audited the consolidated balance sheet of Homes For America
Holdings, Inc. (a Nevada corporation) as of December 31, 1998, and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit. The financial statements of Homes
For America Holdings, Inc., as of and for the year ended December 31, 1997, were
audited by other auditors whose report dated March 2, 1998, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1998 financial statements referred to above present
fairly, in all material respects, the financial position of Homes For America
Holdings, Inc. as of December 31, 1998, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
LAZAR LEVINE & FELIX, LLP
New York, New York
March 19, 1999
Page - 33
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $766,293 $66,694
Accounts receivable - tenants (Note 2k) 17,799 -
Accounts receivable - other fees 450,840 141,021
Restricted deposits and funded
reserves - current (Note 5) 518,645 200,792
Prepaid expenses and other current assets 53,057 140,846
---------- ----------
TOTAL CURRENT ASSETS 1,806,634 549,353
---------- ----------
INVESTMENTS IN REAL ESTATE - NET
(Notes 2e, 3, 6 and 7) 9,842,952 6,147,621
---------- ----------
FIXED ASSETS - NET (Notes 2e, 4 and 8) 48,574 6,310
---------- ----------
OTHER ASSETS:
Restricted deposits and funded reserves (Note 5) 3,842,255 3,923,442
Loans receivable (Note 6) - 400,000
Deferred financing costs - net (Note 2f) 580,141 118,571
Deferred asset management fee - net (Note 2g) 95,750 104,325
Organization costs - net (Note 2h) 372,262 319,810
Pre-acquisition costs (Note 2i) 191,987 324,463
---------- ----------
5,082,395 5,190,611
16,780,555 11,893,895
=========== ===========
Page - 34
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
BALANCE SHEETS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
1998 1997
----------- -----------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $509,002 $498,900
Tenants' security deposits 75,011 44,198
Unearned rent (Note 2k) 9,514 9,577
Current portion - liabilities applicable to
investments in real estate (Note 6) 127,534 -
Current portion - notes payable (Note 7) 313,000 100,384
Current portion of capitalized leases payable
(Note 8) 13,679 -
----------- -----------
TOTAL CURRENT LIABILITIES 1,047,740 653,059
----------- -----------
LIABILITIES APPLICABLE TO INVESTMENTS IN
REAL ESTATE (Note 6) 11,293,785 7,713,130
----------- -----------
LONG-TERM LIABILITIES - NET OF CURRENT PORTION:
Notes payable (Note 7) 270,045 318,157
Capitalized leases payable (Note 8) 32,271 -
Deferred income taxes (Notes 2j and 11) 578,400 179,700
----------- -----------
880,716 497,857
----------- -----------
MINORITY INTERESTS IN SUBSIDIARIES (Note 9) 1,540,175 2,286,258
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY (Note 10):
Common stock; $.001 par value; 25,000,000
shares authorized, 8,351,683 and 6,548,966
shares issued in 1998 and 1997, respectively
(Note 7) 8,352 6,549
Additional paid-in capital 941,955 668,401
Stock subscription receivable - (211,268)
Retained earnings 1,067,832 279,909
----------- -----------
2,018,139 743,591
----------- -----------
16,780,555 11,893,895
=========== ===========
Page - 35
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
------------ -------------
REVENUES:
Rental income (Note 2k) $2,400,036 $1,430,657
Real estate development fees (Note 2k) 1,722,211 1,082,079
Interest income 56,398 2,624
Other income 55,222 93,353
------------ -------------
4,233,867 2,608,713
------------ -------------
EXPENSES:
Administrative expenses 1,227,421 418,158
Maintenance and operating costs 332,947 264,061
Utilities 554,915 315,475
Taxes and insurance 201,506 152,673
Interest expense 558,293 371,883
Depreciation and amortization 415,665 273,754
------------ -------------
3,290,747 1,796,004
------------ -------------
INCOME BEFORE MINORITY INTERESTS AND PROVISION
FOR INCOME TAXES 943,120 812,709
Minority interests in net loss of
consolidated subsidiaries (Note 9) 243,503 -
------------ -------------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,186,623 812,709
Provision for income taxes (Notes 2j and 11) 398,700 208,000
------------ -------------
NET INCOME 787,923 604,709
============ =============
BASIC INCOME PER COMMON SHARE (Note 2l):
Net income before minority interest $.08 $.10
Minority interests in net loss of subsidiaries .03 -
------ ------
NET INCOME PER SHARE $.11 $.10
====== ======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 7,450,325 6,343,612
============ =============
See accompanying notes.
Page - 36
<PAGE>
HOMES FOR AMERICA HOLDING, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
Additional Stock
Common Paid-in Subscription Retained
Stock Capital Receivable Earnings Total
<S> <S> <S> <S> <S>
Balance at January 1, 1997 $10,772 $559,428 $ - $(324,800) $245,400
Sale of common stock 411 315,406 (211,268) - 104,549
Purchase and cancellation of common stock (4,634) (206,433) - - (211,067)
Net income - - - 604,709 604,709
------------ ----------- -------------- ----------- ------------
Balance at December 31, 1997 6,549 668,401 (211,268) 279,909 743,591
Sale of common stock 1,803 273,554 - - 275,357
Receipt of stock subscription - - 211,268 - 211,268
Net income - 787,923 787,923
------------ ----------- -------------- ----------- ------------
BALANCE AT DECEMBER 31, 1998 $ 8,352 $941,955 $ - $1,067,832 $ 2,018,139
============ =========== ============== =========== ============
<C> <C> <C> <C> <C>
</TABLE>
See accompanying notes.
Page - 37
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
Net income $787,923 $604,709
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 610,057 273,754
Minority interests (243,503) -
Deferred income taxes 398,700 208,000
(Increase) decrease in assets:
Accounts receivable - tenants (8,623) -
Accounts receivable - other (346,714) (546,407)
Prepaid expenses and other current assets (52,697) -
Organization costs (47,150) -
Operating escrow (248,701) (61,621)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 317 233,598
Unearned rent (63) 9,577
------------ -------------
Net cash provided by operating activities 849,546 721,610
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real property (650,089) (842,146)
Increase in project improvement fund (10,000) -
Construction in progress expenditures (50,000) -
(Additions) to replacement reserves (31,016) (110,756)
Pre-acquisition costs (57,577) (486,345)
------------ -------------
Net cash (utilized) by investing activities (798,682) (1,439,247)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 486,625 99,927
Contributions from minority shareholders 746,083 711,912
Proceeds from long-term debt - 21,186
Payments of long-term debt (245,577) (54,247)
Payments of capital lease obligations (24,680) -
Payments for bond issuance costs (203,250) -
Payments for financing costs (110,466) -
------------ -------------
Net cash provided by financing activities 648,735 778,778
------------ -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 699,599 61,141
Cash and cash equivalents, beginning of year 66,694 5,553
------------ -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $766,293 $66,694
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $463,363 $371,883
Income taxes paid - -
See accompanying notes.
Page - 38
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - DESCRIPTION OF BUSINESS:
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 residential
real estate. As to the Affordable Housing portion of the
portfolio, the Company sells partnership interests through
newly formed subsidiaries, including "tax-credit" benefits,
according to Section 42 of the IRS Code, and depreciation and
amortization for equity, acquisition and management fees.
The Company's wholly-owned subsidiaries are:
(i) Glen Hills Homes for America, Inc., a Texas corporation,
which is the General Partner in Dallas/Glen Hills L. P.
("Dallas/Glen/Hills")
(ii) Prairie Village-Homes for America, Inc., an Indiana
corporation, which is the General Partner of Middlebury
Elkhart, L.P. ("Prairie Village")
(iii) Putnam Homes for America Holdings, Inc., a Connecticut
corporation, which is the General Partner of TVMJG
1996-Putnam Square Limited Partnership ("Putnam")
(iv) BriarMeadows/Homes for America, Inc., a Texas corporation
("BriarMeadows") and (v) Arlington/Homes for America, Inc., a
Texas corporation ("Arlington")
Glen Hills Homes for America, Inc., Prairie Village-Homes for
America, Inc., and Putnam Homes for America Holdings, Inc.,
("the general partners"), have no other operating activities.
On December 18, 1998, BriarMeadows purchased an apartment
property (land and building) located in Dallas, Texas for a
cost of $1,050,000. The operations of this rental property are
included in the consolidated financial statements from the date
of acquisition.
On December 21, 1998, Arlington purchased a tract of land in
Arlington, Texas, for an aggregate cost of $1,000,000. The
Company has received approval from the City of Arlington to
construct a 210-unit apartment complex and is presently
negotiating for permanent financing for this project.
Construction is expected to begin in July 1999, with completion
anticipated in April 2000.
Page - 39
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - DESCRIPTION OF BUSINESS (Continued):
CERTAIN PROVISIONS OF LIMITED PARTNERSHIP AGREEMENTS:
Dallas/Glen Hills, L.P.:
Dallas/Glen Hills, L.P., (Dallas/Glen Hills) was formed in
October 1995 and commenced operations in February 1996. The
partnership agreement was amended in March 1997, to provide for
the withdrawal or reduction in ownership interest of the
existing partners and the contribution of capital and the
admittance of new partners, with the general partner being Glen
Hills Homes for America, Inc., a wholly-owned subsidiary of the
Company. Dallas/Glen Hills was organized to purchase,
rehabilitate and operate the Willow Pond Apartment Project
("the Project") located in Dallas, Texas. The Project received
an allocation of low income housing tax credits from the Texas
Department of Housing and Community Affairs under Section 42 of
the Internal Revenue Code, which regulates the use of the
Project as to occupant eligibility and unit gross rent, among
other requirements. 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. The project must meet the
provisions of these regulations during each of 15 consecutive
years in order to remain qualified to receive these credits.
Losses, subject to certain provisions, and tax credits are
allocated .01% to the general partner and 99.99% to the limited
partners. Operating profits, subject to certain provisions, are
allocated first to the extent of losses previously allocated
then based on cash distributions already made or to be made.
However, annual distributable cash flow is first utilized to
satisfy loans and certain accrued and unpaid liabilities, in
accordance with the partnership agreement, and then to satisfy
various fees and obligations to the general partner. Finally,
any distributable cash flow remaining after the general
partner's fees and obligations are satisfied, is distributed
50.1% to the general partner and 40.9% to the limited partners.
The cumulative effect of the distribution priorities is that
the general partner receives approximately 95% of the
partnership's distributable cash flow, effectively giving the
general partner control of the entity.
Middlebury Elkhart, L.P.:
Middlebury Elkhart, L. P., (Prairie Village) was formed in July
1997 and in December 1998, acquired a 110-unit apartment
building (including land) in Elkhart, Indiana, for rental to
low income tenants. Rehabilitation of this building is expected
to be completed in 1999. Prairie Village has applied to receive
an allocation of low income housing tax credits from the
Indiana Housing Finance Authority under Section 42 of the
Internal Revenue Code of 1986, as amended. As such, similar to
Dallas/Glen Hills, management is required to lease a minimum of
40% of Prairie Village's units to families whose income is 60%
or less of the area median gross income. Under the terms of an
amended partnership agreement dated December 1998, Prairie
Village-Homes for America, Inc., became the general partner and
has a .1% interest in the partnership.
Page - 40
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 - DESCRIPTION OF BUSINESS (Continued):
CERTAIN PROVISIONS OF LIMITED PARTNERSHIP AGREEMENTS (Continued):
Middlebury Elkhart, L.P. (continued):
Profits, losses and tax credits generally are allocated to the
partners in accordance with their ownership interests. However,
annual distributable cash flow is first utilized to satisfy
unpaid liabilities, as set forth in the partnership agreement,
then the remainder is distributed 80% to the general partner
and 20% to the limited partners, effectively giving the general
partner control of the entity.
TVMJG 1996-Putnam Square Limited Partnership:
TVMJG 1996-Putnam Square Limited Partnership (Putnam Square)
was formed in February 1996 for the purpose of acquiring,
developing and operating a 18-unit rental housing project in
Bridgeport, Connecticut. The housing project has qualified and
been allocated low income housing tax credits pursuant to
Section 42 of the Internal Revenue Code of 1986. The general
partner, Putnam Homes for America Holdings, Inc., has a 1%
interest in the partnership.
Profits, losses and tax credits generally are allocated to the
partners in accordance with their ownership interests. However,
annual distributable cash flow is first utilized to satisfy
unpaid liabilities, as set forth in the partnership agreement,
then the remainder is distributed 75% to the general partner
and 25% to the limited partners, effectively giving the general
partner control of the entity.
General:
The general partners have also entered into guaranty agreements
with the limited partners of each partnership, whereby the
general partner has agreed to fund (i) operating deficits (as
defined in each agreement) incurred during a specific period
and (ii) replacement reserve escrow accounts to meet
replacement reserve obligations during the guaranty period.
All fees paid to the general partner, according to terms of the
partnership agreements, have been eliminated upon
consolidation.
Page - 41
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(1) Principles of Consolidation:
The consolidated financial statements are prepared on the
accrual basis of accounting in accordance with generally
accepted accounting principles and include the accounts of the
Company and all of its wholly-owned subsidiaries (which include
the general partners). The general partners own less than 50%
of the limited partnerships but the substance of the
partnership agreements provide for control by the general
partners, since their participation in distributable cash flow
is always in excess of 75%. As such, according to the
provisions of Statement of Position 78-9 "Accounting for
Investments in Real Estate Ventures," the Company, as the
controlling investor, accounts for such investments under the
principles of accounting applicable to investments in
subsidiaries. See also Note 9 re:
Minority Interests.
All material intercompany balances and transactions have been
eliminated.
(2) Use of Estimates:
In preparing financial statements in accordance with generally
accepted accounting principles, management makes certain
estimates and assumptions, where applicable, that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and
expenses during the reporting period. While actual results
could differ from those estimates, management does not expect
such variances, if any, to have a material effect on the
financial statements.
(3) Statements of Cash Flows:
For purposes of the statements of cash flows, the Company
considers all highly liquid investments purchased with a
remaining maturity of three months or less to be cash
equivalents.
(4) Comprehensive Income:
SFAS 130 "Reporting Comprehensive Income" is effective for
years beginning after December 15, 1997. This statement
prescribes standards for reporting other comprehensive income
and its components. Since the Company currently does not have
any items of other comprehensive income, a statement of
comprehensive income is not yet required.
Page - 42
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(5) Property and equipment:
Land, buildings, furniture and equipment, including investment
property, are recorded at cost. Depreciation is computed using
the straight-line method as follows:
Buildings and improvements 27 1/2- 40 years
Furniture and Equipment 7 years
Building improvements are capitalized, while expenditures for
maintenance and repairs are charged to operations. Depreciation
expense for the years ended December 31, 1998 and 1997
aggregated $403,163 and $264,848, respectively.
(6) Deferred Financing Costs:
Costs directly associated with obtaining permanent debt
financing have been deferred and are being amortized on a
straight-line basis over the term of the permanent loans.
Accumulated amortization at December 31, 1998 and 1997
aggregated $17,055 and $7,309, respectively. Amortization
expense for the years ended December 31, 1998 and 1997
aggregated $9,746 and $7,309, respectively.
(7) Deferred asset management fee:
The asset management fee paid to an affiliate of the limited
partner in Dallas/Glen Hills is being amortized over the life
of the 15-year agreement. Accumulated amortization at December
31, 1998 and 1997 aggregated $15,006 and $6,431, respectively.
Amortization expense for the years ended December 31, 1998 and
1997 aggregated $8,575 and $6,431, respectively.
(a) Organization Costs:
Organization costs are being amortized on a straight line basis
over 5 years. Accumulated amortization at December 31, 1998 and
1997 aggregated $197,131 and $7,333, respectively. Amortization
expense for each of the years ended December 31, 1998 and 1997
aggregated $184,798 and $5,047, respectively.
(b) Pre-Acquisition Costs:
Costs incurred in pursuit of new acquisitions including, but
not limited to, professional, consulting, travel and due
diligence expenditures, are deferred, pending either the
acquisition of the property or the determination by management
that a particular property will not be acquired. Certain of
these costs may be reimbursed to the Company upon acquisition
of the property. Costs remaining upon the consummation of an
acquisition are capitalized and become part of the Company's
investment in the related entity. Alternatively, at such time
that management determines that acquisition of the property is
not feasible, any deferred costs are charged to expense.
Page - 43
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(1) Pre-Acquisition Costs (continued):
At December 31, 1998 and 1997, pre-acquisition costs were
comprised of the following:
1998 1997
------------ -----------
UDR Portfolio $166,487 $ -
Schenectady 25,500 -
University Place - 134,410
Middlebury Elkhart - 190,053
------------- --------------
$191,987 $324,463
Costs associated with Middlebury Elkhart, L.P., at December 31, 1997, were
included in the investment in that entity at December 31, 1998, following the
acquisition of that property. Costs associated with University Place were
written off during 1998.
(10) Income Taxes:
The Company accounts for its income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109,
which reflects an asset and liability approach in accounting
for income taxes. The objective of the asset and liability
method is to establish deferred tax assets and liabilities for
the temporary differences between the financial reporting basis
and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts
are realized or settled. Deferred income taxes result
principally from utilizing the accrual basis for financial
reporting purposes and the cash basis for income tax purposes.
No Federal or state income taxes are payable by the
partnerships, and none have been provided for.
(11) Revenue Recognition:
Rental income is recognized as rent becomes due. Rental
payments received in advance are deferred until earned. The
Company does not believe that an allowance for doubtful
accounts is necessary at this time.
When the Company acquires rental property which is eligible for
tax credits, it establishes a limited partnership in which
individuals and entities invest as limited partners. Limited
partners, by participating in the partnership, are eligible for
a proportionate share of these credits represented by their
equity interests in the limited partnership. The Company
records the limited partners' capital contributions as income,
in the year the credits are allocated to the rental property.
Page - 44
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(l) Earnings Per Share:
Earnings per share has been computed on the basis of the
weighted average number of common shares outstanding during
each period presented according to the standards of SFAS No.
128 "Earnings Per Share".
(m) Reclassifications:
Certain reclassifications have been made to the 1997 financial
statements to correspond to the presentation used in 1998.
NOTE 3 - INVESTMENTS IN REAL ESTATE:
Investments in real estate represent the rental properties
owned by the limited partnerships and consist of the following:
1998 1997
-------------- --------------
Buildings and improvements $ 6,878,107 $4,466,835
Furniture, fixtures and equipment 1,243,508 1,036,800
Construction in progress 132,978 -
-------------- --------------
8,254,593 5,503,635
Less: accumulated depreciation
and amortization (724,411) (260,014)
-------------- --------------
7,530,182 5,243,621
Land 2,312,770 904,000
-------------- --------------
$9,842,952 $6,147,621
=============== ==============
NOTE 4 - FIXED ASSETS:
Fixed assets consist of the following:
1998 1997
-------------- --------------
Office equipment $ 63,261 $ 6,310
Less: accumulated depreciation (14,687) -
-------------- --------------
$ 48,574 $ 6,310
============== ==============
Page - 45
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 5 - RESTRICTED DEPOSITS AND FUNDED RESERVES:
The terms of the partnership agreements require that various
escrow accounts be maintained in amounts and for periods as set
forth in each agreement. As of December 31, 1998 and 1997,
restricted deposits and funded reserves consist of the
following:
1998 1997
-------------- --------------
CURRENT ASSETS:
Tax and escrow reserves $ 155,279 $ 129,942
Rehabilitation reserves 260,000 -
Replacement reserves 103,366 70,850
-------------- --------------
518,645 200,792
-------------- --------------
OTHER ASSETS:
Debt reduction escrow (Note 6) 1,500,000 1,500,000
Restricted mortgage funds (Note 6) 2,176,840 2,408,200
Operating reserves 165,415 15,242
-------------- --------------
3,842,255 3,923,442
TOTAL $4,360,900 $4,124,234
========== ==========
NOTE 6 - LIABILITIES APPLICABLE TO INVESTMENTS IN REAL ESTATE:
Liabilities applicable to investments in real estate consist of
the following:
1998 1997
-------------- --------------
Mortgage loans payable $11,127,600 $5,150,700
Development loan payable (Note 5) - 2,408,200
Note payable 13,000 -
Accrued interest payable 88,801 46,492
Accounts payable - acquisition 31,553 -
Real estate taxes payable 160,365 107,738
-------------- --------------
11,421,319 7,713,130
Less: current portion 127,534 -
-------------- --------------
$11,293,785 $7,713,130
============== ==============
Dallas/Glen Hills entered into a mortgage loan agreement in 1996, with a bank,
in the amount of $5,350,000. As of December 31, 1998, the mortgage balance was
$5,150,700. The loan bears interest at an annual rate of 8.25% and monthly
principal and interest payments of $42,182 are payable until February 2011. The
mortgage loan matures in March 2011 and is collateralized by the Dallas/Glen
Hills' property. The partnership has funded a debt escrow account in the amount
of $1,500,000 to be applied against the outstanding loan balance upon
refinancing.
Page - 46
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 6 - LIABILITIES APPLICABLE TO INVESTMENTS IN REAL ESTATE (Continued):
Prairie Village, in December 1998, entered into a $3,236,900 mortgage loan
with a lender relating to the issuance of a total of $3,210,000 in Mortgage
Revenue Refunding Bonds, issued by the City of Elkhart, Indiana. As of December
31, 1998, the Company had drawn down $1,060,060 with the balance of $2,176,840
being held in an escrow account. The loan bears interest at an annual rate of
5.85%, and requires monthly payments of interest only through June 2000.
Beginning July 2000, monthly principal and interest payments of $19,096 are
payable for 30 years. The loan agreement requires monthly payments of principal
and interest sufficient to meet sinking fund requirements for payments of
amounts due under the bonds, based on their varying maturities and interest
rates.
Putnam Square is obligated under two promissory notes aggregating $400,000.
Monthly payments of principal and interest of $3,087 are due to the extent of
surplus cash as defined in the notes. The notes mature in January 2014 and are
secured by a mortgage on the Bridgeport, Connecticut property. As of December
31, 1998, the outstanding balance was $400,000. $200,000 of this note is payable
to the Company (and has been eliminated in consolidation) and the balance is due
to the former general partner. The partnership is also obligated under a
promissory note payable to the Company, as the general partner, in the amount of
$200,000 in connection with the development fee (which amount has also been
eliminated in consolidation). The note bears interest at an annual rate of 7%
per annum, and is payable from cash flow as defined in the partnership
agreement. The note matures on December 31, 2006, and is unsecured.
Briar Meadows is obligated under a promissory note in the amount of
$500,000. The note accrues interest at an annual rate of 15.25%, payable
monthly, and may be prepaid in full as long as three months of interest payments
have been made. This note matures on June 17, 2000.
Briar Meadows is also obligated under a promissory note in the amount of
$840,000. This note accrues interest at an annual rate equal to the lesser of
prime + 2% or the highest rate allowable by law. The note requires monthly
payments of $942 for 7 years and a balloon payment on maturity, January 1, 2006.
Arlington is obligated under a promissory note in the amount of $1,200,000.
This note accrues interest at an annual rate of 15 1/4% which is payable
monthly. The note may be prepaid under specific conditions as long as three
months of interest payments have been made. This note matures on June 17, 2000.
The aggregate maturities of mortgage loans payable for the next five years
are $127,534; $1,846,718; $178,479; $191,658; $205,896 and $8,577,315
thereafter.
Putnam is also obligated under the terms of a promissory note in the amount
of $13,000 for legal services provided in connection with the acquisition of the
property. This note is unsecured, payable from future capital contributions to
the partnership and is non-interest bearing.
Page - 47
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 7 - NOTES PAYABLE:
Notes payable consist of the following:
1998 1997
------------- -------------
9% installment note payable
secured by the rights in
Dallas/Glen Hills payable in
monthly installments of $6,772,
including interest, maturing in 2004 $318,045 $364,541
9% note payable in equal installments
of $125,000 in January and July of
1999, plus interest, secured by
150,000 shares of the Company's
common stock (a) 250,000 -
10% note payable before December 31, 1999 15,000 54,000
------------ -----------
583,045 418,541
Less: current maturities 313,000 100,384
----------- ----------
$270,045 $318,157
=========== ==========
(1) Payment of $125,000 was made in January 1999 as required
under the terms of the note. On February 22, 1999,
subsequent to the balance sheet date, the lender advanced
an additional $250,000 to the Company. This new loan is
payable in two installments of $125,000 on January 15 and
July 15, 2000, with interest at an annual rate of 9 1/2%.
The aggregate maturities of long-term debt, existing as of
December 31, 1998, for the next two years are $313,000 and
$270,045, respectively.
NOTE 8 - CAPITALIZED LEASE OBLIGATIONS:
The Company is the lessee of office equipment with leases
expiring in various years through 2002. The assets and
liabilities under capital leases are recorded at the lower of
the present value of the minimum lease payments or the fair
market value of the asset. The assets are depreciated over
their estimated productive lives. Accumulated depreciation of
assets held under capitalized leases aggregated $14,687 as of
December 31, 1998.
Minimum future lease payments under capital leases as of
December 31, 1998 and for each of the next four fiscal years
and in the aggregate are:
1999 $22,088
2000 14,972
2001 14,623
2002 14,117
--------
Total minimum lease payments 65,800
Less: amount representing interest 19,850
--------
$45,950
========
Page - 48
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 8 - CAPITALIZED LEASE OBLIGATIONS (Continued):
The interest rates on the capitalized leases have been
calculated at approximately 20% and were based on the lessors'
implicit rate of return.
Certain of the capital leases provide for a bargain purchase
option at the end of the lease.
NOTE 9 - MINORITY INTERESTS:
Three wholly-owned subsidiaries of the Company are the general
partners of three separate limited partnership entities (see
Note 1). The partnerships were established for the purpose of
acquiring rental properties which are controlled and managed by
the Company. For financial reporting purposes, the financial
statements of the partnership entities are included in the
Company's consolidated financial statements (see Note 2a).
The minority interests represent the equity investment by the
investor limited partners in the limited partnerships that own
specific properties. Under the terms of the various partnership
agreements, the limited partners are typically allocated 99% of
the taxable income or loss. Cash flow from the partnership
property is allocated 75% or more to the general partner, and
residual value is allocated 80% or more to the general partner.
Accordingly, all operating control of the property rests solely
with the general partner. The limited partners' interests in the
partnerships have been recorded as minority interest
liabilities, net of offsets for the limited partners investment
cost to be eligible for tax credits (see Note 2k).
NOTE 10 - SHAREHOLDERS' EQUITY:
The Company's authorized capital consists of 25,000,000 shares
of common stock, $.001 par value.
During 1997, the Company sold 410,708 shares of common stock for
$315,817, of which amount $104,549 was received in 1997 and the
balance of $211,268, was received from the shareholders in 1998.
The Company also purchased 4,633,742 shares of its common stock
at an aggregate cost of $211,067. These shares were canceled
upon re-acquisition.
During 1998, the Company received $275,357 in cash from the sale
of 1,802,717 shares of its common stock.
Page - 49
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 11 - INCOME TAXES:
The provision for income taxes consists of the following:
1998 1997
------------ ------------
Current tax expense $ - $ -
Deferred tax expense:
Federal 296,000 154,400
State 102,700 53,600
---------- ----------
$398,700 $208,000
======== ========
The following is a summary of the significant components of the
Company's deferred tax assets and liabilities:
1998 1997
------------- ------------
Deferred asset:
Net operating loss $ - $ 126,380
Deferred liability:
Conversion of accrual to cash (578,400) (306,080)
--------- ----------
Net deferred liability $(578,400) $(179,700)
========= =========
NOTE 12 - COMMITMENTS AND CONTINGENCIES:
(a) Operating leases:
For the years ended December 31, 1998 and 1997, the Company
occupied office space owned by an officer of the Company. No
rent was charged or paid and the value of the office space was
nominal.
At December 31, 1998 and 1997, there were no leases in effect.
On April 22, 1999, subsequent to the balance sheet date, the
Company entered into a three-year lease for office space.
Rental payments under said lease are as follows:
1999 $ 24,072
2000 37,445
2001 39,452
2002 13,373
-----------
$ 114,342
===========
Page - 50
<PAGE>
HOMES FOR AMERICA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued):
(b) Consulting Agreements:
The Company has entered into a five-year agreement with a
corporate entity, which owns 1,612,000 shares of the Company's
common stock, for services to be provided by an employee of this
entity. This individual functions as the Chief Acquisition
Officer, primarily responsible for identifying and consummating
new acquisitions. Under the terms of the consulting agreement,
which commenced August 1, 1998 and continues to July 31, 2003,
the monthly fee is $15,000 through December 31, 1998, with
annual increases of not less than 105% effective in January of
each year. This agreement is renewable annually upon expiration,
at similar terms.
(c) Employment Agreements:
The Company has entered into a five-year employment agreement
with an individual and a corporation controlled by him, for his
services as Chief Executive Officer. The agreement commenced
August 1, 1998 and continues to July 31, 2003. Under the terms
of the agreement, the monthly compensation is $15,500 through
December 31, 1998, with annual increases of not less than 105%
effective in January of each year. The individual has chosen to
have such payments made to the corporation.
Page - 51
<PAGE>
PART F/S
ITEM 2.
UNAUDITED FINANCIAL STATEMENTS FOR
HOMES FOR AMERICA HOLDINGS, INC.
FOR THE QUARTER ENDED MARCH 31, 1999
Page - 52
<PAGE>
Homes For America Holdings, Inc.
Consolidated Balance Sheet
March 31, 1999 and 1998
ASSETS
1999 1998
------------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ 280,839 $ (21,590)
Accounts receivable - Tenants 7,527 1,964
Accounts receivable - other fees 461,671 16,203
Restricted deposits and funded reserves - current 594,098 262,186
Prepaid expenses and other current assets 44,786 140,846
------------- -------------
TOTAL CURRENT ASSETS 1,388,921 399,609
------------- -------------
INVESTMENTS IN REAL ESTATE - NET 10,794,335 6,682,536
FIXED ASSETS - NET 49,074 26,310
OTHER ASSETS:
Restricted deposits and funded reserves 3,874,721 3,923,442
Deferred financing costs - net 626,135 118,571
Deferred asset management fee - net 93,605 104,325
Organization costs - net 326,000 351,405
Preacquisition costs 206,987 337,675
Other 23,022 532
------------- -------------
5,150,470 4,835,950
------------- -------------
$17,382,800 $11,944,405
============= =============
Page - 53
<PAGE>
Homes For America Holdings, Inc.
Consolidated Balance Sheet
March 31, 1999 and 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
------------- -------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 459,374 $ 475,875
Tenant security deposits 94,709 58,147
Unearned rent 5,151 10,602
Current portion - liabilities applicable to
investment in real estate 145,000 77,735
Current portion - notes payable 397,500 102,250
Current portion of capitalized leases payable 14,000 7,500
------------- -------------
TOTAL CURRENT LIABILITIES 1,115,734 732,109
------------- -------------
LIABILITIES APPLICABLE TO INVESTMENTS IN REAL ESTATE 11,271,001 7,825,679
LONG TERM LIABILITIES - NET OF CURRENT PORTION
Notes payable 166,000 457,386
Capitalized leases payable 25,778 12,500
Deferred income taxes 526,400 170,300
------------- -------------
718,178 640,186
------------- -------------
MINORITY INTERESTS IN SUBSIDIARIES 2,376,300 1,890,870
SHAREHOLDERS' EQUITY:
Common stock 8,374 6,549
Additional paid in capital 959,486 668,401
Stock subscription receivable (60,719)
Retained earnings 933,727 241,330
------------- -------------
1,901,587 855,561
------------- -------------
$17,382,800 $11,944,405
============= =============
Page - 54
<PAGE>
Homes For America Holdings, Inc.
Consolidated Statement of Operations
for the Three Months Ended March 31, 1999 and 1998
1999 1998
------------- -------------
REVENUES:
Rental Income $ 878,924 $ 546,400
Interest Income 537
Other Income 27,483 20,312
------------- -------------
906,944 566,712
------------- -------------
EXPENSES:
Administrative Expenses 369,440 219,386
Maintenance and Operating 155,462 161,194
Utilities 192,481 77,188
Taxes and Insurance 73,056 52,822
Interest Expense 167,731 147,712
Depreciation and Amortization 171,813 101,092
Property Management Fee 5,549
------------- -------------
1,135,532 759,394
------------- -------------
INCOME (LOSS) BEFORE MINORITY INTERESTS AND
PROVISION FOR INCOME TAXES (228,588) (192,682)
Minority interests in net loss (income) of
consolidated subsidiaries 42,483 144,503
------------- -------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (186,105) (48,179)
Provision for income taxes (52,000) (9,600)
------------- -------------
NET PROFIT (LOSS) $ (134,105) $ (38,579)
============= =============
Page - 55
<PAGE>
Homes for America Holdings, Inc.
Consolidated Statement of Changes in Shareholders' Equity
for the Three Months Ended March 31, 1999
Additional
Common Paid in Retained
Stock Capital Earnings Total
--------- ---------- ------------ ------------
BALANCE AT JANUARY 1, 1999 $ 8,352 $ 941,955 $ 1,067,832 $ 2,018,139
Purchase and cancellation of
common stock (3) (7,442) (7,445)
Common stock issued in settlement
of debt 25 24,973 24,998
Net Income (134,105) (134,105)
--------- ---------- ------------ ------------
BALANCE AT MARCH 31, 1999 $ 8,374 $ 959,486 $ 933,727 $ 1,901,587
========= ========== ============ ============
Page - 56
<PAGE>
Homes for America Holdings, Inc.
Consolidated Statement of Changes in Shareholders' Equity
for the Three Months Ended March 31, 1998
Additional Stock
Common Paid in Subscription Retained
Stock Capital Receivable Earnings Total
--------- --------- ----------- --------- ---------
BALANCE AT JANUARY 1, 1998 6,549 668,401 (211,268) 279,909 743,591
Receipt of Stock Subscription 150,549 150,549
Net Loss (38,579) (38,579)
--------- --------- ----------- --------- ---------
BALANCE AT MARCH 31, 1998 6,549 668,401 (60,719) 241,330 855,561
========= ========= =========== ========= =========
Page - 57
<PAGE>
Homes For America Holdings, Inc.
Consolidated Statement of Cash Flows
for the Three Months Ended March 31, 1999 and 1998
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(134,105) $ (38,579)
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 171,813 101,092
Minority interests (42,483) (144,503)
Deferred income taxes (52,000) (9,600)
(Increase) decrease in assets:
Accounts Receivable - Tenants 5,055 1,964
Accounts Receivable - Other (25,260) (2,488)
Prepaid expenses and other current assets (2,723) (748)
Escrows 129,870 (15,922)
Increase (decrease) in liabilities:
Accounts Payable & Accrued Expenses (217,345) 94,725
Prepaid rent (4,363) 10,289
----------- -----------
Net cash provided by operating activities (171,541) (3,770)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real property (415,145) (79,474)
Pre-acquisition costs (139,980) 132,087
(Additions) to replacement reserves (5,323) (45,173)
Purchase of equipment (20,000)
Increase in restricted funds (350,000)
----------- -----------
Net cash (utilized) by investing activities (910,448) (12,560)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt 344,243
Payment of long term debt (148,383) (222,503)
(Additions) to deferred financing costs (24,551)
Payments for bond issuance costs (28,000)
Repayment of developer note (HFAH) (22,042)
Sale of common stock 150,549
Partner's capital contribution 350,000
Draw down of restricted mortgage funds 125,268
----------- -----------
Net cash provided by financing activities 596,535 (71,954)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (485,454) (88,284)
Cash and cash equivalents, beginning of year 766,293 66,694
----------- -----------
CASH AND CASH EQUIVALENTS, MARCH 31, 1999 AND 1998 $ 280,839 $ (21,590)
=========== ===========
Page - 58
<PAGE>
PART F/S
ITEM 3.
AUDITED FINANCIAL STATEMENTS FOR
DALLAS/GLEN HILLS, L.P. (WILLOW POND APARTMENTS)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Page - 59
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Dallas/Glen Hills, L.P.
We have audited the balance sheets of Dallas/Glen Hills, L.P., (a Texas limited
partnership), as of December 31, 1998 and 1997 and the related statements of
operations, partners' capital and cash flows for the year ended December 31,
1998 and from March 27, 1997 (Inception) to December 31. 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dallas/Glen Hills, L.P., as of
December 31, 1998 and 1997, and the results of its operations, changes in
partners' capital and cash flows for the periods then ended in conformity with
generally accepted accounting principles.
As described in Note 1 to the financial statements, on March 27, 1997, the
limited partnership agreement was amended and restated to provide for the
withdrawal and reduction of the partnership interests of the existing partners
and the admittance of new partners and such new partners assumed control of the
Partnership. The amendment and restatement of the partnership agreement results
in the Partnership being treated as a new accounting entity effective as of
March 27, 1997, accordingly the Partnership has established a new accounting
basis in its assets and liabilities based on the acquisition costs of the new
partners.
/s/ Thomas V. Stephen & Co., P.C.
- ------------------------------------
Thomas V. Stephen & Company, P.C.
February 26, 1999
Page - 60
<PAGE>
DALLAS/GLEN HILLS, L.P.
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
- ------------------------------------------------------------------------
CURRENT ASSETS
Cash $ 45,865 $
Accounts receivable-tenants 5,252
Accounts receivable-other 1,385
Prepaid insurance 20,849
Capital contribution receivable 140,846
- ------------------------------------------------------------------------
TOTAL CURRENT ASSETS 73,351 140,846
- -----------------------------------------------------------------------
RESTRICTED DEPOSITS
Replacement reserves 103,366 70,850
Tax and insurance escrow 155,279 129,942
Debt reduction escrow 1,500,000 1,500,000
Operating deficit escrow 100,677 15,242
-----------------------------------------------------------------------
TOTAL RESTRICTED DEPOSITS 1,859,322 1,716,034
- ------------------------------------------------------------------------
RENTAL PROPERTY
Land 904,000 904,000
Buildings and improvements 4,466,835 4,466,835
Furniture and equipment 1,116,012 1,036,800
- ------------------------------------------------------------------------
6,486,847 6,407,635
Less accumulated depreciation (612,595) (260,014)
-----------------------------------------------------------------------
NET RENTAL PROPERTY 5,874,252 6,147,621
- ------------------------------------------------------------------------
OTHER ASSETS
Deferred financing costs, net 108,825 118,571
Deferred asset management fees, net 95,750 104,325
- ------------------------------------------------------------------------
TOTAL OTHER ASSETS 204,575 222,896
- ------------------------------------------------------------------------
TOTAL ASSETS $8,011,500 $8,227,397
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
See notes to financial statements.
Page - 61
<PAGE>
DALLAS/GLEN HILLS, L.P.
BALANCE SHEETS (Continued)
December 31, 1998 and 1997
LIABILITIES AND PARTNERS' CAPITAL
1998 1997
- ----------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable $82,891 $104,686
Accrued payroll 10,701
Accrued interest 45,957 46,492
Accrued real estate taxes 107,738 107,738
Current maturities of long-term debt 84,396 77,735
Prepaid rent 9,514 9,577
- ----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 341,197 346,228
- ----------------------------------------------------------------------------
TENANT SECURITY DEPOSITS 57,003 44,234
- ----------------------------------------------------------------------------
LONG-TERM LIABILITIES
Mortgage note 5,066,304 5,150,700
- ----------------------------------------------------------------------------
TOTAL LONG-TERM LIABILITIES 5,066,304 5,150,700
- ----------------------------------------------------------------------------
TOTAL LIABILITIES 5,464,504 5,541,162
---------------------------------------------------------------------------
PARTNERS' CAPITAL 2,546,996 2,686,235
---------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $8,011,500 $8,227,397
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
See notes to financial statements.
Page - 62
<PAGE>
DALLAS/GLEN HILLS, L.P..
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1998 and
From March 27,1997 (Inception) to December 31, 1997
1998 1997
------------------------------------------------------------------
REVENUES
Rental income $ 2,281,856 $ 1,430,657
Interest income 6,346 1,086
Other income 47,626 93,353
- -------------------------------------------------------------------
Total Revenue 2,335,828 1,525,096
------------------------------------------------------------------
OPERATING EXPENSES
Administrative 299,620 177,784
Utilities 520,777 315,475
Maintenance 313,707 264,061
Property management fee 93,257 27,095
Taxes 112,451 116,341
Insurance 66,375 36,331
Interest 427,915 371,883
Depreciation and amortization 370,901 273,754
------------------------------------------------------------------
Total Expenses 2,205,003 1,582,724
- -------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS 130,825 (57,628)
- --------------------------------------------------------------------
PARTNERSHIP EXPENSES
Asset management fee 23,314 16,275
Local administrative fee 5,000
Oversight fee 140,846
Incentive management fee 88,614 38,630
Supervisory management fee 12,290
NET LOSS $ (139,239) $(112,533)
- ---------------------------------------------------------------------
See notes to financial statements.
Page - 63
<PAGE>
DALLAS/GLEN HILLS, L.P.
STATEMENTS OF PARTNERS' CAPITAL
For the Year Ended December 31, 1998 and
From March 27, 1997 (Inception) to December 31, 1997
Class Z Investor Special
General General Limited Limited
Partner Partner Partner Partner Total
- --------------------------------------------------------------------------------
Contributions $1 $- $2,352,758 $1 $2,352,760
Additional
acquisition costs 400,000 - 46,008 - 446,008
Net Loss (11) - (112,511) (11) (112,533)
- --------------------------------------------------------------------------------
Balance at 12/31/1997 399,990 - 2,286,255 (10) 2,686,235
- --------------------------------------------------------------------------------
Net Loss (14) - (139,211) (14) (139,239)
- --------------------------------------------------------------------------------
Balance at 12/31/1998 $399,976 - $2,147,044 (24) $2,546,996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
Page - 64
<PAGE>
DALLAS/GLEN HILLS, L.P.
STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1998 and
From March 27, 1997 (Inception) to December 31, 1997
1998 1997
-----------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (139,239) $(112,533)
-----------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 370,902 273,754
Increase in accrued liabilities 10,166 105,256
Net security deposits received 12,769 7,064
Increase (Decrease) in accounts payable (21,795) 67,430
Increase in tax and insurance escrows (25,337) (46,379)
Increase (Decrease) in unearned rent (63) 9,577
Increase in accounts receivable (5,252) 0
Increase in other receivables (1,385) 0
Increase in prepaid expenses (20,849) 0
Increase in operating deficit escrow (85,435) (15,242)
-----------------------------------------------------------------------------
Total adjustments 233,721 401,460
- -----------------------------------------------------------------------------
Net cash provided by operating activities 94,482 288,927
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of rental property (79,212) (835,836)
Additions to replacement reserves (32,516) (210,185)
Increase in other assets 0 (110,756)
Withdrawals from reserve for replacements 0 210,185
- ------------------------------------------------------------------------------
Net cash used in investing activities (111,728) (946,592)
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from partner's capital contributions 140,846 2,211,912
Increase in debt reduction escrow 0 (1,500,000)
Principal payments on long-term debt (77,735) (54,247)
-----------------------------------------------------------------------------
Net cash provided by financing activities 63,111 657,665
- ------------------------------------------------------------------------------
Net change in cash and equivalents
and balance at end of period $ 45,865 $0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
See notes to financial statements.
Page - 65
<PAGE>
DALLAS/GLEN HILLS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and l997
NOTE 1 - NATURE OF BUSINESS AND ORGANIZATION
Dallas/Glen Hills, L.P. (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, as subsequently amended, (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, L.P. (the "Investor Limited
Partner") and the special limited partner is Related Corporate SLP L.P. (the
"Special Limited Partner").
In view of the significance of the changes in ownership and financial position,
the Partnership is being 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 costs of the new partners as of
March 27, 1997.
The Partnership was organized to purchase, rehabilitate and operate the Willow
Pond Apartment (formerly Glen Hills Apartments) project (the "Project") located
in Dallas, Texas. The Project operates thereon 386 multi-family residential
units for rental to low and moderate income tenants.
The Project received an allocation of low income housing tax credits from the
Texas Department of Housing and Community Affairs 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
Basis of Accounting
The financial statements of the partnership are prepared on the accrual basis of
accounting and in accordance with generally accepted accounting principles.
Page - 66
<PAGE>
DALLAS/GLEN HILLS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Rental Property
Land, buildings, furniture and equipment are recorded at cost. Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets as follows:
Buildings 27.5 years
Furniture & fixtures 7 years
Computer equipment 5 years
Improvements are capitalized, while expenditures for maintenance and repairs are
charged to expense as incurred.
Deferred Financing Costs
Costs directly associated with obtaining permanent debt financing are
deferred and are amortized over the term of the permanent loan on a
straight-line basis over 15 years.
Deferred Asset Management Fee
Asset management fees paid to an affiliate of the limited partner for its
services in monitoring the operations of the Project are amortized over the life
of the 15 year agreement.
Organization Costs
Organization costs are amortized over 60 months using the straight-line
method.
Income Taxes
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. The Partnership's tax returns are subject to examination by Federal
taxing authorities. The tax law rules and regulations governing these returns is
complex, technical and subject to varying interpretations. If an examination
required the partnership to make adjustments, the profits or losses allocated to
the partners would be adjusted accordingly. No such examination is currently in
process.
Page - 67
<PAGE>
DALLAS/GLEN HILLS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and l997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Rental Income
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 the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and cash equivalents
For purposes of the statement of cash flows, the Partnership considers all
investments purchased with an original maturity of three months or less to be
cash equivalents.
Reclassification
Certain amounts in 1997 have been reclassified to conform with the 1998
presentation.
NOTE 3 - LONG-TERM DEBT
The Partnership entered into a mortgage loan agreement with Mellon Mortgage
Company for $5,350,000 (the "Mortgage Loan") dated February 9, 1996. The
Mortgage Loan bears interest at a rate of 8.25% per annum. Monthly principal and
interest payments of $42,182 are payable until February 2011. The note matures
on 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 debt reduction escrow account in the amount $1,500,000
to be applied against the outstanding loan balance upon refinancing.
Page - 68
<PAGE>
DALLAS/GLEN HILLS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE 3 - LONG-TERM DEBT- (Continued)
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, 1999 $ 84,396
2000 91,628
2001 99,480
2002 108,005
2003 117,260
Thereafter 4,649,931
Total $ 5,150,700
NOTE 4 - CERTAIN PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP
Allocations of Profits, Losses, Cash Flow, and Tax Credits
Tax credits are allocated 99.98% to the Investor Limited Partner, .01% to the
Special Limited Partner and .01% to the General Partner.
Subject to certain provisions, losses shall be allocated 99.98% to the Investor
Limited Partner, .01% to the Special Limited Partner and .01% to the General
Partner.
Subject to certain provisions, profits other than those arising from a sale or
refinancing transaction shall be allocated as follows to each partner (1) to the
extent of prior allocations of losses (2) until the profits allocated to such
partner equals the cash distributions made to such partners and (3) an amount
equal to the cash distributions that would have been made if the Partnership had
available cash.
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. Due
to certain preclosing requirements, the Partnership and the Class Z General
Page - 69
<PAGE>
DALLAS/GLEN HILLS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE 4 - CERTAIN PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP
(Continued)
Partner were required to escrow, in the name of the Partnership, a debt
reduction deposit of $1,500,000 to be used as a prepayment of the mortgage loan.
This prepayment will be released to the mortgage lender upon the termination of
a prepayment lock out and thereby reducing the mortgage by $1,500,000. Following
the mortgage reduction, the Partnership has an obligation upon sale or
refinancing to distribute $1,500,000 to the Class Z General Partner. In the
event a refinancing is not completed, the Class Z General Partner is entitled to
receive, from cash flow, payments toward the $1,500,000 plus interest. The Class
Z General Partner has no property foreclosure rights.
4. To pay any accrued but unpaid management fees.
5. To the Special Limited Partner for accrued annual local administrative fees
not to exceed $5,000 per year.
6. To the General Partner to contractor fees of $30,000.
7. To the General Partner, to the extent of 50% of remaining cash flow, the
difference between any operating loans and any unpaid credit reduction
payments.
8. To the General Partner to pay the difference, if positive, between $88,614
and any unpaid credit reduction payments.
9. To the General Partner to pay the difference between the Asset Management Fee
and any unpaid credit reduction payments.
10. To the extent of 40% of remaking 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 .01% to the Special Limited Partner.
Net proceeds from a sale or refinancing transaction will be paid to the Class Z
General Partner in an amount equal to the excess of (1) $1,500,000 plus accrued
interest over (2) certain previous distributions. Any remaining net proceeds
will be distributed according to specific provisions of the Partnership
Agreement.
Oversight Fee
Pursuant with terms of the First Amendment to the Amended and Restated Agreement
of Limited Partnership, the Partnership paid an oversight fee of $140,846 to the
General Partner in 1998. The oversight fee is consideration for services
provided by the General Partner in overseeing the 1998 operations of the
Partnership.
Page - 70
<PAGE>
DALLAS/GLEN HILLS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE 4 - CERTAIN PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP
Incentive Management Fee
The Partnership paid a $88,614 and $38,630 non-cumulative incentive
management fee to the General Partner in 1998 and 1997, respectively, pursuant
to terms of the Partnership Agreement.
Supervisory Management Fee
The Partnership Agreement provides for a supervisory management fee equal
to 40% of the Partnership's available cash flow as defined, payable to the
General Partner, of which, $12,290 was paid during 1998.
Asset Management Fee
For its services in monitoring the operations of the Project, the
Partnership is obligated to 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. $23,314 and $16,275 were paid during 1998 and 1997,
respectively.
In addition, the Partnership paid an affiliate of the Investor Limited Partner a
$110,756 consulting monitoring fee during 1997 in consideration for its services
in assisting the Partnership in acquiring the Project. This fee is classified as
a deferred asset management fee on the accompanying balance sheet.
Property Management Fee
Pursuant to terms of the Property Management Agreement, the General Partner is
obligated to manage the operations of the apartment complex. The General Partner
shall receive a management fee from the Partnership in an amount not to exceed
4% of net rental income.
$93,257 and $27,095 were paid during 1998 and 1997, respectively.
Operating Deficit Guarantee Agreement
On March 27, 1997 the Partnership executed a 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
Page - 71
<PAGE>
DALLAS/GLEN HILLS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31. 1998 and 1997
NOTE 4 - CERTAIN PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP
(Continued)
in the Agreement) and ending on the third anniversary of the break-even date.
The guarantee 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 funded the escrow account $81,044 and $15,242 during 1998 and 1997,
respectively. 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 interests of the Limited Partners 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).
Replacement 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, 1998 and 1997,
the Partnership held $103,366 and $70,850, respectively, in replacement
reserves.
Debt Reduction Escrow
On December 29, 1996, the Partnership entered into an escrow agreement with
the Texas Department of Housing and Community Affairs (TDHCA), whereby, the
Partnership placed $1,500,000 in a bank escrow account. The bank will deliver
the entire balance to Mellon Mortgage Company in 1999 to be paid toward the
principal balance of the Mortgage Loan. The funds are not to be disbursed
without approval from TDHCA. The Partnership will disburse any interest earned
on this escrow account to the Class Z General Partner.
Page - 72
<PAGE>
DALLAS/GLEN HILLS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 3l, 1998 and 1997
NOTE 4 - CERTAIN PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP (Continued)
Guarantee of Tax Credits
Under the terms of the Partnership Agreement, the General Partner has the
duty to use its best efforts to ensure that the Partnership qualifies for the
maximum lawful low-income-housing tax credits. In the event that actual
low-income-housing tax credits accruing to the benefit of the Investment Limited
Partner are less than the amount of credits that were projected at the formation
of the Partnership, the additional contributions of capital otherwise required
of the Investment Limited Partner may be reduced, or constructive advances
deemed made, in accordance with applicable procedures contained within the
Partnership Agreement.
NOTE 5 - CONCENTRATIONS OF RISK
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. Each tenant is also required to make a security deposit
of a portion of one month's rent. Credit risk associated with the lease
agreements is limited to the amount of rents receivable from tenants and HUD
less security deposits.
NOTE 6 - TRANSACTIONS WITH RELATED PARTIES
The General Partner provided certain construction management services to
the Partnership and was paid a fee of $30,000 during 1997 for such services.
NOTE 7 - 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
necessarily 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.
Page - 73
<PAGE>
PART F/S
ITEM 4.
AUDITED FINANCIAL STATEMENTS FOR
TVMJG 1996 - PUTNAM SQUARE LIMITED PARTNERSHIP (PUTNAM SQUARE APARTMENTS)
FOR THE YEAR ENDED DECEMBER 31, 1998
Page - 74
<PAGE>
Reznick Fedder & Silverman
Certified Public Accountants o A Professional Corporation
4520 EastWest Highway - Suite 300 - Bethesda, Maryland 20814-3319
Phone (301) 652-9100 - Fax (301) 652-1848
INDEPENDENT AUDITORS' REPORT
To the Partners
TVMJG 1996 - Putnam Square Limited Partnership
We have audited the accompanying balance sheet of TVMJG 1996 - Putnam
Square Limited Partnership as of December 31, 1998, and the related statements
of operations, changes in partners' equity and cash flows for the year ended
December 31, 1998. These financial statements are the responsibility of the
partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of TVMJG 1996 - Putnam
Square Limited Partnership as of December 31, 1998, and the results of its
operations, the changes in partners' equity and cash flows for the year ended
December 31, 1998, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 14
and 15 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
Bethesda, Maryland
March 11, 1999
- ------------------------------------------------------------------------------
Two Hopkins Plaza 212 S.Tryon Street
Suite 2100 Suite 1180
Baltimore, MD 21201-2911 Charlotte, NC 28281-8100
Phone (410) 783-4900 Phone (704) 332-9100
Fax (410) 727-0460 Fax (704) 332-6444
745 Atlantic Avenue 5607 Glenridge Drive
Suite 800 Suite 500
Boston, MA 02111-2735 Atlanta, GA 30342-1376
Phone (617) 423-5855 Phone (404) 847-9447
Fax (617) 423-6651 Fax (404) 847-9495
Page - 75
<PAGE>
TVMJG 1996 - Putnam Square
Limited Partnership
BALANCE SHEET
December 31, 1998
ASSETS
INVESTMENT IN REAL ESTATE $ 45,000
Land 1,140,628
Building 63,000
----------
Personal property 1,248,628
Accumulated depreciation (110,889)
----------
1,137,739
OTHER ASSETS
Cash $ 3,212
Tenant security deposits - funded 6,602
Accounts receivable - tenants 5,945
Prepaid expenses 3,477
Organization costs, net of accumulated
amortization of $12,380 12,854 32,090
------------ --------------
$1,169,829
============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES APPLICABLE TO INVESTMENT IN REAL ESTATE
REAL ESTATE
Mortgage note payable $400,000
Accrued interest on mortgage payable 85,688
Development note payable - general partner 200,000
Accrued interest on development note payable 36,516
Note payable 13,000
Accounts payable - acquisition 31,553 $766,757
---------
OTHER LIABILITIES
Trade payables 27,368
Tenant security deposits 7,163 34,531
---------
CONTINGENCY -
PARTNERS' EQUITY 368,541
-----------
$1,169,829
=============
Page - 76
<PAGE>
TVMJG 1996 - Putnam Square
Limited Partnership
STATEMENT OF OPERATIONS
Year ended December 31, 1998
Income
Rental income $ 83,018
Miscellaneous tenant income 6,833
Interest income 96
--------
Total 89,947
Expenses
Administrative $ 39,752
Utilities 33,798
Operating and maintenance 18,615
Taxes and insurance 17,817
Financial 49,952
Depreciation and amortization 43,837
--------
Total 203,771
-----------
Net income (loss) $ (113,824)
===========
See notes to financial statements.
Page - 77
<PAGE>
TVMJG 1996 - Putnam Square
Limited Partnership
STATEMENT OF CHANGES IN PARTNERS' EQUITY
Year ended December 31, 1998
Investor
General limited
Partners partner Total
Partners' equity, December 31, 1997 $(1,976) $375,914 $373,938
Contributions - 108,427 108,427
Net income (loss) (1,138) (112,686) (113,824)
----------- ------------ -----------
Partners' equity, December 31, 1998 $(3,114) $371,655 $368,541
=========== ============ ===========
See notes to financial statements.
Page - 78
<PAGE>
TVMJG 1996 - Putnam Square
Limited Partnership
STATEMENT OF CASH FLOWS
Year ended December 31, 1998
Cash flows from operating activities
Net income (loss) $ (113,824)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities
Depreciation 38,790
Amortization 5,047
(Increase) decrease in assets
Rents receivable (3,371)
Prepaid expenses (3,477)
Organizational costs (5,234)
Increase (decrease) in liabilities
Accounts payable (8,779)
Accrued interest 46,000
Tenant security deposits - net (2,276)
-------
Net cash provided (used) by operating activities (47,124)
-------
Cash flows from investing activities
Investment in rental property (59,591)
Withdrawal from reserve for replacements 1,500
-------
Net cash provided (used) by investing activities (58,091)
-------
Cash flows from financing activities
Capital contributions received 108,427
-------
Net cash provided (used) by financing activities 108,427
-------
NET INCREASE (DECREASE) IN CASH 3,212
Cash, beginning -
-------
Cash, ending $ 3,212
=======
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 3,952
=======
See notes to financial statements.
Page - 79
<PAGE>
TVMJG 1996 - Putnam Square
Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The partnership was formed as a limited partnership under the laws of the State
of Connecticut on February 2, 1996 for the purpose of acquiring, developing and
operating a 18 unit rental housing project in Bridgeport, Connecticut.
The project has qualified and been allocated low-income housing credits pursuant
to Internal Revenue Code Section 42 ("Section 42") which regulates the use of
the project as to occupant eligibility and unit gross rent, among other
requirements. The project must meet the provisions of these regulations during
each of 30 consecutive years in order to remain qualified to receive the
credits.
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 assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Rental Property
Investment in rental property is carried at cost. Depreciation is provided for
in amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives. Buildings and improvements are depreciated
over 40 years using the straight-line method. Equipment is depreciated over
seven years using an accelerated method.
Amortization
Organization costs are amortized over 60 months using the straight-line method.
Income Taxes
No provision or benefit for income taxes has been included in these financial
statements since taxable income or loss passes through to, and is reportable by,
the partners individually.
Page - 80
<PAGE>
TVMJG 1996 - Putnam Square
Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Rental Income
Rental income is recognized as rentals become due. Rental payments received in
advance are deferred until earned. All leases between the partnership and the
tenants of the property are operating leases.
NOTE B - MORTGAGE AND NOTE PAYABLE
The partnership is obligated under a $400,000 promissory note. The note bears
interest at 8% per annum. Monthly payments of principal and interest of $3,087
are due to the extent of surplus cash as defined in the note. The note matures
January 1, 2014 and is secured by an open-end mortgage deed and security
agreement. During 1998, $32,000 of interest was charged to operations. As of
December 31, 1998, the balance of the note and accrued interest was $400,000 and
$85,688, respectively.
The liability of the partnership under the note is limited to the underlying
value of the real estate collateral plus other amounts deposited with the
lender.
The partnership is obligated under a promissory note to the general partner in
the amount of $200,000 in connection with the development fee. The note bears
interest at the rate of 7% per annum and is payable from cash flow as defined in
the partnership agreement. The note matures December 31, 2006 and is unsecured.
During 1998, $14,000 of interest was charged to operations. As of December 31,
1998, the balance of the note and accrued interest was $200,000 and $36,516.
The partnership is obligated under the terms of a promissory note in the amount
of $13,000 for legal services provided in connection with the acquisition of the
property. The note is unsecured, payable from future capital contributions and
is noninterest bearing.
NOTE C - CAPITAL CONTRIBUTION
The partnership has one investor limited partner, U.S.A. Institutional Tax
Credit Fund IV L.P., which has a 99% interest and one general partner, Putnam
Homes for America Holdings, Inc., who has a 1% interest. The investor limited
partner is responsible for capital contributions totaling $692,065 of which
$12,117 is outstanding as of December 31,1998. The general partner is
responsible for a $100 contribution, which is outstanding as of December 31,
1998.
Page - 81
<PAGE>
TVMJG 1996 - Putnam Square
Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
NOTE D - RELATED PARTY TRANSACTIONS
Development Fee
Pursuant to a development fee agreement, the partnership is obligated to pay a
development fee of $200,000 to the general partner. The fee has been capitalized
as part of buildings and improvements. As of December 31, 1998, the entire fee
remains payable. The payment of the development fee has been deferred and the
obligation to pay such fee is evidenced by a promissory note (see note B).
Partnership Administrative Fee
For its services in managing the operations of the partnership, the general
partner earns an annual partnership administrative fee calculated as follows:
50% of net cash flow will be used to pay operating deficit loans, the net cash
flow remaining 75% will be paid to the general partner as payment of the
development fee and thereafter as a partnership administration fee up to a
maximum of $40,000 per year. Such fee is cumulative. At December 31, 1998, no
fee was earned.
Operating Deficit Guaranty
The general partner has agreed to fund operating deficits up to the date of
achievement of break-even operations in an unlimited amount. Upon break-even and
through the fifth anniversary of break-even operations the obligation is limited
to $100,000.
Break-even operations is defined in the partnership agreement as the earlier
date in which the following occurs: 1) three consecutive months in which cash
revenue exceeds accrued operational expenses (on an accrual basis),
debt-service, mortgage escrow deposits and reserve for replacements or 2) the
date in which income from operations exceeds operational expenses for a twelve
month period as reported in an annual audited financial statement of the
partnership. As of December 31, 1998, break-even operations has not occurred and
no operating deficit advance was required.
Page - 82
<PAGE>
TVMJG 1996 - Putnam Square
Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
NOTE E - RESERVE FOR REPLACEMENTS
The partnership agreement requires that a minimum of $200 per unit be deposited
annually into a segregated bank account until such time as the reserve fund
equals 5% of the mortgage loan. During 1998, no deposits into the reserve was
made. As of December 31, 1998, the partnership's delinquent deposits to the
reserve totaled $10,800.
NOTE F - OPERATING RESERVE FUND
An operating reserve fund is required to be funded from future capital
contributions of the investor limited partner in the amount of $20,000. As of
December 31, 1998, the reserve has not been funded.
NOTE G - PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS
All profits and losses are allocated 1% to the general partner and 99% to the
investor limited partner.
Cash flow, as defined in the partnership agreement, is to be distributed as
follows:
1. 50% to pay operating deficit loans.
2. 75% to the general partner as payment of the development note and thereafter
as payment of the partnership administration fee.
3. 25% to the investor limited partner.
Beginning in 1996, to the extent that there is not sufficient cash flow to
distribute at least $3,000 to the investor limited partner, the general partner
or the management agent is required to fund the shortfall to the investor
limited partner. No amount was funded or advanced in 1998.
Gain from a "capital transaction" is allocable as follows:
1. To all partners having negative balances in their capital accounts.
2. To each partner until the positive capital account balance is equal to the
amount of cash available for distribution as a result of the transaction,
as defined in the partnership agreement.
Page - 83
<PAGE>
TVMJG 1996 - Putnam Square
Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998
NOTE G - PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS (Continued)
Loss from a capital transaction is allocable as follows:
1. To the partners in proportion their capital account balances.
2. To the partners to the extent that they bear an economic risk of such loss.
NOTE H - CONTINGENCY
The project's low income housing credits are contingent on its ability to
maintain compliance with applicable sections of Section 42. Failure to maintain
compliance with occupant eligibility, and/or unit gross rent, or to correct
noncompliance within a specified time period could result in recapture of
previously taken tax credits plus interest. In addition, such potential
noncompliance may require an adjustment to the capital contributed by the
investor limited partner.
Page - 84
<PAGE>
SUPPLEMENTAL INFORMATION
Page - 85
<PAGE>
Statement of U.S. Department of Housing and Urban Development
Profit and Loss Office of Housing - Federal Housing Commissioner
OMB Approval No.2502-0052(exp.1/31/95)
Public Reporting Burden for this collection of information is estimated to
average 1.0 hours per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Reports Management
Officer, Office of Information Policies and Systems, U.S. Department of Housing
and Urban Development, Washington, D.C.20410-3600, and to the Office of
Management and Budget Paperwork Reduction.
Project (2502-0052), Washington. D.C.20503. Do not send this completed form to
either of these addresses.
For Month/Period
Beginning: 1/1/1998 Ending: 12/31/98
Part I Description of Account Account No. Amount*
- --------------------------------------------------------------------------
Apartments or Member Carrying
Charges (Coops) 5120 $ 83,018
Tenant Assistance Payments 5121 $ -
Rental Furniture and Equipment 5130 $ -
Income Stores and Commercial 5140 $ -
5100 Garage and Parking Spaces 5170 $ -
Flexible Subsidy Income 5180 $ -
Miscellaneous (Specify) 5190 $ -
---------------------------------------------------------------------
Tool Rent Revenue Potential
at 100% Occupancy $ 83,018
- -------------------------------------------------------------------------------
Apartments 5220 $ -
Furniture end equipment 5230 $ -
Vacancies Stores and Commercial 5240 $ -
5200 Garage and Parking Spaces 5270 -
Miscellaneous (Specify) 5290 $ -
Total Vacancies $ $ -
---------------------------------------------------------------------
Net Rental Revenue $ 83,018
- -------------------------------------------------------------------------------
Elderly and Congregate
Services Income-5300
Total Service Income 5300 $ -
- -------------------------------------------------------------------------------
Interest Income - Project Operations 5410 $ 96
Financial Income from Investments
Revenue - Residual Receipts 5430 $ -
5400 - Reserve for Replacement 5440 $ -
- Miscellaneous 5490 $ -
---------------------------------------------------------------------
Total Financial Revenue $ 96
- -------------------------------------------------------------------------------
Laundry and Vending 5910 $ 1,723
NSF and Late Charges 5920 $ 100
Other Damages and Cleaning Fees 5930 $ -
Revenue Forfeited Tenant Security Deposits 5940 $ -
5900 Other Revenue (Specify) 5990 $ 5,010
Total Other Revenue $ 6,833
---------------------------------------------------------------------
Total Revenue $ 89,947
- -------------------------------------------------------------------------------
Advertising 6210 $ -
Other Renting Expenses 6250 $ 281
Office Salaries 6310 $ -
Office Supplies 6311 $ 1,478
Office or Model Apartment Rent 6312 $ -
Admin. Management Fee 6320 $ 16,168
Expenses Manager/Superintendent Salaries 6330 $ -
6200/ Manager/Superintendent Rent Free 6331 $ -
6300 Legal Expenses (Project) 6340 $2,925
Auditing Expenses (Project) 6350 $3,000
Bookkeeping Fees/Accounting Services 6351 $ -
Telephone and Answering Services 6360 $ -
Bad Debts 6370 $ 14,540
Miscellaneous Administrative 6390 $ 1,360
---------------------------------------------------------------------
Total Administrative Expenses $ 39,752
- -------------------------------------------------------------------------------
Fuel Oil/Coal 6420 $ -
Utilities Electricity 6450 $ 6,957
Expense Water 6451 $ 9,851
6400 Gas 6452 $ 13,074
Sewer 6453 $ 3,916
---------------------------------------------------------------------
Total Utilities Expense $33,798
- -------------------------------------------------------------------------------
* All amounts must be rounded to the nearest dollar. $.50 and over, round up-
$.49 and below round down.
Form HUD-92410(7/91) ref Handbook 4370.2
Page - 86
<PAGE>
Part I Description of Account Account No. Amount*
- -------------------------------------------------------------------------------
Janitor and Cleaning Payroll 6510 $-
Janitor and Cleaning Supplies 6515 $2,829
Janitor and Cleaning Contract 6517 $-
Exterminating Payroll/Contract 6519 $-
Exterminating Supplies 6520 $11,683
Garbage and Trash Removal 6525 $3,142
Security Payroll/Contract 6530 $-
Grounds Payroll 6535 $-
Grounds Supplies 6536 $-
Operating/ Grounds Contract 6537 $-
Maintenance Repairs Payroll 6540 $-
Expenses Repairs Material 6541 $-
6500 Repairs Contract 6542 $-
Elevator Maintenance/Contract 6545 $-
Heating/Cooling Repairs/Maintenance 6546 $855
Pool Maintenance/Contract 6547 $-
Snow Removal 6548 $-
Decorating Payroll/Contract 6560 $-
Decorating Supplies 6561 $-
Other 6570 $-
Miscellaneous Operating and
Maintenance Expenses 6590 $106
-------------------------------------------------------------------
Total Operating and Maintenance
Expenses $18,615
- --------------------------------------------------------------------------------
Real Estate Taxes 6710 $13,733
Payroll Taxes(FICA) 6711 $-
Miscellaneous Taxes, Licenses/Permits 6719 $700
Taxes and Property and Liability Insurance 6720 $ 3,384
Insurance Fidelity Bond Insurance 6721 $-
6700 Workmen's Compensation 6722 $-
Health Insurance & Other Employee
Benefits 6723 $-
Other Insurance (Specify) 6729 $-
-------------------------------------------------------------------
Total Taxes and Insurance $ 17,817
- --------------------------------------------------------------------------------
Interest on Bonds Payable 6810 $-
Interest on Mortgage Payable 6820 $-
Financial Interest on Notes Payable (LT) 6830 $46,000
Expenses Interest on Notes Payable (ST) 6840 $-
6800 Mortgage Insurance Premium/
Service Charge 6850 $-
Miscellaneous Financial Expenses 6890 $3,952
-------------------------------------------------------------------
Total Financial Expenses $ 49,952
- --------------------------------------------------------------------------------
Elderly/ Total Service Expenses 6900 $-
-------------------------------------------------------------------
Congregate Total Cost of Operations Before
Depreciation $ 159,934
-------------------------------------------------------------------
Service Profit (Loss) Before Depreciation $ (69,987)
-------------------------------------------------------------------
Expenses Depreciation (Total) $ Amortization 6600 $ 43,837
-------------------------------------------------------------------
6900 Operating Profit or (Loss) $ (113,824)
- --------------------------------------------------------------------------------
Officer Salaries 7110 $-
Corporate/ Legal Expenses (Entity) 7120 $-
Mortgagor Taxes (Federal-State-Entity) 7130-32 $-
Entity Other Expenses (Entity) 7190 $-
-------------------------------------------------------------------
Expenses Total Corporate Expenses/
7100 Net Profit or (Loss) $ (113,824)
------------------------------------------------------------------------------
Warning: HUD will prosecute false claims and statements. Conviction may result
in criminal and/or civil penalties (18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729,
3802) Miscellaneous or other Income and Expenses Sub-account Groups. If
miscellaneous or other Income and/or expense sub-accounts (5190, 5290, 5490,
5990, 6390, 6590, 6729, 6890 and 7190) exceed the Account Groupings by 10% or
more, attach a separate schedule describing or explaining the miscellaneous
income or expense.
Part II
I. Total principal payments required under the mortgage, even if payments
under a Workout Agreement are less or more than those required under the
mortgage. NONE
2. Replacement Reserve deposits required by the Regulatory Agreement or
Amendments thereto, even if payments may be temporarily suspended or
waived. NONE
3 Replacement or Painting Reserve releases which are included as expense
items on He Profit and Loss statement. NONE
4. Project Improvement Reserve Releases under the Flexible Subsidy Program
that are included as expense items on this Profit and Loss statement. N/A
Page - 87
<PAGE>
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.
10.7.2
Amended and Restated Agreement of Limited Partnership of Middlebury
Elkhart, L.P. dated December 1, 1998
Page - 88
<PAGE>
No. Description
- --------------------------------------------------------------------------------
10.8
Agreement of Purchase and Sale by and between BRE-N, Inc. and the Company
dated July 13, 1998.
10.9
Contract of Sale dated November 2, 1998 between Legato Investments, Inc.
and the Company.
10.9.1
Assignment of Contract of Sale dated December 1998 between
Arlington/Homes For America, Inc. and the Company.
10.10
Agreement of Purchase and Sale by and between the Company and William C.
Mannix, DBA R. Mannix, Inc.
10.11
Property Purchase Agreement dated March 24, 1999 between Lake's Edge
Partners, L.P. and Lakes Edge-Homes Holdings, Inc.
10.12
Promissory Note dated July 29, 1998 between the Company and William
Kaplovitz, Jr.
10.13
Consulting Agreement dated August 1, 1998 between the Company and
International Business & Realty Consultants, L.L.C.
10.14
Employment Agreement dated August 1, 1998 between the Company and Mr.
Robert A. MacFarlane.
10.15
Promissory Note dated June 23, 1999 between the Company and William
Marovitz.
10.16
Promissory Note dated June 28, 1999 between the Company and William
Kaplovitz.
10.17
Promissory Note dated March 3, 1999 between the Company and Actrade
Capital, Inc.
21
List of Subsidiaries
27
Financial Data Schedule
Page - 89
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Homes For America Holdings, Inc.
------------------------------------
(Registrant)
By: /s/ Robert A. MacFarlane
-----------------------------
Name: Robert A. MacFarlane
-----------------------------
Title: President
-----------------------------
Dated August 2, 1999
Page - 90
ARTICLES OF INCORPORATION OF GELT ENTERPRISES, INC. .
FIRST. The name of the Company shall be GELT ENTERPRISES, INC.
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 Public
----------------------------
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
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 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.
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.
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. 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
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 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.
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.
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.
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
- ------------------------------
Bonnie Jean C. Tippetts, Secretary
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
By: /s/ David Korb
-------------------------------
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 HANOVER 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
By: s/s David Korb
-----------------------------
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:
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
April 26, 1996
$200,000.00
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:
/s/ Robert A. MacFarlane
------------------------------ 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
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MIDDLEBURY ELKHART, L.P.
By and Among
PRAIRIE VILLAGE - HOMES FOR AMERICA, INC.
as the General Partner
and
HOMES FOR AMERICA HOLDINGS, INC.
as the Preexisting Limited Partner
and
ALLIANT TAX CREDIT V, INC.,
a Florida corporation,
as the Administrative Limited Partner
and
ALLIANT TAX CREDIT FUND V LIMITED PARTNERSHIP, a Massachusetts limited
partnership, as the Investor Limited Partner
Dated as of December 1, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINED TERMS.....................................................5
ARTICLE 2 GENERAL 20
Section 2.1 Continuation of the Partnership.............................20
Section 2.2 Principal Office............................................21
Section 2.3 Principal Place of Business; Resident Agent.................21
Section 2.4 Term........................................................21
Section 2.5 Purpose.....................................................21
ARTICLE 3 CAPITAL CONTRIBUTIONS; CLOSINGS; DEFAULT BY LIMITED PARTNER......22
Section 3.1 General Partners............................................22
Section 3.2 Withdrawal of Preexisting Limited Partners..................22
Section 3.3 Admission of Administrative Limited Partner.................23
Section 3.4 Admission of Limited Partners...............................23
Section 3.5 Treatment of Other Advances.................................23
Section 3.6 Capital Accounts; Interest; Withdrawal......................24
Section 3.7 Liability of Limited Partners...............................24
Section 3.8 Tax Credit Protection; Adjustment of Interests..............24
Section 3.9 Closing.....................................................26
Section 3.10 Satisfaction of Conditions.................................27
Section 3.11 Mortgage Loan Commitment...................................27
Section 3.13 Payment....................................................29
Section 3.14 Additional Low Income Housing Tax Credit Certificates......29
Section 3.15 Loan Defaults..............................................30
ARTICLE 4 COMPLIANCE WITH CREDIT AGENCY REQUIREMENTS;
PARTNERSHIP BORROWINGS.....................................................30
Section 4.1 Credit Agency Requirements..................................30
Section 4.2 Loans.......................................................30
ARTICLE 5 RIGHTS, POWERS AND OBLIGATIONS OF THE GENERAL PARTNERS AND
LIMITATIONS THEREON........................................................31
Section 5.1 Exercise of Management......................................31
Section 5.2 Authority and Duties of General Partners....................31
Section 5.3 Delegation of General Partner Authority;
Tax Matters Partner.........................................34
Section 5.4 Lease, Conveyance or Refinancing of Assets
of the Partnership..........................................35
Section 5.5 Restrictions on Authority...................................36
Section 5.6 Activities of Partners......................................37
Section 5.7 Dealing with Affiliates.....................................38
Section 5.8 Indemnification and Liability of the Partners...............38
Section 5.9 Construction of the Apartment Complex; Development Deficits;
Rental Achievement; Operating Deficits....................39
Section 5.10 Supervisory and Incentive Management Agreement.............41
Section 5.11 Additional Covenants of General Partners...................41
Section 5.12 Obligation to Repair and Rebuild Apartment Complex.........41
ARTICLE 6 REPRESENTATIONS AND WARRANTIES...................................41
Section 6.1 Organization and Authorization..............................41
Section 6.2 Consents Required...........................................42
Section 6.3 Liens, Pledges or Encumbrances..............................43
Section 6.4 Litigation..................................................43
Section 6.5 Agreements Affecting the Apartment Complex..................43
Section 6.6 Other Matters Affecting the Apartment Complex...............44
Section 6.7 Administrative, Zoning and Environmental Compliance.........46
Section 6.8 Financial Statements........................................48
Section 6.9 Absence of Undisclosed Liabilities..........................48
Section 6.10 Housing Tax Credits........................................48
Section 6.11 Qualified Nonrecourse and Commercial Financing; Fees.......49
Section 6.12 Prior Activities...........................................50
Section 6.13 Tax Matters................................................50
Section 6.14 Untrue or Misleading Statements............................50
Section 6.15 Scope of Representations...................................50
ARTICLE 7 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.......................51
Section 7.1 Management of the Partnership...............................51
Section 7.2 Limitation on Liability of Investor Limited Partners........51
Section 7.3 Other Activities............................................51
Section 7.4 Rescission..................................................52
Section 8.1 Designation of Management Agent.............................52
Section 8.2 Management Fee..............................................53
Section 8.3 Absence of Management Agent.................................53
Section 8.4 Rights of Administrative Limited Partner....................53
ARTICLE 9 DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES; TAX CREDITS....54
Section 9.1 Profits, Losses and Housing Tax Credits.....................54
Section 9.2 Distribution and Application of Cash Flow and Sale or Refinancing
Transaction Proceeds........................................59
ARTICLE 10 TRANSFER OF PARTNER INTERESTS...................................60
Section 10.1 Assignment of Limited Partner Interests....................60
Section 10.2 Substituted Partners; Admission............................61
Section 10.3 Withdrawal.................................................61
ARTICLE 11 WITHDRAWAL OF GENERAL PARTNER; NEW GENERAL PARTNER..............62
Section 11.1 Withdrawal.................................................62
Section 11.2 Effect of Withdrawal; Election to Continue Business........63
Section 11.3 Continuation of Partnership................................63
Section 11.4 Special Removal Rights.....................................64
Section 11.5 Additional General Partner.................................66
Section 11.6 Amendment of Schedule and Agreement........................66
Section 11.7 Survival of Liabilities....................................66
ARTICLE 12 DISSOLUTION AND TERMINATION OF THE PARTNERSHIP..................66
Section 12.1 Events Which Cause a Dissolution...........................66
Section 12.2 Actions of Liquidating Agent Upon Dissolution..............67
Section 12.3 Statements on Termination..................................67
Section 12.4 Priority on Liquidation; Distribution of
Non-Liquid Assets..........................................67
Section 12.5 Orderly Liquidation........................................68
ARTICLE 13 ACCOUNTING, REPORTS, BOOKS AND BANK ACCOUNTS....................68
Section 13.1 Bank Accounts..............................................68
Section 13.2 Books of Account...........................................69
Section 13.3 Reports....................................................69
Section 13.4 Other Reports..............................................70
Section 13.5 Tax Returns and Tax Treatment..............................70
Section 13.6 Asset Management Fee.......................................71
ARTICLE 14 FOREIGN PARTNERS................................................71
Section 14.1 Certification of Non-Foreign Status........................71
Section 14.2 Withholding of Certain Amounts Attributable to Interests
of Foreign Partners........................................72
ARTICLE 15 MISCELLANEOUS...................................................72
Section 15.1 Law Governing..............................................72
Section 15.2 Power of Attorney..........................................72
Section 15.3 Counterparts...............................................73
Section 15.4 Separability of Provisions.................................73
Section 15.5 Address and Notice.........................................73
Section 15.6 Computation of Time........................................74
Section 15.7 Titles and Captions........................................74
Section 15.8 Entire Agreement...........................................74
Section 15.9 Agreement Binding..........................................74
Section 15.10 Parties in Interest.......................................74
Section 15.11 Amendments; Other Actions.................................75
Section 15.12 Survival of Representations, Warranties and Agreements....75
Section 15.13 Further Assurances........................................75
Section 15.14 Remedies Cumulative.......................................75
Section 15.15 Attorneys'Fees............................................75
Section 15.16 Meetings..................................................75
Section 15.17 Enforceability............................................76
EXHIBIT A -- LEGAL DESCRIPTION.............................................84
EXHIBIT B -- PERSONALTY....................................................85
EXHIBIT C -- COMPLETION CERTIFICATE........................................86
EXHIBIT D -- DUE DILIGENCE DOCUMENTS.......................................87
EXHIBIT E -- CERTIFICATE...................................................91
EXHIBIT F -- GUARANTY AGREEMENT............................................92
EXHIBIT G -- LOW INCOME HOUSING TAX CREDIT CERTIFICATE.....................99
EXHIBIT H -- LITIGATION...................................................106
EXHIBIT I -- SUPERVISORY MANAGEMENT AND INCENTIVE AGREEMENT...............107
EXHIBIT J -- PROJECT BUDGET...............................................110
EXHIBIT K -- PERMITTED ENCUMBRANCES.......................................111
EXHIBIT L -- TITLE INSURANCE REQUIREMENTS.................................112
<PAGE>
MIDDLEBURY ELKHART, L.P.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (the
"Agreement") of Middlebury Elkhart, L.P. an Indiana limited partnership (the
"Partnership"), dated as of December 1, 1998 is by and among the parties set
forth on the cover page of this Agreement.
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 of Indiana pursuant to an Agreement of Limited Partnership
dated as of July 21, 1997 and the Original Certificate, and
WHEREAS, (i) the Preexisting Limited Partners agreed to withdraw from
the Partnership, (ii) the Investor Limited Partner, in exchange for the Investor
Limited Partner Contribution, is to be admitted into the Partnership, and (iii)
the Administrative Limited Partner, in exchange for its Capital Contribution, is
to be admitted into the Partnership as the Administrative Limited Partner, all
as of the Closing; and
WHEREAS, the parties hereto desire to enter into this Agreement to
provide for, among other things, (i) the continuation of the Partnership, (ii)
the admission of the Investor Limited Partner and the Administrative Limited
Partner into the Partnership, (iii) the withdrawal of the Preexisting Limited
Partners from the Partnership, (iv) the payment of the Investor Limited Partner
Contribution by the Investor Limited Partner and the payment of a Capital
Contribution by the Administrative 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 Partners 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 Original Partnership
Agreement is hereby amended and restated in its entirety to read as follows:
<PAGE>
ARTICLE 1 DEFINED TERMS
Capitalized terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article 1. Certain
additional defined terms may be set forth elsewhere in this Agreement. 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.
"Accountants" means the firm so identified in the Schedule, or such
other firm or firms of independent certified public accountants as may be
selected by the General Partners with the Consent of the Administrative Limited
Partner, which shall not be unreasonably withheld.
"Actual Credit" means, as of any point in time, 99.9% of the total
amount of the Housing Tax Credits reported and claimed by the Partnership as a
whole on its federal information and income tax returns, as amended if
applicable, and not disallowed by any Final Determination of the applicable
taxing authority and actually available to the Limited Partners.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(i) Crediting to such Capital Account all amounts which such
Partner is obligated to restore or is deemed to be obligated to restore
pursuant to Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations; and
(ii) Debiting from such Capital Account the items described in
paragraphs (4), (5) and (6) of Section 1.704-1(b)(2)(ii)(d) 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.
"Administrative Limited Partner" means Alliant Tax Credit V, Inc., a
Florida corporation, and its successors and assigns.
"Affiliate" of a specified Person means (i) any Person directly or
indirectly controlling, controlled by or under common control with the Person
specified, (ii) any Person owning or controlling 10% or more of the outstanding
voting securities or beneficial interests of the Person specified, (iii) any
officer, director, partner, trustee or member of the immediate family of the
Person specified, (iv) if the Person specified is an officer, director, general
partner or trustee, any corporation, partnership or trust for which that Person
acts in that capacity or (v) any Person who is an officer, director, general
partner, trustee or holder of 10% or more of the outstanding voting securities
or beneficial interests of any Person described in clauses (i) through (iv). The
term "control" (including the term "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as it may be amended from time to time.
"Apartment Complex" means, collectively, the Land, the Improvements
and the Personalty.
"Architect" means the firm so identified in the Schedule as the
architect for the Apartment Complex, and its or his successors and assigns.
"Asset Management Fee" means the annual fee payable by the Partnership
to the Investor Limited Partner pursuant to Section 13.6.
"Asset Value" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(i) The initial 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 Partnership;
(ii) The Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the General Partners, with the Consent of the
Administrative Limited Partner (such Consent not to be unreasonably
withheld), as of the following times: (a) the acquisition of an
additional interest in the Partnership by any new or existing Partner
in exchange for more than a de minimis Capital Contribution; and (b)
the distribution by the Partnership to a Partner of more than a de
minimis amount of Partnership property as consideration for an interest
in the Partnership; provided, however, that adjustments pursuant to
clauses (a) and (b) above shall be made only if the General Partners
reasonably determine, with the Consent of the Administrative Limited
Partner, that such adjustments are necessary or appropriate to reflect
the relative economic interests of the Partners in the Partnership;
(iii) The Asset Value of any Partnership asset distributed to
any Partner shall be the gross fair market value of such asset on the
date of distribution; and
(iv) The Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted bases of such
assets pursuant to Section 734(b) or 743(b) of the Code, but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations and Section 9.1D(vii) hereof; provided, however, that Asset
Values shall not be adjusted pursuant to this subparagraph (iv) to the
extent the General Partners determine, with the Consent of the
Administrative Limited Partner (such Consent not to be unreasonably
withheld), that an adjustment pursuant to subparagraph (ii) hereof is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this subparagraph (iv).
If the Asset Value of any asset has been determined or adjusted pursuant to
subparagraphs (i), (ii), or (iv) hereof, such Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such
asset for purposes of computing Profits and Losses.
"Assignment" means a valid sale, exchange, transfer 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.
"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 the
appointment of a receiver, liquidator, custodian or trustee 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 60
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.
"Bonds" means the bonds issued by the City of Elkhart, Indiana,
denominated "City of Elkhart, Indiana Multifamily Housing Mortgage Revenue
Refunding Bonds Series 1998 (GNMA Collateralized - Prairie Village Apartments
Project)" in two subseries: (a) tax exempt first lien Series A Bonds in the
principal amount of $2,380,000, and (b) taxable second lien Series B Bonds in
the principal amount of $850,000, from the proceeds of both of which the
Mortgage Loan will be made.
"Break-Even" shall be deemed to have occurred in any month for which
the Accountants have determined that the cash receipts from rents and other
revenues of a recurring nature from operation of the Apartment Complex
(excluding any tenant in a Tax Credit Apartment Unit who does not qualify as low
income under the requirements of Section 42 of the Code and the Project
Documents), together with any amounts actually received in such month from
housing assistance payments under the National Housing Act of 1937 or equivalent
government subsidy program, equal or exceed all operating obligations of the
Partnership. All such operating obligations will be computed on the accrual
basis of accounting and include, without limitation, payments of principal and
interest due on any Mortgage Note and any other loans encumbering the Apartment
Complex and all other indebtedness of the Partnership, real estate taxes,
insurance premiums, accounting fees, mortgage insurance premiums (if any),
management fees, reserves for repairs and replacements (which reserves to the
extent not required by a Lender shall require the Consent of the Administrative
Limited Partner), reserves which have been required by any Lender or any Credit
Agency, reserves for all taxes or payments in lieu of taxes, capital
expenditures to the extent not covered by insurance proceeds or releases from
reserves, compliance monitoring fees charged by the Credit Agency or any other
Governmental Agency relating to allocation of the Housing Tax Credits and any
other expenses which were incurred during that period. Real estate taxes,
insurance premiums, accounting fees and all material costs and expenses which
are seasonal, including, but not limited to, fuel or other utility costs, shall
be annualized so as to reflect on a monthly basis the average of expenses so
incurred. With respect to tenants who have been granted rent concessions,
rebates and other rental incentives, rental receipts shall be adjusted to
reflect the average monthly rent over the term of such tenant's lease, with the
concessions, rebates and other incentives being spread ratably over the term of
the lease. Without limiting the generality of the foregoing, the Partnership's
revenues for purposes of determining Break-Even shall not include Capital
Contributions, tenant security deposits, the proceeds of Partnership borrowings
or loans, interest or any other income earned on investment of Partnership
funds, casualty insurance proceeds or Sale or Refinancing Transaction Proceeds,
and the Partnership's operating obligations shall not include any obligations
which are funded from such sources. Notwithstanding anything herein contained to
the contrary, for purposes of determining whether the Partnership has attained
Break-Even, in addition to the other items set forth above, real property taxes
shall be included in operating obligations in an amount which reflects a full
assessment of the Apartment Complex as fully completed.
"Capital Account" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(i) 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 Sections 9.1D, 9.1E and 9.1F hereof,
and the amount of all Partnership liabilities assumed by such Partner
or which are secured by any property distributed to such Partner;
(ii) To each Partner's Capital Account there shall be debited
the amount of cash and the 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 Sections
9.1D, 9.1E or 9.1F hereof, and the amount of all liabilities of such
Partner assumed by the Partnership or which are secured by any property
contributed by such Partner to the Partnership;
(iii) In the event all or a portion of an Interest in the
Partnership is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Interest; and
(iv) In determining the amount of any liability for purposes
of subparagraphs (i) and (ii) hereof, there shall be taken into account
Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Sections
1.704-1(b) and 1.704-2 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 Partners) are
computed in order to comply with such Regulations, the General Partners may make
such modifications, provided that the Administrative Limited Partner shall
Consent thereto (such Consent not to be unreasonably withheld) and it is not
likely to have a material effect on the amounts distributable to any Partner
pursuant to Sections 9.2 or 12.4 hereof upon the dissolution of the Partnership.
The General Partners also shall, to the extent permitted by Section
1.704-1(b)(2)(iv)(q) of the Regulations and with the Consent of the
Administrative Limited Partner, not to be unreasonably withheld, (i) make all
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Partners on the one hand and the amount of Partnership
capital reflected on the Partnership's balance sheet, as computed for book
purposes, on the other hand, and (ii) make all appropriate modifications in the
event unanticipated events might otherwise cause this Agreement not to comply
with Section 1.704-1(b) of the Regulations.
"Capital Contribution" means the total amount of cash contributed to
the Partnership by each Partner. Any reference in this Agreement to the Capital
Contribution of a party which is a Partner shall include the contributions to
the capital of the Partnership made by any predecessor in interest of such
Partner.
"Cash Expenditures" means all disbursements of cash determined on an
accrual basis during the Fiscal Year (excluding distributions to Partners),
including, without limitation, payment of operating expenses, payment of
principal and interest of the Partnership's indebtedness (excluding payments of
principal and interest of Voluntary Loans and Operating Loans), mortgage
insurance premiums (if any), cost of repair, replacement and restoration of the
Apartment Complex, amounts allocated to reserves by the General Partners with
the Consent of the Administrative Limited Partner, and the payment of the fees
set forth in Article 5 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 so long as the increase is not the
result of accrued interest earned on monies in escrow deposit. 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, including, without limitation, cash from operations and
from net insurance recoveries, but not including proceeds from title insurance
recoveries, Sale or Refinancing Transaction Proceeds 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, Cash
Receipts received within 30 days prior to the close 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 may,
in the discretion of the Administrative Limited Partner, be deemed to be
received in such subsequent Fiscal Year.
"Certificate" means the Original Certificate or any other instrument
filed in the Filing Office as the Certificate of Limited Partnership of the
Partnership in accordance with the Uniform Act, as amended from time to time.
"Class" means a specific class or grouping of Partners (i.e., the
General Partners, the Investor Limited Partner or the Administrative Limited
Partner).
"Closing," "Closing Documents," and "Closing Date" are defined in
Section 3.9.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute.
"Completion" means the later of the date when (i) lien-free completion
of 100% of the Construction pursuant to all federal, state and local law
requirements and the approved Plans and Specifications in a good and workmanlike
manner without any known defects in materials or workmanship, whether latent or
otherwise, has taken place and the Architect has delivered the Completion
Certificate to the Administrative Limited Partner and (ii) certificates of
occupancy for all of the units in the Apartment Complex from any local
government body or agency having jurisdiction have been obtained sufficient to
permit lawful occupancy of such units with only "punch list" type items
remaining to be completed. For purposes hereof, "lien-free completion" shall be
deemed to have occurred notwithstanding the pendency of any lien claims, so long
as such claims are bonded, insured over or a corresponding amount of funds is
placed in escrow in a manner reasonably satisfactory to the Administrative
Limited Partner by a bonding company or the issuer of the Title Policy.
"Completion Date" means the date designated as such set forth in the
Schedule.
"Completion Certificate" means the form of completion certificate which
is attached hereto as Exhibit C.
"Compliance Period" shall have the meaning provided in Section 42(i)(1)
of the Code.
"Consent" of a specified Partner means the prior written consent or
approval of such Partner.
"Construction" means the construction or, if applicable as shown
on the Schedule, the rehabilitation of the Improvements.
"Construction Agreements" means the construction agreements for the
Construction between the Partnership and the Contractor, as they may be amended
from time to time, a true, complete and current list of which agreements is
identified in the Schedule.
"Contractor" means the licensed general contractor for the Apartment
Complex identified in the Schedule, and its or his successors and assigns.
"Cost Certification" means the date upon which the Investor Limited
Partner shall have received the written certification of the Accountants, in a
form and in substance satisfactory to the Administrative Limited Partner, as to
the itemized amounts of the construction and development costs of the Apartment
Complex and the "eligible basis" and "applicable percentage" (as defined in
Section 42 of the Code) pertaining to each building in the Apartment Complex.
"CPI Adjustment" means the ratio of (a) the Consumer Price Index most
recently published prior to the specified date the CPI Adjustment is to be
determined, divided by (b) the Consumer Price Index most recently published
prior to the Closing Date. "Consumer Price Index" means the Consumer Price Index
for All Urban Consumers, All Cities, for All Items (base 1982-84 = 100)
published by the United States Bureau of Labor Statistics. In the event such
index is not in existence when any determination relying on such index under
this Agreement is to be made, the most comparable governmental index published
in lieu thereof shall be substituted therefor.
"Credit Agency" means (i) any applicable housing finance authority or
other agency authorized to issue bonds or other evidence of indebtedness to
finance residential housing development and (ii) the housing credit agency (as
defined in Section 42(h)(7)(A) of the Code) of the State having jurisdiction
over the Apartment Complex. To the extent applicable, Credit Agency shall also
mean HUD or any other governmental body or agency having jurisdiction over the
operations of the Apartment Complex.
"Credit Allocation" means a final allocation for the Partnership of
Housing Tax Credits pursuant to Section 42 of the Code in the amount set forth
in the Schedule.
"Credit Period" means, with respect to Housing Tax Credits attributable
to a building, the period of ten taxable years beginning with the taxable year
in which such building is placed in service or, at the election of the General
Partners with the Consent of the Administrative Limited Partner, the succeeding
taxable year, provided that such building is eligible for Housing Tax Credits as
of the close of the first year of such period.
"Credit Year" means the year for which the Credit Agency issued the
Credit Allocation, as identified in the Schedule.
"Depreciation" means, for each Fiscal Year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such year
or other period, except that if the Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount which bears the same ratio to such
beginning Asset Value as the federal income tax depreciation, amortization or
other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Asset
Value using any reasonable method selected by the General Partners, with the
Consent of the Administrative Limited Partner.
"Development Deficits" means all funds in excess of (a) the proceeds of
the Mortgage Loan, (b) operating income of the Apartment Complex realized prior
to funding of the Mortgage Loan, and (c) that portion or portions of the
Investor Limited Partner Contribution payable at or prior to closing of the
Mortgage Loan which are required to (i) complete the Construction, including
paying all amounts due under and pursuant to the Construction Agreements, and
any construction cost overruns and the cost of any change orders which have been
approved by the Lender and which are not funded from proceeds of the Mortgage
Loan, as applicable, but not including any portion of the Development Fee which
may be deferred pursuant to the Development Services Agreement; (ii) achieve
commencement of the Permanent Financing Phase, and satisfy any escrow deposit
requirements which are conditions thereto, including, without limitation, any
amounts necessary for local taxes, utilities, mortgage insurance premiums,
casualty and liability insurance premiums and any additional reserves or
insurance required under this Agreement, and any other amounts which are
required pursuant to the Mortgage Loan; (iii) pay any applicable loan assessment
fees, discounts or other expenses incurred by the Partnership as a result of the
commencement of the Permanent Financing Phase; and (iv) pay any Operating
Deficits incurred by the Partnership prior to Rental Achievement.
"Development Fee" means the fee to be paid by the Partnership
pursuant to the Development Services Agreement.
"Development Services Agreement" means the agreement so described in
the Schedule.
"Draw Requests" means each request for disbursement made by the
Partnership under the Loan Agreement, including all backup documentation
accompanying such request, including at a minimum interim mechanics' lien
waivers, contractors' and owners' sworn statements, and architects'
certifications as to the stage of completion.
"Due Diligence Documents" means the documents described in Exhibit D
hereto, together with any additional documents provided to the Investor Limited
Partners in connection with their review of the transaction reflected herein.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2.
"Filing Office" means the Secretary of State, the office in which
certificates of limited partnership are properly filed under the Uniform Act as
enacted in the State.
"Final Determination" means (i) a decision of a court of competent
jurisdiction from which no appeal (other than an appeal to the United States
Supreme Court) is available or which is not appealed by the Partnership within
90 days, (ii) a binding agreement between the Partnership or the Investor
Limited Partner or any other Partner (or any partner of the Investor Limited
Partner) and the IRS with respect to such issue, or (iii) a final ruling or
administrative determination by the IRS, from which no appeal is available or is
not appealed by the Partnership within 90 days.
"Fiscal Year" means the twelve-month period which begins on the first
day of January and ends on the thirty-first day of December of each calendar
year (or ends on the date of final dissolution for the year in which the
Partnership is wound up and dissolved).
"Foreign Partner" means a Partner who at the time of acquisition of
such Partner's Interest is a Foreign Person.
"Force Majeure" means strikes, acts of God, governmental restrictions,
severe or unusual shortages of labor or materials, enemy action, riot, civil
commotion, fire, unavoidable casualty, unusually severe or abnormal weather
conditions 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.
"Foreign Person" means a non-resident alien, foreign corporation,
foreign partnership, foreign trust or foreign estate, within the meaning of
Sections 897 and 1445 of the Code.
"General Partners" means the parties so identified as such on the cover
page of this Agreement, including, without limitation, such parties and any
Person or Persons who, at the time of reference thereto, have been admitted as
additional or successor General Partners. At any and all times where there is
only one General Partner, the term "General Partners" shall mean such sole
General Partner.
"Governmental Agreements" means all agreements between the Partnership
and any Credit Agency with respect to the Apartment Complex and relating to
insuring, supplementing, subsidizing, endorsing or otherwise affecting the
Mortgage Loan or the Apartment Complex or the Housing Tax Credits, and all such
agreements with respect to bond financing secured by a Mortgage, including
without limitation any regulatory agreement, Rental Assistance Contract, and all
applications to and agreements with the Credit Agency with respect to Housing
Tax Credits, as the same may be modified after the date of this Agreement with
the Consent of the Administrative Limited Partner.
"Guarantor" means Homes for America Holdings, Inc., a Nevada
corporation.
"Guaranty Agreement" means the Guaranty Agreement of even date with
this Agreement pursuant to which the Guarantor has guaranteed for the benefit of
the Investor Limited Partner the performance of certain specified obligations of
the General Partners.
"Housing Tax Credits" means any low-income housing tax credits under
Section 42 of the Code.
"HUD" means the United States Department of Housing and Urban
Development, or any successor federal agency.
"Improvements" means those certain 6 residential buildings containing
120 apartment units and the ancillary and appurtenant facilities located upon
the Land or to be constructed or rehabilitated (as set forth in the Schedule)
thereon pursuant to the Construction Agreements.
"Initial Lease" means, with respect to each dwelling unit in the
Apartment Complex, the lease entered into by the initial occupant thereof
following the placement in service of the Apartment Complex following the
allocation thereto of any Housing Tax Credits.
"Interest" means the entire ownership interest of a Partner in the
Partnership at any particular time, including, without limitation, its interest
in allocations of the Profits and Losses, distributions of Cash Flow, Sale or
Refinancing Transaction Proceeds, its rights with respect to approvals and
consents and its interest in its Capital Account and 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.
"Interest Rate" means a rate per annum (compounded annually on December
31 of each calendar year) equal to the greater of 12% or 2% over the Prime Rate,
but in no event more than the maximum rate of interest permitted by law.
"Investor Limited Partner" means Alliant Tax Credit Fund V Limited
Partnership, a Massachusetts limited partnership, and its successors and
assigns.
"Investor Limited Partner Contribution" means the gross investment of
the Investor Limited Partner in the Partnership as set forth in Article 3
hereof, plus any supplemental amounts paid in addition to that provided for in
this Agreement, as the same may be reduced pursuant to the provisions hereof
(including without limitation any adjustments or returns of Capital
Contributions made pursuant to Section 3.8).
"Involuntary Withdrawal" means, as to any General Partner, any
Withdrawal caused by Bankruptcy, death, adjudication of insanity or
incompetence.
"IRS" means the Internal Revenue Service.
"Land" means that certain parcel of real property owned by the
Partnership on which the Improvements are or are to be located, which parcel is
identified in Exhibit A hereto.
"Lender" means any lender or lenders under any Mortgage Loan (as
identified in the Schedule).
. "Limited Partner" means either or both of the Investor
Limited Partner and the Administrative Limited Partner.
"Liquidating Agent" means that Person conducting and supervising the
liquidation of the Partnership in accordance with the terms of Section 12.2
hereof.
"Loan Agreement" means the Loan Agreement entered into by the
Partnership and the Lender pertaining to the Mortgage Loan.
"Low Income Housing Tax Credit Certificate" means the certificate so
designated in the form annexed hereto as Exhibit G, together with any updates or
modifications thereof delivered in accordance with Sections 3.9B and 3.12B
hereof.
"Major Default" means the happening of any one of the events set
forth under Section 11.4A hereof.
"Majority in Interest" means with respect to each Class, those Partners
holding more than one-half of the Interests held by such Class.
"Management Agent" means the Person, approved by each Credit Agency (to
the extent such approval is required) and Consented to by the Administrative
Limited Partner, selected to provide management services to the Apartment
Complex from time to time in accordance with Article 8 hereof.
"Management Agreement" means the agreement between the Partnership and
the Management Agent in connection with management of the Apartment Complex
entered into pursuant to the authority granted by Article 8 hereof.
"Mortgage" means any mortgage or deed of trust securing an indebtedness
of the Partnership evidenced by a Mortgage Note 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
permits, 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 document, the term "Mortgage" shall refer to any such subsequent
document. If the Apartment Complex is encumbered by more than one such document,
all such documents shall be deemed collectively to be "the Mortgage."
"Mortgage Loan" means the construction/permanent loan in the
anticipated principal amount set forth in the Schedule to be made to the
Partnership by the Lender identified in the Schedule at the Closing, which is to
be (a) evidenced by a promissory note given by the Partnership to the Lender at
the Closing, (b) secured by a first mortgage and other related security
documents and financing statements, and (c) funded from the proceeds of the sale
of the Bonds.
"Mortgage Note" means any promissory note held by a Lender evidencing
Mortgage Loan indebtedness.
"Nonrecourse Debt" has the meaning given to the term
"nonrecourse liability" in Section 1.704-2(b)(3) of the Regulations.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations. The amount of Nonrecourse Deductions for each
Fiscal Year shall equal the excess, if any, of the net increase, if any, in the
amount of Partnership Minimum Gain during that Fiscal Year over the aggregate
amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse
Debt that are allocable to an increase in Partnership Minimum Gain, determined
in accordance with the provisions of Section 1.704-2(c) of the Regulations.
"Occupancy" means lawful occupancy of apartment units in the Apartment
Complex under leases (i) having a term of not less than six months, (ii) under
which full rental payments have commenced at rental rates which are (in the case
of the Tax Credit Apartment Units) consistent with the definition of "rent
restricted unit" under Section 42(g)(2) of the Code, or at such lower rental
rates as may be prescribed under any applicable restrictions contained in the
Project Documents, but in no event at rates which are less than 90% of the
maximum rents which can be charged to tenants of rent restricted units under
Section 42(g)(2) (unless any Project Document prescribes a lower rent, in which
case at rates which are less than 90% of such lower rents), (iii) to tenants
actually occupying the apartment unit and who (in the case of the Tax Credit
Apartment Units) meet the income requirements of Section 42(g) of the Code and
the Project Documents ("Qualified Tenants"), and (iv) on such other terms as are
commercially reasonable and customary under residential apartment leasing
practices observed in the area in which the Apartment Complex is located. An
apartment unit shall not be considered "Occupied" unless and until each of the
foregoing criteria has been complied with. A unit which was deemed Occupied and
which is later vacated shall continue to be considered Occupied so long as it is
held out for rent to Qualified Tenants and the next available unit is lawfully
occupied at the same or lower rental rates to a Qualified Tenant. At the
election of the Administrative Limited Partner, Occupancy may be certified by an
internal audit or by independent accountants selected by the Administrative
Limited Partner. "Occupancy" at a specified percentage means Occupancy of the
specified percentage of the total number of apartment units in the Apartment
Complex.
"Operating Deficit" means, for any specified period of time, the amount
by which the actual collected receipts on a cash basis (including government
subsidies actually received during such period) by the Partnership of revenues
from rental income and other related income (such as laundry machine revenue or
similar amounts paid by tenants for goods or services) from the Apartment
Complex, at the required low-income rates as provided in Section 42 of the Code
and the Project Documents, is less than the amount necessary to meet all
operating obligations of the Partnership (except for payment of the Asset
Management Fee). Such operating obligations will be computed on the same basis
and include those payments set forth under "Break-Even," above. Without limiting
the generality of the foregoing, the Partnership's revenues for purposes of
calculating any Operating Deficit shall not include tenant security deposits,
interest or other income earned on Partnership funds, Capital Contributions, the
proceeds of Partnership borrowings or loans, casualty insurance proceeds or Sale
or Refinancing Transaction Proceeds, nor shall the Partnership's operating
obligations include amounts paid from any of the foregoing sources.
"Operating Deficit Guaranty Period" means the period described in the
Schedule during which the General Partners is obligated to fund Operating
Deficits.
"Operating Loans" means loans made to the Partnership pursuant to
Section 5.9C hereof to fund Operating Deficits occurring during the Operating
Deficit Guaranty Period, which loans do not bear interest and are repayable only
as provided in Article 9.
"Original Agreement" means the Agreement of Limited Partnership of the
Partnership as the same may have been amended prior to the date hereof, as set
forth in the Schedule.
"Original Certificate" means the Certificate of Limited Partnership
for the Partnership, as identified on the Schedule.
"Original Partnership Agreement" means, collectively, the Original
Certificate and the Original Agreement.
"Partner" or "Partners" means any or all of the General Partners, the
Administrative Limited Partner and the Investor Limited Partner.
"Partner Information Schedule" means the schedule so designated which
is annexed to this Agreement.
"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 and shall be determined in accordance
with Section 1.704-2(i)(3) of the Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(i)(2) of the Regulations. The amount of Partner Nonrecourse Deductions
with respect to a Partner Nonrecourse Debt for a Partnership Fiscal Year equals
the excess, if any, of the net increase, if any, in the amount of Partner
Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse Debt during
that Fiscal Year over the aggregate amount of any distributions during that
Fiscal Year to the Partner that bears the economic risk of loss for such Partner
Nonrecourse Debt to the extent that such distributions are from the proceeds of
such Partner Nonrecourse Debt which are allocable to an increase in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined according to the provisions of Section 1.704-2(i)(2) of the
Regulations.
"Partnership" means the limited partnership governed by this Agreement,
as such Agreement may from time to time be amended or reconstituted.
"Partnership Minimum Gain" has the meaning set forth in
Section 1.704-2(d) of the Regulations.
"Permanent Financing Phase" means the period of time beginning on the
last to occur of each of the following: (a) Completion; (b) satisfaction on a
timely basis of all construction and development requirements pursuant to the
Mortgage Loan; and (c) commencement of regularly scheduled monthly debt service
payments amortizing the principal balance of the Mortgage Loan.
"Permitted Encumbrances" is defined in Section 6.6.
"Person" means any individual or entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person as
the context may require.
"Personalty" means, collectively, all fixtures, appliances and personal
property required in connection with the use, operation and maintenance of the
Improvements and all other property and rights more particularly described in
Exhibit B attached hereto.
"Plans and Specifications" means the plans and specifications for the
Apartment Complex stamped with the seal of the Architect, which have received
the Consent of the Administrative Limited Partner (including any change orders
made in compliance with Section 5.5C).
"Preexisting Limited Partners" means, collectively, all existing
limited partners so identified on the cover page of this Agreement, who are
hereby withdrawing from the Partnership simultaneously with the admission of the
Investor Limited Partner as the sole limited partner therein. At any and all
times where there is only one Preexisting Limited Partner, the term "Preexisting
Limited Partners" shall mean such sole Preexisting Limited Partner.
"Prime Rate" means the rate of interest publicly announced from time to
time by The Chase Manhattan Bank, N.A., as its prime rate.
"Profits" and "Losses" means, for each Fiscal Year or other period, an
amount equal to the Partnership's taxable income or loss for such year or
period, determined in accordance with Section 703(a) of the Code (and 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 for such year or period
shall be included in the determination of such taxable income or loss), with the
following adjustments:
(i) 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;
(ii) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
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;
(iii) 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
Asset Value of the property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its Asset Value;
(iv) In the event of a distribution of Partnership assets to a
Partner (whether in connection with a liquidation or otherwise), or in
the event the Asset Value of any Partnership asset is adjusted upon the
acquisition of an additional interest in the Partnership, unrealized
income, gain, loss and deduction inherent in such distributed or
adjusted assets (not previously reflected in Capital Accounts) shall be
allocated pursuant to Section 9.1 hereof as if there had been a taxable
disposition of such distributed or adjusted assets at fair market
value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such fiscal
year or other period, computed in accordance with the definition of
Depreciation herein; and
(vi) Notwithstanding any other provision of this definition of
Profits and Losses, any items that are allocated pursuant to Sections
9.1D or 9.1E hereof shall not be taken into account in computing
Profits or Losses.
"Project Documents" means the Governmental Agreements, the Management
Agreement, the Mortgage, the Mortgage Note and other Mortgage Loan
documentation, and any other document related to the financing, development,
rehabilitation or operation of the Apartment Complex, as any such document may
be amended from time to time.
"Projected Credits" means Housing Tax Credits described in the
Schedule, which the General Partners has projected to be the total amount of the
Housing Tax Credits which will be allocated to the Investor Limited Partners by
the Partnership, constituting 99.9% of the Housing Tax Credits which are
projected to be available to the Partnership. The Projected Credits as of the
date hereof are allocated to the following Fiscal Years in the following
respective amounts (subject to adjustment if the Projected Credits are revised
pursuant to Section 3.8B):
1999: $33,230
2000: $124,750
2001 through 2008: $129,330 per year
2009: $100,680
"Qualified Units" means those low-income apartment units in the
Apartment Complex which meet the requirements of Section 42(i)(3) of the Code.
"Regulations" means the Income Tax Regulations (whether temporary or
final) promulgated under the Code as such regulations may be amended from time
to time (including corresponding provisions of succeeding regulations).
"Rental Achievement" means the date that all of the following
conditions have been fulfilled: (i) commencement of the Permanent Financing
Phase; (ii) all governmental approvals necessary for legal occupancy of all
units in the Apartment Complex have been obtained; and (iii) 90% Occupancy
(based solely on actual occupancy) of the Apartment Complex has occurred during
each of three consecutive months (but no earlier than the three consecutive
months immediately preceding the commencement of the Permanent Financing Phase),
and which produces a cumulative debt service coverage ratio of 1.15 to 1.00 (the
ratio of net income remaining after the subtraction of all operating expenses
and reserve deposits, all such income, expenses and reserve deposits to be
calculated on the same basis as provided in the calculation of Break Even).
"Rental Assistance Contract" means the contract if any between the
Partnership and HUD providing for annual rental subsidies for the Apartment
Complex.
"Revised Projected Credits" is defined in Section 3.8A.
"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 the Apartment Complex or any part thereof,
recoveries of damage awards and insurance proceeds (other than business or
rental interruption insurance proceeds), the refinancing of any Mortgage Loan 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
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 the following:
(i) the amount of cash paid or to be paid in connection with or as an expense of
such Sale or Refinancing Transaction, and, with regard to damage recoveries or
insurance or condemnation proceeds (other than for temporary loss of use), cash
paid or to be paid for repairs, replacements or renewals resulting from damage
to or partial condemnation of the affected property; and (ii) the amount
necessary for the payment of all debts and obligations of the Partnership due
upon the occurrence of the particular Sale or Refinancing Transaction.
"Schedule" means the Schedule annexed hereto.
"State" means the state in which the Apartment Complex is located.
"Substituted Partner" means any transferee of an Interest who is
admitted to the Partnership as a successor partner.
"Tax Credit Apartment Units" means the 120 apartment units in the
Apartment Complex which are to be occupied by tenants in a manner which will
qualify such units for Housing Tax Credits and which will permit the Partnership
to claim an "applicable fraction", pursuant to Section 42(c)(1)(B) of the Code
with respect to the Housing Tax Credits, of 100%.
"Tax Credit Percentage" is the percentage set forth in the Schedule.
"Tax Credit Recapture Event" means an event, evidenced by a
determination thereof by the Accountants or as a result of a Final
Determination, which results in a recapture with respect to all or any portion
of the Partnership's Housing Tax Credits under Section 42(j) of the Code or
which results in a disallowance of any Housing Tax Credits previously claimed by
the Partnership.
"Tax Credit Shortfall" means any reduction in Housing Tax Credits
allocable to the Limited Partners as a result of (a) Actual Credits being less
than the Credit Allocation or the Projected Credit (or, if applicable, the
Revised Projected Credits), or (b) as a result of a Tax Credit Recapture Event,
evidenced by a determination thereof by the Accountants or as a result of a
Final Determination.
"Tax Credit Shortfall Payment" means any amounts payable by reason of
the provisions of Section 3.8 hereof as a result of a Tax Credit Shortfall.
"Tax Matters Partner" means the Partner designated from time to time as
the Tax Matters Partner of the Partnership pursuant to Section 5.3B hereof.
"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 by
any Partner to the Partnership as described in Section 4.2 hereof.
"Withdrawing" or "Withdrawal" (including the verb form "Withdraw" and
the adjectival form "Withdrawn") means, as to any 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
term of this Agreement.
ARTICLE 2 GENERAL
Section 2.1 Continuation of the Partnership
A. The Partnership shall be continued as a limited partnership pursuant
to this Agreement. The name of the Partnership shall continue to be the name set
forth at the beginning of this Agreement or such other name selected by the
General Partners, with the Consent of the Administrative Limited Partner, as may
be acceptable to the Filing Office.
B. As soon after the execution of this Agreement as is practicable, the
General Partners shall (if, to the extent and in the manner required under the
Uniform Act) file this Agreement and/or a certificate related hereto in the
Filing Office. The General Partners shall from time to time take all such other
actions as may be deemed to be necessary or appropriate, 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, 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, and (iii) protect the limited liability of the Limited
Partners under the laws of the State. The Partners shall execute such
certificates, documents and instruments and take such other action as may be
necessary to enable the General Partners to fulfill their responsibilities under
this Section 2.1B. The power of attorney granted in Section 15.2 hereof may be
exercised by the Administrative Limited Partner to effect the provisions of this
Section 2.1B. In the event the General Partners fail to comply with this Section
2.1B, the Administrative Limited Partner is authorized to do so on behalf of the
General Partners.
Section 2.2 Principal Office
The principal office of the Partnership shall be located at the
location set forth in the Schedule. The General Partners may maintain such other
offices on behalf of the Partnership in the State as it may from time to time
deem advisable. The Partnership's books and records and other documents,
agreements and information will be made available at its principal office in
accordance with the Uniform Act. The principal office of the Partnership may be
changed by the General Partners to any place in the continental United States,
in which event prior written notice thereof shall be given by the General
Partners to all the other Partners.
Section 2.3 Principal Place of Business; Resident Agent
The principal place of business of the Partnership shall be at the
location of the Apartment Complex. The party so identified in the Schedule, at
the aforementioned address, has been appointed the Partnership's resident agent
for the service of process in the State.
Section 2.4 Term
The Partnership shall continue in full force and effect until the
dissolution and termination of the Partnership pursuant to Article 12 hereof.
Section 2.5 Purpose
A. The specific business and purpose of the Partnership is investment
in real property and the provision of low income housing through the
construction, renovation, rehabilitation, operation (including conversion to
cooperative or condominium form of ownership and the sale of apartment units, if
permitted) and leasing of the Apartment Complex and any commercial space located
therein, and in connection therewith, subject to and in accordance with the
permission of each applicable Credit Agency 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.
B. In order to carry out its business and purpose under Section 2.5A
hereof and subject to the limitations set forth elsewhere in this Agreement, the
Partnership is hereby authorized to:
(i) Acquire, construct, renovate, rehabilitate, own,
maintain and operate the Apartment Complex;
(ii) Mortgage, refinance, lease, transfer and exchange or
otherwise convey and encumber, with the Mortgage Loan or otherwise with
the Consent of the Administrative Limited Partner, the Apartment
Complex (including conversion to cooperative or condominium form of
ownership and the sale of apartment units) in furtherance of any and
all of the objectives of the business of the Partnership;
(iii) Enter into, perform and carry out contracts of any kind
necessary to, or in connection with or incidental to, the acquisition,
renovation, rehabilitation, ownership, financing, maintenance and
operation of the Apartment Complex, including, but not by way of
limitation, any contracts with any Credit Agency which may be desirable
or necessary to comply with the requirements of such Credit Agency,
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;
(iv) Rent dwelling units and commercial space, if any, therein
from time to time in accordance with applicable federal, state and
local regulations, in such a manner so as to qualify for the Housing
Tax Credits, 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 Credit Agency;
and
(v) Carry on any and all activities incidental and appropriate
to effectuate the purposes of the Partnership.
ARTICLE 3 CAPITAL CONTRIBUTIONS; CLOSINGS; DEFAULT BY LIMITED PARTNER
-----------------------------------------------------------
Section 3.1 General Partners
The Capital Contribution of the General Partners is set forth in the
Partner Information Schedule annexed hereto. In addition, if the Development Fee
has not been paid in full by the tenth anniversary of the occurrence of
Completion, the General Partners will make a loan within 10 days thereafter in
an amount sufficient for payment of any unpaid balance of the Development Fee.
Such loan shall bear no interest and shall be payable solely as provided in
Section 9.2 hereof
Section 3.2 Withdrawal of Preexisting Limited Partners
Each of the Preexisting Limited Partners hereby withdraws from the
Partnership. Each of the Preexisting Limited Partners acknowledges that it has
no further interest in the Partnership as of the Closing and shall be deemed to
have withdrawn as a limited partner in the Partnership as of such date. The
Preexisting Limited Partners shall have no further rights, liabilities,
interests or obligations of a limited partner hereunder.
Section 3.3 Admission of Administrative Limited Partner
The Administrative Limited Partner is hereby admitted into the
Partnership as of the Closing. Subject to compliance with the terms of this
Agreement and all agreements related thereto, the Administrative Limited Partner
shall be obligated to contribute $100 to the capital of the Partnership.
Section 3.4 Admission of Limited Partners
The Investor Limited Partner is hereby admitted into the Partnership as
of the Closing. The Investor Limited Partner has, concurrently with the
execution hereof, contributed the sum of $100 to the capital of the Partnership.
Subject to compliance with the terms of this Agreement and all agreements
related thereto, the Investor Limited Partner shall contribute further to the
capital of the Partnership the Investor Limited Partner Contribution. Subject to
Section 3.12 hereof, the Investor Limited Partner Contribution shall be made in
the following manner and amounts (subject to adjustment as described in Section
3.8 hereof):
A. $848,408 shall be payable upon the later to occur of (i)
Closing, including, but not limited to, the receipt of all required
federal, state and local governmental approvals concerning the
Apartment Complex, the acquisition of the Interests by the Investor
Limited Partner and the Administrative Limited Partner and (ii)
commencement of funding of the Mortgage Loan on terms approved by the
Administrative Limited Partner, which approval shall not be
unreasonably withheld, with such funds to be used solely for site
acquisition, development and rehabilitation costs; provided, however,
that the Investor Limited Partner shall withhold $350,000 from the
amount payable under this Paragraph A, and shall pay such withheld
amount directly to the Lender on January 5, 1999 to fund reserves.
B. $212,098 shall be payable upon the last to occur of (i)
satisfaction of all conditions precedent to the payment set forth in
Paragraph A above, (ii) Completion by the Completion Date and delivery
of a Completion Certificate in the form annexed hereto as Exhibit C
executed by the Architect (including all commercial space, if any),
(iii) issuance of certificates of occupancy for all units in the
Apartment Complex after completion of rehabilitation thereof (if such
certificates of occupancy are not final, then, to the extent of any
"punchlist" construction items, the Investor Limited Partner shall
withhold an amount equal to 125% of the cost reasonably estimated to
complete such items, and such withheld funds shall be disbursed to the
Partnership upon issuance of final certificates of occupancy), (iv)
Cost Certification, (v) issuance of Forms 8609 for the entire Apartment
Complex and computation of the internal rate of return as provided in
Section 3.8A, and (vi) the attainment of Rental Achievement.
Section 3.5 Treatment of Other Advances
If any Partner or Affiliate 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. Unless
otherwise expressly indicated to the contrary elsewhere in this Agreement, any
such advance shall be considered a Voluntary Loan in accordance with Section 4.2
below.
Section 3.6 Capital Accounts; Interest; Withdrawal
No Partner shall have the right to demand a return of its 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 in this Agreement. Except as specifically otherwise
provided in this Agreement, no General Partner shall be personally liable for
the return of the Investor Limited Partner Contribution, or any portion thereof,
it being expressly understood that any such return shall be made solely from
assets 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.
Section 3.7 Liability of Limited Partners
No Limited Partner shall be liable for any debts, liabilities,
contracts or obligations of the Partnership, except as provided by law. Each
Limited Partner shall be liable only to make its Capital Contribution as and
when due under this Agreement and otherwise to comply with its obligations
hereunder.
Section 3.8 Tax Credit Protection; Adjustment of Interests
A. It is intended that the Investor Limited Partner Contribution will
be adjusted to an amount such that the internal rate of return ("IRR") to the
Investor Limited Partner for its investment in the Partnership shall not fall
below 10.0%. Accordingly, upon the issuance by the Credit Agency of Treasury
Forms 8609 for all of the buildings comprising the Apartment Complex, the
Investor shall compute its IRR based on the same assumptions and projections of
the amount and timing of Capital Contributions paid by, and Housing Tax Credit
and Partnership Profits and Losses allocable to, the Investor Limited Partner as
applied at the Closing, but modified to reflect those events which (1) actually
occurred between the Closing and the date of IRR computation and (2) any changes
in future assumptions and projections which are reasonably appropriate based on
information then available at the date of IRR computation (including, without
limitation, any changed amount of Housing Tax Credit reflected on such Forms
8609). In the event such IRR computation results in an IRR of less than 10.0%,
then the Investor Limited Partner Contribution shall be reduced, in the manner
provided by Section 3.8D hereof, by a Tax Credit Shortfall Payment in an amount
such that the IRR shall increase to 10.0% when computed after such Tax Credit
Shortfall Payment is taken into account. After such Investor Limited Partner
Contribution reduction has been determined, then no future installment thereof
shall be payable any sooner than the specific date assumed in computing such IRR
at 10.0%.
B. If at any time the Accountants determine that, for any Fiscal Year
or portion thereof during the Partnership's operation, by reason of any event
other than an event described in Section 3.8A or 3.8C hereof, there is a Tax
Credit Shortfall because the Actual Credit for such Fiscal Year or portion
thereof is less than the Projected Credit, or the Revised Projected Credit, if
applicable, for such Fiscal Year or portion thereof, for any reason, including,
without limitation, a reduction in the Credit Allocation as set forth in Section
3.8A hereof, the Apartment Complex not being placed in service during the second
calendar year after the Credit Year or the failure of the Partnership to operate
the Apartment Complex so as to have 100% of the Tax Credit Apartment Units
therein eligible for the Housing Tax Credits (but not including a change in law
or a transfer by the Investor Limited Partner of its Interest or other action of
the Investor Limited Partner), or upon the occurrence of a Tax Credit Recapture
Event, the Investor Limited Partner Contribution shall be reduced, in the manner
set forth in Section 3.8D, by a Tax Credit Shortfall Payment equal to the
product of such Tax Credit Shortfall multiplied by the Tax Credit Percentage. In
the case of a Tax Credit Recapture Event, the Tax Credit Shortfall Payment shall
include all additions to the tax of the Limited Partners, and all penalties and
interest assessed against the Limited Partners or any of their partners as a
result of such occurrence..
C. Notwithstanding the provisions of Section 3.8B, in the event that
there is a Tax Credit Shortfall because the Actual Credits for 1999 or 2000 are
less than the Projected Credits for such year (or if applicable the Revised
Projected Credits for such year) solely by reason that the applicable fraction
for such year with respect to any buildings in the Apartment Complex was, by
reason of the application of Section 42(f)(2) of the Code, lower than projected
in the Projected Credits (or Revised Projected Credits, if applicable), the
Investor Limited Partner Contribution, shall be reduced, in the manner provided
by Section 3.8D hereof, by a Tax Credit Shortfall Payment equal to the product
of such Tax Credit Shortfall for such year multiplied by the Tax Credit
Percentage. In the event that the Actual Credits for 1999 or 2000 are greater
than the Projected Credits for such year (or if applicable the Revised Projected
Credits for such year), giving rise to a "Credit Excess," then, at the Investor
Limited Partner's option, (x) the Investor Limited Partner Contribution shall be
increased proportionately by increasing pro rata the unpaid installments of the
Investor Limited Partner Contribution by an amount equal to the Tax Credit
Percentage multiplied by the Credit Excess for the year in question, and/or (y)
the Interest of the Investor Limited Partner shall be reduced so that the
Investor Limited Partner shall be in the same economic position as if the
Housing Tax Credits had not increased; provided, however, that the foregoing
option to reduce the Investor Limited Partner's Interest shall only be available
if and to the extent that the Investor Limited Partner Contribution would, by
reason of the increase in the Actual Credits, increase by more than 5% of the
Investor Limited Partner Contribution set forth herein. Any adjustment in the
Investor Limited Partner Contribution effectuated by this provision shall be
made in accordance with Section 3.8D.
D. Whenever in this Section 3.8 it is provided that the Investor
Limited Partner Contribution shall be modified, each remaining installment of
the Investor Limited Partner Contribution then outstanding shall be reduced or
increased, pro rata, so that the aggregate contributions, when made, will total
the new amount of the Investor Limited Partner Contribution. If the outstanding
balance of the Investor Limited Partner Contribution has been reduced to zero by
reason of the aforesaid adjustments to the Investor Limited Partner Contribution
and/or payments previously made thereon or offsets applied thereto, then the
General Partners shall immediately make a Capital Contribution to the
Partnership in the amount owed to the Investor Limited Partner (including
without limitation interest under Section 3.8E), from its own funds, and shall
cause the Partnership to pay such amount to the Investor Limited Partner.
Notwithstanding the foregoing, if and to the extent that a Tax Credit Shortfall
arises by reason of an event not covered in Section 3.8A or Section 3.8C and is
an event of non-compliance or an event which occurs after the end of the
Operating Deficit Guaranty Period, any amounts which are not recoverable by a
reduction of the Investor Limited Partner Contribution shall be recoverable only
out of Cash Flow as provided in Section 9.2A, or, to the extent still unpaid,
from Sale or Refinancing Transaction Proceeds as provided in Section 9.2B
hereof.
E. Any amount owing to the Partnership or the Investor Limited Partner
under this Section 3.8 shall be increased by an amount equal to the Interest
Rate from the date such amount is determined to be due until the date such
payment is made.
F. If all or a portion of the Investor Limited Partner Contribution is
returned to it under this Section 3.8, the General Partners shall promptly file
an amendment to this Agreement and/or the Certificate.
Section 3.9 Closing
A. The initial closing of the transactions contemplated hereunder (the
"Closing") shall take place on the "Closing Date" designated in the Schedule.
B. At the Closing and as a condition thereof, the following documents
(collectively, the "Closing Documents"), all in form and substance reasonably
satisfactory to the Investor Limited Partner, shall be delivered and/or executed
by all necessary parties:
(i) a title insurance policy meeting the requirements
of Exhibit L (the "Title Policy");
(ii) an opinion of the General Partners' counsel confirming
such tax and corporate matters, and in such form, as the Investor
Limited Partner or its counsel may reasonably request. Such opinion
shall expressly permit reliance thereon by the Investor Limited Partner
and counsel engaged by the Investor Limited Partner in connection with
the admission of the Investor Limited Partner and the Administrative
Limited Partner to the Partnership;
(iii) a certificate in the form of Exhibit E annexed hereto,
duly executed by the General Partners;
(iv) a Development Services Agreement between the Partnership
and the party described in the Schedule, as Developer, in form
reasonably acceptable to the Investor Limited Partner, pursuant to
which the Developer will be paid a Development Fee as described in the
Schedule;
(v) the Guaranty in the form of Exhibit F annexed hereto;
(vi) the Low Income Housing Tax Credit Certificate in the form
of Exhibit G annexed hereto and the Low Income Housing Credit
Allocation certification (Treasury Form 8609), if issued;
(vii) an ALTA survey certified to the Partnership, the
Investor Limited Partner and the Administrative Limited Partner;
(viii) a true and correct copy of each Initial Lease existing
as of the date of the Closing;
(ix) the written determinations of the issuer of the Bonds
necessary to comply with Section 42(m)(2)(D) of the Code;
(x) a bonded construction contract in an amount
approved by the Investor Limited Partner; and
(xi) the Due Diligence Documents.
After the General Partners have delivered, or caused to be delivered, on behalf
of itself and the Partnership, the Closing Documents, and so long as the
representations and warranties referred to in Article 6 are in fact true and
correct on the Closing Date and all other conditions set forth in Section 3.4A
have been met, the Investor Limited Partner shall pay to the Partnership the
initial installment of the Investor Limited Partner Contribution described in
Section 3.4A.
Section 3.10 Satisfaction of Conditions
If all conditions precedent to the Closing have not been satisfied on
or before the Closing Date and the Closing Date has not been extended with the
Consent of the Administrative Limited Partner after written request therefor by
the General Partners, the Investor Limited Partner and the Administrative
Limited Partner shall be entitled to rescind and terminate all of their
obligations under this Agreement and any documents or agreements executed
pursuant hereto and to receive a refund of any sums which have previously been
paid as a Investor Limited Partner Contribution to the General Partners or for
the benefit of the Partnership. Upon the refund to the Limited Partners of the
sums paid by them, the General Partners and the Partnership shall have not
further obligation or liability to the Limited Partners; provided, however, that
the General Partners shall indemnify the Limited Partners from any liability
they may have incurred as a result of their participation in the Partnership. In
the event that a General Partner has breached any covenant, representation or
warranty, the Investor Limited Partner and the Administrative Limited Partner
shall also be entitled to exercise all other rights and remedies which may arise
as a result thereof.
Section 3.11 Mortgage Loan Commitment
The obligation of the Investor Limited Partner to make its Capital
Contribution is further predicated on the General Partners having obtained the
Mortgage Loan. At the Investor Limited Partner's election, any and all fees paid
to the General Partners and their Affiliates from the Investor Limited Partner's
Capital Contribution shall be returned to the Partnership and the transactions
contemplated by this Agreement shall be rescinded if the General Partners are in
default under this Section 3.11.
Section 3.12 Subsequent Closing(s)
A. There shall be subsequent closing(s) (individually referred to as a
"Subsequent Closing") which shall be held 20 days after the respective date(s)
on which all of the conditions precedent to the payment of each of the
installments of the Capital Contribution referred to in Section 3.4B
(hereinafter referred to as a "Subsequent Closing Date"). It shall be a
condition to the Investor Limited Partner's obligation for the installment of
its Capital Contribution that there shall be no defaults under any of the
Project Documents.
B. At each Subsequent Closing and as a condition thereof, the General
Partners on behalf of themselves and the Partnership shall deliver the following
documents (collectively, the "Subsequent Closing Documents") to the Investor
Limited Partner, all in form and substance reasonably satisfactory to the
Investor Limited Partner:
(i) A date down certificate or endorsement to the Title Policy
("Bring Down Certificate"), dated as of such Subsequent Closing Date,
at the Partnership's expense, insuring (in an amount equal to the sum
of the Investor Limited Partner Contribution and the principal amount
of the Mortgage Loan) the Partnership's ownership of the Apartment
Complex, showing that the Apartment Complex is subject to no mortgage,
deed of trust, lien, encumbrance, easement, covenant, restriction or
charge other than the exceptions set forth on the Title Policy (and, if
applicable, such other matters as may be approved by the Investor
Limited Partner in writing);
(ii) A survey of the Apartment Complex (to the extent any
conditions which would be disclosed by an updated survey have not been
shown on the latest survey previously delivered);
(iii) A certificate of the General Partners, dated as of such
Subsequent Closing Date, certifying on behalf of themselves and the
Partnership that the warranties and representations set forth in
Article 6 hereof continue to be true, correct and in force as of such
date;
(iv) A "comfort letter" from the General Partners' counsel,
stating that nothing has come to its attention which affects adversely
the matters addressed in its opinion delivered at the Closing;
(v) An estoppel certificate from the holder of each Mortgage,
dated no earlier than 30 days prior to such Subsequent Closing Date;
(vi) An updated (as of such Subsequent Closing Date) Low
Income Housing Tax Credit Certificate, and the Low Income Housing
Credit Allocation certification (Forms 8609), if not previously
delivered;
(vii) An unaudited balance sheet of the Partnership, dated no
earlier than 30 days prior to such Subsequent Closing Date, certified
by the General Partners as true, complete and correct;
(viii) A true and correct copy of each Initial Lease executed
after the Closing and each prior Subsequent Closing; and
(ix) Such other documents as the Investor Limited Partner
determines are reasonably necessary to clarify any matter disclosed by
the documents described above or a fact or circumstance which has the
Investor Limited Partner has discovered and/or has occurred since the
date of the Closing and is reasonably required to evidence the
fulfillment of the conditions precedent for the portion of the Capital
Contribution to be made at that time.
In addition to the foregoing, at the Subsequent Closing it shall be an
additional condition precedent to the payment of the Capital Contribution then
due that the Investor Limited Partner and the Administrative Limited Partner
receive a report from the construction consultant to the Investor Limited
Partner that all design, site, construction and finishing work necessary for the
completion of the Apartment Complex and any necessary utilities have been
finished in a good and workmanlike manner, free from defects in design and
construction and substantially in accordance with the Plans and Specifications.
The consultant shall complete its inspection and report prior to the date which
is 10 days after the date on which all of the other Subsequent Closing Documents
for that Subsequent Closing have been delivered to the Investor Limited Partner
as required under this Section 3.12. The Investor Limited Partner shall cause
its consultant to deliver a copy of its report (or the pertinent portions
thereof) promptly to the General Partners if there are any construction or other
development items which the Investor Limited Partner claims are unsatisfactory
based upon the findings in the report.
The General Partners shall promptly notify the Administrative Limited
Partner and the Investor Limited Partner if the General Partners become aware of
the existence of any fact or circumstance which makes untrue or misleading in
any material respect any of the statements or information contained in and/or
covered by the Subsequent Closing Documents. As a condition to the delivery (as
further described below) of the installment of the Investor Limited Partner
Contribution due at a Subsequent Closing, the General Partners shall certify
that none of them has any knowledge of any such fact or circumstance. After the
General Partners has delivered or caused to be delivered on behalf of themselves
and the Partnership the Subsequent Closing Documents (including, without
limitation, the confirmation described in the immediately preceding sentence),
and so long as (i) no General Partner has defaulted in any of its obligations
under the terms of this Agreement or any other document executed by a General
Partner pursuant to this Agreement, which default is continuing, and (ii) the
warranties and representations referred to in Article 6 are in fact true and
correct at such time, the Investor Limited Partner shall deliver at each
Subsequent Closing for the account of the Partnership that portion of the
Investor Limited Partner Contribution payable on the applicable Subsequent
Closing Date.
The Investor Limited Partner and/or the Administrative Limited Partner
shall have twenty days with respect to the Subsequent Closing for the
installment of the Capital Contribution described in Section 3.4B (such twenty
days is hereinafter referred to as the "Response Period") after receipt of (A) a
request from the General Partners for the payment of the Capital Contribution
corresponding to such Subsequent Closing and (B) copies of what the General
Partners believe to be all of the Subsequent Closing Documents required at such
Subsequent Closing to send a notice (a "Deficiency Notice") to the General
Partners stating the reasons why any of such Subsequent Closing Documents do not
satisfy the requirements set forth above and/or that there is additional
information reasonably required by Investor Limited Partner and/or the
Administrative Limited Partner to verify the accuracy and/or completeness of
such Subsequent Closing Documents. If a Deficiency Notice is sent to the General
Partners and the General Partners respond, the Investor Limited Partner and/or
the Administrative Limited Partner shall have five business days to approve the
Subsequent Closing Documents and, if applicable, any supplemental or additional
documentation and/or other information provided by or for the benefit of the
General Partners. If the Investor Limited Partner or the Administrative Limited
Partner fails to send a Deficiency Notice within the applicable Response Period,
the Subsequent Closing Documents shall be deemed approved and the applicable
Capital Contribution shall be due and payable within twenty days after the date
on which Investor Limited Partner received such Subsequent Closing Documents and
any supplemental or additional documentation and other information from the
General Partners.
Section 3.13 Payment
The portion of the Investor Limited Partner Contribution due to be paid
at the Closing or any Subsequent Closing shall be paid either by a cashier's
check or by federal funds wired or otherwise transferred to a federally insured
bank account of the Partnership, as directed by the Partnership by a written
notice to the Investor Limited Partner at least three business days prior to the
Closing or Subsequent Closing.
Section 3.14 Additional Low Income Housing Tax Credit Certificates
The General Partners shall deliver to the Investor Limited Partner an
updated Low Income Housing Tax Credit Certificate dated as of the last day of
the first taxable year of the Credit Period within 30 days after said date and
at such other times as may be reasonably required by the Investor Limited
Partner.
Section 3.15 Loan Defaults
If there is a default or if events which with notice or the passage of
time, or both, would constitute a default, which events result in an
acceleration of any Mortgage, the Investor Limited Partner shall have the right,
in addition to any other remedies available to it hereunder or at law or equity,
to terminate this Agreement, without any further liability, and to rescind this
Agreement under Section 7.4.
ARTICLE 4 COMPLIANCE WITH CREDIT AGENCY REQUIREMENTS; PARTNERSHIP BORROWINGS
Section 4.1 Credit Agency Requirements
The following provisions shall apply at all times: (i) each of the
provisions of this Agreement shall be subject to, and the General Partners
covenant to act in accordance with, the Project Documents and all applicable
federal, state, and local laws and regulations; (ii) such documents, laws and
regulations, as amended or supplemented, shall govern the rights and obligations
of the Partners, their heirs, executors, administrators, successors and assigns;
(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 Governmental Agreements in a manner
satisfactory to each Credit Agency; (iv) no amendment of this Agreement shall
affect the rights of any Credit Agency under any of the Project Documents
without the prior written consent of such Credit Agency; (v) 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 any and all
conditions, approvals and other requirements of the rules and regulations of any
Credit Agency applicable thereto; and (vi) the General Partners shall at no time
do or cause to be done any act directly or indirectly affecting the Apartment
Complex except with the prior approval or pursuant to the requirements of each
Credit Agency and each Lender, if such approval is required. Specifically,
without limiting the generality of the foregoing, the General Partners shall
cause 120 apartment units to be held for persons whose income is below 50% of
the area median income, and shall provide any home ownership incentive programs
and any and all other programs, services and amenities described in its Housing
Tax Credit application applicable to the Apartment Complex.
Section 4.2 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 Credit Agency. 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 Partners or its
Affiliates shall, except to the extent that such borrowings are required to be
made by the Partnership hereunder, require the Consent of the Administrative
Limited Partner. The Administrative Limited Partner and the Investor Limited
Partner shall make loans to the Partnership only with the Consent of the General
Partners. 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 or a loan
made pursuant to Section 3.1, shall be a "Voluntary Loan," shall bear interest
per annum at a rate equal to the Interest Rate and shall be repayable as set
forth in Article 9 hereof (to the extent permitted by each Credit Agency);
provided, however, that any Voluntary Loan shall be made solely for the benefit
of the Partnership. No Voluntary Loan by the General Partners or its Affiliates
may be made to the Partnership in substitution of its obligation to make
Operating Loans to the Partnership.
ARTICLE 5 RIGHTS, POWERS AND OBLIGATIONS OF THE GENERAL PARTNERS
AND LIMITATIONS THEREON
Section 5.1 Exercise of Management
A. The overall management and control of the business, assets and
affairs of the Partnership shall be vested in the General Partners and, subject
to the specific limitations and restrictions set forth in this Article 5, the
General Partners, in extension of and not in limitation of the powers given them
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, except as otherwise set forth in this Agreement. Neither the
Administrative Limited Partner nor the Investor Limited Partner shall take part
in the management or control of the business of the Partnership or have
authority to bind the Partnership.
B. If at any time more than one Person constitutes the General
Partners, then the General Partners shall act by vote of a all such Persons.
C. 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 this Agreement.
D. 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
11 hereof.
Section 5.2 Authority and Duties of General Partners
A. Except as otherwise set forth in this Agreement, the General
Partners are hereby fully authorized 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:
(i) Any note, mortgage or other instrument or document in
connection with the Mortgage Loan or any Governmental Agreement, and
all other agreements, contracts, certificates, instruments and
documents required by any Credit Agency and/or any Lender in connection
therewith or with the acquisition, improvement, operation or leasing of
the Apartment Complex or otherwise required by any Credit Agency and/or
any Lender;
(ii) Any deed, lease, mortgage note, bill of sale, contract or
any other instrument purporting to convey or encumber the real or
personal property of the Partnership;
(iii) 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;
(iv) Any and all agreements, contracts, documents,
certificates and instruments whatsoever involving the acquisition,
improvement, management, maintenance, leasing or operation of the
Apartment Complex, including the employment of such Persons as may be
necessary therefor; and
(v) Any and all instruments, agreements, contracts,
certificates and 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
Credit Agency and/or any Lender in connection with any financing.
B. Every contract, agreement, certificate, document or other instrument
executed by a General Partner shall be conclusive evidence in favor of every
Person relying thereon or claiming thereunder that, at the time of the delivery
thereof, the Partnership was in existence; secondly, that this Agreement had not
been terminated or canceled or amended in any manner so as to restrict such
authority (except as shown in any instrument duly filed in the Filing Office);
and thirdly, that the execution and delivery thereof was duly authorized by the
General Partners. Any Person dealing with the Partnership or a General Partner
may always rely on a certificate signed by a General Partner:
(i) As to the identity of the Partners;
(ii) 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;
(iii) As to who is authorized to execute and deliver any
instrument, contract, agreement, certificate or document for the
Partnership;
(iv) As to the authenticity of any copy of this
Agreement and amendments thereto; or
(v) 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.
C. The Partners hereby consent to the exercise by the General Partners
of the powers conferred on them by this Agreement.
D. The General Partners shall devote to the Partnership such time as
may be necessary for the proper performance of the duties of the General
Partners. The General Partners shall have the fiduciary responsibility for the
safekeeping and use of all funds and assets of the Partnership, whether or not
in their immediate possession or control. The General Partners shall not employ,
or permit another to employ, such funds or assets in any manner except for the
exclusive benefit of the Partnership. The signature of a General Partner shall
be needed 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 a General Partner. The General Partners are authorized and directed
to:
(i) Take all action that may be necessary or
appropriate to carry out the purposes of the Partnership as described in
this Agreement;
(ii) Make inspections of the Apartment Complex and assure that
the Apartment Complex is being properly maintained and necessary
repairs are being made;
(iii) Prepare or cause to be prepared in conformity with good
business practice all reports required to be furnished to the Partners
or required by taxing bodies or other governmental agencies, including
operations reports of the Apartment Complex and the financial
statements and reports referred to in Section 7.3 hereof;
(iv) 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 must
be in an amount at least sufficient to repair and rebuild the Apartment
Complex under the circumstances and in the manner described in Section
5.12 hereof), including (if customary for properties in the vicinity of
the Apartment Complex) wind insurance.
(v) 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;
(vi) Obtain and maintain in force or cause to be obtained and
maintained in force adequate public liability insurance, the amount of
coverage to be at least $2,000,000 per occurrence, together with any
and all insurance required hereunder; and
(vii) 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, including, but not limited to, the
execution of all conveyances, deeds, notes, mortgages and other
documents.
Notwithstanding anything contained in this Agreement to the contrary, if the
Administrative Limited Partner is able to obtain insurance coverage for the
Partnership and the Apartment Complex described in subparagraphs (iv) and/or
(vi) above which is comparable in all material respects to the coverage proposed
to be obtained by the General Partners, with companies having equivalent claims
paying ability as those proposed by the General Partners and the premiums
payable by the Partnership for such insurance coverage would not exceed the
premiums payable for the insurance identified by the General Partners (or the
Administrative Limited Partner or the Investor Limited Partner is willing to pay
any excess), then, at the request of the Administrative Limited Partner, the
General Partners shall obtain such insurance policies through the Administrative
Limited Partner or its agent. At least 30 days prior to seeking to obtain any
insurance coverage, the General Partners shall furnish the Administrative
Limited Partner sufficient information to enable the Administrative Limited
Partner to obtain proposals to provide such coverage.
E. The General Partners shall cause the Apartment Complex to be
constructed, operated and managed in such a manner that (i) the Apartment
Complex complies with all Project Documents (including but not limited to those
requiring the provision of such tenant services programs and amenities as
described in the Partnership's Credit Application) and (ii) the Apartment
Complex will be eligible to receive the full amount of the Projected Credit or
the Revised Projected Credit, as applicable, with respect to 100% of the Tax
Credit Apartment Units. To that end, the General Partners agree, without
limitation, to make all elections necessary under Section 42 of the Code
(including those requested by the Administrative Limited Partner) to allow the
Partnership or its Partners to claim the Housing Tax Credits, to enter into the
extended low-income housing commitment required by Section 42(h)(6) of the Code,
and, if the Mortgage involves Bonds, to satisfy the requirements of Sections
42(m)(1)(D) and (2)(D) of the Code, to operate the Apartment Complex and cause
the Management Agent to manage the Apartment Complex so as to comply with the
requirements of Section 42 of the Code, including Sections 42(g) and (i)(3) of
the Code, and to make all certifications required by Section 42(l) of the Code,
and to operate the Apartment Complex at all times in compliance with the
requirements of the Project Documents.
F. The General Partners agree that they shall prepare or cause to be
prepared an annual budget in connection with the operations of the Apartment
Complex for the succeeding Fiscal Year of the Partnership and shall deliver the
same to the Administrative Limited Partner not later than November 1 of the
Fiscal Year preceding the Fiscal Year to which such budget relates. Such budget
shall not be adopted until the Administrative Limited Partner shall have
approved the same in writing; provided, however, if the Administrative Limited
Partner has not approved the proposed annual budget within 20 days after the
receipt thereof from the General Partners, such proposed annual budget shall be
deemed approved by the Administrative Limited Partner. If the General Partners
and the Administrative Limited Partner are unable to agree on a budget, then (i)
the General Partners can operate the Partnership using the most current budget
and (ii) the General Partners and the Administrative Limited Partner shall
cooperate in good faith to resolve such dispute and, if unable to do so, submit
the same to binding arbitration as expeditiously as practical. Notwithstanding
anything to the contrary contained herein, the Partnership shall not make any
expenditure of funds, or commit to make any such expenditure (other than in
response to an emergency), except as provided for in an annual budget so
approved by the Administrative Limited Partner or if such expenditure or
commitment, individually and together with all of the other unapproved
expenditures and commitments for such Fiscal Year, does not represent a material
deviation from the annual budget approved for the previous Fiscal Year and is
for a purpose consistent with the provisions of this Agreement.
Section 5.3 Delegation of General Partner Authority; Tax Matters
Partner
A. Each General Partner may delegate all or any of its powers, rights
and obligations hereunder, and may appoint, employ, contract or otherwise deal
with any Person for the transaction of the business of the Partnership, which
Person may, under the supervision of the General Partners, perform any acts or
services for the Partnership as the General Partners may approve and in
accordance with the terms of this Agreement, provided, however, such delegation
shall not relieve the General Partners of any of their obligations hereunder.
B. All of the Partners hereby agree that the 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; provided, however, that if
such General Partner shall withdraw from the Partnership, become Bankrupt or be
dissolved, the Administrative Limited Partner shall thereafter be the Tax
Matters Partner. The Tax Matters Partner shall promptly, after receipt thereof,
provide to the Investor Limited Partner all notices and other communications
received from or sent to the IRS. The Tax Matters Partner shall provide the
Investor Limited Partner with reasonable notice of all meetings or conferences
with the IRS, and the Investor Limited Partner shall have the right to attend
all such meetings or conferences. The Investor Limited Partner shall have the
right to require the Tax Matters Partner to commence a judicial action with
respect to a federal income tax matter and to appeal any adverse determination
of a judicial tribunal. Without the prior written Consent of the Investor
Limited Partner, the Tax Matters Partner shall not (i) commence a judicial
action (including filing a petition) as contemplated in Section 6226(a)(2) or
6228 of the Code with respect to a federal income tax matter or appeal any
adverse determination of a judicial tribunal, or (ii) enter into a settlement
agreement with the IRS which purports to bind the Investor Limited Partner;
(iii) intervene in any action as contemplated in Section 6226(b) of the Code;
(iv) file any request contemplated in Section 6227(b) of the Code; or (v) enter
into an agreement extending the period of limitations as contemplated in Section
6229(b)(1)(B) of the Code. The Partnership shall indemnify the Tax Matters
Partner from and against any claim, liability and expense (including attorneys'
fees) it may incur in connection with its duties as Tax Matters Partner.
Section 5.4 Lease, Conveyance or Refinancing of Assets of the
Partnership
A. Except as may be otherwise expressly provided in Section 4.1 hereof
and elsewhere in this Agreement, the General Partners, with the approval of each
Credit Agency (if required), are 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 notwithstanding any other
provision of this Agreement (other than Section 5.4B and Section 5.4C hereof),
the terms of any such sale, exchange, refinancing or other transfer, conveyance
or encumbrance must receive the Consent of the Administrative Limited Partner
and the Consent of the Investor Limited Partner before such transaction is
consummated, except that neither the Consent of the Administrative Limited
Partner nor the Consent of the Investor Limited Partner shall be required for
the leasing of apartment units to tenants or leases or concessions of facilities
in the Apartment Complex in the normal course of operations.
B. Notwithstanding any provision of this Agreement to the contrary,
other than the requirements of Section 4.1 hereof, the Administrative Limited
Partner shall have the right at any time after the end of the fourteenth year of
the Compliance Period to require, by notice to the General Partners that the
General Partners submit a written request (the "Termination of the Extended Use
Notice") to the Credit Agency to find a person to acquire the Partnership's
interest in the low-income portion of the Apartment Complex pursuant to the
provisions of the extended low-income housing commitment agreement entered into
by and between the Partnership and such Credit Agency (the "Extended Use
Agreement") and in accordance with the provisions of Section 42(h)(6) of the
Code, unless the Partnership has waived its right to do so. If the General
Partners shall fail to submit the Termination of the Extended Use Notice within
ten days of the Administrative Limited Partner's request therefor, then the
Administrative Limited Partner shall have the right at any time thereafter to
submit the Termination of the Extended Use Notice to such Credit Agency. If
within one year of the Credit Agency's receipt of the Termination of the
Extended Use Notice, the housing credit agency presents a "qualified contract",
as said term is defined in Section 42(h)(6)(F) of the Code (hereinafter
"Qualified Contract"), for the acquisition of the Apartment Complex, then the
General Partners shall cause the Partnership promptly to sell the Apartment
Complex in accordance with the terms of said Qualified Contract.
C. Notwithstanding any provision of this Agreement to the contrary
other than the requirements of Section 4.1, at any time after the later of: (i)
the end of the Compliance Period, or (ii) the expiration of one year after the
date upon which the Termination of the Extended Use Notice was submitted to the
Credit Agency (if such Notice was delivered prior to the end of the Compliance
Period), the Administrative Limited Partner shall have the right to require, by
notice to the General Partners (the "Required Sale Notice"), that the General
Partners promptly use commercially reasonable efforts to obtain a buyer for the
Apartment Complex on the most favorable terms then obtainable. The General
Partners shall submit the terms of any proposed sale to the Administrative
Limited Partner and the Investor Limited Partner for their approval as provided
in Section 5.4A hereof. If the General Partners shall fail to so obtain a buyer
for the Apartment Complex within twelve months of the Required Sale Notice or if
the Administrative Limited Partner and/or the Investor Limited Partner in
its/their sole discretion shall withhold its/their Consent to any proposed sale
to such buyer, then the Administrative Limited Partner shall have the right at
any time thereafter to obtain a buyer for the Apartment Complex on terms most
favorable then obtainable and otherwise acceptable to the Administrative Limited
Partner (but not less favorable to the Partnership than any proposed sale
previously rejected by the Administrative Limited Partner). In the event that
the Administrative Limited Partner so obtains a buyer, it shall notify the
General Partners and the Investor Limited Partner in writing with respect to the
terms and conditions of the proposed sale, and, provided the Investor Limited
Partner approves, in its sole discretion, the terms of such sale, the General
Partners shall cause the Partnership promptly to sell the Apartment Complex to
such buyer. In the event that the Investor Limited Partner fails to approve any
such sale proposed by the General Partners, the General Partners shall have the
right to purchase the Interests of the Administrative Limited Partner and the
Investor Limited Partner for a price equal to the greater of (i) the then fair
market value of the Apartment Complex or (ii) the amount which they would have
received (giving effect to reasonable estimates of closing costs which would
have been incurred) in liquidation of the Partnership had such sale been
consummated. In the event that the General Partners fail to exercise such right
or, having exercised the same, to consummate the purchase of such Interests
within 90 days after the disapproval by the Investor Limited Partner of the
proposed sale, the Investor Limited Partner shall have the right to purchase the
Interest of the General Partners for a price equal to the greater of (i) the
then fair market value of the Apartment Complex or (ii) the amount it would have
received (giving effect to reasonable estimates of closing costs which would
have been incurred) in liquidation of the Partnership had the sale which was not
approved been consummated.
D. A sale of the Apartment Complex prior to the end of the Compliance
Period may only take place with the Consent of the Administrative Limited
Partner (which may be withheld in its sole discretion).
Section 5.5 Restrictions on Authority
Notwithstanding any other provisions of this Agreement:
A. No General Partner shall have authority to perform any act in
violation of any applicable law or regulation, the Project Documents or any
agreement between the Partnership and any Credit Agency 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.
B. No General Partner shall have any authority to do any of the
following acts on behalf of the Partnership, except with the Consent of the
Administrative Limited Partner and the approval, to the extent required, of any
Credit Agency and any Lender:
(i) Acquire any real or personal property (tangible or
intangible) except to the extent approved in an approved annual budget;
(ii) Acquire, become personally liable on or in respect of, or
guarantee, directly or indirectly (or allow any person related to any
General Partner within the meaning of Section 752 of the Code to
acquire, become liable on or guaranty), all or any portion of a
Mortgage Note or a Mortgage or, except as otherwise contemplated herein
or in the Development Services Agreement, any other indebtedness of the
Partnership;
(iii) Pay any salary, fees or other compensation to a General
Partner or its Affiliates, except as authorized by Section 5.7, or
Articles 6 and 8 hereof, or as otherwise specifically provided for in
this Agreement;
(iv) Sell all or any portion of the Apartment Complex or
modify, prepay or refinance the Mortgage Loan or incur any indebtedness
for borrowed money except in accordance with Section 5.4 hereof;
(v) Terminate the services of the Accountants or the
Management Agent (the Consent of the Administrative Limited Partner
shall not be unreasonably withheld) or amend or modify any Project
Document;
(vi) Make any capital improvement to the Apartment Complex the
aggregate value of which shall exceed $25,000 (or any other amount
approved in an annual budget) in any Fiscal Year (other than in
response to an emergency); or
(vii) make any election or take any other action which could
result in the Partnership being taxed as an entity other than a
partnership for federal income tax purposes.
C. No General Partner shall have any authority to submit any Draw
Request for Mortgage Loan proceeds to any Lender and/or approve any change order
except with the Consent of the Administrative Limited Partner (which will not
unreasonably be withheld), provided that Consent of the Administrative Limited
Partner shall not be required for any change order where the addition or
reduction to the total construction cost resulting from such change order plus
any other change orders related to the same modification to the Plans and
Specifications does not in total exceed $25,000. All Draw Requests payable from
Capital Contributions shall be subject to the approval of the Administrative
Limited Partner, which shall not unreasonably be withheld; provided, however, if
the Administrative Limited Partner does not notify the General Partners within
five calendar days after receipt of such request or proposed change order of the
Administrative Limited Partner's disapproval, together with a reasonably
detailed explanation of the reasons for such disapproval, then the request
and/or change order shall be deemed approved.
D. The Administrative Limited Partner will designate a representative
for the review of all construction draw requests. No draw shall be obtained by
the General Partners without the approval of such representative, which will not
unreasonably be withheld or delayed.
Section 5.6 Activities of Partners
It is understood that each General Partner is and will be engaged in
other activities and occupations unrelated to the Partnership, and each General
Partner shall be required to devote only so much of its time as shall be
necessary to the proper conduct of 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 a General Partner of any of its fiduciary obligations with respect to
the management 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 its connection with the
Partnership or the Apartment Complex.
Section 5.7 Dealing with Affiliates
Without the prior written Consent of the Administrative Limited
Partner, no General Partner may enter into, for, in the name of or on behalf of,
the Partnership, agreements or contracts for performance of services for the
Partnership as an independent contractor with itself or its Affiliates or pay
compensation for and on account of any such services. The Administrative Limited
Partner shall not withhold its Consent to any such contract so long as the same
is not less favorable in any material respect than the Partnership could obtain
from a non-Affiliate of the General Partners engaged in the business of
providing the services sought from the Affiliate.
Section 5.8 Indemnification and Liability of the Partners
A. The Partnership, its receiver or its trustee, shall indemnify and
hold harmless the Limited Partners, the General Partners and their Affiliates
from any liability, loss or damage incurred by them by reason of any act
performed or omitted to be performed by them on behalf of the Partnership,
including costs and reasonable attorneys' fees (which attorneys' fees may be
paid as incurred) 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 the Limited Partners or the General Partners in
its capacity as such; (ii) if such liability, loss or damage arises out of
action or inaction of Limited Partners or the General Partners or their
Affiliates, (a) such party(ies) must have reasonably determined, in good faith,
that such course of conduct was in the best interests of the Partnership, and
such party(ies) must have been acting on behalf of or performing services for
the Partnership, and (b) such course of conduct must not have constituted fraud,
gross negligence, misrepresentation, breach of any material provision of this
Agreement or misconduct by such party(ies); 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, the Limited
Partners or the General Partners or their Affiliates, wherein such party(ies)
is/are entitled to indemnification, must first be satisfied from Partnership
assets before such party(ies) is/are responsible for these obligations;
provided, however, that notwithstanding the foregoing, in no event shall the
Partnership be required to sell the Apartment Complex, or any part thereof or
any interest therein which would result in a loss or recapture of Housing Tax
Credits to satisfy its indemnification obligation to the Limited Partners or the
General Partners or their Affiliates. The Partnership shall not pay for any
insurance covering liability of the Limited Partners or the General Partners or
their 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
similar business, or from naming such party(ies) 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 a Limited
Partner of any right which it may have against any party under federal or state
securities laws nor a waiver of the fiduciary duty owed to it by the General
Partners or their Affiliates under common law. The provision of advances from
the Partnership to the Limited Partners or the General Partners or their
Affiliates for legal expenses and other costs incurred as a result of a legal
action potentially subject to indemnification is permissible if the following
three conditions are satisfied: (x) the legal action relates to the performance
of duties or services by such indemnified party(ies) on behalf of the
Partnership; (y) the legal action is initiated by a third party who is not a
Partner or an Affiliate; and (z) such indemnified party(ies) undertake in
writing to repay to the Partnership the funds so advanced in cases in which they
would not be entitled to indemnification hereunder, together with interest at
the Interest Rate. Notwithstanding anything to the contrary contained herein, in
no event shall any indemnity under this Section 5.8A be applicable to any
expenditure or obligation of the Limited Partners or the General Partners or
their Affiliates which is the subject of a separate obligation to or agreement
with the Partnership or the Limited Partners by such party(ies).
B. Notwithstanding the provisions of Section 5.8A hereof, the General
Partners and their Affiliates shall not be indemnified or held harmless 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 of such party arising under this Agreement or any agreement entered
into pursuant to this Agreement or the Development Services Agreement or any
certificate or other document delivered pursuant hereto which is attributable to
the breach of any representation, warranty or covenant set forth therein; 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 such party(ies) 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 specifically finds that indemnification of the settlement and related costs
should be made. Any person seeking indemnification shall apprise the court as to
the current position of the Securities and Exchange Commission and other
applicable state securities administrators regarding indemnification for
violations of securities law.
Section 5.9 Construction of the Apartment Complex;
Development Deficits; Rental Achievement; Operating Deficits
A. The General Partners shall perform all functions necessary or
advisable for the Construction and guarantee Completion on or before the
Completion Date set forth in the Schedule. In the event that the Administrative
Limited Partner shall give notice to the General Partners that the
Administrative Limited Partner has reasonably determined that Completion is
unlikely to occur by the Completion Date, then on the 30th day following the
date on which such notice is given the General Partners shall be in default
hereunder unless, within said 30-day period, the General Partners shall have
taken all steps necessary to assure, to the reasonable satisfaction of the
Administrative Limited Partner, that Completion will in fact occur by the
Completion Date.
B. The General Partners covenant that they will pay any Development
Deficit. Development Deficits shall be funded first from any Net Cash Flow
arising through Completion after paying operating obligations and thereafter any
payments required pursuant to this Section 5.9B shall be made and funded on a
current basis in fulfillment of the obligations of the General Partners to the
Partnership, the Investor Limited Partner, and the Administrative Limited
Partner, and shall be deemed a capital contribution to the Partnership by the
General Partners. Notwithstanding the foregoing, the General Partners shall be
entitled to advance sums for completion of Construction and shall be entitled to
the repayment of such advances to the extent that there are proceeds of the
Mortgage Loan or Investor Limited Partner Contributions available, after paying
all other obligations of the Partnership incurred in connection with such
Construction and the establishment of all required reserves or escrow accounts
under the Project Documents, to repay such advances. Any such advances which are
not so repaid shall be deemed a capital contribution by the General Partners.
C. The General Partners hereby covenant to lend to the Partnership any
amounts required to fund Operating Deficits incurred by the Partnership during
the Operating Deficit Guaranty Period and not obtainable from the Operating
Deficit Reserve Account described in Section 5.9D. Any loans required pursuant
to this Paragraph C shall be made and funded by the General Partners when the
operating obligations of the Partnership giving rise to the Operating Deficit
are due (or, if no due date is specified, by the earlier of (a) the end of the
calendar year in which incurred, or (b) within 30 days after presentation of
each invoice to the Partnership) in fulfillment of the obligations of the
General Partners to the Partnership, the Investor Limited Partner and the
Administrative Limited Partner. In the event payments due hereunder are not paid
by the General Partners within ten days, the Partnership, the Investor Limited
Partner and/or the Administrative Limited Partner (the "Advancing Party"), has
the right but not the obligation, to advance any such amounts required to be
paid by the General Partners (provided that no such advance shall be deemed to
cure the default by the General Partners in making such payment). Such advances
shall at the election of the Advancing Party be deemed a loan to the General
Partners and, in addition to all other rights and remedies available to the
Advancing Party, the General Partners shall reimburse the Advancing Party the
full amount of such funds advanced by it plus interest in such amount from the
date so advanced at the rate per annum equal to the Interest Rate. In the event
there is any Cash Flow and/or Sale or Refinancing Transaction Proceeds which
would otherwise be payable to the General Partners pursuant to Sections 9.2A or
Section 9.2B hereof, the Partnership shall first apply such funds to any unpaid
amounts owed the Administrative Limited Partner and/or the Investor Limited
Partner as the Advancing Party hereunder.
D. The General Partners shall establish and at all times maintain an
operating deficit reserve (the "Operating Deficit Reserve Account") in the
amount of $120,000, which shall be funded from Bond proceeds. The Operating
Deficit Reserve Account shall be held by the lender of the Mortgage Loan, in
accordance with terms and conditions of the Mortgage Loan Commitment, as the
same exists as of the date hereof.
E. On the Closing Date, the General Partners agree to cause the
Partnership to fund, in a separate Partnership bank account, a repair and
replacement reserve in the amount of $200,000 and the General Partners agree
cause the Partnership to deposit $12,948 annually thereafter into such account.
At all times, the balance of the account shall remain in excess of $60,000. The
General Partners shall be entitled to withdraw funds from such account to
effectuate repairs and personal property replacements required from time to
time; provided, however, that the Administrative Limited Partner shall approve,
which approval shall not be unreasonably withheld, any expenditures in excess of
$10,000 from such account, either in an approved annual budget for the Apartment
Complex or, if not so approved, upon the request of the General Partners;
provided, however, if the Administrative Limited Partner has not approved or
disapproved of the proposed expenditure within 5 calendar days after the receipt
thereof from the General Partners, such proposed expenditure shall be deemed
approved by the Administrative Limited Partner.
Section 5.10 Supervisory and Incentive Management Agreement
The Partnership has entered into a Supervisory and Incentive Management
Agreement in the form attached hereto as Exhibit I, with the General Partners or
an Affiliate thereof of even date herewith for services in managing the business
of the Partnership for the period from the date hereof throughout the term of
the Partnership. Payment of fees pursuant to the Supervisory and Incentive
Management Agreement shall be in accordance with any applicable requirements of
the Mortgage Loan.
Section 5.11 Additional Covenants of General Partners
The General Partners shall permit the Administrative Limited Partner,
the Investor Limited Partner and their respective representatives, upon
reasonable prior notice, to have access to the Apartment Complex at all
reasonable times during normal business hours and to examine all agreements and
plans and specifications and shall deliver copies and such reports as may
reasonably be required by the Administrative Limited Partner. The General
Partners shall promptly provide the Administrative Limited Partner and the
Investor Limited Partner with copies of all correspondence, notices and reports
sent pursuant to and received under the Project Documents or from any Credit
Agency with respect to the Apartment Complex, together with copies of all other
correspondence which a prudent investor would wish to examine in connection with
a similar transaction.
Section 5.12 Obligation to Repair and Rebuild Apartment Complex
With the approval of any Lender and any Credit Agency, if such approval
is required, and the Administrative Limited Partner, all insurance proceeds
received by the Partnership due to fire or other casualty affecting the
Apartment Complex will be utilized to repair and rebuild the Apartment Complex
in accordance with Section 42(j)(4)(E) of the Code and to the extent required by
any Lender and any Credit Agency. The General Partner shall have no obligation
to furnish any funds to the Partnership to accomplish such repair and rebuilding
except to the extent that such insurance proceeds are insufficient due to the
failure of the General Partner to maintain insurance policies for the
Partnership in compliance with the requirements of this Agreement.
ARTICLE 6 REPRESENTATIONS AND WARRANTIES
As a material inducement to the Investor Limited Partner's and the
Administrative Limited Partner's entering into this Agreement, the General
Partners hereby represent and warrant that the following are true and correct on
the date hereof and will be true and correct as of the Closing Date and each
Subsequent Closing Date:
Section 6.1 Organization and Authorization
A. Organization of the Partnership. The Partnership is a limited
partnership duly organized, validly existing and in good standing under the laws
governing limited partnerships, as adopted in the state of its formation. The
Partnership has taken all requisite action in order to conduct lawfully its
business in the state in which the Apartment Complex is situated, and is not
qualified or licensed to do business and is not required to be so qualified or
licensed in any other jurisdiction. The Partnership has the full power and
authority to carry on its business, including without limitation, to own, lease,
develop and operate the Apartment Complex, and the properties and assets to be
acquired, or now owned or operated by the Partnership and has full power and
authority to enter into this Agreement and any other agreement, document or
instrument contemplated under this Agreement. The Partnership has complied with
all recording, filing and other requirements with the proper authorities
necessary to establish and maintain the limited liability of the Limited
Partners. The filing or recordation of an amendment to the Original Certificate
shall not affect the validity of the organization, formation or qualification of
the Partnership, or its right to transact business as a limited partnership in
any jurisdiction.
B. Partnership Agreement. The General Partners have previously provided
a true, complete and current copy of the Original Partnership Agreement to the
Investor Limited Partner which reflects all agreements among the current
Partners of the Partnership pertaining to the subject matter of the Partnership.
The Original Partnership Agreement has not been altered or amended except as
expressly disclosed in writing, and is in full force and effect. There are no
oral modifications, amendments or waivers by or among any of the Partners
pertaining to the subject matter of the Original Partnership Agreement.
C. Due Authorization. The execution and delivery of this Agreement and
each of the other documents and agreements described in or contemplated by this
Agreement by the General Partners, the Preexisting Limited Partners and the
Partnership, as appropriate, and the performance of the transactions
contemplated by each of such documents have been duly authorized by all
requisite corporate and/or partnership actions and proceedings, and will not
violate or result in a breach of, or default under, any instrument or agreement
to which the any General Partner, Preexisting Limited Partner or the Partnership
is a party or is bound or to which their respective properties are subject, or
any law, administrative rule, regulation or decree of any court, governmental
body or administrative agency applicable to any of them or their respective
properties. The Preexisting Limited Partners, as of the Closing Date (but not
any Subsequent Closing Date), are the only limited partners of the Partnership
and together with the General Partners are the only Partners of the Partnership.
The documents used or to be used to solicit the Consent of the Preexisting
Limited Partners do not and will not contain a misstatement of a material fact
or omit to state a material fact required to be so stated therein in order to
make the statements therein not misleading. If any General Partner or
Preexisting Limited Partner is a corporation or partnership, it is duly
organized, validly existing and in good standing under the laws of the state of
its formation and in the state where the Apartment Complex is located, with
power to enter into this Agreement and to consummate the transactions
contemplated hereby.
D. Enforceability. As of the Closing Date and each Subsequent Closing
Date, this Agreement and each of the other documents and agreements described in
or contemplated by this Agreement are binding upon and enforceable against the
Partnership and each of the General Partners and the Preexisting Limited
Partners, as appropriate, in accordance with their respective terms.
Section 6.2 Consents Required
Except as set forth in this Agreement, no consent, approval, or
authorization of, or registration or declaration with, any federal, state or
local governmental agency, authority or body is required in connection with the
execution of this Agreement or any other agreement, instrument or document
contemplated under this Agreement.
Section 6.3 Liens, Pledges or Encumbrances
The Interests are not subject to any lien, pledge or encumbrance of any
nature whatsoever and the Investor Limited Partner and the Administrative
Limited Partner shall acquire the same free of any rights or claims thereto by
any other party.
Section 6.4 Litigation
Except as set forth in Exhibit H, there is no litigation, action,
proceeding, investigation or claim pending or, to the best of the General
Partners' knowledge, threatened against or involving the Apartment Complex, the
Partnership or any of the General Partners, or to the best of the General
Partners' knowledge, after due inquiry, the Preexisting Limited Partners'
interests in the Partnership, or which questions the validity of this Agreement
or any instrument, document or agreement contemplated under this Agreement, and,
to the best of each General Partner's knowledge, after due inquiry, there is no
fact or circumstance which could give rise to any such litigation, action,
proceeding, investigation or claim. The Partnership does not have any liability
or obligation that is not disclosed in this Agreement or any Exhibit or Schedule
attached hereto and which was not incurred in the ordinary course of business.
No statutory or other lien, other than liens arising out of construction of the
Improvements or for taxes not yet due and payable, exists with respect to the
Partnership, the Apartment Complex, or the General Partners or any property of
any of the foregoing. None of the General Partners or the Partnership have
received any notice of taking, condemnation, betterment or assessment, actual or
proposed, with respect to the Apartment Complex; no such taking, condemnation,
betterment or assessment has occurred; and none of the General Partners have any
reason to believe that any such taking, condemnation, betterment or assessment
has been proposed or is under consideration.
Section 6.5 Agreements Affecting the Apartment Complex
A. Agreements Affecting Ownership or Operation. There is no contract or
agreement, written or oral, affecting the ownership or operation of the
Apartment Complex other than the Project Documents, the Construction Agreements,
the Mortgage Note, Mortgage and related documents evidencing the Mortgage Loan
and the Governmental Agreements, including without limitation the Extended Use
Agreement to be recorded in accordance with the requirements of Section 42 of
the Code; no party to any of such contract or agreement is (or, with notice or
the passage of time or both, would be) in default thereunder and all conditions
to the effectiveness or continuing effectiveness thereof required to be
satisfied by the date hereof have been satisfied. Except for certain provisions
of the documents evidencing the Mortgage Loan, there is no contract or
agreement, written or oral, which would prohibit the prepayment of the Mortgage
Loan or restrict the refinancing, sale or other disposition of the Apartment
Complex. Except for the Management Agent and the developer under the Development
Services Agreement, no Affiliate of any General Partner is a party to any
contract or agreement with the Partnership.
B. Default or Acceleration of Obligations. No event of default by the
Partnership has occurred and is continuing under a Mortgage, or any other
agreement, instrument or document to which the Partnership or any Affiliate of
any General Partner is a party or by which the Apartment Complex is bound and,
to the best knowledge of the General Partners, after due inquiry, there is no
default by the Partnership or any Affiliate of any General Partner or state of
facts or events which with notice or the passage of time, or both, would
constitute a default under a Mortgage or under any other agreement or document
to which the Partnership is a party or otherwise bound, directly or indirectly.
The execution and delivery of this Agreement and the other agreements,
instruments and documents contemplated under this Agreement, and the performance
of the transactions contemplated thereby, will not permit any party to any
Mortgage Loan or any other obligation evidenced as an exception in the Title
Policy or any Bring Down Certificate to accelerate the payment thereof, to
declare a default (or declare a default after giving notice or the passage of
time or both), to require payment of any penalty or other charge, to alter,
modify or amend any term thereof, or to impose any other requirement,
restriction or charge of any kind on the Apartment Complex or the Partnership or
any Partner therein.
C. Mortgage Loan. The General Partners have heretofore provided to the
Investor Limited Partner true, complete and current copies of the documents
constituting the Mortgage Loan described in the Schedule; the Schedule contains
a true and accurate description of the Mortgage Loan; all payments and other
charges due and payable under the Mortgage Loan to date have been paid. The
entire indebtedness intended to be secured by the Mortgage Loan has been or will
be advanced and utilized for the purposes set forth therein.
D. Agreements Regarding Interests in the Partnership. None of the
Partnership, the General Partners, the Apartment Complex or, to the best of the
General Partners' knowledge, after due inquiry, the Preexisting Limited
Partners, is subject to any outstanding agreement with any third party pursuant
to which any such party has or may acquire any interest in the Apartment Complex
(other than by virtue of foreclosure of a lien securing the Mortgage Loan), in
any General Partner or in the Partnership.
E. Budget and Construction Agreements. Annexed hereto as Exhibit J is a
true, complete and current copy of the budget for the construction of the
Improvements and the furnishing of all Personalty (the "Construction Budget").
True, complete and current copies of all documents constituting the Construction
Agreements have been previously provided to the Investor Limited Partner and a
current list of such documents is set forth in the Schedule. The Construction
Agreements include a completion bond in favor of the Partnership insuring
Completion in accordance with the Construction Budget. The Partnership has
sufficient funds available to it, from the proceeds of the Investor Limited
Partner Contribution due prior to Completion and the proceeds of the Mortgage
Loan, to complete the Construction in accordance with the Budget and to pay all
obligations of the Partnership anticipated to be incurred through Completion.
F. Development Services. The Partnership has entered into the
Development Services Agreement with Homes for America Holdings, Inc. as
developer pursuant to which such developer will perform various development
services in connection with the acquisition of the Apartment Complex and the
construction thereof, and the Development Services Agreement is in full force
and effect. In light of their experience in real estate matters and the
acquisition and development of real property, the General Partners believe and
represent that each of the fees set forth in the Development Services Agreement
constitutes reasonable compensation for the services for which such fee is
payable.
Section 6.6 Other Matters Affecting the Apartment Complex.
A. Title to the Apartment Complex. The Partnership has, prior to the
admission of the Investor Limited Partner into the Partnership, and thereafter
will continue to have, good and clear record, marketable, insurable and
indefeasible fee simple title to the Apartment Complex, free from all easements,
rights-of-way, liens, security interests, encumbrances, defects, purchase
options, rights of first refusal and other title exceptions of any kind, except
for the exceptions (the "Permitted Encumbrances") attached hereto as Exhibit K
and the Mortgage Loan. Except for the Apartment Complex, the Housing Tax
Credits, and the contractual rights referred to herein, the Partnership owns no
other property, tangible or intangible, real or personal. Except as set forth in
the Title Policy, all real estate taxes, personal property taxes, assessments,
water and sewer charges and other municipal charges relating to the Apartment
Complex, to the extent due and owing, have been paid in full.
B. Insurance. The amount of insurance which will be maintained by the
Partnership against a casualty loss (as defined in Section 42(j)(4)(E) of the
Code) with respect to the Apartment Complex will be sufficient to permit full
replacement of the Apartment Complex within a reasonable period of time
following any such casualty. Each of the policies effectuating such insurance is
in full force and effect, and all premiums due and payable thereunder have been
paid. No notice has been received by the General Partners or the Partnership
from the insurance company which issued any of such policies stating in effect
that any of such policies is not in full force and effect, will not be renewed
or will be renewed only upon satisfaction of other specified conditions.
C. Flood Plain Insurance. If the Apartment Complex is located in a
federal flood plain (as such term is defined in HUD rules and/or regulations),
the Partnership has obtained or will obtain prior to Closing and maintain at all
times flood plain insurance; provided, however, if the Apartment Complex ceases
to be so located in a federal flood plain, such insurance shall no longer be
required.
D. Fire Damage. As of the date of the Closing, the Apartment Complex
has not been damaged by fire or other casualty except for possible minor damage
which has been fully repaired and restored prior to the date of this Agreement.
In the event any such damage occurs in the future, the Partnership will promptly
undertake to repair the same and complete such repair within a reasonable time.
E. Management Agent. The identity of the management agent (the
"Management Agent") which the General Partners have retained to manage the
Apartment Complex is set forth in the Schedule, and such party is not an
Affiliate of the General Partners. The General Partners have furnished to the
Investor Limited Partner a true, correct and complete copy of the management
agreement (the "Management Agreement") pursuant to which the Management Agent
will manage the Apartment Complex. The Management Agreement as in effect from
and after the Closing provides that the Management Agent shall certify annually
that all aspects of the Apartment Complex, and each of the tenants occupying a
Tax Credit Apartment Unit is in compliance with all regulations and requirements
required to qualify the Partnership to receive the full amount of the Projected
Credits, or the Revised Projected Credits, as applicable.
F. Adequacy of Funds. The Construction Budget indicates that the
Partnership has sufficient funds to pay in full all costs and expenses related
to Completion in accordance with the approved Plans and Specifications from the
following sources: (i) the proceeds of the Mortgage Loan; (ii) net rental income
of the Apartment Complex prior to Completion; and (iii) the portions of the
Investor Limited Partner Contribution that are due and payable in cash at or
prior to Completion.
G. Utilities. All utility services necessary for the construction of
the Improvements and the operation of the Apartment Complex for its intended
purpose, including water supply, storm and sanitary sewer facilities, gas,
electric and telephone facilities, are available at the boundaries of the Land
and either reach the Land through adjoining public streets or if they pass
through adjoining private land do so in accordance with valid, permanent,
non-terminable public or private easements; there is no impediment or
restriction with respect to connecting any utilities to the Improvements and
there is no charge required therefor that has not been specifically provided for
in the Construction Budget.
H. Roads. All roads necessary for the full utilization of the
Improvements for their intended purposes have either been completed or the
necessary rights of way therefor have been acquired by the appropriate
governmental authority or have been dedicated to public use and accepted by said
governmental authority.
I. Contractors and Liens. All contractors and subcontractors have been
paid all amounts due them to date. Neither the General Partners nor the
Partnership have made any contract or commitment, the performance of which could
give rise to a lien against the Apartment Complex, except with a person or
entity which has given a lien waiver with respect thereto and except as set
forth in the Title Policy.
J. Construction. The General Partners will cause the construction of
the Improvements to be completed in a timely, workmanlike and lien-free manner
in accordance with applicable requirements and regulations of all appropriate
governmental entities and in accordance with the approved Plans and
Specifications which have been or will be delivered to the Investor Limited
Partner, such compliance to be certified by the Architect in the Completion
Certificate. The Improvements (i) lie within the perimeter of the Land, (ii) are
being (or have been) constructed in accordance with the Plans and Specifications
for the Improvements which have been prepared by the Architect and revised
pursuant to change orders only to the extent approved as provided in Section
5.5C, (iii) are being (or have been) constructed in compliance with all
restrictive covenants applicable thereto, and (iv) to the best of the knowledge
of the General Partners, contain no structural or other substantial defect
(latent or otherwise).
K. Construction Warranties. The General Partners have received for the
benefit of the Partnership complete standard written construction and
manufacturers' warranties with respect to the Improvements and all components
thereof, including without limitation a general contractor's warranty regarding
(and if any General Partner or any Affiliate thereof has acted as the Contractor
for the Apartment Complex, the General Partners hereby warrant) the defect-free
Construction in accordance with the Plans and Specifications and all other
Construction Agreements, and in accordance with all applicable building codes,
and other laws, rules and regulations. Furthermore, the General Partners hereby
expressly assign to the Partnership any and all contractor's or manufacturer's
warranties (written, oral or otherwise).
Section 6.7 Administrative, Zoning and Environmental Compliance
A. Compliance With Law. The Construction and the operation of the
business of the Partnership comply with all applicable laws, rules,
restrictions, orders and regulations of all governmental authorities. All
governmental certificates, authorizations, permits and licenses required to
construct, operate and occupy (except for certificates of occupancy, which shall
be obtained upon Completion) the Improvements (the "Governmental Permits") have
been obtained, and true, complete and current copies thereof have been
previously provided to the Investor Limited Partner, a true, complete and
current list of which is set forth in the Schedule (or will be timely obtained).
No violation of any requirement of any governmental authority exists with
respect to the Improvements and the anticipated and actual use and operation
thereof complies with applicable planning, building, zoning, environmental and
other laws, ordinances, regulations and restrictive covenants affecting the
Land. No notice of violation of any statute, code, law, ordinance, regulation,
or permit has been noted or given by any governmental authority having
jurisdiction over the development of the Apartment Complex which notice has not
been heretofore complied with in all respects, or the defects specified therein
remedied to the satisfaction of the governmental authority, or both.
B. Environmental Compliance. To the best of the General Partners'
actual knowledge, after due inquiry and based in part upon information contained
in the Phase I environmental report delivered to the Limited Partners (the
"Environmental Report"), the Apartment Complex is not in violation of any
federal, state or local law, ordinance or regulation relating to industrial
hygiene or to the environmental conditions on, under or about the Apartment
Complex including, but not limited to, soil and groundwater conditions. To the
best of the General Partners' actual knowledge, after due inquiry and based in
part upon information contained in the Environmental Report, no Hazardous
Substance has been used, generated, manufactured, stored or disposed of on,
under or about the Apartment Complex or transported to or from the Apartment
Complex. The term "Hazardous Substance" means any substance defined as a
hazardous substance, hazardous material, hazardous waste, toxic substance or
toxic waste in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. Section 9601 et seq.;
the Hazardous Materials Transportation Act, as amended, 39 U.S.C. Section 1801
et al; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901 et seq.; or any similar applicable state or local law; or in any regulation
adopted or publication promulgated pursuant to any said law. In connection with
the acquisition of the Apartment Complex, the Partnership obtained a "phase I"
environmental survey of the Apartment Complex consistent with good commercial
practice and, to the best of the General Partners' knowledge, such inquiry was
sufficient for the Partnership to successfully establish an innocent landowner
defense pursuant to Section 101(35) of CERCLA. Further, none of the Partnership,
the General Partners nor any of their Affiliates has given any waiver or release
of liability pursuant to CERCLA or any of the aforementioned statutes or any
similar applicable state or local law to any person or entity in the chain of
title of the Land or the Apartment Complex. Each of the General Partners hereby
agrees to indemnify and hold harmless Investor Limited Partner, the
Administrative Limited Partner, the Partnership and their respective partners,
directors, officers, employees and agents (collectively "Indemnitees"), from and
against any and all monetary liability, including all foreseeable and
unforeseeable consequential damages, including, without limitation, the cost of
any required or necessary repair, cleanup or detoxification, and the preparation
of all closure and other required plans, whether such action is required or
necessary prior to or following the Closing, directly or indirectly arising out
of the use, generation, manufacture, storage or disposal of Hazardous Substance
on, under or about the Apartment Complex. The foregoing indemnification
obligation of the General Partners shall survive the Closing, the Subsequent
Closing and the dissolution and termination of the Partnership; provided,
however, such indemnification obligation shall not be for the benefit of any
purchaser of the Apartment Complex. Promptly upon any Indemnitee acquiring
knowledge of any matter as to which the General Partners shall be required to
indemnify hereunder, such Indemnitee shall notify the General Partners thereof,
and the General Partners shall have the right, with counsel reasonably
acceptable to the Indemnitee, to defend any such matter. Any settlement of any
matter as to which indemnification is required hereunder shall require the
Consent of the General Partners.
C. Default. To the best of the General Partners' knowledge, after due
inquiry, none of the General Partners or the Partnership is in default with
respect to any law, administrative rule, regulation, judgment, decision, order,
writ, injunction, decree or demand of any court or any governmental authority,
and the consummation of the transactions contemplated herein will not conflict
with, or constitute a breach of or default under, any of the foregoing or any
agreement or instrument applicable to the Partnership, any General Partner or
the Apartment Complex.
D. Regulatory Scheme. The Apartment Complex is not subject to any
federal, state or local regulatory scheme, other than as will be provided for in
the Governmental Agreements, which does not generally affect all rental
properties in the locality in which the Apartment Complex is located.
Section 6.8 Financial Statements
The financial statements of the General Partners for the most recent
fiscal year, which have previously been delivered to the Investor Limited
Partner, are true, complete and correct as of the date thereof, and fully and
accurately reflect the financial condition and results of operations of the
General Partners; there has been no material adverse change in the financial
condition of the General Partners since the date thereof.
Section 6.9 Absence of Undisclosed Liabilities
Except for liabilities and obligations of the Partnership in connection
with this Agreement, the Mortgage Loan or arising in the ordinary course of
business, none of which individually or in the aggregate are materially adverse,
and except for liens for taxes not yet due, the Partnership does not have, and
none of its assets is subject to, any debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise. There is no fact
known to the General Partners which might reasonably serve as the basis, in
whole or in part, for the assertion of any liability or obligation against the
Partnership.
Section 6.10 Housing Tax Credits
For purposes of Housing Tax Credits and Section 42 of the Code:
A. The General Partners have provided the Investor Limited Partner with
true, complete and correct copies of all material correspondence and contracts
with, applications to, and allocation certifications, if any, from any Credit
Agency concerning Housing Tax Credits allocated or otherwise available to the
Apartment Complex. The Credit Allocation is binding and in full force and effect
in accordance with its terms.
B. The General Partners have delivered to the Investor Limited Partner
a true, complete and correct Low Income Housing Tax Credit Certificate, and will
update and redeliver such Certificate as required under this Agreement. The
General Partners have attached (or will attach when applicable) to the Low
Income Housing Tax Credit Certificate a true, complete and correct certified
rent roll revealing each tenant of the Apartment Complex, including certified
incomes for each such tenant necessary to establish which apartment units of the
Apartment Complex are Qualified Units, and such rent roll evidences compliance
with all laws and regulations necessary to establish and maintain the
availability of Housing Tax Credits for the entire Apartment Complex.
C. The Partnership has or will have the right to receive annual reports
from tenants of the Apartment Complex concerning their incomes and family sizes.
If required by a Governmental Agency, the Partnership shall provide income
certifications on a form provided by such Governmental Agency and acknowledged
by the tenants.
D. Unless otherwise agreed to by the Administrative Limited Partner and
the Investor Limited Partner (not to be unreasonably withheld), the Partnership
will elect under Section 42(f)(1) of the Code to have the Credit Period with
respect to each building in the Apartment Complex commence with the taxable year
of the Partnership set forth in the Schedule.
E. No portion of the Apartment Complex shall fail to qualify for the
accelerated cost recovery system under Section 168 of the Code, as amended, on
account of any federal income tax election of the Partnership, exemption or
other provision by or relating to the direct or indirect partners in the
Partnership, other than the Administrative Limited Partner, the Investor Limited
Partner or any direct or indirect partners of the Investor Limited Partner.
F. All costs incurred in connection with the rehabilitation of the
Apartment Complex will be includible in the eligible basis pursuant to Section
42(d)(1) and 42(d)(4) of the Code.
G. No portion of the Apartment Complex will be depreciable under
Section 168(g) of the Code.
Section 6.11 Qualified Nonrecourse and Commercial Financing; Fees
A. All of the debt secured or contemplated to be secured by the
Apartment Complex, including without limitation, the Mortgage Loan (the
"Apartment Complex Debt"), is (except for prior to commencement of the Permanent
Financing Phase) nonrecourse as to the Partnership and no person has any
personal liability with respect to such Apartment Complex Debt (excluding for
this purpose, however, any form of credit enhancement provided by a financial
institution which is not a "related person" (as defined in Section 465(b)(3)(C)
of the Code) with respect to the Partnership, any of its Partners or any of its
former partners) and otherwise conforms with Treasury Regulations ss.1.752-2(d).
None of the Apartment Complex Debt is convertible into equity of any kind.
B. Each component of the Apartment Complex Debt (i) represents a loan
from a federal, state or local government or instrumentality thereof, or is
guaranteed by a federal state or local government, or (ii) is borrowed from a
person or entity which is actively and regularly engaged in the business of
lending money and which is not (1) a "related person" (as defined in Section
49(a)(1)(D)(v) of the Code) with respect to the Partnership or any of its
present or former Partners, (2) a person or entity from which the Partnership
acquired the Land or the Apartment Complex, (3) a person or entity which has
received or will receive a fee with respect to the Partnership's investment in
the Apartment Complex, or (4) a "related person" (as defined in Section
49(a)(1)(D)(v) of the Code) with respect to any person or entity described in
the foregoing clause (2) or (3).
C. Each component of the Apartment Complex Debt which does not
represent a loan from a federal, state or local government or instrumentality
thereof (or a loan guaranteed by a federal, state or local government) is
borrowed from a "qualified person" (as defined in Section 49(a)(1)(D)(iv) of the
Code) and constitutes "qualified commercial financing" (as defined in Section
49(a)(1)(D)(ii) of the Code) as modified by Section 42(k) of the Code and
"qualified nonrecourse financing" (as defined in Section 465(b)(6)(B) of the
Code), in each case with respect to the Partnership, each of its Partners and
each of its former partners and otherwise conforms with Treasury Regulations
ss.1.752-2(d).
D. The documentation evidencing each component of the Apartment Complex
Debt requires that a copy of each notice to be given to the Partnership or to
any Partners shall also be given to the Administrative Limited Partner at its
address for notices determined pursuant to Section 15.5B hereof.
E. The fees charged or to be charged by a Partner or Affiliate thereof
and by the Management Agent are consistent with those paid in commercial
transactions of a similar nature, are reasonable in amount in light of the
services to be performed, and are not in excess of other fees that would be
payable to qualified unrelated parties pursuant to negotiations held at arm's
length.
Section 6.12 Prior Activities
None of the General Partners, nor any present or former Affiliate, has
ever sought the protection of or been subject to any proceeding under any
bankruptcy or insolvency or debtor's relief provision of state or federal law.
Neither any lender nor any governmental agency has ever instituted foreclosure
proceedings, judicial or non-judicial, with respect to any loan or any subsidy
agreement secured by any housing or other project in which any General Partner
or any Affiliate has or had an interest. Except as otherwise disclosed to the
Investor Limited Partner, none of the General Partners or any Affiliate has ever
been indicted for any criminal activity, including criminal fraud or for any
similar crime, or had a complaint filed against it alleging violation of any
anti-fraud provision of state or federal securities law or alleging violation of
any registration or reporting provision of state or federal securities law, nor
has any such person or entity ever had a judgment rendered against it as a
defendant (or admitted to liability) in any action based upon civil fraud or
misrepresentation.
Section 6.13 Tax Matters
The Partnership has timely filed all federal and state tax returns
required to be filed by it as of the date of the making of this representation.
No governmental authority has initiated any inquiry, investigation, audit or
other administrative action questioning any tax return which has been filed by
the Partnership. The General Partners will at all times take such actions
necessary to permit the Partnership to be treated as a partnership for federal
income tax purposes, and will refrain from making any election or taking any
action which would adversely affect such treatment.
Section 6.14 Untrue or Misleading Statements
The documents delivered to the Investor Limited Partner and/or the
Administrative Limited Partner hereunder or annexed hereto as Exhibits or
Schedules and all Closing Documents and Due Diligence Documents and any other
documents delivered to the Investor Limited Partner by the General Partners and
their Affiliates constitute true, correct and complete copies of the instruments
which they purport to be as of the date delivered, and, with respect to each of
such documents, there is no other document of the same sort or amendment or
other related agreement which has been executed by the parties thereto. All of
the representations and warranties contained in any documents delivered to the
Investor Limited Partner and/or the Administrative Limited Partner hereunder or
annexed hereto as Exhibits or Schedules shall be true and correct as of their
respective dates and as of the Closing Date and any Subsequent Closing Date, as
if made on such dates. No fact necessary to make the information and statements
contained in this Article 6 not misleading has been omitted therefrom, and to
the best of the General Partners' knowledge, no material fact concerning the
Apartment Complex or the Housing Tax Credits, the General Partners, the
Partnership or the Preexisting Limited Partners has been withheld from the
Investor Limited Partner and/or the Administrative Limited Partner and no
material document has not been delivered to the Investor Limited Partner. All of
the covenants, representations and warranties contained herein shall survive the
Closing and every Subsequent Closing.
Section 6.15 Scope of Representations
The Investor Limited Partner's due diligence review of the Apartment
Complex, the Partnership and the General Partners shall not diminish the scope
or enforceability of any of the foregoing representations and warranties. For
purposes of this Article 6, the term "General Partners' knowledge" shall include
the knowledge of the General Partners and all Affiliates of the General
Partners.
ARTICLE 7 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 7.1 Management of the Partnership
Except as otherwise provided herein, no Investor Limited Partner shall
take part in the management or control of the business of the Partnership nor
transact any business in the name of the Partnership. Except as otherwise
expressly provided in this Agreement, the Investor Limited Partner shall not
have the power or authority to bind the Partnership or to sign any agreement or
document in the name of the Partnership. The Investor Limited Partner shall not
have any power or authority with respect to the Partnership except insofar as
the Consent of the Investor Limited Partner shall be expressly required and
except as otherwise expressly provided in this Agreement.
Section 7.2 Limitation on Liability of Investor Limited Partners
The Investor Limited Partner shall not be liable for any debts,
liabilities, contracts or obligations of the Partnership except to the extent
the Investor Limited Partner shall specifically undertake such liability
pursuant to a separate written instrument. The Investor Limited Partner shall be
liable to the Partnership only to make payments of the Investor Limited Partner
Contribution as and when due hereunder, and, after the Investor Limited Partner
Contribution shall be fully paid, the Investor Limited Partner shall not, except
as otherwise required by the Uniform Act, be required to make any further
capital contribution or lend any funds to the Partnership.
Section 7.3 Other Activities
The Investor Limited Partner may engage in or possess interests in
other business ventures of every kind and description for its own account,
including without limitation, serving as general or limited partner of other
partnerships which own, either directly or through interests in other
partnerships, government-assisted housing projects similar to the Apartment
Complex. Neither the Partnership nor any of the Partners shall have any right by
virtue of this Agreement in or to such other business ventures to the income or
profits derived therefrom.
Section 7.4 Rescission
A. At the Investor Limited Partner's election, a rescission of
its investment in the Partnership shall occur in accordance with Subparagraph
B. below if:
(i) Completion does not occur on or before the Completion
Date, or
(ii) prior to the Completion of the Apartment Complex, there
is a default uncured after the expiration of any applicable cure period
under a Mortgage Loan which results in an acceleration thereof, or an
event of default existing after the expiration of any applicable cure
period which prevents commencement of the Permanent Financing Phase
(unless such Mortgage Loan is replaced with other indebtedness no less
favorable to the Partnership from a responsible and reputable
institutional lender within 90 days), or a foreclosure action is
commenced against the Apartment Complex, or
(iii) the Permanent Financing Phase does not commence on or
before the deadlines set forth in the Mortgage Loan documents, or
(iv) Forms 8609 are not issued for all buildings in the
Apartment Complex on or before December 31, 2000 (subject to delays in
issuance thereof solely due to inaction of the Credit Agency), or
(v) Occupancy with respect to all apartment units in the
Apartment Complex does not occur on or before April 30, 2000, or
(vi) Rental Achievement does not occur on or before May 30,
2000, or
(vii) a right of rescission arises in favor of the Investor
Limited Partner under any of Sections 3.8A, 3.11 or 3.15 hereof.
If Completion of the Apartment Complex is delayed due to Force Majeure, the
Completion Date may be extended for the period of time that such Force Majeure
causes the delay, but in no event so long as to result in the loss or recapture
of any Housing Tax Credits by the Partnership.
B. If any of the grounds for rescission described in Paragraph A,
above, arises, the General Partners shall notify the Investor Limited Partner
and the Administrative Limited Partner within 10 days thereafter, which notice
(the "Rescission Notice") shall also automatically constitute an offer by the
General Partners and their Affiliates to return the Investor Limited Partner
Contribution to the Investor Limited Partner (together with interest thereon at
the Prime Rate from the date on which the Rescission Notice was or should have
been delivered). If the Limited Partners wish to accept the foregoing offers
(collectively, the "Offer"), the Investor Limited Partner shall send written
acceptance of the Offer to the General Partners by the later of 60 days after
such notice or before Completion or Rental Achievement occurs, in which event
the General Partners and the Partnership shall fulfill their obligations under
the Offer within ten days after acceptance of the Offer. Furthermore, if the
General Partners fail to give the Rescission Notice as required above, the
Investor Limited Partner may, at its option, at any time after acquiring notice
of the event giving rise to the right of rescission, unilaterally give written
notice of its election to rescind, which shall be deemed acceptance of the Offer
that the General Partners were required to make. Upon acceptance of the Offer,
the Investor Limited Partner and the Administrative Limited Partner shall have
no further liability to the Partnership or the General Partners and upon the
return of the Investor Limited Partner Contribution, the Interests shall
terminate and the General Partners shall forthwith cause an amendment to the
Original Certificate to be filed reflecting the withdrawal of the Investor
Limited Partner and the Administrative Limited Partner.
ARTICLE 8 MANAGEMENT AGENT
Section 8.1 Designation of Management Agent
The General Partners shall have the responsibility for managing the
Apartment Complex and obtaining a management agent (the "Management Agent"), the
choice of which (other than the party designated in the Schedule or the General
Partners if serving as interim Management Agent during any period between the
termination of a Management Agent and the engagement of a successor thereto)
shall require the Consent of the Administrative Limited Partner. The Management
Agent at the Closing shall be the party so designated in the Schedule. After the
expiration of the Operating Deficit Guaranty Period, the General Partners shall
have the right to designate a different Management Agent, subject to the Consent
of the Administrative Limited Partner.
Section 8.2 Management Fee
The Management Agent shall receive a management fee payable by the
Partnership on an annual basis in an amount not to exceed 5.0% of the gross
rental receipts from the Apartment Complex for management services in accordance
with the Management Agreement as approved by each Credit Agency (if such
approval is required) and the Administrative Limited Partner. Any Management
Agreement shall be for a term not to exceed one year and shall be renewable for
additional one year terms unless terminated by written notice of either party to
the other. No payment or penalty shall be payable by the Partnership for failure
to renew any such agreement. The Management Agreement shall be terminable
without penalty (a) if there exists any building code violation (which is not
timely cured within 7 days), or (b) if the Management Agent fails to comply with
any applicable compliance rule and/or reporting requirement under Section 42 of
the Code (which is not timely cured within 30 days), or (c) if any Unit ceases
to be a Qualified Unit, or (d) on account of the Management Agent's willful
misconduct or gross negligence, or (e) if, after the expiration of the Operating
Deficit Guaranty Period, there occurs an Operating Deficit for any six-month
consecutive period, or (f) upon the removal of any General Partner in accordance
with the terms hereof.
Section 8.3 Absence of Management Agent
The General Partners 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 Partners for such services an annual management fee equal to such
amount as each Credit Agency and the Administrative Limited Partner shall
approve from time to time or, if no approval is required, a fee equal to the
amounts set forth in Section 8.2 hereof. If at any time prior to the expiration
of the Operating Deficit Guaranty Period the present Management Agent shall
cease to act as the Management Agent, the General Partners shall be authorized,
subject to the Consent of the Administrative Limited Partner and the approval of
each Credit Agency 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.
Section 8.4 Rights of Administrative Limited Partner
Subject to the approval of each Credit Agency, if required, and
notwithstanding any longer term of any Management Agreement or other contract,
the Administrative Limited Partner shall have the right in the event a General
Partner is removed pursuant to this Agreement, to terminate the Management
Agreement and every other contract, except for the Development Services
Agreement, between the Partnership and the General Partners and/or Affiliates of
any General Partner by notice, effective simultaneously with such removal. The
General Partners hereby represent and warrant to the other Partners that all
existing contracts between the Partnership and any of the General Partners or
Affiliates of any of the General Partners have been amended to contain this
right and the General Partners covenant not to enter any future contract with
the Partnership or cause the Partnership to enter into any future contract with
any of their Affiliates which does not contain such right.
ARTICLE 9 DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES; TAX CREDITS
Section 9.1 Profits, Losses and Housing Tax Credits
A. Profits and Losses Other Than from Sale or Refinancing Transaction
(i) Profits. Profits other than from Sale or Refinancing Transaction
for any taxable year shall be allocated 99.89% to the Investor Limited Partner,
0.01% to the Administrative Limited Partner and 0.1% to the General Partners.
(ii) Losses. Losses other than from Sale or Refinancing Transaction for
any taxable year shall be allocated 99.89% to the Investor Limited Partner,
0.01% to the Administrative Limited Partner and 0.1% to the General Partners.
B. Profits and Losses From Sale or Refinancing Transaction
(i) Profits. Profits from Sale or Refinancing Transaction for any
taxable year shall be allocated as follows:
(A) First, an amount of Profits from Sale or Refinancing
Transaction equal to the aggregate negative balances (if any) in the
Capital Accounts of all Partners having negative Capital Account
balances shall be allocated to the Partners having negative Capital
Account balances in proportion to their negative Capital Account
balances until all such Capital Accounts have a zero balance; and
(B) The balance, to the Partners in a manner so as to cause
the positive Capital Account balance of each Partner to be equal to the
amount that would have been distributable to such Partner if an amount
equal to the sum of (i) the positive Capital Account balances of all
Partners, determined prior to any allocation under this Section
9.1B(i)(B) with respect to such Sale or Refinancing Transaction, plus
(ii) the Profits to be allocated among the Partners pursuant to this
Section 9.1B(i)(B) with respect to such Sale or Refinancing
Transaction, were distributed among the Partners pursuant to clauses
iii, iv and vii of Section 9.2B hereof.
.
(ii) Losses. Losses from Sale or Refinancing Transaction for any
taxable year shall be allocated in the following order and priority:
(A) First, an amount of Losses from Sale or Refinancing
Transaction equal to the aggregate positive balances (if any) in the
Capital Accounts of all Partners having positive Capital Account
balances shall be allocated to the Partners having positive Capital
Account balances in proportion to their positive Capital Account
balances until all such Capital Accounts have a zero balance; and
(B) The balance, if any, to those Partners who bear the
Economic Risk of Loss.
(iii) For purposes of the allocations of Profits and Losses from a Sale
or Refinancing Transaction, a Partner's Capital Account shall be determined
immediately prior to the event giving rise to the Profits and Losses as if, at
such time, the books of the Partnership had been closed as though at the end of
the taxable year. If, in any taxable year, there is a sale of a portion but less
than substantially all of the Partnership property, then solely for purposes of
allocating Profits or Losses from a Sale or Refinancing Transaction each
Partner's Capital Account shall be deemed to be credited with such Partner's
share of Partnership Minimum Gain and/or Partner Nonrecourse Debt Minimum Gain
remaining after any allocation of Profit or Loss pursuant to Section 9.1D
attributable to such sale.
C. Limitation on Allocation of Losses
The aggregate Losses allocated to the Partners pursuant to Section
9.1A(ii) or 9.1B(ii) shall not exceed the maximum amount of Losses that can be
so allocated without causing any Partner to have an Adjusted Capital Account
Deficit at the end of any fiscal year. In the event some but not all of the
Partners would have Adjusted Capital Account Deficits as a consequence of an
allocation pursuant to Section 9.1A(ii) or 9.1B(ii), the limitation set forth in
this Section 9.1C shall be applied on a Partner-by-Partner basis so as to
allocate the maximum permissible Losses to each Partner who is not a General
Partner under Section 1.704-1(b)(2)(ii)(d) of the Regulations.
D. Special Allocations
The following special allocations shall be made in the following order
and priority:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 9.1, if there is a net decrease in
Partnership Minimum Gain during any Partnership fiscal year or other
period, each Partner shall be specially allocated items of Partnership
income and gain for such year or other period (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the net
decrease in Partnership Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g)(2). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required
to be allocated to the various Partners pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations
Section 1.704-2(f)(6). This Section 9.1D(i) is intended to comply with
the minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith. To the
extent permitted by such Section of the Regulations and for purposes of
this Section 9.1D(i) only, each Partner's Adjusted Capital Account
Deficit shall be determined prior to any other allocations pursuant to
this Section 9.1D with respect to such fiscal year or other period.
(ii) Partner Nonrecourse Debt Minimum Gain Chargeback.
Notwithstanding any other provision of this Section 9.1 except Section
9.1D(i), if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to a Partner Nonrecourse Debt during any Partnership
fiscal year or other period, each Partner with a share of the Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Section 1.704-2(i)(5) shall be
specially allocated items of Partnership income and gain for such year
or other period (and, if necessary, subsequent years) in an amount
equal to such Partner's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to the various Partners
pursuant thereto. The items to be so allocated shall be determined in
accordance with Section 1.704-2(i)(4) of the Regulations. This Section
9.1D(ii) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith. Solely for purposes of this Section
9.1D(ii), each Partner's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to this Section 9.1D
with respect to such fiscal year or other period, other than
allocations pursuant to Section 9.1D(i) hereof.
(iii) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations, or distributions
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of
Partnership income and gain shall be specially allocated to each such
Partner in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of
such Partner as quickly as possible, provided that an allocation
pursuant to this Section 9.1D(iii) shall be made only if and to the
extent that such Partner would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Section 9.1 have been
tentatively made as if this Section 9.1D(iii) were not in this
Agreement.
(iv) Gross Income Allocation. In the event any Partner has a
deficit Capital Account at the end of any Partnership fiscal year that
is in excess of the sum of (i) the amount such Partner is obligated to
restore pursuant to any provision of this Agreement, and (ii) the
amount such Partner is deemed to be obligated to restore pursuant to
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), 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 9.1D(iv) shall be made only if and
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
Section 9.1 have been tentatively made as if this Section 9.1D(iv) and
Section 9.1D(iii) were not in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any
fiscal year or other period shall be specially allocated 99.89% to the
Investor Limited Partner, 0.01% to the Administrative Limited Partner
and 0.1% to the General Partners.
(vi) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any fiscal year or other period shall be allocated, in
accordance with Section 1.704-2(i)(1), to the Partner that bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable.
(vii) Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant
to Code Section 734(b) or 743(b) is required to be taken into account
in determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases
such basis), and such gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
(viii) Basis Increases. In the event the adjusted tax basis of
any investment credit property that has been placed in service by the
Partnership is increased pursuant to Code Section 50(c), such increase
shall be specially allocated among the Partners (as an item in the
nature of income or gain) in the same proportions as the investment tax
credit that is recaptured with respect to such property is shared among
the Partners.
(ix) Basis Reductions. Any reduction in the adjusted tax basis
(or cost) of Partnership investment credit property pursuant to Code
Section 50(c) shall be specially allocated among the Partners (as an
item in the nature of expenses or losses) in the same proportions as
the basis (or cost) of such property is allocated pursuant to
Regulations Section 1.46-3(f)(2)(i).
E. Curative Allocations
The "Regulatory Allocations" consist of (x) allocations made to a
Partner (or predecessor) under Section 9.1D(iii) and Section 9.1D(iv),
allocations to be made to a Partner (or predecessor) under Section 9.1D(i) to
the extent the cumulative amount of such allocations exceeds the cumulative
amount of Nonrecourse Deductions allocated to such Partner (or predecessor), and
(y) allocations made to a Partner (or predecessor) under Section 9.1D(ii) to the
extent the cumulative amount of such Allocations exceeds the cumulative amount
of Partner Nonrecourse Deductions allocated to such Partner (or predecessor).
Notwithstanding any other provisions of this Section 9.1 (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into account
in allocating other items of income, gain, loss and deduction among the Partners
so that, to the extent possible, the net amount of such allocations of other
items and the Regulatory Allocations to each Partner shall be equal to the net
amount that would have been allocated to each such Partner if the Regulatory
Allocations had not occurred.
F. Other Allocation Rules
(i) For purposes of computing the Profits, Losses or any other items
allocable to any period, Profits, Losses and any other such items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partners using any permissible method under Code Section 706 and the Regulations
thereunder.
(ii) For purposes of determining a Partner's proportionate share of the
"excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3) (or the equivalent sections of any earlier
Regulations which may be determined to be applicable), the Partners' interests
in Partnership Profits shall be allocated 0.1% to the General Partners, 0.01% to
the Administrative Limited Partner and 99.89% to the Investor Limited Partner.
(iii) To the extent permitted by Sections 1.704-2(h) and 1.704-2(i)(6)
of the Regulations, the General Partners shall endeavor to treat distributions
of Cash Flow and Sale or Refinancing Transaction Proceeds as having been made
from proceeds of Nonrecourse Debt or Partner Nonrecourse Debt only to the extent
that such distributions would have otherwise caused or increased an Adjusted
Capital Account Deficit for any Partner.
(iv) The basis (or cost) of any Partnership investment credit property
shall be allocated among the Partners in accordance with Regulations Section
1.46-3(f)(2)(i).
(v) In the event Partnership investment credit property is disposed of
during any taxable year, Profits for such taxable year (and, to the extent such
Profits are insufficient, Profits for subsequent taxable years) in an amount
equal to the excess, if any, of (i) the reduction in the adjusted tax basis (or
cost) of such property pursuant to Code Section 50(c), over (ii) any increase in
the adjusted tax basis of such property pursuant to Code Section 50(c) caused by
the disposition of such property, shall be excluded from the Profits allocated
pursuant to Sections 9.1A and 9.1B hereof and shall instead be allocated among
the Partners in proportion to their respective shares of such excess, determined
pursuant to Sections 9.1D(viii) and 9.1D(ix) hereof. In the event more than one
item of such property is disposed of by the Partnership, the foregoing sentence
shall apply to such items in the order in which they are disposed of by the
Partnership, so that Profits equal to the entire amount of such excess with
respect to the first such property disposed of shall be allocated prior to any
allocations with respect to the second such property disposed of, and so forth.
G. Tax Allocations
(i) In General. Except as otherwise provided in this Agreement, all
items of Partnership income, gain, loss, deduction, and any other allocations
not otherwise provided for shall be allocated among the Partners for tax
purposes in the same proportions as they are allocated Profits or Losses or
items thereof pursuant to Section 9.1 hereof for such year. Any elections or
other decisions relating to such allocations shall be made by the General
Partners in any manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to this Section 9.1G are solely for
purposes of federal, state and local taxes and shall not affect, or in any way
be taken into account in computing, any Person's Capital Account or share of
Profits, Losses, other items or distributions pursuant to any provision of this
Agreement.
(ii) Code Section 704(c). In accordance with Code Section 704(c) and
the Regulations thereunder, income, gain, loss, and deduction with respect to
any property contributed to the capital of the Partnership or owned by the
Partnership upon the occurrence of any of the events described in Regulations
Section 1.704-1(b)(2)(iv)(f)(5) shall, solely for tax purposes (and not for
purposes of determining Capital Accounts or allocating Profits, Losses or items
thereof), be allocated among the Partners so as to take into account any
variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and (i) its Asset Value at the time of the
contribution or as adjusted for the occurrence pursuant to paragraph (ii) of the
definition of Asset Value set forth herein, as the case may be, or (ii) its fair
market value at the time of the occurrence if the Asset Value is not adjusted
pursuant to said paragraph. Notwithstanding the foregoing, no allocation shall
be made pursuant to clause (ii) of this Section 9.1(G)(ii) if an equivalent
allocation has been made pursuant to Section 9.1(G)(i) in connection with a
transaction that would otherwise result in an allocation pursuant to this
Section 9.1(G)(ii). The foregoing provision is intended to comply with Section
704(c) of the Code and with Regulations Section 1.704-1(b). To the extent
permitted by the Code and Regulations, any variation referred to in this Section
9.1G(ii) shall be taken into account by allocations of gain from a Disposition
and not through allocations of depreciation.
(iii) Recapture. Gain from the disposition of Partnership assets which
is allocated to a Partner for tax purposes shall include, to the extent
possible, ordinary income consisting directly or indirectly of recaptured
deductions (for depreciation or otherwise) to the same extent and in the same
proportion as such deductions were previously allocated to such Partner.
(iv) Section 751 Assets. In the event that a Partner (other than a
Partner who becomes a Partner by purchasing the Interest in the Partnership of
another Partner) is admitted (an "Admission") to the Partnership after the date
hereof or in the event that a Partner's interest in Profits or Losses is
increased (an "Increase") after the date hereof, the Partner so admitted shall
obtain no interest, or the Partner so increased shall obtain no greater interest
than prior to the Increase, in the Partnership's "unrealized receivables" (as
defined in Section 751(c) of the Code), determined immediately prior to such
Admission or Increase. As the respective interests in such "unrealized
receivables" of the Partners who were Partners prior to such Admission or such
Increase are not reduced thereby, the Partner so admitted or so increased shall,
to the extent required, obtain a greater than proportionate interest in the
Partnership's other assets (including the assets contributed by such Partner),
determined after giving effect to such Admission or Increase.
(v) Housing Tax Credits.
(A) Pursuant to Regulations Section 1.704-1(b)(4)(ii), Housing
Tax Credits shall be allocated among the Partners in accordance with
their respective shares of Partnership expenditures that give rise to
such Housing Tax Credits in the taxable year to which such Housing Tax
Credits relate. Because the allocations of Nonrecourse Deductions,
Losses and Profits (and related items of income and deductions) provide
for allocations of expenditures which give rise to Housing Tax Credits
in the ratio of 99.89% to the Investor Limited Partner, 0.01% to the
Administrative Limited Partner and 0.1% to the General Partners, the
Partners intend that Housing Tax Credits shall be allocated 99.89% to
the Investor Limited Partner, 0.01% to the Administrative Limited
Partner and 0.1% to the General Partners.
(B) In the event there occurs a Tax Credit Recapture Event,
then, pursuant to Section 42(j)(1) of the Code, Housing Tax Credits
shall be recaptured by the Partners who originally claimed said Housing
Tax Credits, in proportion to the ratio in which such recaptured
Housing Tax Credits were claimed.
H. Order of Priority
The allocation and distribution provisions of this Agreement will be
applied in such order as may be determined by the Accountants, with the approval
of the Investor Limited Partner, to be in accordance with the Code and otherwise
reflective of the economic effect of the provisions of this Agreement.
Section 9.2 Distribution and Application of Cash Flow and
Sale or Refinancing Transaction Proceeds
Except as otherwise provided by this Agreement or required by law
(including all applicable rules, directives and regulations of each Credit
Agency), cash distributions shall be made to the Partners on the following bases
within 90 days after the end of each calendar quarter:
A. Cash Flow shall be applied in the following order of priority:
(i) To the Investor Limited Partner in an amount
equal to the unpaid Tax Credit Shortfall Payment;
(ii) To pay interest on any loans, including Voluntary Loans,
from Partners or their Affiliates provided for herein, pro rata in
accordance with the amount of interest accrued as of the date of such
distribution;
(iii) To repay principal of any loans, including Voluntary
Loans, payable to Partners or their affiliates, pro rata in accordance
with the amount of the principal balances as of the date of such
distribution;
(iv) To pay in full any unpaid Asset Management Fees;
(v) To pay in full any unpaid Development Fee;
(vi) To pay the fees due pursuant to the Supervisory Agent and
Incentive Management Agreement; and
(vii) The balance to be paid 80.0% to the General Partners,
0.01% to the Administrative Limited Partner and 19.99% to the Investor
Limited Partner.
B. Subject to Section 12.4 hereof, Sale or Refinancing Transaction
Proceeds shall be applied in the following order of priority:
(i) To the payment of liabilities of the Partnership
then due and owing to Persons other than the Partners;
(ii) To establish such reserves as the General Partners, with
the Consent of the Administrative Limited Partner, determine 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 Partners, with
the Consent of the Administrative Limited Partner, shall determine that
such reserve is no longer necessary shall be distributed in accordance
with the following subparagraphs of this Section 9.2B;
(iii) To the Investor Limited Partner in an amount equal to
the unpaid Tax Credit Shortfall Payment;
(iv) To pay interest on any loans from Partners or their
Affiliates provided for herein, pro rata in accordance with the amount
of interest accrued as of the date of such distribution;
(v) To repay principal of any loans, including Voluntary
Loans, payable to Partners or their affiliates, pro rata in accordance
with the amount of the principal balances as of the date of such
distribution;
(vi) To pay in full any unpaid Asset Management Fees; and
(vii) The balance, if any, 29.9% to the Investor Limited
Partner, 0.1% to the Administrative Limited Partner and 70% to the
General Partners.
C. 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.
ARTICLE 10 TRANSFER OF PARTNER INTERESTS
Section 10.1 Assignment of Limited Partner Interests
The Investor Limited Partner and the Administrative Limited Partner
shall have the right at any time to make an Assignment of their Interests
without the Consent or approval of the General Partners or any other Partners,
subject to the approval of each Lender, to the extent required. The General
Partners shall cooperate with the Investor Limited Partner and the
Administrative 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 Partners and any other matters reasonably necessary in the judgment
of the Administrative Limited Partner to facilitate and effect such Assignment,
but only to the extent such information is readily available to the General
Partners either (a) at no or at nominal cost or (b) the Limited Partners shall
reimburse the General Partners for the reasonable cost thereof. The Investor
Limited Partner and the Administrative Limited Partner shall notify the General
Partners as to any proposed Assignment.
Section 10.2 Substituted Partners; Admission
A. The General Partners may not admit any additional partner to the
Partnership without the Consent of the Administrative Limited Partner.
B. An Assignee of a Limited Partner Interest shall be admitted as a
Substituted Partner but only if (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.
C. Upon the admission of a Substituted Partner, the Partner Information
Schedule 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 and/or the Certificate reflecting such admission shall be
filed in accordance with the Uniform Act. No Consent or approval of the Investor
Limited Partner (other than the Assignor and the Assignee) shall be required.
Section 10.3 Withdrawal
A. 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.
B. Any Assignee pursuant to an Assignment satisfying the conditions of
this Article 10 who does not become a Substituted Partner in accordance with
this Article 10 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, but shall have no voting or consent rights to which the Assignor
was entitled under this Agreement or any of the other Project Documents. If such
Assignee desires to make an Assignment of his Interest, he shall be subject to
all the provisions of this Article 10 to the same extent and in the same manner
as any Partner desiring to make an Assignment.
C. 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 10, such Assignor shall
retain all rights and be subject to all obligations under the Uniform Act and
this Agreement. No assignment shall itself operate to relieve the assignor of
any such obligation.
D. In the event of an Assignment, the obligation of the Assignor to
make Capital Contributions or loans hereunder shall be extinguished only by and
to the extent of Capital Contributions or loans actually made by him or his
Assignee.
E. 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 effecting such Assignment. Such instrument must evidence the written
acceptance of the Assignee to all the terms and provisions of this Agreement. If
such instrument is not so filed, the Partnership need not recognize any such
purported Assignment for any purpose.
ARTICLE 11 WITHDRAWAL OF GENERAL PARTNER; NEW GENERAL PARTNER
Section 11.1 Withdrawal.
A. No General Partner may Withdraw (other than an Involuntary
Withdrawal) from the Partnership or assign, pledge or encumber all or any part
of its Interest without the Consent of the Administrative Limited Partner, and,
to the extent required, the consent of each Credit Agency and each Lender. The
Consent of the Investor Limited Partner shall not be required.
B. In the event of a Withdrawal of a General Partner or the pledge or
encumbrance of any part of its Interest in violation of Section 11.1A hereof or
the removal of a General Partner pursuant to Section 11.4 (any such Withdrawal
hereinafter referred to as a "(Voluntary Withdrawal"), the Interest of the
General Partner shall immediately and automatically terminate on the effective
date of such Withdrawal (or the effective date of such Assignment, pledge,
encumbrance or removal) 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, pledge or encumbrance, the rights of such Withdrawing
General Partner to receive or to be paid such allocations, distributions, funds,
assets, fees or repayments shall be reallocated to the other General Partners,
or if there is no other General Partner at that time, to the Administrative
Limited Partner. Notwithstanding such Withdrawal, pledge, encumbrance or
removal, and loss of any right to receive such allocations, distributions,
funds, assets, fees and repayments, such Withdrawing General Partner shall
remain liable to the Partnership and the other Partners for all obligations
theretofore incurred by it under this Agreement, or which may arise upon or
following such Withdrawal, pledge, encumbrance or removal. Notwithstanding
anything herein to the contrary, any remaining Partner shall have all other
rights and remedies against such Withdrawing General Partner as provided by law.
C. Upon the Involuntary Withdrawal of a General Partner, such
Withdrawing General Partner shall remain liable for obligations incurred by it
under this Agreement through the effective date of its Withdrawal, and its
Interest shall automatically convert to an Interest of a limited partner, but it
shall not be entitled to participate in the management of the Partnership's
business or to participate in any allocation of Profits or Losses or
distributions payable to the Investor Limited Partner or the Administrative
Limited Partner. Subject to the provisions of Section 11.3B hereof, such limited
partner or its successors shall be entitled to share in the Profits and Losses
and distributions at the same times and in the same manner as such Withdrawing
General Partner would have otherwise received as a General Partner reduced by an
amount reasonably necessary to compensate the remaining General Partners or any
successor general partner for assuming the obligations of the Withdrawing
General Partner.
Section 11.2 Effect of Withdrawal; Election to Continue Business
Upon the occurrence of an event giving rise to Withdrawal of a General
Partner (i) any remaining General Partners, if any, or, if there be no remaining
General Partners, such Withdrawing General Partner or its legal representative
shall promptly notify the Investor Limited Partner of such Withdrawal (the
"Withdrawal Notice"), (ii) the Administrative Limited Partner shall have the
right to appoint and cause the admission to the Partnership as a General Partner
of itself, its Affiliates or another Person to succeed such Withdrawing General
Partner, and (iii) the Partnership shall be dissolved and terminated unless the
then remaining General Partners or the Administrative Limited Partner or the
Investor Limited Partner, pursuant to the provisions of Section 11.3, elects to
continue the business of the Partnership. If the Investor Limited Partner so
elects, Withdrawal of a General Partners 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 Investor Limited Partner. .
Section 11.3 Continuation of Partnership
A. Upon the occurrence of an event giving rise to the Withdrawal of a
General Partner, if there is then no other General Partner or, if there is then
one or more other General Partners but the remaining General Partners or the
Administrative Limited Partner do not elect to continue the business of the
Partnership pursuant to Section 11.2 hereof, the Investor Limited Partner may
elect within 90 days thereafter to continue the Partnership on substantially
identical terms to those of this Agreement, to carry on the business of the
Partnership and to designate a successor general partner to serve in place of
such Withdrawing General Partner with the approval of each Credit Agency and
each Lender, if such approval is required.
B. If the Investor Limited Partner shall designate a successor general
partner and obtain all necessary approvals therefor where the Withdrawal is
Involuntary, the Investor Limited Partner at its option may require that the
Interest of such Withdrawing General Partner be transferred to the successor
general partner upon its written assumption of the obligations of such
Withdrawing General Partner under this Agreement (except for any obligations of
such Withdrawing General Partner under this Agreement specifically excepted by
the Administrative Limited Partner). In such event, the successor general
partner shall pay to such Withdrawing General Partner or its legal
representative as the purchase price for its Interest an amount to be agreed
upon between them. If such Withdrawing General Partner and the successor general
partner cannot agree upon the consideration for the transfer of such Interest
within 60 days after such Withdrawal, consideration therefor shall be the fair
market value of such Interest as determined by a committee of three qualified
real estate appraisers, one selected by such Withdrawing General Partner, one
selected by the Administrative Limited Partner and a third selected by the other
two real estate appraisers (or, if the first two real estate appraisers cannot
agree upon the third real estate appraiser within 30 days such third appraiser
shall be selected by the American Arbitration Association). The purchase of such
Withdrawing General Partner's Interest under this Section 11.3B shall take place
within ten days after the purchase price is determined (whether by agreement or
appraisal), and the closing shall take place at the office of the Administrative
Limited Partner. The purchase price for such Interest shall be payable by a
promissory note bearing interest at a rate equal to the Prime Rate and payable
solely out of Sale or Refinancing Transaction Proceeds payable with respect to
the Interest being purchased, shall be secured by the Interest being purchased
and shall otherwise be without recourse to the maker.
C. Unless any other General Partner shall agree to continue the
Partnership pursuant to Section 11.2 hereof, the Interest of such other General
Partners other than such Withdrawing General Partner shall be converted into and
shall be deemed to be that of a limited partner with the same Interest in the
Partnership as such General Partners had as general partners prior to the
Withdrawal, reduced by an amount reasonably necessary to compensate the
successor general partner for assuming the obligations of such other General
Partners. Such Interest shall be purchased by the successor general partner
concurrently with the purchase of such Withdrawing General Partner's Interest in
accordance with and on the same terms and conditions as set forth in Section
11.3B hereof.
Section 11.4 Special Removal Rights
A. Notwithstanding any other provision of this Agreement to the
contrary, the following events shall be considered a Major Default under the
terms of this Agreement:
(i) Any General Partner shall:
(A) materially violate its fiduciary
responsibilities as a General Partner of the Partnership;
(B) violate the Completion guaranty set forth in
Section 5.9A hereof;
(C) be in material breach of any provision (other
than Section 5.9A) of this Agreement (including any Low Income
Housing Tax Credit Certificate or update thereof), the
Development Services Agreement or any other document for 15
days after notice thereof has been given by the Administrative
Limited Partner; provided, however, that if such breach is of
the type that cannot reasonably be cured within 30 days, the
Administrative Limited Partner shall not have the right to
remove a General Partner under this Section 11.4A(i)(B) with
respect to such breach for a 75-day period after such notice
is given so long as such General Partner is diligently
pursuing a cure of such breach at all times during such 75-day
period and accomplishes such cure within such 75-day period;
(D) willfully violate any law, regulation or order
applicable to the Partnership which has or is likely to have a
material adverse effect on the Partnership or the Apartment
Complex; or
(E) become Bankrupt; or
(ii) The Partnership shall:
(A) be in material breach of any Project Document or
any other material agreement or document (including any Low
Income Housing Tax Credit Certificate or update thereof)
affecting the Partnership, which breach has failed to have
been cured within any applicable cure or grace period;
(B) at any time after Rental Achievement, incur an
Operating Deficit with respect to any period of six
consecutive months which Operating Deficits are not funded by
Voluntary Loans made or caused to be made by the General
Partners; or
(C) be in any situation where the annual amount of
the Housing Tax Credits which the Partnership is entitled to
claim under Section 42 of the Code is less than 82% of the
annual amount of Housing Tax Credits set forth in the
Schedule; or
(iii) Completion shall not have occurred by the Completion
Date set forth in the Schedule (provided, however, that if Completion
is delayed due to Force Majeure, such date may be extended for the
period of time that such Force Majeure cause a delay in Completion to
occur, but in no event so long as to result in any loss of Housing Tax
Credits by the Partnership; or
(iv) Prior to Completion, (a) a default occurs and remains
uncured after the expiration of all applicable cure periods under any
material 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; or
(v) The guarantor pursuant to the Guaranty Agreement shall
default thereunder or become Bankrupt.
Upon a Major Default, the Administrative Limited Partner shall have (in addition
to any other rights the Limited Partners may have against the General Partners
at law or in equity) the right, but not the obligation, in the sole discretion
of the Administrative Limited Partner, upon ten days' prior notice to such
General Partner, to remove such General Partner (and, if the Administrative
Limited Partner so elects) all other General Partners who are Affiliates of such
General Partner and to appoint itself or any of its Affiliates or any other
Person to succeed such General Partner(s) as a General Partner in accordance
with the provisions of Section 11.2 hereof.
B. The General Partners agree to indemnify and hold the Investor
Limited Partner and the Administrative Limited Partner harmless from and against
all losses, costs and expenses incurred in connection with a Major Default
(other than pursuant to Section 11.4A(ii)(B) hereof) and the exercise of the
remedies provided above, including, without limitation, all reasonable legal
fees and other reasonable expenses of the Investor Limited Partner and
Administrative Limited Partner in connection therewith.
C. The removal of a General Partner pursuant to Section 11.4A hereof
(other than pursuant to Section 11.4A(i)(D) hereof) shall be treated for
purposes of this Agreement as a Voluntary Withdrawal of such General Partner
subject to the provisions of Section 11.1B.
D. If a Major Default occurs, and the Administrative Limited Partner
does not exercise its right to remove the General Partner(s), the Investor
Limited Partner, upon the vote of a Majority in Interest of the limited partners
of the Investor Limited Partner, shall cause the Administrative Limited Partner
to remove such General Partner(s) upon thirty days' prior written notice to such
General Partners and to appoint the Administrative Limited Partner or any of its
Affiliates to succeed such General Partner(s) as a General Partner of the
Partnership in accordance with the provisions of Section 11.2 hereof.
Section 11.5 Additional General Partner
At any time, the General Partners, with the Consent of the
Administrative Limited Partner (but the Consent of the Investor Limited Partner
shall not be necessary), 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 Partners' 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 terms of this Agreement, the Project Documents and any
other document required in connection therewith to the same extent and on the
same terms as the General Partners. Except in the event of a Withdrawal of a
General Partner or the pledge or encumbrance of any part of its Interest in
violation of Section 11.1A hereof or the removal of a General Partner pursuant
to Section 11.4 hereof, the Administrative Limited Partner shall not have the
right to admit an additional General Partner.
Section 11.6 Amendment of Schedule and Agreement
Upon the admission of a successor or additional general partner or the
Withdrawal of a General Partner, the Partner Information Schedule attached
hereto shall be amended to reflect such admission or Withdrawal and such
amendment and/or Certificate of Amendment shall be filed as required by the
Uniform Act.
Section 11.7 Survival of Liabilities
It is expressly understood that no Withdrawal, Assignment, pledge or
encumbrance of a General Partner's Interest, even if it results in the
substitution of the Assignee as a Partner, shall release the Withdrawing General
Partner from any liability to the Partnership attributable to the period prior
to the Withdrawal, all of which shall survive such Withdrawal, Assignment,
pledge or encumbrance as and to the extent provided in this Agreement.
ARTICLE 12 DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
Section 12.1 Events Which Cause a Dissolution
The Partnership shall continue in full force and effect until December
31, 2040, except that the Partnership shall be dissolved prior thereto upon the
happening of any of the following events:
A. An election to dissolve the Partnership made in
writing by the Partners;
B. The Withdrawal of a General Partner, if the
Partnership is not continued in accordance with Sections 11.2 or 11.3 hereof;
C. Any event which shall make it unlawful for
the existence of the Partnership to be continued;
D. The sale or other disposition of all or
substantially all of the assets of the Partnership; or
E. Upon the vote of the General Partners and a Majority in
Interest of the limited partners of the Investor Limited Partner.
Section 12.2 Actions of Liquidating Agent Upon Dissolution
Upon the dissolution of the Partnership, the Partnership shall be
liquidated in accordance with this Article 12 and the Uniform Act. The
liquidation shall be conducted and supervised by the General Partners or, if
there is no remaining General Partner, by the Administrative Limited Partner
(the General Partners or Administrative Limited Partner, as the case may be,
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.
Section 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 of 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 Administrative 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 and any other certificates regarding the dissolution and
termination of the Partnership as required by the Uniform Act.
Section 12.4 Priority on Liquidation; Distribution of Non-Liquid Assets
A. 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 Sections 9.2B(i) through (v) hereof, and the balance of
the assets of the Partnership shall be distributed by the Liquidating Agent,
subject to Section 12.4C in compliance with Section 1.704-1(b)(2)(ii)(b)(2) of
the Regulations, to the Partners with positive balances in their Capital
Accounts, in accordance with the ratio of such positive Capital Account
balances, after giving effect to all contributions, distributions, allocations
and adjustments required hereunder, for all periods, in the order of priority
established pursuant to Section 9.1H hereof. Any distribution described in the
preceding sentence to be made to the General Partners which will cause the
General Partners to have a contribution requirement described in the second
paragraph of Section 12.4B (or will increase such contribution requirement)
shall not be made and shall instead be deemed to have first been distributed to
the General Partners and then contributed by the General Partners to the
Partnership. Thereafter, such amount shall be distributed in the manner
described in this Section 12.4A as if it constituted additional assets of the
Partnership.
B. In the event the Partnership is "liquidated" within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations, if the General Partners'
Capital Accounts have a deficit balance in the aggregate (after giving effect to
all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), the General Partners
shall contribute to the capital of the Partnership an amount equal to the lesser
of (i) the amount necessary to restore such deficit balance to zero, or (ii) an
amount equal to the excess of (a) 0.101% of the Capital Contributions of the
Investor Limited Partner over (b) the Capital Contributions previously made by
the General Partners, in compliance with Section 1.704-1(b)(2)(ii)(b)(3) of the
Regulations. Any amount required to be contributed by the General Partners
pursuant to the preceding sentence shall be contributed by the General Partners
in proportion to their respective deficit Capital Account balances, if any.
C. If the Liquidating Agent, shall determine, in its sole discretion,
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 may distribute those assets
in kind to the Partners or to a liquidation trust or similar vehicle for the
purpose of the orderly liquidation of such assets at the earliest possible time
for the benefit of, and in the best interests of the Partners. Any distribution
of assets in kind shall be distributed on the basis of the fair market value
thereof (which shall be determined by independent appraisal) 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,
in its sole discretion, 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 to be fair and equitable, 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.
Section 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.
ARTICLE 13 ACCOUNTING, REPORTS, BOOKS AND BANK ACCOUNTS
Section 13.1 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 Credit Agency and as the General Partners shall determine,
and withdrawals shall be made on such signature or signatures as the General
Partners shall determine. The General Partners shall notify the Administrative
Limited Partner of the location of all bank accounts of the Partnership from
time to time. 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
by any Credit Agency or Lender to be placed in escrow and other funds not needed
in the operation of the Partnership's business) shall be deposited, to the
extent permitted by each Credit Agency or Lender, 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 Credit Agency or
Lender shall be controlled by such Credit Agency or Lender and the General
Partners shall not be permitted to make any withdrawal from such funds without
the express written consent of such Credit Agency or Lender to the extent
required.
Section 13.2 Books of Account
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 Partners. The books shall be kept on an
accrual basis of accounting. All of the Partnership's books of account, together
with an executed copy of this Agreement and copies of such other instruments as
the General Partners 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 and copying by any Partner
or its duly authorized representative or, at the expense of any Partner, for
audit by such Partner or its duly authorized representative.
Section 13.3 Reports
A. The General Partners shall, within five days after acquiring
knowledge that any of the following specified events occurs, notify the Investor
Limited Partner of any correspondence from or communications with the Credit
Agency or the IRS relating to or referencing the Housing Tax Credits or the
Apartment Complex, any change made or proposed to the allocation of Housing Tax
Credits, any notice of an audit by the Credit Agency or any other governmental
agency, including the IRS, any material cost overruns in the construction of the
Apartment Complex, any material damage to or change in the construction of the
Apartment Complex, any notice of default under the Mortgage, breach of any
Governmental Agreement or Project Document, any non-payment of taxes, the filing
of any lien against the Apartment Complex, or non-compliance with any federal,
state, or local law, ordinance, or regulation, commencement or termination of
any lawsuit against the Partnership or any of its property, cancellation or
non-renewal of any insurance, cancellation or non-renewal of any subsidy
agreement, any material change to the Project Documents, any extraordinary item
charges or credits or any other material charges or credits to income of an
unusual nature or any material provisions for loss, any other circumstance
which, either in amount or time or otherwise materially affects the business of
the Partnership or the interest of the Partners or the Housing Tax Credits, or
any occurrence that would cause any representation or warranty of the General
Partners herein to become inaccurate in any material respect.
B. Within 30 days after the end of each calendar month, the General
Partners shall have prepared and shall deliver to each of the Partners a
detailed income and expense statement and occupancy report/updated rent roll for
such month.
C. Within 45 days after the end of each of the first three quarters of
each Fiscal Year, the General Partners shall have prepared and shall deliver to
the other Partners, commencing with the first quarterly period ending after the
Closing Date, a balance sheet and statements of income (or loss) and Cash Flow
for, or as of the end of, such quarter in such form and substance as the
Administrative Limited Partner shall reasonably request, 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 Partners
or any of their Affiliates. All such balance sheets, reports and statements
provided pursuant to this Section 13.3C, other than the statement of Cash Flow
shall be prepared in accordance with generally accepted accounting principles,
consistently applied, and shall accurately reflect the information contained on
the Partnership's books and records.
D. Within 30 days after the end of each six-month fiscal period, the
General Partners shall send to the other Partners preliminary drafts of (i) the
balance sheet of the Partnership as of the end of such six-month fiscal period
and statements of income (loss), Partners' equity and cash flow of the
Partnership for such six-month fiscal period, all of which shall be prepared in
accordance with generally accepted accounting principles, consistently applied
and (ii) a statement of Cash Flow for such fiscal period (which need not be
audited), showing distributions in respect of such fiscal period, which
statement shall identify distributions from (a) Cash Flow generated during the
fiscal period, and Cash Flow generated during prior fiscal periods, (b) proceeds
from the disposition of property and investments, and (c) reserves and other
sources. Within 60 days after the end of each six-month period, the General
Partners shall send to the other Partners final drafts of each of the
aforementioned statements, which, with respect to the period of time
corresponding to the end of a Fiscal Year, shall be accompanied by an annual
report of the Accountants containing an unqualified audit opinion of the
Accountants.
E. Prior to substantial completion of the Apartment Complex, the
General Partners shall provide the Investor Limited Partner with (i) monthly
construction progress reports; (ii) a copy of each inspection report, evaluation
or similar report issued to the Partnership by the Credit Agency or any Lender
promptly upon receipt thereof; and (iii) a copy of each Tax Credit compliance
report delivered to or prepared by the Credit Agency with respect to the
Apartment Complex.
F. If the General Partners shall fail, for any reason, to deliver to
the other Partners when due any of the audited annual financial statement
described in Section 13.3D hereof and/or any of the tax returns, including,
without limitation, a copy of Schedule K-1, referred to in Section 13.5 hereof,
and such failure is not due to a matter outside the reasonable control of the
General Partners, any Affiliate or the Management Agent and/or Accountants
selected by the General Partners, (i) the Administrative Limited Partner shall
have the right, but not the obligation, to cause such reports, information or
statements to be prepared at the expense of the Partnership by such accountants
or other professionals as the Administrative Limited Partner shall designate and
(ii) after notice from the Investor Limited Partner of the failure of such
delivery, the Partnership shall pay the Investor Limited Partner, as liquidated
damages for such failure, an amount equal to $100.00 for each day that elapses
after the respective due date until such tax information or audited financial
statement has been delivered to the other Partners.
Section 13.4 Other Reports
The General Partners 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 requirement to its partners or governmental authorities. In addition,
the General Partners shall provide the Administrative Limited Partner and the
Investor Limited Partner with copies of all information, reports, and filings
pertaining to the Housing Tax Credits and/or the "qualified basis" (as defined
in Section 42 of the Code) of the Apartment Complex. The General Partners 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. The Investor Limited Partner shall be entitled to receive
a list of all limited partners of the Partnership.
Section 13.5 Tax Returns and Tax Treatment
A. The General Partners 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 Partners 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.
B. The General Partners shall send to the other Partners such tax
information, including, without limitation, a copy of Schedule K-1, as shall be
reasonably necessary for inclusion by the Investor Limited Partner and the
Administrative Limited Partner in their federal income tax returns and required
state income tax and other tax returns. The General Partners shall send this
information to the Administrative Limited Partner for its review and approval
within 45 days after the end of each Fiscal Year. The General Partners hereby
acknowledge that the Investor Limited Partner considers it of paramount
importance that it file its information returns with the IRS in sufficient time
to enable all of its partners to file their tax returns by April 15 following
each Fiscal Year. Accordingly, the General Partners shall be liable to the
Investor Limited Partner, as liquidated damages, in the sum of $100.00 for each
day that such information is provided after the 45th day after the end of each
Fiscal Year. The Administrative Limited Partner shall have the right to review
and approve such information prior to the filing of the related tax returns with
the appropriate taxing authority. The Administrative Limited Partner shall have
the right to cause the Partnership to make any tax election (including, without
limitation, an election under Section 754 of the Code) which it determines to be
in the best interests of the Investor Limited Partner. At such time as the
General Partners have received the Consent of the Administrative Limited Partner
to the tax returns, the General Partners shall promptly file final tax returns
and simultaneously provide the Administrative Limited Partner with copies of
same.
Section 13.6 Asset Management Fee
Commencing on April 1, 1999 and for each year thereafter, the
Partnership shall pay to the Limited Partner a fee of $7,500 per annum, $3,500
payable on April 1st and the balance on October 1st (provided, however, that
such fee shall be payable only to the extent sufficient Cash Flow is available
pursuant to Section 9.2A, and any portion of such fee which cannot be paid shall
accrue without interest until there is sufficient Cash Flow or Sale or
Refinancing Transaction Proceeds to pay the outstanding accrued amount), for its
services in reviewing the informational reports, financial statements and tax
returns furnished to it pursuant to this Article 13. Such fee shall be adjusted
April 1 of each year thereafter by multiplying $7,500 by the CPI Adjustment as
of the adjustment date.
ARTICLE 14 FOREIGN PARTNERS
Section 14.1 Certification of Non-Foreign Status
A. Each Partner shall upon acquiring an Interest certify that he is not
a Foreign Person on forms to be provided by the General Partners at the time of
admission. 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.
B. Each Partner shall notify the General Partners if he becomes a
Foreign Person within 30 days of such change.
C. Prior to a disposition of a United States Real Property Interest or
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.
Section 14.2 Withholding of Certain Amounts Attributable to
Interests of Foreign Partners
A. In the event that either (i) the Partnership's actual or deemed
amount realized upon disposition of any United States Real Property Interest is
attributed to a Foreign Partner or (ii) the Partnership makes a distribution to
any Foreign Partner:
(i) 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;
(ii) The General Partners 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 required withholding payment
attributable to that Foreign Partner; and
(iii) The General Partners 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 14.2A(ii)
hereof.
B. For purposes of this Section 14.2, any Partner who fails to provide
a certification of a non-foreign status within five days after a request to do
so by the General Partners shall be treated as a Foreign Person.
ARTICLE 15 MISCELLANEOUS
Section 15.1 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.
Section 15.2 Power of Attorney
Each Partner hereby irrevocably constitutes and appoints the
Administrative Limited Partner and the President, Vice President and Secretary
of the Administrative Limited Partner, 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 document
requisite to carrying out the intention and purposes of the Partnership and this
Agreement, including, but not limited to, the execution, acknowledgment,
swearing to, delivery, filing, recording and publication of this Agreement and
amendments hereto, documents, conveyances, leases, contracts, loan documents
and/or counterparts thereof, the execution and filing of appropriate documents
with any Credit Agency or any Lender, and all other documents which such persons
reasonably deem necessary or appropriate:
A. To qualify or continue the Partnership as a limited
partnership;
B. To reflect an amendment of this Agreement;
C. To accomplish the purposes and carry out the powers
of the Partnership as set forth in this Agreement;
D. To reflect the dissolution and termination of the
Partnership; or
E. To effect transfers, admissions, Withdrawals and
substitutions of Partners as specifically provided under the terms of
this Agreement.
The power of attorney hereby granted is a special power of attorney coupled with
an interest and shall survive the subsequent death, incompetency, disability,
incapacity, dissolution, Bankruptcy or termination of any Partner. No Person
shall take any action as an attorney-in-fact of a Limited Partner which is not
expressly authorized by the terms of this Agreement or which would in any way
increase the liability of the Limited Partner beyond the liability expressly set
forth in this Agreement or which would otherwise materially adversely affect the
Limited Partner.
Section 15.3 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.
Section 15.4 Separability of Provisions
Each provision of this Agreement shall be considered separate and if
for any reason any provision or provisions herein (i) 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 (ii) would cause the a Limited Partner to be liable for the obligations
of the Partnership (other than under the rules, directives and regulations of
any Credit Agency) 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.
Section 15.5 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 (i) when personally delivered or telecopied, (ii) one
business day after the date when deposited with an overnight courier or (iii)
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:
A. If to the Partnership and/or the General Partners, to the
intended recipient at:
Homes for America Holdings, Inc.
1725 DeSales Street, NW, Suite 300
Washington, D.C. 20036
Attn: Robert MacFarlane
with a copy to:
Chernove & Associates
228 N. Plymouth Blvd.
Los Angeles, CA 90004-3834
Attn: Sheldon Chernove, Esq.
B. If to the Investor Limited Partner and/or the Administrative Limited
Partner, to the intended recipient at:
Alliant Asset Management Company LLC
12424 Wilshire Boulevard
Suite 1030
Los Angeles, California 90025
Attn: Shawn Horwitz
with a copy to:
Peabody & Brown
101 Federal Street
Boston, Massachusetts 02110
Attn: Robert H. Adkins, P.C.
Re: Matter 31108-12
Section 15.6 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.
Section 15.7 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.
Section 15.8 Entire Agreement
This Agreement, together with the Exhibits and Schedules hereto,
contains 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.
Section 15.9 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.
Section 15.10 Parties in Interest
Nothing herein shall be construed to be for the benefit of or
enforceable by any third party including, but not limited to, any creditor of
the Partnership.
Section 15.11 Amendments; Other Actions
A. This Agreement may not be amended except by the General Partners
with the Consent of all Partners, and, in each case, the approval, if required,
of each Credit Agency. In particular but not limiting the foregoing, all
Partners must give their Consent in writing to any amendment which would (i)
extend the term of the Partnership as set forth in Section 12.1 hereof, (ii)
amend this Section 15.11, (iii) increase or extend the liability or obligation
of the Investor Limited Partner or the Administrative Limited Partner, (iv)
increase the amount of Capital Contributions payable by the Investor Limited
Partner or the Administrative Limited Partner, (v) accelerate the date of
payment of any portion of the Investor Limited Partner Contribution, (vi) alter
the distribution or allocation to the Partners of any profits and losses and
distributions of the Partnership or (vii) alter the rights, powers and duties of
a General Partner without such General Partner's Consent.
B. 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.
Section 15.12 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.
Section 15.13 Further Assurances
The Partners shall 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.
Section 15.14 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.
Section 15.15 Attorneys' Fees
In the event that any court or arbitration proceeding is brought under
or in connection with this Agreement, the prevailing party in such proceeding
(whether at trial or on appeal) shall be entitled to recover from the other
party all costs, expenses, and reasonable attorneys' fees incident to any such
proceeding. The term "prevailing party" as used herein shall mean the party in
whose favor the final judgment or award is entered in any such judicial or
arbitration proceeding.
Section 15.16 Meetings
Meetings of the Partnership may be called by the General Partners, the
Administrative Limited Partner or the Investor 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
no cost. Upon receipt of a request from any Person entitled to call a meeting
stating the purposes of the meeting, the General Partners or the Administrative
Limited Partner shall provide the Partners, within ten days after receipt of
such request, notice of a meeting and the purpose of such meeting to be held on
a date not less than 15 nor more than 60 days after receipt of such request, at
a time and place within or without the State convenient to the Partners.
Included within the notice shall be a detailed statement of the action proposed,
including a verbatim statement of the wording of any resolution proposed for
adoption by the Investor Limited Partner and any proposed amendment to this
Agreement. Said notice shall provide for proxies or written consents which
specify a choice between approval and disapproval of each matter to be acted
upon at a meeting. A Majority in Interest of Limited Partners entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting.
Section 15.17 Enforceability
It is agreed that the rights granted to the Administrative Limited
Partner and the Investor Limited Partner hereunder are of a special and unique
kind and character and that, if there is a breach by the General Partners of any
material provision of this Agreement, the Administrative Limited Partner and the
Investor Limited Partner would not have any adequate remedy at law. It is
expressly agreed, therefore, that the rights of the Administrative Limited
Partner and the Investor Limited Partner hereunder shall be enforceable by a
decree of specific performance. Such remedy shall be cumulative and not
exclusive and shall be in addition to any and all other remedies the
Administrative Limited Partner and the Investor Limited Partner may have
pursuant to this Agreement, at law, or in equity.
Section 15.18 HUD Provisions
If the loan is to be insured by HUD, acting by and through the Federal
Housing Administration ("FHA") the Partnership must comply with the HUD
requirements which can be found, in part, in the instructions to the Regulatory
Agreement and HUD Notice H 95-66 dated July 25, 1995.
In addition to being a single asset entity with a term longer than the
term of the mortgage, HUD requires that the Partnership formation documents
contain the following provisions:
A. So long as the Secretary of The Department of Housing and Urban
Development ("Secretary") or the Secretary's successors or assigns is the
insurer or holder to the note secured by the mortgage on Prairie Village
Apartments, in Elkhart, Indiana ( "Apartment Complex"), no amendment to this
Partnership Agreement that results in any of the following will have any force
or effect without the prior written consent of the Secretary:
(a) Any amendment that modified the term of the
Partnership Agreement;
(b) Any amendment that activities the requirements
that a HUD previous participation certification be obtained from any
additional partner;
(c) Any amendment that in any way affects the note, the
mortgage, the security agreement or the regulatory agreement between
HUD and the Partnership (the "Regulatory Agreement");
(d) Any amendment that would authorize any partner other than
the managing general partner to bind the Partnership for all matters
concerning the Apartment Complex which require HUD's consent or
approval;
(e) Any change in the General Partners;
(f) Any change in a Guarantor of any obligation to the
Secretary, or
(g) Any amendment of any provision which has been added to
this Partnership Agreement pursuant to HUD requirements.
B. The Partnership is authorized to execute the note, mortgage,
security agreement, Regulatory Agreement and the other loan documents required
by the Secretary.
C. Any incoming partner must as a condition of receiving an interest in
the Partnership agrees to be bound by the note, mortgage, security agreement and
Regulatory Agreement and any other document required in connection with the FHA
insured loan to the same extent and on the same terms as the other partners.
D. Notwithstanding any other provision contained herein, upon any
dissolution, no title or right to possession and control of the Apartment
Complex, and no right to collect the rents from the Project, shall pass to any
person who is not bound by the Regulatory Agreement in a manner satisfactory to
the Secretary.
E. Notwithstanding any other provision contained herein, in the event
that any provision of this Partnership Agreement conflicts with the Regulatory
Agreement, the provision of the Regulatory Agreement shall control.
F. So long as the Secretary or the Secretary's successors or assigns is
the issuer or holder of the note on the Apartment Complex, (i) the Partnership
may not voluntarily be dissolved and (ii) the General Partner may not be
voluntarily changed to a limited liability company without the prior written
consent of the Secretary.
G. All partners of the Partnership, and any assignee of a partner,
agree to be liable in their individual capacities to HUD with respect to the
following matters:
(a) For funds or property of the Apartment Complex coming into their
hands, which by the provisions of the Regulatory Agreement, they are not
entitled to retain; and
(b) For their own acts and deed, or acts and deeds of others which they
have authorized, in violation of the provisions of the Regulatory Agreement.
H. Any partner, including any incoming partner, upon assuming any of
the following positions must meet the applicable requirements for HUD previous
participation clearance: (i) general partner or (ii) limited partner with a
twenty-five percent (25%) or greater financial interest in the Partnership.
[Page 77 ends here]
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
GENERAL PARTNER(S):
Prairie Village - Homes for America, Inc., an Indiana corporation
/s/ Robert A. MacFarlane
By: -------------------------------
Robert A. MacFarlane, President
PREEXISTING LIMITED PARTNER(S):
Homes For America Holdings, Inc., a Nevada corporation
/s/ Robert A. MacFarlane
By: -------------------------------------
Robert A. MacFarlane, President
INVESTOR LIMITED PARTNER:
Alliant Tax Credit Fund V Limited Partnership, a Massachusetts limited
partnership
By: Alliant V LLC, a Massachusetts limited liability company
By: Alliant, Inc., a Florida corporation, its manager
/s/ Shawn Horwitz
By: ------------------------------
Shawn Horwitz, President
ADMINISTRATIVE LIMITED PARTNER:
Alliant Tax Credit V, Inc., a Florida corporation
/s/ Shawn Horwitz
By: ------------------------------
Shawn Horwitz, President
ACKNOWLEDGMENTS
STATE OF ___________________ )
) ss.
COUNTY OF ________________ )
On ___________________, 199__ before me, the undersigned, a Notary
Public in and for said State, personally appeared Robert A. MacFarlane,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person who executed the within instrument as the President of Prairie
Village - Homes for America, Inc. the corporation that executed the within
instrument, and acknowledged to me that such corporation executed the within
instrument.
WITNESS my hand and official seal.
-----------------------------------
Notary Public
STATE OF ___________________ )
) ss.
COUNTY OF ________________ )
On ___________________, 199__ before me, the undersigned, a Notary
Public in and for said State, personally appeared Robert A. MacFarlane,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person who executed the within instrument as the President of Homes For
America Holdings, Inc., the corporation that executed the within instrument, and
acknowledged to me that such corporation executed the within instrument.
WITNESS my hand and official seal.
-----------------------------------
Notary Public
STATE OF CALIFORNIA )
) ss.
COUNTY OF _________________ )
On ______________________, 199___ before me, the undersigned, a Notary
Public in and for said State, personally appeared Shawn Horwitz, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same in his authorized capacity as (a) the President of
Alliant, Inc., which is the manager of Alliant V, LLC, which is the general
partner of Alliant Tax Credit Fund V Limited Partnership, and (b) the President
of Alliant Tax Credit V, Inc., and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
-----------------------------------
Notary Public
<PAGE>
PARTNER INFORMATION SCHEDULE
TO THE
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
MIDDLEBURY ELKHART, L.P.
Name and Address Capital Contribution
General Partners:
Prairie Village - Homes for America, Inc. $100.00
1725 DeSales Street, Suite 300
Washington, D.C. 20036
Administrative Limited Partner:
Alliant Tax Credit V, Inc. $100.00
12424 Wilshire Boulevard, Suite 1030
Los Angeles, California 90025
Investor Limited Partner:
Alliant Tax Credit Fund V Limited Partnership $1,060,506
12424 Wilshire Boulevard, Suite 1030 (subject to adjustment as provided
Los Angeles, California 90025 in this Agreement)
<PAGE>
SCHEDULE TO
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MIDDLEBURY ELKHART, L.P.
As used in the Agreement, the following references to the following
matters set forth in the Schedule shall be to the following:
============================== =========== =====================================
Term Reference Description or Definition
in Document
============================== =========== =====================================
Accountant Definition Thomas V. Stephen & Company
============================== =========== =====================================
Architect Definition CTG Associates, Inc.
============================== =========== =====================================
Bonds Definition Tax-exempt first lien Series A Bonds
issued by the City of Elkhart,
Indiana in the amount of
$2,380,000. Taxable second lien
Series B Bonds issued by the City of
Elkhart, Indiana in the amount of
$850,000.
============================== =========== =====================================
Completion Date Definition September 30, 1999
============================== =========== =====================================
Construction Definition Rehabilitation
============================== =========== =====================================
Construction Agreements Definition Dated July 17, 1998 between Homes
for America Holdings, Inc. and Mast
Construction LLC
============================== =========== =====================================
Contractor Definition Mast Construction LLC
============================== =========== =====================================
Credit Allocation Definition $129,460 annually
============================== =========== =====================================
Lender Definition The Patrician Financial Company
Limited Partnership
============================== =========== =====================================
Mortgage Loan Definition Construction/permanent financing in
the amount of $3,235,000 provided by
the Lender and funded from the
proceeds of the Bonds.
============================== =========== =====================================
Original Agreement Definition Dated July 21, 1997
============================== =========== =====================================
Original Certificate Definition Certificate of Limited Partnership
dated July 16, 1997 and filed with
the Indiana Secretary of State on
July 23, 1997.
============================== =========== =====================================
Projected Credits Definition $33,230 for 1999, $124,750 for 2000,
$129,330 per year for 2001 through
2008, and $100,680 for 2009.
============================== =========== =====================================
Tax Credit Percentage Definition 82.0%
============================== =========== =====================================
Principal Office ss.2.2 One North Capital Avenue
Indianapolis, IN 46204
============================== =========== =====================================
Resident Agent ss.2.3 CT Corporation System
============================== =========== =====================================
Capital Contribution of $100
General Partners ss.3.1
============================== =========== =====================================
Closing Date ss.3.9 December 16, 1998
============================== =========== =====================================
Development Services Agreement ss.3.9B(iv) Dated August 1, 1998
============================== =========== =====================================
Operating Deficit Guaranty ss.5.9C 36 months following the date Rental
Period Achievement is achieved
============================== =========== =====================================
Operating Deficit Reserve ss.5.9D $120,000
Amount
============================== =========== =====================================
Initial Management Agent ss.6.6E Mathews Click Revel & Henry, LLC
============================== =========== =====================================
First Year of Credit Period ss.6.10D 1999
============================== =========== =====================================
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT B
PERSONALTY
Each Tax Credit Apartment Unit will be equipped with the following:
1. electric range and oven
2. range hood
3. dishwasher
4. refrigerator/freezer
5. garbage disposal
6. kitchen cabinets
7. countertops and sink
8. air conditioning
9. carpeting
<PAGE>
EXHIBIT C
COMPLETION CERTIFICATE
THIS CERTIFICATE is made as of ________________, 199_, by the
undersigned, an architect duly licensed and registered in the State of Indiana
who has prepared final working plans and detailed specifications for
________________ dated _____________, attached hereto as Annex C-1 and referred
to in the Partnership Agreement among Alliant Tax Credit Fund V Limited
Partnership, a Massachusetts limited partnership ("Investor Limited Partner"),
and certain other parties in connection with the construction of improvements on
certain real property (the "Improvements"), located in Elkhart, County of
Elkhart, State of Indiana, such Improvements being made to a project known as
Prairie Village (the "Apartment Complex").
The undersigned hereby certifies that (i) the Improvements have been
completed in substantial accordance with the aforesaid plans and specifications,
(ii) a permanent Certificate of Occupancy and all other permits required for the
continued use and occupancy of the Apartment Complex have been issued with
respect thereto by the governmental agencies having jurisdiction thereover, and
(iii) the Improvements are in compliance with all requirements and restrictions
of all governmental authorities having jurisdiction, including, without
limitation, all applicable zoning, building, environmental, fire, and health
ordinances, rules and regulations.
This Certificate is made as of the date first written above to induce
the Investor Limited Partner to take certain actions under the Partnership
Agreement and consummate the transactions contemplated thereby.
ARCHITECT:
CTG Associates, Inc.
By: _________________________
_________________, Principal
<PAGE>
EXHIBIT D
DUE DILIGENCE DOCUMENTS
- ------------------- --------- --------------------------------------------------
Documentation/Summary
- ------------------- --------- --------------------------------------------------
Basic Deal Information - 100
=================== --------- --------------------------------------------------
101. Syndication Agreement/Equity Letter.
=================== --------- --------------------------------------------------
102. Development Team Information.
=================== --------- --------------------------------------------------
103. Apartment Complex Information/Executive Summary.
=================== --------- --------------------------------------------------
104. Investor Limited Partner Investment Committee
Package.
=================== --------- --------------------------------------------------
105. Investment Analysis (Final).
=================== --------- --------------------------------------------------
106. Alliant Staff Site Visit Report.
================================================================================
Partnership Information - 200
=================== --------- --------------------------------------------------
201. Initial Agreement forming Partnership.
=================== --------- --------------------------------------------------
202. Amendment to Partnership Agreement.
=================== --------- --------------------------------------------------
203. Initially filed Certificate.
=================== --------- --------------------------------------------------
204. Amendment to Certificate.
=================== --------- --------------------------------------------------
205. Evidence of qualification in foreign jurisdiction.
=================== --------- --------------------------------------------------
206. Partnership Financial Statements.
=================== --------- --------------------------------------------------
207. Partnership Tax Returns.
=================== --------- --------------------------------------------------
208. Guaranty of General Partner Obligations
=================== --------- --------------------------------------------------
209. General Partner Closing Certificate
=================== --------- --------------------------------------------------
210. Historical Audit.
=================== --------- --------------------------------------------------
211. Wire Instructions for Capital Contribution
Distributions.
=================== --------- -------------------------------------------------
212. Closing Memo.
===============================================================================
Construction Loan - 300
=================== --------- -------------------------------------------------
301. Application.
=================== --------- -------------------------------------------------
302. Commitment Letter.
=================== --------- -------------------------------------------------
303. Promissory Note.
=================== --------- -------------------------------------------------
304. Loan Agreement.
=================== --------- -------------------------------------------------
305. Mortgage/Deed of Trust.
=================== --------- -------------------------------------------------
306. Regulatory Agreement.
=================== --------- -------------------------------------------------
307. Assignment of Rents.
=================== --------- -------------------------------------------------
308. Assignment of construction, architectural
and engineering documents.
=================== --------- --------------------------------------------------
309. Security Agreement and UCC Financing Statements.
=================== --------- --------------------------------------------------
310. Loan Guaranty.
=================== --------- --------------------------------------------------
311. Legal Opinion.
=================== --------- --------------------------------------------------
312. Loan Disbursement Request.
=================== --------- --------------------------------------------------
313. Replacement Reserve & Security Agreement.
=================== --------- --------------------------------------------------
314. Buy-Sell Agreement.
=================== --------- --------------------------------------------------
315. Agreement for Amendment of Documents.
=================== --------- --------------------------------------------------
316. Representations, Warranty & Indemnity Agreement.
=================== --------- --------------------------------------------------
317. Rent Escrow Agreement.
=================== --------- --------------------------------------------------
318. Non-Transfer Agreement.
=================== --------- --------------------------------------------------
319. Assignment of Rents & Security Agreement.
=================== --------- --------------------------------------------------
320. Account Consent & Acknowledgment Agreement.
=================== --------- --------------------------------------------------
321. Indemnification Agreement.
=================== --------- --------------------------------------------------
322. Amortization Schedule.
=================== --------- --------------------------------------------------
323. Miscellaneous Documents.
================================================================================
Mortgage Loan - 400
=================== --------- --------------------------------------------------
401. Application.
=================== --------- --------------------------------------------------
402. Commitment Letter.
=================== --------- --------------------------------------------------
403. Promissory Note.
=================== --------- --------------------------------------------------
404. Loan Agreement.
=================== --------- --------------------------------------------------
405. Mortgage/Deed of Trust.
=================== --------- --------------------------------------------------
406. Regulatory Agreement.
=================== --------- --------------------------------------------------
407. Assignment of Rents.
=================== --------- --------------------------------------------------
408. Assignment of construction documents.
=================== --------- --------------------------------------------------
409. Security Agreement and UCC Financing Statement.
=================== --------- --------------------------------------------------
410. Loan Guaranty.
=================== --------- --------------------------------------------------
411. Legal Opinion.
=================== --------- --------------------------------------------------
412. Loan Disbursement Request.
=================== --------- --------------------------------------------------
413. Amortization Schedule.
=================== --------- --------------------------------------------------
414. Miscellaneous Documents.
================================================================================
Project Development, Construction Documents - 500
=================== --------- --------------------------------------------------
501. Building Construction Plans
=================== --------- --------------------------------------------------
502. Building Construction Specifications.
=================== --------- --------------------------------------------------
503. Engineer/Architect's Contract.
=================== --------- --------------------------------------------------
504. Construction Contract.
=================== --------- --------------------------------------------------
505. Payment Bond.
=================== --------- --------------------------------------------------
506. Performance Bond.
=================== --------- --------------------------------------------------
507. Development Services/Fee Agreement.
=================== --------- --------------------------------------------------
508. Environmental Phase I Assessment.
=================== --------- --------------------------------------------------
509. Desk Review of Phase I.
=================== --------- --------------------------------------------------
510. Zoning Designation and Availability of Utilities.
=================== --------- --------------------------------------------------
511. Building Permits.
=================== --------- --------------------------------------------------
512. Certificates of Completion/Occupancy.
=================== --------- --------------------------------------------------
513. Construction Cost Breakdown/Schedule.
=================== --------- --------------------------------------------------
514. Geotechnical Report.
=================== --------- --------------------------------------------------
515. Alliant Pre-Construction Analysis Report.
=================== --------- --------------------------------------------------
516. Completion Certificate (Architect).
=================== --------- --------------------------------------------------
517. Purchase and Sale Agreement.
=================== --------- --------------------------------------------------
518. Deed.
=================== --------- --------------------------------------------------
519. Settlement Statement.
=================== --------- --------------------------------------------------
520. Property Tax Bill.
================================================================================
Project Operating Documents - 600
=================== --------- --------------------------------------------------
601. Real Estate Tax Deferral/Abatement Agreement.
=================== --------- --------------------------------------------------
602. Property Management Agreement.
=================== --------- --------------------------------------------------
603. Property Management Plan.
=================== --------- --------------------------------------------------
604. Sources and Uses Statement.
=================== --------- --------------------------------------------------
605. Apartment Lease Form.
=================== --------- --------------------------------------------------
606. Master Lease/Operating Deficit Support Agreement.
=================== --------- --------------------------------------------------
607. Common Facilities Joint Use/Access Services
Information.
=================== --------- --------------------------------------------------
608. Pro Formas/Sources and Uses.
=================== --------- --------------------------------------------------
609. Monthly Operating Rates for the Past 12 Months.
=================== --------- --------------------------------------------------
610. Termite Inspection Report and/or Bond.
=================== --------- --------------------------------------------------
611. Current Bank Statement.
=================== --------- --------------------------------------------------
612. Current Bank Statement (Security Deposits).
=================== --------- --------------------------------------------------
613. Laundry Equipment Lease (if applicable).
================================================================================
Low-Income Tax Credit Material - 700
=================== --------- --------------------------------------------------
701. Credit Reservation Application.
=================== --------- --------------------------------------------------
702. Credit Reservation.
=================== --------- --------------------------------------------------
703. Carryover Application.
=================== --------- --------------------------------------------------
704. Carryover Allocation.
=================== --------- --------------------------------------------------
705. Evidence of 10% Costs Incurred (include
accountant's certification, invoices, checks, etc.
=================== --------- --------------------------------------------------
706. Local housing authority/public utility
determination of utility allowances.
=================== --------- --------------------------------------------------
707. Credit Allocation/Form 8609.
=================== --------- --------------------------------------------------
708. Confirmation that per building credit allocations
match actual per building low income tenant
occupancy (project less than 100% low income).
=================== --------- --------------------------------------------------
709. Election to Fix Credit Percentage.
=================== --------- --------------------------------------------------
710. Tax Credit Regulatory Agreement/Restrictive
Covenants.
=================== --------- --------------------------------------------------
711. Evidence of ten year holding period; waiver of
holding period.
=================== --------- --------------------------------------------------
712. Evidence of eligibility for 130% increase in
credit amount.
=================== --------- --------------------------------------------------
713. Evidence of participation by nonprofit sponsor.
=================== --------- --------------------------------------------------
714. Developer Cost Certification or CPA Basis
Verification.
=================== --------- --------------------------------------------------
715. Section 42 Compliance Procedures.
=================== --------- --------------------------------------------------
716. Certified Rent Roll (Section 42 rents).
=================== --------- --------------------------------------------------
717. Current Leases w/Income Verification.
=================== --------- --------------------------------------------------
718. Subsidy Agreement (if applicable).
================================================================================
Property Insurance - 800
=================== --------- --------------------------------------------------
801. Builder's Risk Insurance.
=================== --------- --------------------------------------------------
802. Casualty Insurance.
=================== --------- --------------------------------------------------
803. Liability Insurance.
================================================================================
Title Information - 900
=================== --------- --------------------------------------------------
901. Title Policy Commitment.
=================== --------- --------------------------------------------------
902. Title Policy.
=================== --------- --------------------------------------------------
903. Documents evidencing title exceptions.
=================== --------- --------------------------------------------------
904. Property survey w/flood plain certification or
As-Built Survey.
================================================================================
Property Financial Information - 1000
=================== --------- --------------------------------------------------
1001. Property Appraisal.
=================== --------- --------------------------------------------------
1002. Property Market Study.
=================== --------- --------------------------------------------------
1003. Property Development Budget.
=================== --------- --------------------------------------------------
1004. Property Operating Budget.
================================================================================
General Partners' Information - 2000
=================== --------- --------------------------------------------------
2001. Resume.
=================== --------- --------------------------------------------------
2002. Financial Statement.
=================== --------- --------------------------------------------------
2003. Questionnaire.
=================== --------- --------------------------------------------------
2004. Credit Check Authorization and Credit Report.
================================================================================
Corporate General Partners - 3000
=================== --------- --------------------------------------------------
3001. Articles of Organization.
=================== --------- --------------------------------------------------
3002. Corporate By-laws.
=================== --------- --------------------------------------------------
3003. Relevant Corporate Votes.
=================== --------- --------------------------------------------------
3004. Controlling Person Information.
================================================================================
Guarantors of Corporate General Partners' Obligations - 4000
=================== --------- --------------------------------------------------
4001. Resume.
=================== --------- --------------------------------------------------
4002. Financial Statement.
=================== --------- --------------------------------------------------
4003. Questionnaire.
=================== --------- --------------------------------------------------
4004. Credit Check Authorization and Credit Report.
================================================================================
Contractor Information - 5000
=================== --------- --------------------------------------------------
5001. Resume.
=================== --------- --------------------------------------------------
5002. Financial Statement.
=================== --------- --------------------------------------------------
5003. Questionnaire.
=================== --------- --------------------------------------------------
5004. Credit Check Authorization and Credit Report.
================================================================================
Architect Information - 6000
=================== --------- --------------------------------------------------
6001. Resume.
=================== --------- --------------------------------------------------
6002. Errors & Omissions Insurance.
================================================================================
Property Management Agent - 7000
=================== --------- --------------------------------------------------
7001. Resume.
=================== --------- --------------------------------------------------
7002. Financial Statement.
=================== --------- --------------------------------------------------
7003. Questionnaire.
=================== --------- --------------------------------------------------
7004. Credit Check Authorization and Credit Report.
=================== ========= ==================================================
7005. Fidelity Bond.
=================== ========= ==================================================
<PAGE>
EXHIBIT E
CERTIFICATE
The undersigned is a duly authorized corporate officer of Prairie
Village - Homes for America, Inc., the General Partner of Middlebury Elkhart,
L.P., an Indiana limited partnership (the "Partnership"), and hereby certifies
to Alliant Tax Credit Fund V Limited Partnership, a Massachusetts limited
partnership ("Investor Limited Partner"), and Alliant Tax Credit V, Inc., a
Florida corporation (the "Administrative Limited Partner"), in connection with
Investor Limited Partner's and the Administrative Limited Partner's acquisition
of the Interests (as that and all other capitalized terms used herein are
defined in the Partnership Agreement (the "Partnership Agreement") by and among
the General Partners, the Investor Limited Partner, the Administrative Limited
Partner and certain other parties), as follows:
1. All action required to be taken by the General Partners prior to the
admission of the Investor Limited Partner and the Administrative Limited Partner
as Partners of the Partnership has been taken and subject to obtaining the
approvals specified in Section 4.1 of the Partnership Agreement and upon (i)
compliance with all other terms set forth in the Partnership Agreement, (ii) the
execution of the Partnership Agreement by the parties thereto, (iii) the filing
or recording such Partnership Agreement or a certificate summarizing the
provisions thereof in the appropriate jurisdiction, (iv) the payment of any
required filing fees, and (v) any publications required by the partnership laws
of the appropriate jurisdiction, then (a) the Administrative Limited Partner
will become such an administrative limited partner of the Partnership, (b) the
Investor Limited Partner will become the "Investor Limited Partner" of the
Partnership with its liability limited to the Investor Limited Partner
Contribution under the Partnership Agreement, and (c) the Investor Limited
Partner and the Administrative Limited Partner will be entitled to all the
rights of Partners under the Partnership Agreement, as such rights may be
limited by laws of the jurisdiction of organization of the Partnership.
2. All of the representations and warranties of the General Partners
set forth in the Partnership Agreement are true and correct in all respects as
of the Closing Date as if made thereon and the General Partners have performed
all covenants required to be performed by them on or before the Closing.
3. Chernove & Associates is authorized to rely upon this Certificate in
connection with the issuance of any legal and tax opinions by Chernove &
Associates to any parties associated with the Partnership.
This Certificate is made on the date hereof as a condition to Closing
under the Partnership Agreement and the Exhibits and Schedules thereto.
Dated as of _____________, 199___
Prairie Village - Homes for America,
Inc.
/s/ Robert A. MacFarlane
By:-----------------------------
Robert A. MacFarlane, President
<PAGE>
EXHIBIT F
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT is made as of December 1, 1998, is by Homes for
America Holdings, Inc. (hereinafter referred to, even if only one, as the
"Guarantors"), whose address is set forth below, for the benefit of ALLIANT TAX
CREDIT FUND V LIMITED PARTNERSHIP, a Massachusetts limited partnership (the
"Investor Limited Partner"), whose address is set forth below.
WITNESSETH:
WHEREAS, Prairie Village - Homes for America, Inc., an Indiana
corporation (hereinafter referred to, even if only one, as the "General
Partners"), is the general partner of Middlebury Elkhart, L.P., an Indiana
limited partnership (the "Partnership");
WHEREAS the Partnership is governed by its Amended and Restated
Agreement of Limited Partnership dated as of date hereof (the "Agreement");
WHEREAS, Homes for America Holdings, Inc. (the "Developer"),
a Nevada corporation, and the Partnership entered into that certain Development
Agreement dated August 1, 1998 (the "Development Services Agreement");
WHEREAS, the Investor Limited Partner has been requested to enter into
the Agreement with the General Partners;
WHEREAS, each Guarantor is an affiliate of the General Partners, and
believes it shall substantially benefit, directly or indirectly, from the
Investor Limited Partner's entering into the Agreement with the General
Partners; and
WHEREAS, as a condition to entering into the Agreement and being
admitted to the Partnership, the Investor Limited Partner has required the
Guarantors to guarantee to the Investor Limited Partner certain obligations of
the General Partners under the Agreement, and certain other items as herein set
forth;
NOW, THEREFORE, in order to induce the Investor Limited Partner to
enter into the Agreement and the Partnership in consideration of the premises
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each Guarantor hereby jointly and severally
covenants and agrees as follows:
1. Each Guarantor irrevocably and unconditionally fully guarantees the
due, prompt and complete performance of each and every one of the following
obligations:
(a) the payment and performance by the General Partners of
each and every one of the following obligations under the following
provisions of the Partnership Agreement:
(i) the obligation to effectuate Completion in accordance with the requirements
of Section 5.9A;
(ii) the obligation to pay all Development Deficits under Section 5.9B;
(iii) the obligation to fund amounts payable to the Investor Limited Partner by
reason of any Tax Credit Shortfalls as provided under Section 3.8;
(iv) the obligation to fund Operating Deficits under Section 5.9C;
(v) the obligation to indemnify against environmental risks under Section 6.7B;
and
(vi) the obligations under Section 7.4 in the event of a rescission; and
(b) the due, prompt and complete payment of all costs and expenses (including,
without limitation, reasonable attorneys' fees) incurred by the Investor Limited
Partner in the enforcement of this Guaranty Agreement against the Guarantors.
(The obligations described in this Paragraph 1 are hereinafter collectively
referred to as the "Indebtedness").
2. Each Guarantor hereby grants to each of the Limited Partners, in the
its uncontrolled discretion, and without notice to any Guarantor, the power and
authority to deal in any lawful manner with the Indebtedness and the other
obligations guaranteed hereby, and without limiting the generality of the
foregoing, further power and authority, from time to time:
(A) to renew, compromise, extend, accelerate or otherwise
change the time or place of payment of or to otherwise change the terms
of the Indebtedness;
(B) to modify or to waive any of the terms of the Agreement,
the Development Agreement and/or any other obligations guaranteed
hereby;
(C) to take and hold security for the payment of the
Indebtedness and/or performance of the other obligations guaranteed
hereby and to impair, exhaust, exchange, enforce, waive or release any
such security;
(D) to direct the order or manner of sale of any such security
as the Limited Partners, in their discretion, may determine;
(E) to grant any indulgence, forbearance or waiver with
respect to the Indebtedness or any of the other obligations guaranteed
hereby;
(F) to release or waive rights against any one or more
Guarantors without releasing or waiving any rights against any other
Guarantor; and/or
(G) to agree to any valuation by the Limited Partners of any
collateral securing payment of any of the Indebtedness in any
proceedings under the United States Bankruptcy Code concerning either
Limited Partner or the Guarantors.
The liability of each Guarantor hereunder shall not be affected,
impaired or reduced in any way by any action taken by any Limited Partner under
the foregoing provisions or any other provision hereof, or by any delay, failure
or refusal of any Limited Partner to exercise any right or remedy it may have
against the General Partners or any other person, firm or corporation, including
other guarantors, if any, liable for all or any part of the Indebtedness or any
of the other obligations guaranteed hereby.
3. The Guarantors agree that if any of the Indebtedness is not fully
and timely paid or performed according to the tenor thereof, whether by
acceleration or otherwise, the Guarantors shall immediately, upon receipt of
written demand therefor from either Limited Partner, pay all of the Indebtedness
hereby guaranteed in like manner as if the Indebtedness constituted the direct
and primary obligation of the Guarantors. The Guarantors shall not have any
right of subrogation as a result of any payment hereunder or any other payment
made by the Guarantors or a Guarantor on account of the Indebtedness, and each
Guarantor hereby waives, releases and relinquishes any claim based on any right
of subrogation, any claim for unjust enrichment or any other theory that would
entitle a Guarantor to a claim against the General Partners based on any payment
made hereunder or otherwise on account of the Indebtedness.
4. This Guaranty Agreement and the obligations of the Guarantors
hereunder shall be continuing and irrevocable until the Indebtedness has been
satisfied in full. Notwithstanding the foregoing or anything else set forth
herein, and in addition thereto, if at any time all or any part of any payment
received by a Limited Partner from a Guarantor under or with respect to this
Guaranty Agreement is or must be rescinded or returned for any reason whatsoever
(including, but not limited to, determination that said payment was a voidable
preference or fraudulent transfer under insolvency, bankruptcy or reorganization
laws), then Guarantors' obligations hereunder shall, to the extent of the
payment rescinded or returned, be deemed to have continued in existence,
notwithstanding such previous receipt of payment by the Limited Partner, and
Guarantors' obligations hereunder shall continue to be effective or be
reinstated as to such payment, all as though such previous payment to the
Limited Partner had never been made. The provisions of the foregoing sentence
shall survive termination of this Guaranty Agreement, and shall remain a valid
and binding obligation of each Guarantor until satisfied.
5. Each Guarantor hereby waives notice of acceptance of this Guaranty
Agreement by the Limited Partners and this Guaranty Agreement shall immediately
be binding upon each Guarantor. Any Guarantor who executes this Agreement shall
be fully bound hereby regardless of whether or not any other Guarantor
subsequently executes this Guaranty Agreement.
6. Each Guarantor hereby waives and agrees not to assert or take
advantage of:
(A) any right to require the General Partners to proceed
against any other person or to proceed against or exhaust any security
held by the General Partners at any time or to pursue any other remedy
in the General Partner's power before proceeding against any one or
more Guarantors hereunder;
(B) any right to require any Limited Partner to proceed
against the General Partners or any other person or to proceed against
or exhaust any security held by a Limited Partner at any time or to
pursue any other remedy in Limited Partner's power before proceeding
against any one or more Guarantors hereunder;
(C) the defense of the statute of limitations in any action
hereunder or in any action for the collection of the Indebtedness or
the performance of any other obligations guaranteed hereby;
(D) any defense that may arise by reason of the incapacity,
lack of authority, death or disability of any other person or persons
or the failure of a Limited Partner to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of
any other person or persons;
(E) except as otherwise provided for herein, demand,
presentment for payment, notice of non-payment, protest, notice of
protest and all other notices of any kind, including, without
limitation, notice of the existence, creation or incurring of any new
or additional indebtedness or obligation or of any action or non-action
on the part of a Limited Partner or any endorser or creditor of a
Limited Partner or any Guarantor or on the part of any other person
whomsoever under this or any other instrument in connection with any
obligation or evidence of indebtedness held by a Limited Partner or in
connection with the Indebtedness;
(F) any defense based upon an election of remedies by a
Limited Partner, the right of Guarantors to proceed against a Limited
Partner for reimbursement, or both;
(G) any election by a Limited Partner to exercise any right or
remedy it may have against the Partnership or any security held by a
Limited Partner, including, without limitation, the right to foreclose
upon any such security by judicial or nonjudicial sale, without
affecting or impairing in any way the liability of Guarantors
hereunder, except to the extent the indebtedness has been paid, and the
Guarantors waive any default arising out of the absence, impairment or
loss of any right of reimbursement, contribution or subrogation or any
other right or remedy of the Guarantors against the Partnership or any
such security whether resulting from such election by a Limited Partner
or otherwise. The Guarantors understand that if all or any part of the
liability of the Partnership to each Limited Partner for the
Indebtedness is secured by real property the Guarantors shall be liable
for the full amount of their liability hereunder, notwithstanding
foreclosure on such real property by trustee sale or any other reason
impairing the Guarantors' right to proceed against the Partnership; and
(H) all duty or obligation on the part of the Limited Partners
to perfect, protect, not impair, retain or enforce any security for the
payment of the Indebtedness or performance of any of the other
obligations guaranteed hereby.
7. All existing and future indebtedness of the General Partners to the
Guarantors or to any person controlled or owned in whole or in part by any of
the Guarantors and, the right of the Guarantors to withdraw or to cause or
permit any person controlled or owned in whole or in part by any of the
Guarantors to withdraw any capital invested by any Guarantor or such person in
the General Partners, is hereby subordinated to the Indebtedness at any time
after a default exists and continues under the Indebtedness. Furthermore,
without the prior written Consent of the Investor Limited Partner, such
subordinated indebtedness shall not be paid and such capital shall not be
withdrawn in whole or in part nor shall any Guarantor accept or cause or permit
any person controlled or owned in whole or in part by a Guarantor to accept any
payment of or on account of any such subordinated indebtedness or as a
withdrawal of capital at any time after a default exists under the Indebtedness
for as long as such default continues. Any payment received by the Guarantors in
violation of this Guaranty Agreement shall be received by the person to whom
paid in trust for the Limited Partners, and Guarantors shall cause the same to
be paid to the Limited Partners immediately on account of the Indebtedness. No
such payment shall reduce or affect in any manner the liability of the
Guarantors under this Guaranty Agreement.
8. The amount of each Guarantor's liability and all rights, powers and
remedies of the Limited Partners hereunder shall be cumulative and not
alternative and such rights, powers and remedies shall be in addition to all
rights, powers and remedies given to the Limited Partners under the Agreement,
any document or agreement relating in any way to the terms and provisions
thereof or otherwise by law. With respect to each Guarantor, this Guaranty
Agreement is in addition to and exclusive of the guaranty of any other Guarantor
executing this Guaranty Agreement or any other person or entity which guarantees
the Indebtedness and/or the other obligations guaranteed hereby.
9. The liability of each Guarantor under this Guaranty Agreement shall
be an absolute, direct, immediate and unconditional guarantee of payment and not
of collectability. The obligations of each Guarantor hereunder are independent
of the obligations of the General Partners or any other party which may be
initially or otherwise responsible for performance or payment of the obligations
hereunder guaranteed and each other Guarantor, and, in the event of any default
hereunder, a separate action or actions may be brought and prosecuted against
any one or more Guarantors, whether or not the General Partners are joined
therein or a separate action or actions are brought against the General
Partners. The Limited Partners may maintain successive actions for other
defaults. The Limited Partner's rights hereunder shall not be exhausted by its
exercise of any of its rights or remedies or by any such action or by any number
of successive actions until and unless the Indebtedness has been paid in full.
10. Each Limited Partner, in its sole discretion, may at any time enter
into agreements with the General Partners or with any other person to amend,
modify or change the Agreement or any document or agreement relating in any way
to the terms and provisions thereof, or may at any time waive or release any
provision or provisions thereof and, with reference thereto, may make and enter
into all such agreements as the Limited Partner may deem proper or desirable,
without any notice or further assent from any Guarantor and without in any
manner impairing or affecting this Guaranty Agreement or any of the rights of
the Limited Partners or each Guarantor's obligations hereunder.
11. The Guarantors hereby agree to pay to the Limited Partners, upon
demand, reasonable attorneys' fees and all costs and other expenses which the
Limited Partners expend or incur in collecting or compromising the Indebtedness
or in enforcing this Guaranty Agreement against each Guarantor whether or not
suit is filed, including, without limitation, all costs, attorneys' fees and
expenses incurred by the Limited Partners in connection with any insolvency,
bankruptcy, reorganization, arrangement or other similar proceedings involving a
Guarantor which in any way affect the exercise by the Limited Partners of their
rights and remedies hereunder. Any and all such costs, attorneys' fees and
expenses not so paid shall bear interest at an annual interest rate equal to the
lesser of (i) 18%, or (ii) the highest rate permitted by applicable law, from
the date incurred by the Limited Partners until paid by the Guarantors.
12. Should any one or more provisions of this Guaranty Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
13. No provision of this Guaranty Agreement or right of the Limited
Partners hereunder can be waived nor can any Guarantor be released from such
Guarantor's obligations hereunder except by a writing duly executed by the
Limited Partners or otherwise as expressly provided for herein. This Guaranty
Agreement may not be modified, amended, revised, revoked, terminated, changed or
varied in any way whatsoever except by the express terms of a writing duly
executed by both Limited Partners.
14. If only one party hereto constitutes "Guarantors," then the plural
context of any reference thereto herein shall be deemed to refer to the single
party which constitutes "Guarantors" herein. When the context and construction
so require, all words used in the singular herein shall be deemed to have been
used in the plural, and the masculine shall include the feminine and neuter and
vice versa. The word "person" as used herein shall include any individual,
company. firm, association, partnership, corporation, trust or other legal
entity of any kind whatsoever.
15. If any or all of the Indebtedness is assigned by the Limited
Partners, this Guaranty Agreement shall automatically be assigned therewith in
whole or in part, as applicable, without the need of any express assignment and
when so assigned, each Guarantor shall be bound as set forth herein to the
assignee(s) without in any manner affecting such Guarantor's liability hereunder
for any part of the Indebtedness retained by such Limited Partner.
16. Each Guarantor (if there is more than one Guarantor) is jointly and
severally liable with each other Guarantor.
17. This Guaranty Agreement shall inure to the benefit of and bind the
heirs, legal representatives, administrators, executors, successors and assigns
of the Limited Partners and Guarantors.
18. This Guaranty Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to principles of
conflicts of law, except to the extent that any of such laws may now or
hereafter be preempted by Federal law, in which case, such Federal law shall so
govern and be controlling. In any action brought under or arising out of this
Guaranty Agreement, each Guarantor hereby consents to the jurisdiction of any
competent court within the State of Florida and consents to service of process
by any means authorized by the laws of such state. Except as provided in any
other written agreement now or at any time hereafter in force between the
Limited Partners and any Guarantor, this Guaranty Agreement shall constitute the
entire agreement of the Guarantors with the Limited Partners with respect to the
subject matter hereof, and no representation, understanding, promise or
condition concerning the subject matter hereof shall be binding upon the Limited
Partners or any Guarantor unless expressed herein.
19. All notices, demands, requests or other communications to be sent
by one party to the other hereunder or required by law shall be in writing and
shall be deemed to have been validly given or served by delivery of same in
person to the addressee or by depositing same with Federal Express for next
business day delivery or by depositing same in the United States mail, postage
prepaid, registered or certified mail, return receipt requested, addressed as
follows:
Investor Limited Partner: c/o Alliant Asset Management Company, LLC
12424 Wilshire Blvd., Suite 1030
Los Angeles, California 90025
Attn: Shawn Horwitz, President
Tel: (310) 820-1685
Fax: (310) 820-1575
Guarantor: 1725 DeSales Street, NW, Suite 300
Washington, DC 20036
Tel: (202) 785-9191
Fax: (202) 785-9717
All notices, demands and requests shall be effective upon such personal delivery
or upon being deposited with Federal Express or in the United States mail as
required above. However, with respect to notices, demands or requests so
deposited with Federal Express or in the United States mail, the time period in
which a response to any such notice, demand or request must be given shall
commence to run from the next business day following any such deposit with
Federal Express or, in the case of a deposit in the United States mail as
provided above, the date on the return receipt of the notice, demand or request
reflecting the date of delivery or rejection of the same by the addressee
thereof. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall be deemed to be
receipt of the notice, demand or request sent. By giving to the other party
hereto at least 30 days' written notice thereof in accordance with the
provisions hereof, the parties hereto shall have the right from time to time to
change their respective addresses and each shall have the right to specify as
its address any other address within the United States of America.
20. Each Guarantor hereby agrees that this Guaranty Agreement, the
Indebtedness and all other obligations guaranteed hereby, shall remain in full
force and effect at all times hereinafter until paid and/or performed in full
notwithstanding any action or undertakings by, or against, the Limited Partners,
any Guarantor, and/or any partner of the Investor Limited Partner in any
proceeding in the United States Bankruptcy Court, including, without limitation,
any proceeding relating to valuation of collateral, election or imposition of
secured or unsecured claim status upon claims by the Investor Limited Partner
pursuant to any Chapter of the Bankruptcy Code or the Rules of Bankruptcy
Procedure as same may be applicable from time to time.
21. Any married person who signs this Guaranty hereby agrees that
recourse may be had against his or her separate property for all of his or her
obligations.
22. This Guaranty Agreement may be executed in any number of
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, with the same effect as if all parties hereto had signed the
same signature page. Any signature page of this Guaranty Agreement may be
detached from any counterpart of this Guaranty Agreement without impairing the
legal effect of any signatures thereon and may be attached to another
counterpart of this Guaranty Agreement identical in form hereto but having
attached to it one or more additional signature pages. Execution by any
Guarantor shall bind such Guarantor regardless of whether any one or more other
Guarantors execute this Guaranty Agreement.
23. In the event that Guarantors incur costs, including reasonable
legal fees and expenses, to defend any suit brought on this Guaranty Agreement
which suit results in a determination that the Limited Partners' claims were
without merit, the Limited Partners shall reimburse Guarantors for such costs.
IN WITNESS WHEREOF, the undersigned Guarantors have executed this
Guaranty Agreement as of the day and year first above written.
GUARANTORS:
HOMES FOR AMERICA HOLDINGS, INC.
/s/ Robert A. MacFarlane
By:---------------------------------
Robert A. MacFarlane, President
<PAGE>
EXHIBIT G
LOW INCOME HOUSING TAX CREDIT CERTIFICATE
THIS CERTIFICATE is made to Alliant Tax Credit Fund V Limited
Partnership as of December 1, 1998, by Prairie Village - Homes for America, Inc.
an Indiana corporation (referred to herein, even if only one, as the "General
Partners"), the general partner of Middlebury Elkhart, L.P., an Indiana limited
partnership (the "Partnership"), with reference to the following facts:
WHEREAS:
A. The Partnership is the owner of the Prairie Village
apartment complex located in Elkhart, Indiana (the "Apartment Complex");
B. Alliant Tax Credit Fund V Limited Partnership, a Massachusetts
limited partnership ("Investor Limited Partner"), organized for the purpose,
inter alia, of acquiring limited partner interests in limited partnerships
owning housing projects that qualify for low-income housing tax credits (the
"Housing Tax Credits") under Section 42 of the Internal Revenue Code of 1986, as
amended (the "Code"), desires to acquire an investor limited partner interest
and Alliant Tax Credit V, Inc., a Florida corporation (the "Administrative
Limited Partner"), desires to acquire an administrative limited partner interest
(collectively, the "Interests") in the Partnership; and
C. Counsel to the Partnership has been requested to render a tax
opinion as to the availability of Housing Tax Credits with respect to the
Apartment Complex; and
D. All terms not defined herein shall have the meaning set forth in the
Amended and Restated Agreement of the Partnership dated as of December 1, 1998.
NOW, THEREFORE, to induce the Investor Limited Partner and the
Administrative Limited Partner to acquire the Interests and to induce counsel to
the Partnership to render a tax opinion as to the availability of Housing Tax
Credits with respect to the Apartment Complex, the General Partners hereby
certify that the following are true and correct on the date hereof and will
remain true and correct throughout the Compliance Period and that the General
Partners shall take no action which would make any of the following untrue:
1. The Apartment Complex, consisting of 6 residential buildings, is
comprised of 120 residential rental units (whether or not occupied). The
aggregate square footage of the portions of the Apartment Complex is as follows:
Type: Tax Credit Market Rate Commercial
Apartment Units Apartment Units Space
- ------------------------------------------------------------------------------
Number of units: 120 0 0
- ------------------------------------------------------------------------------
Aggregate square 99,158 0 0
feet: (121,279 inc.
common area)
- ------------------------------------------------------------------------------
2. Each of the Tax Credit Apartment Units will be occupied by tenants
whose income is 50% or less of area median gross income, i.e., a family or
individuals whose total income, determined in a manner consistent with the
determination of lower income families or individuals under Section 42 of the
Code and Section 8 of the United States Housing Act of 1937 ("Section 8"), does
not exceed the amount set forth in Column C below:
- -------------------------- ------------------------------ ----------------
A B C
- ---------------- ------------------------------ -------------------------
(Family Size HUD Established Area Median 50% of HUD Established
or Number Gross Income Area Median Gross Income
of Individuals)
- ---------------- ------------------------------ -------------------------
1 $16,870
- ---------------- ------------------------------ -------------------------
- ---------------- ------------------------------ -------------------------
2 $19,280
- ---------------- ------------------------------ -------------------------
- ---------------- ------------------------------ -------------------------
3 $21,690
- ---------------- ------------------------------ -------------------------
- ---------------- ------------------------------ -------------------------
4 $24,100
- ---------------- ------------------------------ -------------------------
- ---------------- ------------------------------ -------------------------
5 $26,028
- ---------------- ------------------------------ -------------------------
- ---------------- ------------------------------ -------------------------
6 $27,956
- ---------------- ------------------------------ -------------------------
With respect to each Tax Credit Apartment Unit, the gross rent does not
exceed 30% of the income limitation indicated in Column C above for the family
size or number of individuals indicated in Column A above. For this purpose, (i)
the size of the family or number of individuals occupying a unit will be deemed
to be (a) one, if the unit does not have a separate bedroom, or (b) one and
one-half multiplied by the number of separate bedrooms, if the unit has one or
more separate bedrooms, and (ii) gross rent does not include payments made on
behalf of the tenant under Section 8 or any comparable rental assistance
program, but does include any utility allowance (other than for telephone).
The Tax Credit Apartment Units are identified as follows:
- -------------- --------- --------------------- -------------- -----------------
Unit Number of Date of First Tenant's Name Income
Designation Separate Occupancy for Tax Certification
Bedrooms Credit Purposes Based On:
- -------------- --------- --------------------- -------------- -----------------
- -------------- --------- --------------------- -------------- -----------------
- -------------- --------- --------------------- -------------- -----------------
- -------------- --------- --------------------- -------------- -----------------
- -------------- --------- --------------------- -------------- -----------------
- -------------- --------- --------------------- -------------- -----------------
- -------------- --------- --------------------- -------------- -----------------
- -------------- --------- --------------------- -------------- -----------------
- -------------- --------- --------------------- -------------- -----------------
Key to Income Certification Basis:
- ------------------ -------------------------------------------------------------
Section 8: Tenant receipt of Section 8 subsidies
- ------------------ -------------------------------------------------------------
- ------------------ -------------------------------------------------------------
Senior Exemption: Tenant receipt of senior citizen rent increase exemption
certificate
- ------------------ -------------------------------------------------------------
- ------------------ -------------------------------------------------------------
Public Assistance: Tenant receipt of public assistance benefits
- ------------------ -------------------------------------------------------------
- ------------------ -------------------------------------------------------------
Other: (Describe specifically: e.g., income tax return, income tax
certification, etc.)
- ------------------ -------------------------------------------------------------
3. The adjusted bases and fair market values of the units and the other
components of the Apartment Complex as of the last day of the first taxable year
of the "Credit Period" (as defined in Section 42(f)(1) of the Code) are
reasonably expected to be as follows:
- --------------------------------- --------------------- --------------------
Property Adjusted Basis Fair Market Value
- --------------------------------- --------------------- --------------------
- --------------------------------- --------------------- --------------------
Residential rental units $729,000 $
- --------------------------------- --------------------- --------------------
- --------------------------------- --------------------- --------------------
Non-residential property $0 $
- --------------------------------- --------------------- --------------------
- --------------------------------- --------------------- --------------------
Depreciable property used
in common areas or provided
as comparable amenities to all
residential rental units for
which no separate charge is made $ $
- --------------------------------- --------------------- --------------------
- --------------------------------- --------------------- --------------------
Land $75,000 $
- --------------------------------- --------------------- --------------------
- --------------------------------- --------------------- --------------------
Other assets $ $
- --------------------------------- --------------------- --------------------
- --------------------------------- --------------------- --------------------
Total: $ $
- --------------------------------- --------------------- --------------------
As of _________________, 199___, the adjusted basis of the Apartment
Complex will be at a minimum $________________.
4. Expenditures have been and are being made with respect to the
Apartment Complex which are chargeable to capital account and incurred for
property of a character subject to the allowance for depreciation in connection
with the rehabilitation of one or more buildings (but not to acquire a building
or an interest therein) in the Apartment Complex. All such expenditures will be
made during a period of 24 months or less ending on or before December 31, 1999,
by which date such construction will be completed. Such expenditures with
respect to each building during such period, as well as the adjusted basis of
each building (ignoring depreciation deductions) as of the first day of such
period, are as follows:
- -------- ----------------------- ------------------ --------------
Building Expenditures Adjusted Low-Income Units Amount of
Basis of Building Rehabilitated Expenditures
- -------- ----------------------- ------------------ --------------
- -------- ----------------------- ------------------ --------------
#1 $399,560 12 $399,560
- -------- ----------------------- ------------------ --------------
- -------- ----------------------- ------------------ --------------
#2 $399,560 12 $399,560
- -------- ----------------------- ------------------ --------------
- -------- ----------------------- ------------------ --------------
#3 $600,972 18 $600,972
- -------- ----------------------- ------------------ --------------
- -------- ----------------------- ------------------ --------------
#4 $802,385 24 $802,385
- -------- ----------------------- ------------------ --------------
- -------- ----------------------- ------------------ --------------
#5 $802,385 24 $802,385
- -------- ----------------------- ------------------ --------------
- -------- ----------------------- ------------------ --------------
#6 $591,249 30 $591,249
- -------- ----------------------- ------------------ --------------
- -------- ----------------------- ------------------ --------------
- -------- ----------------------- ------------------ --------------
5. No grants, federally funded or otherwise, were or will be made with
respect to the Apartment Complex or the operation thereof except as follows:
----------- --------------- ---------------------------
Grant Amount Portion Federally Funded
----------- --------------- ---------------------------
----------- --------------- ---------------------------
NONE $ $
----------- --------------- ---------------------------
----------- --------------- ---------------------------
$ $
----------- --------------- ---------------------------
6. None of the adjusted basis of the Apartment Complex is or will be
attributable to amounts as to which an election has been or will be made under
Section 167(k) of the Code.
7. The Apartment Complex has not received and will not receive any
federal loan assistance except as follows:
- --------------------------- --------------------- --------------------------
Federal Loan Program Mortgage Balance Maturity Date
- --------------------------- --------------------- --------------------------
- --------------------------- --------------------- --------------------------
HUD 221(d)(4) $3,236,900 31.42 years
- --------------------------- --------------------- --------------------------
- --------------------------- --------------------- --------------------------
$
- --------------------------- --------------------- --------------------------
8. The following amounts of the adjusted basis of each building were
financed either (i) by obligations, the interest on which is tax-exempt under
Section 103 of the Code, or (ii) with the proceeds of a "below-market Federal
loan" (as defined in Section 42(i)(2) (D) of the Code):
- --------------------- -------------------- -------------------------
Total Adjusted Basis Financed by Tax Financed by Below
Exempt Obligations Market Federal Loan
- --------------------- -------------------- -------------------------
$3,596,111 $2,380,000 NONE
- --------------------- -------------------- -------------------------
9. At least 50% of the aggregate basis of each building of the
Apartment Complex and the land on which such building is or will be located, for
purposes of Section 42(h)(4) of the Code, will be financed by the proceeds of
tax-exempt bonds which were issued under the volume limitations pursuant to
Section 146 of the Code.
10. No part of the Apartment Complex nor its operation has been,
directly or indirectly, financed at any time with either (1) an obligation the
interests on which is exempt from tax under Section 103 of the Code or (2) any
loan funded in whole or in part, directly or indirectly, with federal funds
(other than funds provided pursuant to Section 106, 107 or 108 of the Housing
and Community Development Act of 1974) if the interest rate payable on such loan
is less than the applicable federal rate in effect under Section 1274(d)(1) of
the Code (as of the date on which the loan is made).
11. The construction indebtedness secured by the Apartment Complex will
consist solely of the following:
- ----------------------------- ----------- ------------- ------------------------
Lender Mortgage Mortgage Indicate Any Ownership
Balance Maturity Date Relationship Between
Lender and Partnership
(or its Partners)
- ----------------------------- ----------- ------------- ------------------------
Patrician Financial Company $3,236,900 31.42 years NONE
- ----------------------------- ----------- ------------- ------------------------
- ----------------------------- ----------- ------------- ------------------------
(converts to permanent loan)
- ----------------------------- ----------- ------------- ------------------------
12. The permanent indebtedness secured by the Apartment Complex will
consist solely of the following:
- ------------ ------------------ -------------- -----------------------------
Lender Mortgage Balance Mortgage Ownership Relationship
Maturity Date Between Lender and
Partnership (or its
Partners)
- ------------ ------------------ -------------- -----------------------------
- ------------ ------------------ -------------- -----------------------------
Same as 11
- ------------ ------------------ -------------- -----------------------------
- ------------ ------------------ -------------- -----------------------------
- ------------ ------------------ -------------- -----------------------------
All of the permanent indebtedness (collectively, the "Apartment Complex
Debt") is nonrecourse as to the Partnership and no person or entity has or will
have any personal liability with respect to any portion of such Apartment
Complex Debt, except as follows:
A. The Partnership Agreement provides for certain guaranties
against Operating Deficits, which may affect the nonrecourse nature of
the permanent financing.
13. None of the Apartment Complex Debt is convertible into an equity
interest in the Partnership.
14. By letter dated ________, 199___ (the "Credit Determination
Letter"), the Indiana Housing Finance Authority (the "Agency") made the
determinations under Section 42(m)(2)(D) of the Code that the Apartment Complex
is expected to be eligible for Housing Tax Credit in the annual amount of
$129,460. The Credit Determination Letter was issued based on the application
for Housing Tax Credits dated November 30, 1998 and submitted to the Agency for
the Apartment Complex, and is in full force and effect.
15. The Housing Tax Credits were reserved for (and will be allocated
to) each building of the Apartment Complex pursuant to a "qualified allocation
plan" as defined in Section 42(m)(1)(B) of the Code. Such reservation is in full
force and effect.
16. The Housing Tax Credits have not been reserved and/or allocated to
the Apartment Complex from the "nonprofit setaside" referred to in Section 42 of
the Code.
17. The Partnership has validly elected under Section 42(b)(2)(A)(i) of
the Code to apply the credit percentage determined for the month the Apartment
Complex is placed in service with respect to the qualified basis of the
Apartment Complex.
18. The Partnership has made and will make all other appropriate
low-income housing credit elections (including the election of the 40-60 set
aside test) in a timely fashion.
19. The Partnership will, only if requested to do so by the Investor
Limited Partner, elect to have the Credit Period for any building in the
Apartment Complex designated by the Investor Limited Partner commence with the
first year following the year in which such building is placed in service,
pursuant to Section 42(f)(1)(B) of the Code.
20. All Tax Credit Apartment Units will be occupied by tenants under
leases with terms of not less than six months.
21. All apartment units in the Apartment Complex will be occupied by
the general public and will be of approximately the same quality standard within
the meaning of Section 42(d)(3) of the Code. All amenities will be available to
all residents, without separate charge. There will not be any medical, nursing,
psychiatric, food or other significant additional services other than those
services provided by the Partnership to tenants of the apartment units pursuant
to the Project Documents or other agreements shown or disclosed to the Investor
Limited Partner. None of the apartments will be leased to students, except as
permitted under Section 42 of the Code. All tenants occupying Tax Credit
Apartment Units will comply with the income restrictions and other restrictions
necessary to cause such units to comply with the occupancy and rent restrictions
of Section 42 of the Code and the Project Documents.
22. All conditions contained in Section 42 of the Code, the Treasury
Regulations and IRS Notices, rulings or releases and any other governmental
authority, to the validity of the Credit Allocation have been or will be
satisfied in a timely manner.
23. The Apartment Complex does not receive assistance under the HUD
Section 8 Moderate Rehabilitation Program.
24. The fair market value of the Apartment Complex upon completion
thereof is not expected to be less than the aggregate indebtedness encumbering
the Apartment Complex at such time.
25. Rehabilitation expenditures with respect to the Apartment Complex
allocable to the Tax Credit Apartment Units during any twenty-four month period
ending on December 31, 1999 are (or will be) equal to or greater than the
greater of $3,000 per low income unit or 15% of the unadjusted basis of the
Apartment Complex.
26. No Person or Entity holds any equity interest in the Apartment
Complex other than the Partnership. The Partnership has the sole responsibility
to pay all maintenance and operating costs, including all taxes levied and all
insurance costs, attributable to the Apartment Complex. The Partnership, except
to the extent it is protected by insurance and excluding any risk borne by
Lenders, bears the sole risk of loss if the Apartment Complex is destroyed or
condemned or there is a diminution in the value of the Apartment Complex. No
Person or Entity except the Partnership has the right to any proceeds, after
payment of all indebtedness, from the sale, refinancing or leasing of the
Apartment Complex.
27. The capital stock of the General Partner consists of a single class
of stock 66.67% of which is owned by the Guarantor and 33.33% of which is owned
by Mast Construction LLC. As between the Guarantor and the General Partner,
there neither exists nor is there contemplated (a) any overlap of boards of
directors to the extent that the overlapping directors possess together a
controlling voting interest in either Entity, or (b) any other direct or
indirect commonality of ownership or control. Neither the Guarantor nor Mast
Construction LLC is a "related person" with respect to any General Partner for
purposes of Treasury Regulation Section 1.752-4(b) issued pursuant to the Code.
28. Qualified rehabilitation expenditures with respect to the Apartment
Complex incurred during the 24-month period ending on the date the Apartment
Complex is placed in service will exceed the aggregate adjusted tax basis of all
persons with an ownership interest in the Apartment Complex as of the
commencement of that 24-month period or of the holding period of the Apartment
Complex, whichever is later.
29. A "qualified nonprofit organization" as defined in Section
42(h)(5)(C) of the Code will not own an interest in the Partnership.
[Page 104 ends here]
<PAGE>
This Closing Certificate is intended to take effect as a sealed
instrument, shall inure to the benefit of the Investor Limited Partner and the
Administrative Limited Partner and their successors and assigns and shall be
binding upon each of the undersigned and each of his successors and assigns.
This Closing Certificate may be executed in any number of counterparts which
together shall constitute one instrument. This instrument, and all rights and
remedies of the parties, shall be determined as to their validity, construction,
effect and enforcement, and in all other respects of the same or different
nature, by the internal laws of the State of Indiana. The undersigned
acknowledge that tax counsel to the Partnership will rely upon the foregoing
certifications for purposes of its preparation and delivery of a tax opinion in
connection with this transaction and hereby consent to such reliance.
GENERAL PARTNERS:
Prairie Village - Homes for America,
Inc.
/s/ Robert A. MacFarlane
By:-------------------------------
Robert A. MacFarlane, President
<PAGE>
EXHIBIT H
LITIGATION
NONE
<PAGE>
EXHIBIT I
SUPERVISORY MANAGEMENT AND INCENTIVE AGREEMENT
This Agreement is made as of December 1, 1998, by and between
Middlebury Elkhart, L.P., an Indiana limited partnership (the "Partnership"),
and Prairie Village - Homes for America, Inc., an Indiana corporation (the
"Supervisory Agent"). This Agreement is made with reference to the following
facts:
A. The Partnership, pursuant to its Amended and Restated Agreement of
Limited Partnership of even date herewith (the "Agreement"), is engaged in the
construction/rehabilitation, ownership and operation of an apartment complex
known as Prairie Village and located in Elkhart, Indiana (the "Apartment
Complex"). (Capitalized terms used and not otherwise defined herein shall have
the respective meanings set forth in the Agreement.)
B. The Supervisory Agent is being retained to perform certain
additional management and oversight services, and the Partnership has agreed to
pay the Supervisory Agent a certain fee, all as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Services and Duties of Supervisory Agent.
(I) The Supervisory Agent shall provide consulting services to
the Partnership and the Apartment Complex. Such services are intended
to enable the Partnership to be better able to comply with all Code
requirements for the Housing Tax Credits (the "Credits"), to establish
eligibility for such Credits with respect to the entire Apartment
Complex and avoid recapture thereof during the compliance period
established under the Code and to ensure that the Partnership shall
comply with all local city, county and state laws applicable to the
business of the Partnership.
(II) The Supervisory Agent shall assist the Partnership and
the Management Agent in planning, supervising and developing a
marketing program for the Apartment Complex, including, without
limitation, the following:
(A) Assisting in (x) the supervision of such
professional copywriters, sign painting companies, artists and
agencies as may be required to develop advertising programs,
brochures, grand opening campaigns or daily newspaper
advertisements, and (y) the selection and supervision of such
decorating services as may be required to furnish model
apartment units, furnish recreation areas or develop rental
displays;
(B) Furnishing such assistance as may be required to
develop a market analysis through field inspections of
competitive projects or surveys of property managers and
owners, and assisting in developing a rental schedule;
(C) Assisting the Partnership and the Management
Agent in developing systems for processing applications,
credit checks, occupancy schedules and such other procedures
as may be required to assure an orderly occupancy of the
Apartment Complex;
(D) Assisting the Partnership and the Management
Agent in coordinating efforts to achieve a desirable tenant
selection through recruitment and screening of tenants before
and during occupancy and assisting in helping tenants organize
themselves for social programs;
(E) Developing and maintaining favorable community
relations between the Partnership and various social and
community organizations; and
(F) Maintaining effective communications with all
governmental bodies having jurisdiction over the Apartment
Complex.
(III) The Supervisory Agent will provide asset management
services for the Partnership. This asset management shall include:
(A) Responsibility for overall strategic management
of the Apartment Complex, including establishing rent levels
and concessions thereto, marketing strategies for the
Apartment Complex, and sales strategies for the Apartment
Complex;
(B) Performance of accounting services for the
Apartment Complex, including providing reports showing income
and expenses, on a monthly and annual basis. These services
will not include tax return preparation for the Partnership or
auditing services to be performed by independent accountants
on behalf of the Partnership; and
(C) Preparation of periodic communications to the
Partnership, with such frequency as Supervisory Agent in its
sole discretion may deem appropriate.
(IV) The Supervisory Agent is authorized to approach and
negotiate with new or existing lenders with respect to the Apartment
Complex from time to time on behalf of the Partnership and to negotiate
for additional funds, better interest rates and/or extended repayment
terms as and when Supervisory Agent determines that such negotiations
may result in beneficial loan modifications and/or refinancing and
shall present such recommended financing to the Partnership for
consideration. The Supervisory Agent shall also provide consulting
services to the Partnership in connection with selling the Apartment
Complex. The listing price and minimum sales price for the Apartment
Complex shall be as recommended by the Supervisory Agent.
2. Compensation.
(I) Commencing October 1, 1999, the Partnership shall pay the
Supervisory Agent an incentive management fee for each year equal to the
following amounts; provided, that the amounts payable with respect to any year
shall be owed and payable only to the extent of Cash Flow available for payment
of the incentive management fee for such year pursuant to Section 9.2A of the
Agreement ("Net Cash Flow"):
80.0% of Net Cash Flow, provided that the incentive management fee for
any year shall not exceed that amount which equals 12.0% of gross
rental income received by the Partnership for such year.
(II) The Partnership shall reimburse the Supervisory Agent for all
ordinary and necessary costs and expenses incurred in connection with its
performing services pursuant to this Agreement.
3. Default of the Supervisory Agent. Notwithstanding anything contained
in this Agreement to the contrary, in the event that (a) the Supervisory Agent
shall default in any material respect in any of its obligations hereunder or (b)
the General Partners default in any of their obligations under the Agreement and
such default shall continue beyond any applicable notice or cure period, then
the Partnership shall have the right to withhold all compensation otherwise
payable to the Supervisory Agent hereunder until such default is fully cured,
and to set off against such compensation any obligations of the Supervisory
Agent hereunder or of the General Partners under the Agreement. In addition,
this Agreement shall automatically terminate upon the withdrawal of a General
Partner as a general partner of the Partnership for whatever reason.
4. Term of Agreement. Subject to Section 3 above, the term of this
Agreement shall commence on and as of the date hereof and shall continue in full
force and effect until termination of the Partnership.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
SUPERVISORY AGENT:
Prairie Village - Homes for America,
Inc., an Indiana corporation
/s/ Robert A. MacFarlane
By: ----------------------------
Robert A. MacFarlane, President
PARTNERSHIP:
Middlebury Elkhart, L.P., an Indiana
limited partnership
By: Prairie Village - Homes for
America, Inc., its general
partner
/s/ Robert A. MacFarlane
By: -------------------------------
Robert A. MacFarlane,
President
<PAGE>
EXHIBIT J
PROJECT BUDGET
<PAGE>
EXHIBIT K
PERMITTED ENCUMBRANCES
As shown on Schedule B of the Title Policy.
<PAGE>
EXHIBIT L
TITLE INSURANCE REQUIREMENTS
The title policy for the property must be acceptable to Alliant and
must be in compliance with the following requirements:
1. The title policy must be written on the current standard ALTA
owner's policy form or a similar form approved by Alliant. If the property is
located in a state in which ALTA forms of coverage are not used or are
unacceptable, the title policy shall provide similar coverage.
2. The title policy shall be issued as an extended coverage policy that
insures against any Standard Exceptions (e.g., parties in possession or other
unrecorded matters).
3. The amount of the title policy must equal the total sum of all
Capital Contributions and the Mortgage Loan.
4. Schedule A of the title policy must (a) name as the "Insured" the
Partnership as constituted as of the issuance date of the title policy and as
may be reconstituted from time to time, (b) insure that the property is owned
solely by the Partnership, and (c) insure that the Partnership's interest in the
property is fee simple absolute.
5. The legal description of the property described in the title policy
must match that shown on the survey of the property.
6. If Schedule B of the title policy indicates the presence of any
easements that are not found on the survey and identified by recording
information, the title policy must provide affirmative insurance against any
loss that conflicts with the use or diminishes the value of the improvements
resulting from the exercise by the holder of such easement or its right to use
or maintain that easement.
7. If the title policy includes any exception for taxes, assessments or
other items which may become a lien on the property, it must insure that such
taxes, assessments or items are not yet delinquent.
8. The title policy shall include such other endorsements as are
customarily obtained in real estate transactions, including, without limitation,
a survey endorsement, a zoning endorsement, an access (to a named public
highway) endorsement, a street address endorsement, a non-imputation endorsement
(except for properties located in the State of Florida) and a Fairway or change
in partners endorsement.
9. Prior to the issuance of the title policy, Alliant and its legal
counsel shall each be provided with recorded copies of all exceptions to title
coverage. Upon the issuance of the title policy, each shall be provided with a
true, correct and complete copy.
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
(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
--------------------------
CONTRACT OF SALE
By and Between
LEGATO INVESTMENTS, INC., a Delaware corporation ("Seller")
and
HOMES FOR AMERICA HOLDINGS, INC., a Nevada corporation ("Buyer")
Dated as of: --------------, 1998
Property Located at
Mineral Springs Road
Arlington, Texas
<PAGE>
Table Of Contents
Page
1. Sale of the
Property........................................................1
2. Purchase Price;
Closing.........................................................1
2.1 Earnest Money
Deposit..............................................1
2.2 Purchase
Price................................................1
2.3
Closing............................. ................2
2.4 Title, Due
Diligence............................................2
2.5 Delivery of
Documents............................................6
2.6 Closing Expenses and
Costs................................................7
2.7
Assignment...........................................8
3. Representations and Warranties of
Seller..........................................................8
3.1
Authority............................................8
3.2 Foreign
Entity...............................................8
3.3 No
Conflict.............................................9
3.4 AS-IS; No Representations and Warranties As To
Condition of Property................................9
3.5 Release;
Indemnity............................................10
4. Covenants and Interim Responsibilities of
Seller..........................................................10
4.1 Prior to
Closing..............................................10
5. Representations and Warranties of
Buyer...........................................................11
5.1
Authorization........................................11
5.2 No
Conflict.............................................11
6. No Brokers, No
Commission......................................................11
7.
Prorations......................................................11
8.
Possession......................................................11
9. Destruction of
Improvements....................................................12
10.
Condemnation....................................................12
11.
Miscellaneous...................................................12
11.1
Notices..............................................12
11.2 Attorneys'
Fees.................................................13
11.3 Entire Agreement,
Amendment............................................13
11.4
Exhibits.............................................13
11.5
Severability.........................................14
11.6 Choice of
Law..................................................14
11.7
Successors...........................................14
11.8
Waiver...............................................14
11.9 Gender and
Number...............................................14
11.10 Further
Actions..............................................14
11.11 Time of the
Essence..............................................14
11.12 Business
Day..................................................14
11.13
Counterparts.........................................15
11.14 Effective
Date.................................................15
11.15
Confidentiality......................................15
11.16 No Third Party
Beneficiary..........................................15
11.17 Independent
Consideration........................................15
11.18 Calculation of Time
Periods..............................................15
11.19 WAIVER OF CONSUMER
RIGHTS...............................................16
12. Termination, Default and
Remedies........................................................16
12.1 Permitted
Termination..........................................16
12.2 Default by
Seller...............................................16
12.3 Default by
Buyer................................................17
EXHIBIT "A" DESCRIPTION OF
LAND............................................................19
EXHIBIT "B" SPECIAL WARRANTY
DEED............................................................20
<PAGE>
CONTRACT OF SALE
This Contract of Sale (this "Contract") is made and entered into as of
the day of ____________, 1998 by and between LEGATO INVESTMENTS, INC., a
Delaware corporation ("Seller"), and HOMES FOR AMERICA HOLDINGS, INC., a Nevada
corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller is the owner of that certain real property situated in
Tarrant County, Texas legally described on Exhibit "A" attached hereto and made
a part hereof for all purposes (the "Land"); together with (i) any improvements
situated thereon (the "Improvements"); (ii) all exterior shrubs, trees and
plants thereon; (iii) all of Seller's interest in all easements, rights of way
and any and all other rights appurtenant thereto. The Land and the Improvements,
and such other property and rights related thereto are hereinafter collectively
referred to as the "Property";
WHEREAS, Buyer desires to purchase the Property and Seller desires to
sell the Property to Buyer on the terms and conditions set forth hereinafter;
NOW THEREFORE, the parties hereto do hereby agree as follows:
1. Sale of the Property.
Seller agrees to bargain, sell, grant, convey and deliver, and Buyer
agrees to purchase and accept the Property, for the price and on the terms and
conditions set forth herein.
2. Purchase Price; Closing.
2.1 Earnest Money Deposit.
Buyer shall, within three (3) business days after full execution of
this Contract, deposit with Chicago Title Insurance Company, 350 North St. Paul,
Suite 250, Dallas, TX 75201, Attn: Gerald Dunn (214) 965-1680 ("Title Company"),
an earnest money deposit in the amount of Twenty Five Thousand and No/100
Dollars ($25,000.00) (together with any and all interest thereon, the "Earnest
Money Deposit". The Earnest Money Deposit shall be held in escrow by the Title
Company pursuant to the terms hereof. All sums comprising the Earnest Money
Deposit shall be held in an interest-bearing account at a federally insured
depository institution. The Earnest Money Deposit shall be applied to the
Purchase Price at the Closing (as hereinafter defined) or otherwise in
accordance with the terms and provisions of this Contract.
2.2 Purchase Price.
The purchase price for the Property shall be One Million and No/100
Dollars ($1,000,000.00) (the "Purchase Price") and shall be payable in cash at
the Closing.
2.3 Closing.
The consummation of the transactions contemplated by this Contract with
respect to the Property (the "Closing") shall take place in the offices of the
Title Company or such other place as is mutually agreeable to Buyer and Seller.
The Closing shall occur at 10:00 a.m. on the date which is thirty (30) days
after the Effective Date, or such other date as may be agreed to in writing by
Buyer and Seller (the "Closing Date").
2.4 Title, Due Diligence.
2.4.1 Title Policy.
At the Closing, Seller shall cause the Title Company to issue
a Texas form Owner's Policy of Title Insurance (the "Title Policy"), or cause
the Title Commitment (as defined in Section 2.4.3 hereof) to be marked up to the
Closing Date, in the amount of the Purchase Price insuring that Buyer is the
owner of good and indefeasible fee simple title to the Land, subject only to
non-delinquent property taxes, those matters shown as exceptions to title in the
Title Commitment (as described in and delivered to Buyer pursuant to Section
2.4.3 below) that are approved by Buyer pursuant to Sections 2.4.4 and 2.4.5
hereof, and such other matters as may be approved by Buyer in writing (the
"Permitted Exceptions"). The cost of the Title Policy shall be borne by Seller,
however, the cost for any survey exception deletion shall be borne by Buyer.
2.4.2 Survey.
Buyer shall obtain, at Buyer's sole cost and expense, a
current "as-built" survey (a "Survey") of the Land and the Improvements thereon,
prepared by a surveyor acceptable to Buyer and to the Title Company. The Survey
shall be dated after the Effective Date, shall include a legal description of
the Land, and shall accurately show the location and dimensions of all the
Improvements sufficient to permit the Title Company, at Buyer's option and sole
cost, to delete any survey exception in the Title Policy. The Survey shall be
certified to Seller, Buyer and the Title Company. Buyer shall deliver copies of
the Survey to Seller and Title Company.
2.4.3 Delivery of Title Commitment.
Seller shall obtain and deliver to Buyer at Seller's sole cost
and expense, a current standard form of commitment for title insurance issued
through the Title Company describing the Land, listing Buyer as the proposed
insured and showing the Purchase Price as the policy amount for the Property
(the "Title Commitment"), together with legible true and complete copies of all
instruments referred to in the Title Commitment as conditions or exceptions to
title to the Property therein described.
2.4.4 Review of Title and Survey.
Buyer shall have a period (the "Title Review Period") ending ten (10)
days after the Effective Date in which to notify Seller in writing of any
objections Buyer has to any matters shown or referred to in the Title Commitment
or on the Survey. Any title encumbrances or exceptions which are set forth in
Title Commitment or on the Survey (except for any title exceptions that arise
subsequent to the date of Title Commitment), and to which Buyer does not object
within the Title Review Period, shall be deemed to be Permitted Exceptions to
the status of Seller's title with respect to the Property. Buyer shall have five
(5) days after receipt of any updates to the Title Commitment issued after the
Title Review Period to review any new exceptions to the Title Commitment and
shall have the right to object to such exceptions and to terminate this Contract
and receive a refund of the Earnest Money Deposit, if Seller fails to cure such
objections to Buyer's reasonable approval.
2.4.5 Objections to Status of Title.
In the event that Buyer shall object to the status of Seller's title
with respect to the Property during the Title Review Period, Seller shall have
ten (10) days from receipt of Buyer's written objections within which to (i)
agree to satisfy Buyer's objections by Closing using reasonable efforts if
Seller reasonably believes that such objections are made in good faith and are
capable of being cured at no cost to Seller (other than liens of an
ascertainable amount created by, under or through Seller affecting the Property,
which Seller shall release at Closing), or (ii) notify Buyer that Seller is
unable or unwilling to cure some or all of Buyer's objections, specifying
Seller's proposed cure and specifying those objections which Seller is unable or
unwilling to cure ("Seller's Notice"). As to those objections which Seller is
unable or unwilling to cure or to which the proposed cure is unacceptable to
Buyer, as specified in Seller's Notice, Buyer shall have five (5) days from
receipt of Seller's Notice to either (a) waive such uncured or such unacceptable
objections and purchase the Property as otherwise contemplated in this Contract,
notwithstanding such objections, in which event the subject matter of such
waived objections shall become Permitted Exceptions, and Seller shall convey the
Property to Buyer by the Deed (defined in Section 2.5.1(a) hereof), subject to
the Permitted Exceptions, or (b) terminate this Contract, which shall be
Permitted Termination as provided in Section 12.1 hereof, in which event the
Earnest Money Deposit, shall immediately be returned to Buyer by the Title
Company.
2.4.6 Condition of Title.
At the Closing, Seller shall convey insurable fee simple title
to the Land to Buyer by the Deed and other legal instruments and documents of
conveyance. When title is conveyed to Buyer, such title shall be free and clear
of all liens, encumbrances, easements, restrictions, rights, conditions and
exceptions to title, except the Permitted Exceptions thereto.
2.4.7 Due Diligence.
(a) Seller makes no representations or warranties with respect to the
contents of any prior reports or other materials relating to the Property which
may be delivered or made available to the Buyer by Seller or Seller's attorneys
or agents during the term of this Contract (collectively, the "Due Diligence
Items"). The Due Diligence Items which may be delivered or made available to
Buyer shall be delivered or made available solely as an accommodation to Buyer
to aid Buyer in conducting Buyer's own investigations. Seller shall have no
obligation to deliver any Due Diligence Items. Buyer shall have the right to
physically inspect and review the Property as it deems necessary to determine
whether or not the Property is suitable for Buyer's needs, which investigation
shall be of such scope as Buyer shall determine and may include, without
limitation, any or all of the following:
(i) Physical Studies. Buyer shall have satisfied itself that the
environmental reports and any engineering and soils reports it
may order on the Property are satisfactory;
(ii) Approvals. Buyer shall have obtained all site plan and any
other approvals and entitlements (but not including building
permits) ("Approvals") from all governing City, County, State and
Federal authorities (collectively "Authorities") required for the
redevelopment and construction of a office building on the
Property (the "Project");
(iii) Land Use. Buyer shall have satisfied itself that the use of
the Land will permit development and construction of the Project
on the Property;
(iv) Utilities. Buyer shall have satisfied itself that utilities
(including water, wastewater, gas, cable and electricity) are
available at the Property in sufficient capacities to support the
Project; and
(v) Final or Preliminary Plat. Buyer shall have obtained and
approved a preliminary or final plat for the Property.
All costs incurred, and any all
fiscal requirements imposed by Authorities,
in connection with satisfying the foregoing
conditions shall be the sole responsibility
of Buyer.
(b) Seller shall in good faith cooperate with Buyer in facilitating Buyer's
investigation of the Property. Seller shall provide Buyer and its agents or
consultants with access to the Property to inspect each and every part thereof
to determine its present condition. Buyer shall have the right to conduct a
Phase II Environmental Study on the Property provided Buyer first notifies
Seller of the proposed scope and nature of any Phase II Study. During Buyer's
process of obtaining the Approvals, Seller agrees to cooperate with Buyer in
filing any plans or plats for the Property provided that (i) any cost or
expense, including reasonable attorney's fees, incurred by Seller shall be paid
by Buyer and (ii) no such filings or certifications or abatements shall be
permanent. Buyer further agrees that in the event Buyer does not purchase the
Property pursuant to this Contract, Buyer shall, at its sole cost and expense
and at Seller's option, take such action as necessary to remove such filings or
certifications or abatements so that the Property is not affected thereafter by
such filings. This provision will survive the termination of this Contract or
certifications or abatements.
(c) Any entry made on the Property by Buyer or its representatives shall be
at the sole risk of Buyer. Buyer shall pay for all work and inspections
performed on or in connection with the Property and shall not permit the
creation of any lien in favor of any contractor, materialman, mechanic,
surveyor, architect or laborer. Buyer's obligations under this Section 2.4.7
shall survive the Closing or the termination of this Contract.
(d) Buyer further agrees to deliver to Seller copies of each third party
report obtained by or on Buyer's behalf in connection with its due diligence
inspections on the Property, including, without limitation, structural,
architectural, environmental, demolition and construction reports, at no cost to
Seller. In the event Buyer refuses or is unable to close under this Contract,
for any reason whatsoever, any and all studies or tests including, without
limitation, soil tests, topographical information, structural tests, engineering
and environmental studies or other similar preliminary work, shall immediately
be delivered to Seller at no cost to Seller and thereafter become the sole
property of Seller.
(e) Buyer shall exercise (and cause its agents to exercise) due care and
ordinary prudence in performing such inspections, examinations, investigations
and tests and Buyer shall not cause or permit any damage or injury to be done to
the Property and shall, to the extent practicable, restore the Property to such
condition as existed prior to such inspections, examinations, investigations and
tests.
(f) BUYER SHALL BE RESPONSIBLE FOR AND SHALL AND HEREBY DOES INDEMNIFY,
EXONERATE AND HOLD HARMLESS SELLER (in addition to the remedies provided in
Section 12.3) FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, ACTIONS,
DEMANDS,COSTS, EXPENSE, INJURY OR DAMAGE ARISING OUT OF OR IN ANY MANNER
CONNECTED WITH SUCH ACTIVITIES BY BUYER OR BUYER'S EMPLOYEES, AGENTS,
REPRESENTATIVES, OR CONTRACTORS OR THEIR SUB-AGENTS OR SUBCONTRACTORS ON THE
PROPERTY, including, without limitation, (i) any and all reasonable attorney and
paralegal fees and expenses or court costs incurred by Seller in connection with
any such claims or activities and (ii) mechanic's liens or claims that may be
filed against the Property by contractors, subcontractors or materialmen
performing such work for Buyer (and Buyer's obligations under this Section 2.4.7
(g) shall not be limited by Section 12.3 hereof).
(g) Buyer shall comply with, and shall instruct any person conducting
inspections, examinations, investigations or tests on Buyer's behalf to comply
with the provisions of Section 11.15 of this Contract with respect to any
information obtained from any inspection of the Property.
2.4.9 Reliance on Inspection.
Buyer agrees and represents that Seller has not made and does not
hereby make any representations, warranties or covenants of any kind or
character whatsoever with respect to the condition of the Property, either
express or implied, including, but not limited to, warranties or representations
as to matters of title, zoning, tax consequences, physical or environmental
conditions, availability of access, ingress or egress, valuation, governmental
approvals, governmental regulations or any other matter or thing relating to or
affecting the Property, including without limitation: (1) the value, condition,
merchantability, marketability, profitability, suitability or fitness for a
particular use or purpose of the Property, or (2) the compliance of or by the
Property with any laws, rules, ordinances or regulations of any governmental
authority or body. Buyer further agrees and represents that Buyer will rely
solely on its own independent inspection of the Property and shall assume the
risk that adverse matters, including, but not limited to, adverse physical and
environmental conditions, may not have been revealed by Buyer's inspections and
investigations and that Buyer is not relying on any warranties, promises,
guaranties, or representations made by Seller or any employee, agent or
representative or anyone acting or claiming to act on behalf of Seller. BUYER
FURTHER ACKNOWLEDGES AND AGREES THAT THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR
REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE PROPERTY BY SELLER OR ANY THIRD
PARTY.
2.4.9 Removal from Market.
After the Effective Date, Seller agrees to remove the Property
from the market and from that time until Closing or the termination of this
Contract, Seller shall not accept or solicit any offers on the Property.
2.5 Delivery of Documents.
2.5.1 Deliveries At Closing.
At the Closing, Seller shall deliver to Buyer:
(a) a special warranty deed (the "Deed") in the form
attached hereto as Exhibit "B" conveying good and insurable
fee simple title to the Land subject to the Permitted
Exceptions;
(b) a non-foreign status affidavit executed by Seller
(c) evidence satisfactory to Title Company of the
authority of Seller or anyone executing documents on behalf of
Seller to consummate the transactions contemplated herein;
(d) a closing statement duly executed by Seller
setting forth the prorations and adjustments required by
Section 7 hereof.
2.5.2 Buyer's Deliveries at Closing.
At the Closing, Buyer shall deliver to Seller:
(a) the Purchase Price in immediately available funds;
(b) evidence satisfactory to the Title Company of the authority of
Buyer or anyone executing documents on behalf of Buyer to
consummate the transactions contemplated herein;
(c) a closing statement duly executed by Buyer setting forth the
prorations and adjustments required by Section 7 hereof; and
(d) such other documents as may be reasonably required by the
Title Company. At the Closing, the Title Company shall deliver
the Earnest Money Deposit plus accrued interest to Seller to
be applied to the Purchase Price.
2.5.3 Deliveries after Closing.
Upon satisfaction of all of the conditions to the Closing
specified in Sections 2.5 and 2.6 of this Contract and upon the Title Company's
delivery to Buyer of the Title Policy or the marked up Title Commitment as
provided in Section 2.4.1 hereof, the following actions shall be taken, all of
which will be deemed taken simultaneously at the Closing, no one of which will
be deemed completed until all have been completed:
(a) Any excess funds deposited by Buyer with the
Title Company (after payment of all of Buyer's Closing
Expenses (as defined below) as contemplated herein) shall be
returned to Buyer at its address set forth herein.
(b) All other funds with the Title Company to which
Seller is entitled hereunder (after payment of all of Seller's
Closing Expenses (as defined below) as contemplated herein)
shall be paid to Seller.
(c) All documents and instruments to be recorded or
delivered by the Title Company shall be recorded in the
appropriate county records and delivered to the appropriate
party pursuant to this Contract.
2.6 Closing Expenses and Costs.
2.6.1 Seller's Costs.
Seller shall pay the following (collectively,
"Seller's Closing Expenses"):
(a) Costs of obtaining a standard coverage Title
Commitment and Title Policy subject to the limitations as
specified in Section 2.4.1 hereof.
(b) All fees relating to the release of any liens on
the Property.
(c) One-half of the escrow charges charged by the
Title Company.
(d) Deed recording fees.
(e) Its share of the prorations set forth in Section
7 hereof.
<PAGE>
2.6.2 Buyer's Costs.
Buyer shall pay the following (collectively "Buyer's Closing Expenses"):
(a) Its share of the prorations set forth in Section 7 hereof.
(b) The cost of the Survey and the cost for the deletion of the Survey
exception.
(c) One-half of the escrow charges. (d) All costs relating to any financing
obtaining by Buyer.
2.6.3 Other Expenses.
Except as otherwise provided in this Section 2.6 or elsewhere
in this Contract, each party hereto agrees to bear its own expenses, including
but not limited to, attorneys' and advisors' fees.
2.7 Assignment.
Except as limited below, this Contract shall be binding upon and inure
to the benefit of Seller and Buyer, and their respective heirs, personal
representatives, successors and assigns. Buyer may not assign its rights
hereunder without the prior written consent of Seller, and only upon delivery to
Seller of a written DTPA waiver executed by the assignee similar to that
contained in Section 11.19 and in form satisfactory to Seller. Buyer shall
promptly notify Seller and Title Company of any such assignment, and Buyer's
assignee shall thereafter assume all obligations and duties of Buyer hereunder,
however Buyer shall remain liable under this Contract and shall not be relieved
of Buyer's duties, obligations and liabilities hereunder.
3. Representations and Warranties of Seller.
Seller hereby makes the following representations to Buyer, all of
which shall be true and correct in all material respects as of the date hereof
and which shall not survive the Closing:
3.1 Authority.
Seller has the full right, power, and authority to enter into and
perform its obligations under this Contract.
3.2 Foreign Entity.
Seller is not a "foreign person" within the meaning of the Internal
Revenue Code of 1954, as amended (hereinafter called the "Code"), Sections 1445
and 7701 (i.e. Seller is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined in the
Code and regulations promulgated thereunder).
<PAGE>
3.3 No Conflict.
This Contract has been duly and properly executed on behalf of Seller,
and neither the execution and delivery of this Contract nor the consummation of
the transactions contemplated hereby will result in a default (or an event that,
with notice or the passage of time or both, would constitute a default) under, a
violation or breach of, a conflict with, a right of termination of, or an
acceleration of indebtedness under or performance required by, any agreement to
which Seller is a party or by which Seller or the Property is bound.
3.4 AS-IS; No Representations and Warranties As To Condition of Property.
BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH IN
THIS CONTRACT, SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO: (A) THE
NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE
WATER, SOIL AND GEOLOGY; (B) THE INCOME TO BE DERIVED FROM THE PROPERTY; (C) THE
SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH BUYER MAY
CONDUCT THEREON; (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH
ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL
AUTHORITY OR BODY; (E) THE HABITABILITY, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY; OR (F) ANY OTHER MATTER WITH RESPECT TO THE
PROPERTY. WITHOUT LIMITING THE FOREGOING EXCEPT AS EXPRESSLY PROVIDED IN THIS
CONTRACT, SELLER DOES NOT AND HAS NOT MADE ANY REPRESENTATION OR WARRANTY
REGARDING THE PRESENCE OR ABSENCE OF ANY HAZARDOUS SUBSTANCES (as hereinafter
defined) ON, UNDER OR ABOUT THE PROPERTY OR THE COMPLIANCE OR NONCOMPLIANCE OF
THE PROPERTY WITH THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT, THE SUPERFUND AMENDMENT AND REAUTHORIZATION ACT, THE RESOURCE
CONVERSATION RECOVERY ACT, THE FEDERAL WATER POLLUTION CONTROL ACT, THE FEDERAL
ENVIRONMENTAL PESTICIDES ACT, THE CLEAN WATER ACT, THE CLEAN AIR ACT, ANY SO
CALLED FEDERAL, STATE OR LOCAL "SUPERFUND" OR "SUPERLIEN" STATUTE, OR ANY OTHER
STATUTE, LAW, ORDINANCE, CODE, RULE, REGULATION, ORDER OR DECREE REGULATING,
RELATING TO OR IMPOSING LIABILITY (INCLUDING STRICT LIABILITY) OR STANDARDS OF
CONDUCT CONCERNING ANY HAZARDOUS SUBSTANCES (collectively, the "Hazardous
Substance Laws"). For purposes of this Contract, the term "Hazardous Substances"
shall mean and include those elements or compounds which are contained on the
list of hazardous substances adopted by the United States Environmental
Protection Agency and the list of toxic pollutants designated by Congress or the
Environmental Protection Agency or under any hazardous substance laws. BUYER
FURTHER ACKNOWLEDGES AND AGREES THAT BEING GIVEN THE OPPORTUNITY TO INSPECT THE
PROPERTY, BUYER WILL BE PURCHASING THE PROPERTY PURSUANT TO ITS INDEPENDENT
EXAMINATION, STUDY, INSPECTION AND KNOWLEDGE OF THE PROPERTY AND BUYER IS
RELYING UPON ITS OWN DETERMINATION OF THE VALUE OF THE PROPERTY AND USES TO
WHICH THE PROPERTY MAY BE PUT, AND NOT ON ANY INFORMATION PROVIDED OR TO BE
PROVIDED BY SELLER. BUYER FURTHER ACKNOWLEDGES AND AGREES THAT SELLER HAS MADE
NO REPRESENTATION OR WARRANTY RESPECTING THE ACCURACY OR COMPLETENESS OF ANY
INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY FROM THIRD
PARTY SOURCES AND THAT SELLER HAS NOT MADE AND WILL NOT BE OBLIGATED TO MAKE ANY
INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION. The occurrence of
the Closing shall constitute an acknowledgment by Buyer that the Property was
accepted without representation or warranty, express or implied (except for such
representations as are expressly set forth in this Contract), and otherwise in
an "AS IS", "WHERE IS", and "WITH ALL FAULTS" condition based solely on Buyer's
own inspection WITHOUT REPRESENTATIONS, WARRANTIES OR COVENANTS, EXPRESS OR
IMPLIED, OF ANY KIND OR NATURE; provided, however, that nothing contained in
this paragraph shall limit the warranties set forth in the special warranty deed
to be delivered from Seller to Buyer at Closing. Buyer acknowledges that it is
knowledgeable in real estate matters, and that upon completion of the
appraisals, inspections, investigations, inquiries, studies, tests and reports
undertaken or contemplated by or available to Buyer, it will have made all of
the appraisals, inspections, investigations, inquiries, studies, tests and
reports Buyer deems necessary in connection with its purchase of the Property
and the use, operation and disposition thereof.
3.5 Release; Indemnity.
Buyer or anyone claiming by, through or under Buyer, hereby fully
waives and releases Seller, its affiliated companies, and their respective
employees, officers, directors, representatives, attorneys and agents ("Released
Parties") from any and all claims, liabilities, damages, losses, penalties,
fines, costs (including , without limitation, reasonable attorneys' and
paralegals' fees, court costs and costs of experts), causes of action, and
remedies arising from or related to any defects or other conditions affecting
the Property. Buyer further acknowledges and agrees that this waiver and release
shall be given full force and effect according to each of its expressed terms
and provisions, including, but not limited to, those relating to unknown and
suspected claims, damages and causes of action. This waiver and release of
claims shall survive Closing and delivery of the Deed. BUYER HEREBY INDEMNIFIES
AND HOLDS SELLER HARMLESS OF AND FROM ANY AND ALL LIABILITIES, CLAIMS, DAMAGES,
COSTS AND EXPENSES, OF ANY KIND AND NATURE, INCLUDING WITHOUT LIMITATION,
REASONABLE ATTORNEYS' AND PARALEGAL FEES AND COURT COSTS (AND AGREES THAT SELLER
SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, PUNITIVE OR OTHER
DAMAGES) RESULTING OR ARISING FROM OR RELATING TO THE OWNERSHIP, USE, CONDITION,
LOCATION, MAINTENANCE, REPAIR OR OPERATION OF THE PROPERTY.
4. Covenants and Interim Responsibilities of Seller.
4.1 Prior to Closing.
Seller agrees that during the period between the Effective Date and the
Closing Date, Seller will continue to maintain the Property in the manner it
currently maintains it.
5. Representations and Warranties of Buyer.
Buyer hereby makes the following representations and warranties to
Seller, all of which shall be true and correct as of the date hereof and as of
the Closing.
5.1 Authorization.
Buyer has full power and authority to execute and deliver this Contract
and the documents contemplated hereby. Buyer's performance of this Contract and
the transactions contemplated hereby have been duly authorized by all requisite
action on the part of Buyer and the individuals executing this Contract and the
documents contemplated hereby on behalf of Buyer have full power and authority
to legally bind Buyer.
5.2 No Conflict.
This Contract has been duly and properly executed on behalf of Buyer,
and neither the execution and delivery of this Contract nor the consummation of
the transactions contemplated hereby will result in a default (or an event that,
with notice or the passage of time or both, would constitute a default) under, a
violation or breach of, a conflict with, a right of termination of, or an
acceleration of indebtedness under or performance required by, any agreement to
which Buyer is a party or by which Buyer or Buyer's property is bound.
6. No Brokers, No Commission.
Neither Seller or Buyer has dealt with any broker or brokerage company
in connection with the proposed purchase and sale of the Property. SELLER AND
BUYER EACH HEREBY AGREES TO INDEMNIFY AND HOLD THE OTHER HARMLESS FROM THE
CLAIMS OF ANY AGENT, BROKER OR OTHER SIMILAR PARTY CLAIMING BY, THROUGH OR UNDER
THE INDEMNIFYING PARTY.
7. Prorations.
Real property ad valorem taxes shall be prorated as of the Closing
Date, based upon actual days involved on a calendar year basis. Seller shall be
responsible for all ad valorem taxes relating to the Property for the portion of
the calendar year in which the Closing occurs through the day before the Closing
Date. Seller and Buyer agree to prorate real property ad valorem taxes based
upon actual taxes for the preceding year. Such tax proration shall be final and
no adjustment shall be made later. Seller shall, on or before the Closing Date
furnish to Buyer and the Title Company all information necessary to compute the
prorations provided for in this Section.
8. Possession.
Seller shall deliver full possession of the Property to Buyer upon the
Closing subject to the Permitted Exceptions.
9. Destruction of Improvements.
Buyer acknowledges that Buyer is interested in acquiring the Property
based upon the value of the Land and that Improvements have no or little value
and are being sold AS-IS. Accordingly, Seller and Buyer agree that the Uniform
Vendor and Buyer Risk Act shall not be applicable. In the event any portion of
the Improvements is damaged by fire or other casualty prior to Closing, there
shall be no effect on Buyer's obligations hereunder, the Closing shall take
place as provided herein and the Purchase Price shall not be reduced.
10. Condemnation.
Seller and Buyer acknowledge and agree that Seller has received notice
of the proposed widening of Sublet Road which is adjacent to the Property and
the proposed taking of a portion of the Property in connection therewith by the
applicable condemning authority (the "Existing Condemnation Action"). Seller and
Buyer each agree to give the other prompt notice of any other actual or
threatened taking or condemnation of all or any portion of the Land between the
date hereof and the Closing Date which comes to the attention of either party.
If prior to the Closing there shall occur the taking or condemnation of all or
any portion of the Land as would materially interfere with the use thereof other
than the Existing Condemnation Action, then in any such event, Buyer may at its
option terminate this Contract by notice to Seller within twenty (20) days after
Buyer has received the notice referred to above or at the Closing, whichever is
earlier. If Buyer does not elect to terminate this Contract, then the Closing
shall take place as provided herein without abatement of the Purchase Price, and
there shall be assigned to Buyer at the Closing without recourse or warranty all
interest of Seller in and to any condemnation awards applicable to the Property
which may be payable to Seller on account of any such occurrence. If prior to
the Closing there shall occur the taking or condemnation of a portion of the
Land which would not materially interfere with the use thereof, then in any such
event, Buyer shall have no right to terminate its obligations under this
Contract, the Closing shall take place as provided herein without abatement of
the Purchase Price, but there shall be assigned to Buyer at Closing without
recourse or warranty all interest of Seller in and to any condemnation awards
applicable to the Property which may be payable to Seller on account of any such
occurrence.
Buyer shall be entitled to participate with Seller in all negotiations
and dealings with the condemning authority in respect of the Existing
Condemnation Action; provided, however, that Seller shall have the right to
finally approve any agreement with the condemning authority and Seller shall, at
the Closing, retain all of its right, title and interest in and to any award or
other benefits made or to be made in connection with the Existing Condemnation
Action.
11. Miscellaneous.
11.1 Notices.
All notices, demands, requests, consents, approvals or other
communications (the "Notices") required or permitted to be given by this
Contract shall be in writing and shall be either personally delivered, or sent
via telecopy with receipt confirmation, or by Federal Express or other regularly
scheduled overnight courier or sent by United States mail, registered or
certified with return receipt requested, properly addressed and with the full
postage prepaid. Said Notices shall be deemed received and effective on the
earlier of (i) the date actually received (which, in the case of telecopied
notice, shall be the date such telecopy is transmitted with confirmation of
receipt) or (ii) three (3) business days after being placed in the United States
Mail as aforesaid.
Said Notices shall be sent to the parties hereto at the following
addresses, unless otherwise notified in writing:
To Seller: LEGATO INVESTMENTS , INC.
c/o Ray T. Khirallah
Donohoe, Jameson & Carroll, PC
1201 Elm Street, Suite 3400
Dallas, Texas 75270-2120
Telecopier: (214) 744-0231
To Buyer: HOMES FOR AMERICA HOLDINGS, INC.
6003 Abrams Road
Dallas, Texas 75231
Attn: Mark MacFarlane
Telecopier: (214) 691-8439
To Title Company: CHICAGO TITLE INSURANCE COMPANY
350 North St. Paul, Suite 250
Dallas, TX 75201
Attention: Gerald Dunn
Telecopier: (214) 720-1047
11.2 Attorneys' Fees.
In the event that any party hereto brings an action or proceeding for a
declaration of the rights of the parties under this Contract, for injunctive
relief, for an alleged breach or default of, or any other action arising out of,
this Contract or the transactions contemplated hereby, or in the event any party
is in default of its obligations pursuant hereto, each party shall bear its own
attorneys' fees. This provision will survive the termination of this Contract.
11.3 Entire Agreement, Amendment.
This Contract, together with all exhibits hereto and documents referred
to herein, if any, constitutes the entire understanding among the parties
hereto, and supersedes any and all prior agreements, arrangements and
understandings among the parties hereto. This Contract may not be amended,
modified, changed or supplemented, nor may any obligations hereunder be waived,
except by a writing signed by the party to be charged or by its agent duly
authorized in writing or as otherwise permitted herein.
11.4 Exhibits.
All exhibits attached hereto are hereby incorporated by reference
herein and made a part hereof.
11.5 Severability.
Whenever possible, each provision of this Contract and every related
document shall be interpreted in such manner as to be valid under applicable
law; but, if any provision of any of the foregoing shall be invalid or
prohibited under said applicable law, such provision shall be ineffective to the
extent of such invalidity or prohibition without invalidating the remainder of
such provision, or the remaining provisions of this Contract.
11.6 Choice of Law.
This Contract and each and every related document is to be governed by,
and construed in accordance with, the laws of the State of Texas applicable to
contracts to be performed in that state.
11.7 Successors.
Except as otherwise provided herein, the provisions and covenants
contained herein shall inure to the benefit of and be binding upon the heirs,
representatives, successors and permitted assigns of the parties hereto.
11.8 Waiver.
No claim of waiver, consent, or acquiescence with respect to any
provision of this Contract shall be made against any party hereto except on the
basis of a written instrument executed by or on behalf of such party. However,
the party for whose unilateral benefit a condition is herein inserted shall have
the right to waive such condition.
11.9 Gender and Number.
Whenever the context so requires herein, the neuter gender shall
include the masculine and feminine, and the singular number shall include the
plural.
11.10 Further Actions.
Buyer and Seller agree to execute such additional documents, and take
such further actions, as may reasonably be required to carry out the provisions
and intent of this Contract, and every agreement or document relating hereto, or
entered into in connection herewith.
11.11 Time of the Essence.
Time is of the essence of each and every term, covenant and provision
hereof.
11.12 Business Day.
The term "business day" as used herein shall mean a day in which
federally insured national banking associations located in the county in which
the Property is situated are not closed. If any date set forth in this Contract
or the last date for the taking of any action hereunder shall fall on a
Saturday, Sunday or other day which is not a business day, then the last date
for taking such action shall be extended to the next succeeding business day.
11.13 Counterparts.
This Contract may be executed in several counterparts, each of which
shall be fully effective as an original and all of which together shall
constitute one and the same instrument. Delivery of an executed counterpart by
telefacsimile shall be equally as effective as delivery manually executed
counter part of this Contract. Any party delivering an executed counterpart of
this Contract by telefacsimile also shall deliver a manually executed
counterpart of this Contract but the failure to deliver a manually executed
counterpart shall not effect the validity, enforceability, and binding effect of
this Contract.
11.14 Effective Date.
The date of formation of this Contract (herein called the "Effective
Date") shall for all purposes be the date of the last of Buyer and Seller to
execute this Contract.
11.15 Confidentiality.
Buyer and Seller agree to maintain the confidentiality of the material
terms of this Contract and Buyer agrees to keep all information obtained on the
Property confidential and will not divulge the same to any person or entity
other than (i) any accountant or attorney; (ii) any existing or prospective
mortgagee of the Property; (iii) any employee or agent of Seller or Buyer as
necessary to perform their respective obligations hereunder; or (iv) as may be
required by applicable law.
11.16 No Third Party Beneficiary.
This Contract is not intended to give or confer any benefits, rights,
privileges, claims, actions, or remedies to any person or entity as a third
party beneficiary or otherwise.
11.17 Independent Consideration.
Concurrently with the execution of this Contract, Buyer shall pay to
Seller the sum of One Hundred Dollars ($100) as independent consideration (the
"Independent Consideration") for the execution of this Contract by Seller. Such
Independent Consideration is being paid to, and shall be retained by, Seller as
additional consideration for this Contract and not as part of the Purchase
Price. Such Independent Consideration is deemed earned by Seller as of the
effective date of this Contract and is non-refundable.
11.18 Calculation of Time Periods.
Unless otherwise specified, in computing any period of time described
herein, the day of the act or event after which the designated period of time
begins to run is not to be included and the last day of the period so computed
is to be included at, unless such last day is Saturday, Sunday or legal holiday
for national banks in the location where the Property is located, in which event
the period shall run until the end of the next day which is neither a Saturday,
Sunday, or legal holiday. The last day of any period of time described herein
shall be deemed to end at 6 p.m. Dallas, Texas time.
11.19 WAIVER OF CONSUMER RIGHTS.
(a) BUYER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS & COMMERCE
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY OF BUYER'S OWN SELECTION, BUYER VOLUNTARILY
CONSENTS TO THIS WAIVER.
(b) Buyer acknowledges and agrees that the Texas Deceptive Trade
Practices-Consumer Protection Act, Subchapter E of Chapter 17 of the Texas
Business and Commerce Code, Sections 17.41 Through 17.63, inclusive (the
"DTPA"), is not applicable to this transaction, and that, with respect to all
acts of Seller, past, present or future in connection with this Contract, the
rights and remedies of Buyer will be governed by legal principles other than the
DTPA.
(c) In furtherance of the foregoing, Buyer represents that it has
knowledge and experience in financial and business matters that enable it to
evaluate the merits and risks of the transaction that is the subject of this
Contract. Seller represents that it is not in a significantly disparate
bargaining position in relation to Seller.
(d) The foregoing Waiver is knowingly, intentionally, and voluntarily
made by Buyer, and Buyer acknowledges that it has been represented by
independent legal counsel selected of its own free will in connection with the
negotiations and execution of this Contract and this Waiver and has had the
opportunity to discuss the foregoing Waiver and its meaning with such counsel.
Buyer understands the legal consequences of signing this Waiver. The provisions
of this Waiver shall survive Closing.
12. Termination, Default and Remedies.
12.1 Permitted Termination.
If this Contract is terminated by either Seller or Buyer pursuant to a
right expressly given it to do so hereunder (herein referred to as a "Permitted
Termination"), except for a termination by Seller because of the default of
Buyer, the Earnest Money Deposit, shall immediately be returned to Buyer by the
Title Company without requirement of any release from or joinder of Seller, and
this Contract shall thereafter be null and void except for such provisions
herein which expressly by their terms survive such termination. The Earnest
Money Deposit shall not be refunded to Buyer for any reason other than upon a
termination permitted by Buyer (i) upon the default of Seller as provided in
Section 12.2 hereof, or (ii) upon the occurrence of certain casualty events as
provided in Section 9 hereof, or (iii) upon the occurrence of certain
condemnation proceedings as provided in Section 10 hereof, or (iv) as permitted
in Section 2.4.5 hereof.
12.2 Default by Seller.
(a) Seller shall be in default hereunder upon the
occurrence of any one or more of the following events:
(i) Any of Seller's warranties or
representations set forth herein are untrue or
inaccurate in any material respect when made or at
the Closing; or
(ii) Seller shall fail to meet, comply with
or perform any material covenant, agreement, or
obligation within the time limits and in the manner
required in this Contract.
(b) In the event of a default by Seller hereunder,
Buyer may, at Buyer's sole option and as its sole and
exclusive remedy, do either of the following: (x) terminate
this Contract by written notice delivered to Title Company and
to Seller at or prior to the Closing (which shall be a
Permitted Termination under Section 12.1 hereof); or (y)
enforce specific performance of this Contract against Seller
in which case Buyer shall accept such title to the Property as
Seller is able to convey.
12.3 Default by Buyer.
Buyer shall be in default hereunder if Buyer shall fail to deliver at
the Closing any of the items required of Buyer in Section 2.5.2 hereof for any
reason other than a default by Seller hereunder or a Permitted Termination. In
the event of a default by Buyer hereunder, Seller, as Seller's sole and
exclusive remedy for such default, shall be entitled to terminate this Contract
by notice to Buyer and retain the Earnest Money Deposit together with all
interest earned thereon, it being agreed between Buyer and Seller that such sum
shall be liquidated damages for a default by Buyer hereunder because of the
difficulty, inconvenience, and uncertainty of ascertaining actual damages for
such default. Nothing in this Section 12.3 shall be deemed to limit any of
Buyer's indemnification obligations under this Contract.
IN WITNESS WHEREOF each of the undersigned has caused this Contract to
be executed and delivered on its behalf by its officers or agents thereunto duly
authorized as of the date first above written.
SELLER:
LEGATO INVESTMENTS, INC.
a Delaware corporation
/s/
By:------------------------------
Name:----------------------------
Title:---------------------------
Dated:---------------------------
BUYER:
HOMES FOR AMERICA HOLDINGS, INC.,
a Nevada corporation
/s/
By:---------------------------------
Name:-------------------------------
Title:------------------------------
Dated:------------------------------
ACKNOWLEDGMENT AND AGREEMENT BY TITLE COMPANY
The undersigned joins herein to confirm receipt of a fully-executed
copy of this Contract and the Earnest Money Deposit and agrees to comply with
the terms and conditions set forth in this Contract.
CHICAGO TITLE INSURANCE COMPANY
/s/
By:--------------------------
Name:------------------------
Title:-----------------------
<PAGE>
EXHIBIT "A"
DESCRIPTION OF LAND
<PAGE>
EXHIBIT "B"
SPECIAL WARRANTY DEED
THE STATE OF TEXAS------------------ss.
------------------ss. KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF TARRANT ss.
THAT, LEGATO INVESTMENTS, INC., a Delaware corporation (herein called
"Grantor"), for and in consideration of the sum of Ten and No/100 Dollars
($10.00) cash and other consideration paid to Grantor, by HOMES FOR AMERICA
HOLDINGS, INC., a Nevada corporation (herein called "Grantee"), the receipt and
sufficiency of which considerations are hereby acknowledged, has GRANTED,
BARGAINED, SOLD AND CONVEYED, and by these presents hereby does GRANT, BARGAIN,
SELL, AND CONVEY unto Grantee all that certain property (the "Property")
situated in the County of Tarrant, Texas, more particularly described on Exhibit
A attached hereto and made a part hereof for all purposes, and all improvements
thereon, subject to the matters set forth on Exhibit B attached hereto and made
a part hereof for all purposes (the "Permitted Exceptions").
TO HAVE AND TO HOLD the Property, together with all and singular the
rights and appurtenances thereto in anywise belonging, unto Grantee and its
successors and assigns forever, and Grantor does hereby bind itself, its
successors and assigns, to warrant and forever defend all and singular the said
Property unto Grantee and its successors and assigns, against every person
whomsoever lawfully claiming or to claim the same, or any part thereof, by,
through, or under Grantor, but not otherwise, subject, however, to the Permitted
Exceptions, to the extent such Permitted Exceptions are valid and subsisting and
affect the Property.
GRANTEE ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH IN
THE CONTRACT OF SALE BETWEEN GRANTOR AND GRANTEE DATED __________, 1998 (THE
"CONTRACT"), GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO: (A) THE
NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE
WATER, SOIL AND GEOLOGY; (B) THE INCOME TO BE DERIVED FROM THE PROPERTY; (C) THE
SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH GRANTEE
MAY CONDUCT THEREON; (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION
WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL
AUTHORITY OR BODY; (E) THE HABITABILITY, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY; OR (F) ANY OTHER MATTER WITH RESPECT TO THE
PROPERTY. WITHOUT LIMITING THE FOREGOING EXCEPT AS EXPRESSLY PROVIDED IN THE
CONTRACT, GRANTOR DOES NOT AND HAS NOT MADE ANY REPRESENTATION OR WARRANTY
REGARDING THE PRESENCE OR ABSENCE OF ANY HAZARDOUS SUBSTANCES (as hereinafter
defined) ON, UNDER OR ABOUT THE PROPERTY OR THE COMPLIANCE OR NONCOMPLIANCE OF
THE PROPERTY WITH THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT, THE SUPERFUND AMENDMENT AND REAUTHORIZATION ACT, THE RESOURCE
CONVERSATION RECOVERY ACT, THE FEDERAL WATER POLLUTION CONTROL ACT, THE FEDERAL
ENVIRONMENTAL PESTICIDES ACT, THE CLEAN WATER ACT, THE CLEAN AIR ACT, ANY SO
CALLED FEDERAL, STATE OR LOCAL "SUPERFUND" OR "SUPERLIEN" STATUTE, OR ANY OTHER
STATUTE, LAW, ORDINANCE, CODE, RULE, REGULATION, ORDER OR DECREE REGULATING,
RELATING TO OR IMPOSING LIABILITY (INCLUDING STRICT LIABILITY) OR STANDARDS OF
CONDUCT CONCERNING ANY HAZARDOUS SUBSTANCES (COLLECTIVELY, THE "HAZARDOUS
SUBSTANCE LAWS"). FOR PURPOSES OF THIS CONTRACT, THE TERM "HAZARDOUS SUBSTANCES"
SHALL MEAN AND INCLUDE THOSE ELEMENTS OR COMPOUNDS WHICH ARE CONTAINED ON THE
LIST OF HAZARDOUS SUBSTANCES ADOPTED BY THE UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY AND THE LIST OF TOXIC POLLUTANTS DESIGNATED BY CONGRESS OR THE
ENVIRONMENTAL PROTECTION AGENCY OR UNDER ANY HAZARDOUS SUBSTANCE LAWS. GRANTEE
FURTHER ACKNOWLEDGES AND AGREES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO
INSPECT THE PROPERTY, GRANTEE IS PURCHASING THE PROPERTY PURSUANT TO ITS
INDEPENDENT EXAMINATION, STUDY, INSPECTION AND KNOWLEDGE OF THE PROPERTY AND
GRANTEE IS RELYING UPON ITS OWN DETERMINATION OF THE VALUE OF THE PROPERTY AND
USES TO WHICH THE PROPERTY MAY BE PUT, AND NOT ON ANY INFORMATION PROVIDED OR TO
BE PROVIDED BY GRANTOR. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT GRANTOR HAS
MADE NO REPRESENTATION OR WARRANTY RESPECTING THE ACCURACY OR COMPLETENESS OF
ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE PROPERTY FROM
THIRD PARTY SOURCES AND THAT GRANTOR HAS NOT MADE AND WILL NOT BE OBLIGATED TO
MAKE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION. GRANTEE
ACKNOWLEDGES THAT THE PROPERTY IS BEING ACCEPTED IN AN "AS IS", "WHERE IS", and
"WITH ALL FAULTS" CONDITION BASED SOLELY ON GRANTEE'S OWN INSPECTION WITHOUT
REPRESENTATIONS, WARRANTIES OR COVENANTS, EXPRESS OR
<PAGE>
IMPLIED, OF ANY KIND OR NATURE; PROVIDED, HOWEVER, THAT NOTHING
CONTAINED IN THIS PARAGRAPH SHALL LIMIT THE SPECIAL WARRANTIES OF TITLE SET
FORTH IN THIS DEED.
WITNESS my hand this ________ day of __________________, 1998.
GRANTOR:
ADDRESS OF GRANTEE: LEGATO INVESTMENTS, INC.,
a Delaware corporation
6003 Abrams Road /s/
Dallas, Texas 75231 By:---------------------------
Attn: Mark MacFarlane Name:-------------------------
Title:------------------------
THE STATE OF TEXAS/ ss.
------------------
This instrument was acknowledged before me on ____________, 1998, by
________________, the ______________ of LEGATO INVESTMENTS, INC., a Delaware
corporation, on behalf of said corporation.
- --------------------------------
Notary Public in and for the State of Texas
My Commission Expires: ---------------------------
- ---------------------------------
Typed or Printed Name of Notary
[SEAL]
ASSIGNMENT AND ASSUMPTION OF CONTRACT OF SALE
THIS ASSIGNMENT AND ASSUMPTION OF CONTRACT OF SALE (this "Assignment"),
is executed as of the ____ day of December, 1998, by and between HOMES FOR
AMERICA HOLDINGS, INC., a Nevada corporation ("Assignor"), and ARLINGTON/HOMES
FOR AMERICA, INC., a Texas corporation ("Assignee").
W I T N E S S E T H:
WHEREAS, LEGATO INVESTMENTS, INC., a Texas corporation, as seller
("Seller"), and Assignor, as buyer, executed a certain Contract of Sale dated as
of November 2, 1998 (the "Agreement") for the purchase and sale of that certain
real property and improvements having an address at 1129 and 1201 Mineral
Springs Road in Tarrant County, Texas; and
WHEREAS, Assignor wishes to assign, convey and transfer to Assignee,
all of Assignor's right, title and interest in, to and under the Agreement,
subject to all of the liabilities, duties and obligations under the Agreement of
Assignor under the Agreement and Assignee wishes to accept such assignment and,
in consideration therefor, is willing to accept and assume such liabilities,
duties and obligations.
NOW THEREFORE, for and in consideration of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Assignor does hereby grant, bargain, sell, and convey to
Assignee all of Assignor's right, title and interest in the Agreement.
Such assignment of the Agreement by Assignor to Assignee as provided
above is made on the following terms and conditions:
1. Assignee accepts and assumes, all of the right, title and interest
of Assignor in, to and under the Agreement, subject to all of the liabilities,
duties and obligations of the Assignor thereunder and Assignee assumes and
covenants to perform all of the liabilities, duties and obligations hereinabove
assigned. Assignee agrees to indemnify, save, and hold harmless Assignor from
and against any and all loss, liability, claims, or causes of action existing in
favor of or asserted by Seller under the Agreement arising out of or relating to
Assignee's failure to perform any of the obligations of the "Buyer" under the
Agreement.
2. Assignor hereby authorizes and empowers Assignee to accept all
benefits and perform all acts associated with the Agreement in the same manner
and with the same effect as Assignor could have done had this Assignment not
been made.
3. Assignor hereby represents and warrants to Assignee that:
(i) the Agreement, a copy of which has been provided to Assignee, is a
true and complete copy of said Agreement, and the same has not been
further amended or modified.
<PAGE>
ASSIGNMENT AND ASSUMPTION OF CONTRACT OF SALE
- ----------------------------------------------
133061.1
(ii) Assignor has not previously assigned, transferred or otherwise
disposed of its right, title and interest in, to and under the
Agreement.
4. This Assignment may be signed in several counterparts, each of which
shall be deemed an original, and all such counterparts shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment to
be effective as of the date first set forth above.
ASSIGNOR:
HOMES FOR AMERICA HOLDINGS, INC.,
a Nevada corporation
/s/ Robert A. MacFarlane
By: ----------------------------
Robert A. MacFarlane,
Chief Executive Officer
ASSIGNEE:
ARLINGTON/HOMES FOR AMERICA, INC.,
a Texas corporation
/s/ Robert A. MacFarlane
By: ----------------------------
Robert A. MacFarlane,
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
--------------------
s/s Robert A. MacFarlane
--------------------
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 s/s Robert A. MacFarlane
- --------------------------- -------------------------
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/ William C. Mannix
- ------------------------
William C. Mannix
/s/ Robert A. MacFarlane
- ------------------------
Robert A. MacFarlane
PROPERTY PURCHASE AGREEMENT
(Lakes Edge Apartments Project)
TABLE OF CONTENTS
ARTICLE I. AGREEMENT FOR PURCHASE AND SALE - DESCRIPTION
OF THE PROPERTY
ARTICLE II. PURCHASE PRICE AND PROPERTY EARNEST MONEY
2.1. The Purchase Price
2.2. The Earnest Money
ARTICLE III. PHYSICAL CONDITION OF PROPERTY
3.1. Property Conveyed "AS IS."
3.2. Access to Property; Tests
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of Seller
4.2. Representations and Warranties of Purchaser
ARTICLE V. INTERIM COVENANTS OF SELLER
5.1. Ordinary Course of Business
5.2. Additional Agreements
5.3. Cooperation; Necessary Approvals
ARTICLE VI. INTERIM COVENANTS OF PURCHASER
6.1. The Necessary Approvals
6.2. Notification Obligations
ARTICLE VII. PERMITTED ENCUMBRANCES TO TITLE
ARTICLE VIII. CONDITION OF TITLE AND TITLE INSURANCE
8.1. Title Commitment; Objections
8.2. Exclusive Remedy of Purchaser
ARTICLE IX. CLOSING
9.1. The Closing Date
9.2. The Closing Statement
9.3. Closing Costs
ARTICLE X. DOCUMENTS TO BE DELIVERED AT CLOSING
10.1. Obligations of Seller
10.2. Obligations of Purchaser
ARTICLE XI. CONDITIONS TO CLOSING
11.1. Conditions to the Obligations of Seller and
Purchaser
11.2. Conditions to the Obligations of Seller
11.3. Conditions to the Obligations of Purchaser
ARTICLE XII. APPORTIONMENTS AND ADJUSTMENTS
12.1. The Adjustment Date
12.2. Adjustments and Apportionments
12.3. Certain Credits to Purchaser
12.4. Certain Tax Prorations
12.5. Insurance; Utilities
12.6. Survivability
ARTICLE XIII. REMEDIES
13.1. Seller's Remedies
13.2. Purchaser's Remedies
13.3. Attorneys' Fees
ARTICLE XIV. INDEMNIFICATION OBLIGATIONS
14.1. Indemnification by Seller
14.2. Indemnification by Purchaser
14.3. General Indemnification Provisions
ARTICLE XV. DAMAGE, DESTRUCTION OR CONDEMNATION
15.1. Maintenance of Insurance
15.2. Events of Casualty and Condemnation
15.3. Insubstantial Damages
15.4. Certain Definitions
15.5. Survivability
ARTICLE XVI. BROKER
16.1. Representations of Purchaser
16.2. Representations of Seller
16.3. Survivability
ARTICLE XVII. NOTICES
ARTICLE XVIII. NO ASSIGNMENT
ARTICLE XIX. INSPECTION
ARTICLE XX. MISCELLANEOUS
20.1. Binding Effect
20.2. Business Days
20.3 Counterparts:
20.4. Section Headings
20.5. Severability
20.6. Entire Agreement
20.7. Waivers
20.8. Governing Law
20.9. No Third Party Beneficiaries
20.10. No Affiliate Liability
20.11. Waiver of Jury Trial
20.12. Press Releases
20.13 Statutory Disclosures Regarding the Property
EXHIBIT A PROPERTY LEGAL DESCRIPTION
EXHIBIT B PERSONAL PROPERTY INVENTORY AS OF SEPTEMBER 1998
EXHIBIT C SPECIAL WARRANTY DEED
EXHIBIT D ASSIGNMENT AND ASSUMPTION OF SERVICE CONTRACTS,WARRANTIES
AND LEASES
EXHIBIT E BILL OF SALE
EXHIBIT F TENANT NOTIFICATION LETTER
EXHIBIT G DUE DILIGENCE DOCUMENTS
EXHIBIT H OUTSTANDING LITIGATION
<PAGE>
PROPERTY PURCHASE AGREEMENT
(Lakes Edge Apartments Project)
THIS PROPERTY PURCHASE AGREEMENT (this "Agreement"), dated as of March
24, 1999 (the "Effective Date"), by and between LAKES EDGE PARTNERS, L.P., a
Delaware limited partnership ("Seller"), and LAKES EDGE-HOMES HOLDINGS, INC., a
Florida corporation ("Purchaser").
RECITALS:
A. Seller is the owner of certain property commonly known as Lakes Edge
Apartments, an apartment project located in Miami-Dade County, Florida.
B. TEWB Real Estate L.P., a Delaware limited partnership ("TEWB"), is
the owner of those certain Multifamily Mortgage Revenue Bonds 1985 Series 12
(Walden Apartments Project) (the "Bonds") which were issued by the Housing
Finance Authority of Dade County, Florida (the "Issuer"), such Bonds in the
outstanding principal sum of $14,850,000.
C. LEHH, Inc., a Florida corporation ("LEHH"), has agreed with TEWB to
enter into, simultaneously with the execution of this Agreement, that certain
Bond Purchase Agreement of even date herewith by and between LEHH and TEWB (the
"Bond Purchase Agreement") pursuant to the terms of which TEWB shall sell and
convey to LEHH the Bonds, together with all of TEWB's rights pursuant to the
Bond Documents (as defined in the Bond Purchase Agreement). Unless otherwise
deemed herein, capitalized terms used herein shall have the meanings ascribed to
them in the Bond Purchase Agreement.
ARTICLE I.
AGREEMENT FOR PURCHASE AND SALE - DESCRIPTION OF THE PROPERTY
1.1. Seller hereby agrees to sell and cause to be conveyed to
Purchaser, and Purchaser hereby agrees to purchase, the following property
(collectively, the "Property"):
(a) The Real Property. The parcel of real property located in
Miami-Dade County, Florida, and legally described on Exhibit A hereto (the
"Land"), together with all right, title and interest, if any, in and to the
streets and roads abutting such property to the center lines thereof, any strips
and gores within or adjoining such property, the air space and right to use the
air space above such property, all rights of ingress and egress by motor
vehicles to parking facilities on or within such property, all alley, drainage,
mineral, water, oil and gas rights, and the tenements, hereditaments, easements,
rights-of-way and appurtenances belonging or in anywise appertaining thereto;
(b) Improvements and the Personal Property. All buildings,
improvements, fixtures (the "Improvements") and all articles of personal
property (the "Personal Property") attached or appurtenant to or used in
connection with the Property (and, in the case of Personal Property, which is
owned by Seller and located at the Property), which articles of personal
property are listed on Exhibit attached hereto, free from all liens and
encumbrances except those permitted by this Agreement;
(c) The Intangible Property. All intangible property and
rights now or on the Closing Date (as hereinafter defined) owned or held by
Seller in connection with the Land, the Improvements and the Personal Property
or the use thereof, or any business or businesses conducted thereon, building
and trade names (including all of Seller's interest in the name "Lakes Edge
Apartments"), business licenses, warranties (including those relating to
construction or fabrication), utility contracts, telephone exchange numbers,
advertising materials, plans and specifications, engineering plans and studies,
soil reports, governmental approvals and development rights related to the Land
and the Improvements or any part thereof and any credits, reimbursements or
other amounts payable to the owner of any portion of the Land, the Improvements
and the Personal Property (the "Intangible Property");
(d) Leases. All leases (the "Leases") of space in the Land or
Improvements, concession leases, and all tenant security deposits held by Seller
on the Closing Date;
(e) Service Contracts. To the extent assignable without the
consent of third parties, the Service Contracts (as hereinafter defined); and
(f) Funds Held by Bonds Trustee. All funds, accounts,
deposits, escrows and other amounts held by First Union National Bank of Florida
(the "Trustee") in its capacity as Trustee with respect to the Bonds.
ARTICLE II.
PURCHASE PRICE AND PROPERTY EARNEST MONEY
2.1. The Purchase Price. The purchase price for the Property hereunder
(the "Purchase Price") shall be comprised of (i) cash consideration in the
amount of One and No/100 Dollars ($1.00) (the "Cash Consideration"); and (ii)
the assumption by Purchaser at the Closing of all of the outstanding principal
and accrued interest arising under the terms of the mortgage securing the Bonds
(the "Assumed Obligations") pursuant to the terms of an Assumption Agreement in
form and substance satisfactory to the Issuer (the "Assumption Agreement"). The
Cash Consideration shall be subject to certain adjustments and prorations as
hereinafter provided, and shall be payable by Purchaser to Seller in immediately
available funds by wire transfer no later than 2:00 p.m. Eastern Time on the
Closing Date.
2.2. The Earnest Money.
(a) Purchaser shall deposit, within two (2) business days
following the Effective Date, with Ticor Title Insurance Company, 2701 Gateway
Drive, Pompano Beach, Florida 33069, Attn: Commercial Escrow Department,
Facsimile: 954/971-2050 (the "Title Company") the amount of Five Thousand and
No/100 Dollars ($5,000.00) (the "Property Earnest Money"), in good funds on or
before 5:00 p.m. Eastern Time on such day. The Property Earnest Money shall also
include any payment by Purchaser pursuant to Section 9.1(a) below of the sum of
Fifty Thousand and No/100 Dollars ($50,000.00) as consideration for the
Extension Period. The Property Earnest Money described herein is in addition to
the "Bond Earnest Money" described in the Bond Purchase Agreement. In any
instance in which the Title Company is authorized to deliver the Property
Earnest Money to Seller pursuant to the terms of this Agreement, such Property
Earnest Money shall be disbursed pursuant to written instructions executed by
Seller, and in the absence thereof may be interplead by the Title Company. In
any instance in which the Title Company is authorized to return the Property
Earnest Money to Purchaser pursuant to the terms of this Agreement, the Title
Company shall not return the Property Earnest Money to Purchaser unless LEHH has
also qualified for return of the Bond Earnest Money under the Bond Purchase
Agreement; provided, however, the Property Earnest Money shall be returned to
Purchaser upon the delivery of a Termination Notice by Purchaser to the Title
Company and Seller at any time prior to the expiration of the Inspection Period.
The Title Company shall deposit the Property Earnest Money into an
interest-bearing money market account or other investment instrument or account
constituting immediately available funds designated by Purchaser which in any
case is maintained by Nations Bank or such other federally insured bank or
savings and loan as Purchaser shall select. All interest accrued on the Property
Earnest Money shall inure to the benefit of Purchaser unless Purchaser defaults
in its obligations hereunder. If the Property Earnest Money is not deposited
within the required time period hereunder, Seller may terminate this Agreement
by delivering written notice to Purchaser and the Title Company. Upon said
termination, the Title Company shall immediately destroy all executed originals
of this Agreement in its possession. Thereafter, neither party shall have any
further rights or obligations hereunder except for the obligations set forth in
Article XIX and Sections 2.2(b), 3.2, and 13.3 hereof (the "Surviving Duties").
(b) Except as otherwise provided below, in the event of a
termination of this Agreement by either Seller or Purchaser, the Title Company
is authorized to deliver the Property Earnest Money (together with all interest
earned thereon) to the party hereto entitled to same pursuant to the terms
hereof on or before the third (3rd) business day following receipt of written
notice of such termination by the Title Company and non-terminating party from
the terminating party, unless either party hereto notifies the Title Company
that it disputes the right of the other party to receive the Property Earnest
Money; provided, however, Seller shall not dispute the right of Purchaser to
receive a return of the Property Earnest Money at any time prior to the
expiration of the Inspection Period. In the event there is a dispute, the Title
Company shall interplead the Property Earnest Money into a court of competent
jurisdiction. All reasonable attorneys' fees and costs and the Title Company's
reasonable costs and expenses incurred in connection with such interpleader
shall be assessed against the party that is not awarded the Property Earnest
Money, or if the Property Earnest Money is distributed in part to both parties
by agreement or by order of a court of competent jurisdiction, then in the
inverse proportion of such distribution. Notwithstanding the foregoing, in the
event this Agreement is terminated and Purchaser is entitled to receive the
Property Earnest Money, the Title Company is not authorized to deliver the
Property Earnest Money to Purchaser unless and until Seller notifies the Title
Company in writing that it has received satisfactory evidence that all Bond
Party Costs have been paid; provided, however, if this Agreement is terminated
as a result of a default by Seller, then the payment of all Bond Party Costs
shall be the responsibility of Seller. Seller shall notify the Title Company
that all Bond Party Costs have been paid within three (3) business days after
Seller verifies that such payment has been made.
(c) Upon the conclusion of the Inspection Period without the
timely delivery of a Termination Notice by Purchaser to Seller, the Property
Earnest Money (and all interest earned thereon) shall be deemed to be fully
earned by Seller and shall be expressly nonrefundable to Purchaser, unless
Seller subsequently defaults under this Agreement or TEWB defaults under the
Bond Purchase Agreement. All interest earned on the Property Earnest Money shall
be reported to the Internal Revenue Service as income of the party receiving the
Property Earnest Money. Purchaser and Seller shall promptly execute all forms
reasonably requested by the Title Company in connection with any reporting to
the Internal Revenue Service.
ARTICLE III.
PHYSICAL (CONDITION OF PROPERTY
3.1. Property Conveyed "AS IS." AS A MATERIAL INDUCEMENT TO SELLER'S
WILLINGNESS TO ENTER INTO THIS AGREEMENT, PURCHASER HEREBY EXPRESSLY
ACKNOWLEDGES ITS UNDERSTANDING AND AGREEMENT THAT, EXCEPT AS OTHERWISE EXPRESSLY
SET FORTH IN SECTION 4.1 HEREOF, SELLER IS NOT MAKING AND SPECIFICALLY DISCLAIMS
ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OR
REPRESENTATIONS AS TO MATTERS OF TITLE (OTHER THAN SELLER'S WARRANTY OF TITLE
SET FORTH IN THE DEED TO BE DELIVERED AT CLOSING), ZONING, TAX CONSEQUENCES,
PHYSICAL OR ENVIRONMENTAL CONDITIONS, AVAILABILITY OF ACCESS, INGRESS OR EGRESS,
OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS,
GOVERNMENTAL REGULATIONS OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING
THE PROPERTY, INCLUDING, WITHOUT LIMITATION, (I) THE VALUE, CONDITION,
MERCHANTABILITY, MARKETABILITY, PROFITABILITY, SUITABILITY OR FITNESS FOR A
PARTICULAR USE OR PURPOSE OF THE PROPERTY, (II) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS INCORPORATED INTO THE PROPERTY, (III) THE MANNER,
QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY, AND (IV) THE
SUITABILITY OR USEFULNESS OF THE BONDS AS FINANCING FOR THE PROPERTY OR THE
ABILITY OF PURCHASER TO HAVE THE BONDS REFUNDED, REISSUED OR RESOLD. PURCHASER
HAS NOT RELIED UPON AND WILL NOT RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY
REPRESENTATION OR WARRANTY OF SELLER OR ANY AGENT OF SELLER EXCEPT FOR THOSE
EXPRESSLY MADE IN THIS AGREEMENT. PURCHASER EXPRESSLY WARRANTS THAT IT IS A
SOPHISTICATED PURCHASER OF REAL ESTATE AND THAT IT IS RELYING SOLELY ON ITS OWN
EXPERTISE AND THAT OF PURCHASER'S CONSULTANTS IN PURCHASING THE PROPERTY.
PURCHASER WILL CONDUCT SUCH INSPECTIONS AND INVESTIGATIONS OF THE PROPERTY AS
PURCHASER DEEMS NECESSARY, INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITIONS OF THE PROPERTY, AND SHALL RELY UPON SAME. UPON
CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT
NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN
REVEALED BY PURCHASER'S INSPECTIONS, TESTS AND INVESTIGATIONS. PURCHASER
ACKNOWLEDGES AND AGREES THAT UPON CLOSING, SELLER SHALL SELL AND CONVEY TO
PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY "AS IS, WHERE IS," WITH ALL
FAULTS EXCEPT FOR ANY REPRESENTATIONS, WARRANTIES AND OTHER MATTERS THAT
SPECIFICALLY SURVIVE CLOSING UNDER THIS AGREEMENT AND SELLER'S WARRANTIES AND
REPRESENTATIONS UNDER THE DEED AND OTHER CLOSING DOCUMENTS. PURCHASER FURTHER
ACKNOWLEDGES AND AGREES THAT THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR
REPRESENTATIONS COLLATERAL TO OR AFFECTING THE PROPERTY BY SELLER, ANY AGENT OF
SELLER OR ANY THIRD PARTY. THE TERMS AND CONDITIONS OF THIS SECTION 3.1 SHALL
EXPRESSLY SURVIVE THE CLOSING AND SHALL NOT MERGE WITH THE PROVISIONS OF ANY
CLOSING DOCUMENTS. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY ORAL OR
WRITTEN STATEMENTS, REPRESENTATIONS, OR INFORMATION PERTAINING TO THE PROPERTY
FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, OR SERVANT OR OTHER
PERSON, UNLESS THE SAME ARE SPECIFICALLY SET FORTH OR REFERRED TO HEREIN.
3.2. Access to Property: Tests. So long as this Agreement remains in
effect, Purchaser and the Permitted Outside Parties shall have the right and
permission to enter upon the Property at all reasonable times, at Purchaser's
expense, to make such investigations, studies and tests which Purchaser deems
necessary or advisable, in its reasonable discretion (collectively, the
"Tests"); all Tests shall be conducted at the sole cost and expense of
Purchaser. Purchaser shall also have the right to review and copy all Leases,
financial records and any other information pertaining to the operation of the
Property in the possession of Seller or its agents, representatives or
contractors during the term of this Agreement. Purchaser shall restore the
Property to its condition existing immediately prior to Purchaser's inspection
thereof, and Purchaser shall be liable for all damage or injury to any person or
property resulting from, relating to or arising out of any such inspection,
whether occasioned by the acts of Purchaser or any of its employees, agents,
representatives or contractors, and Purchaser shall indemnify and hold harmless
Seller and its agents, employees, officers, directors, affiliates and asset
managers from any liability resulting therefrom. This indemnification by
Purchaser shall survive the Closing or the termination of this Agreement, as
applicable. Seller shall make available to Purchaser all of the books and
records, documents and other information pertaining to the Property or the
operation thereof in the possession of Seller and shall reasonably cooperate
with Purchaser in its investigation of the Property.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of Seller. Seller hereby represents
and warrants to Purchaser as follows:
(a) Formation' Authority and Enforceability. Seller is a
limited partnership duly organized and validly existing under the laws of the
State of Delaware and has full power and authority to enter into this Agreement
and to consummate all of the transactions contemplated hereby, without the
consent of any third party or court, and the persons executing this Agreement
and all other documents required to consummate the transactions contemplated
hereby on behalf of Seller are duly authorized to execute this Agreement and
such other documents on behalf of Seller, and are authorized to bind Seller.
(b) United States Person. Seller is a "United States person", as defined by
Internal Revenue Code Section 1445 and -------------------- Section 7701.
(c) No Conflict. Subject to obtaining the required consents,
if any, of the Bond Parties to the sale or transfer of Seller's right, title and
interest in and to the Property, the execution of this Agreement by Seller does
not, and the performance by Seller of the transactions contemplated by this
Agreement will not, violate or constitute a breach of Seller's partnership
agreement or, to Seller's Knowledge, any contract, permit, license, order or
decree to which Seller is a party or by which Seller or its assets are bound.
(d) No Violation: No Legal Proceedings. To Seller's Knowledge,
from the time when Seller acquired its right, title and interest in and to the
Property, Seller has not received any written notice to the effect that the
Property and the operation thereof are in violation of any applicable federal or
state law, or any ordinance, order or regulation of any governmental or
quasi-governmental agency having jurisdiction over the Property. Except as
disclosed in Exhibit H. to Seller's Knowledge, no litigation or similar
proceedings of any type (including condemnation or similar proceedings) have
been instituted or are pending or contemplated against the Property or any part
thereof, nor has Seller received written notice threatening any such litigation
or similar proceedings.
(e) The Due Diligence Documents. As limited by Article XIX,
except as otherwise disclosed to Purchaser in writing, the Due Diligence
Documents delivered to Purchaser are, to Seller's Knowledge, true, accurate and
complete copies of the Due Diligence Documents. Seller has received no written
notice with respect to (i) the Property's failure to comply with applicable
zoning and use requirements and restrictions, (ii) the lack of the availability
of water, storm sewer, sanitary sewer, gas, electric, telephone and drainage
facilities required by law for the operation of the Property, or (iii) the lack
of availability of vehicular and pedestrian ingress and egress to the Land.
(f) No Grant of Rights. Seller has not granted any person or
entity a right or option to acquire all or any portion of the Property, other
than Purchaser pursuant to this Agreement.
(g) No Claims. Seller has not received written notice of any
claim by any party which asserts any interest in the Property, except for claims
by parties disclosed in the Title Commitment.
(h) Insurance. Seller has not received written notice from any
insurance company providing insurance against loss or damage to the Property of
an intent to cancel or not renew such insurance as a result of defects or
deficiencies in the Property.
(i) Restrictive Covenants. Seller has not received any written
notice of any violations by Seller, or by any other person or entity, of any
restrictive covenants or other matters affecting the Property.
(j) General Environmental Matters. Except as disclosed in the
Due Diligence Documents, any environmental reports, the Survey (as defined
herein) and the Title Commitment (as defined herein), and in accordance with
Article XIX hereof, Seller has not received any written notice of any of the
following: (i) any prior owner's or prior or current occupant's generation,
treatment, storage or disposal of Hazardous Materials (as defined below) in,
under or upon the Land or the Improvements or use of any Hazardous Materials in
or on the Property, or any portion thereof, in violation of any Environmental
Laws (as defined below); (ii) the existence of any Hazardous Materials in, under
or upon the Land, the Improvements or any portion thereof in violation of any
Environmental Laws; (iii) the use and operation of the Property in violation of
any Environmental Laws; (iv) the use of the Land or the Improvements as a
sanitary landfill or dump; (v) any underground storage tank or tanks on or under
the Land or the Improvements; or (vi) the presence of Hazardous Materials or
underground storage tanks in, under or upon any parcel of property adjacent to
the Land. For the purposes of this Agreement, the term "Environmental Laws"
shall mean any federal, state or local statute, ordinance, or regulation
pertaining to health, industrial hygiene, or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA");
the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et
seq. ("RCRA"); and all rules adopted and guidelines promulgated pursuant to the
foregoing, and the term "Hazardous Materials" shall include: (A) those
substances included within the definitions of "hazardous substances", "hazardous
materials", "toxic substances", or "solid waste" in CERCLA, RCRA, and the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., and in
the regulations promulgated pursuant thereto; (b) those substances listed in the
United States Department of Transportation Table (49 CFR 172.101 and amendments
thereto) or by the United States Environmental Protection Agency as hazardous
substances (40 CFR Part 302 and amendments thereto); and (C) all other
substances, materials and wastes that are, or that become, regulated under, or
that are classified as hazardous or toxic under, any Environmental Law.
(k) No Hazardous Materials. Except as disclosed in the Due
Diligence Documents, any environmental reports, the Survey and the Title
Commitment, and in accordance with Article XIX hereof, to Seller's Knowledge,
during Seller's ownership of the Land, Seller has not used, generated, treated,
stored or disposed of any Hazardous Materials in, under or upon the Land or the
Improvements (above or below ground), or any portion thereof, in violation of
any Environmental Laws.
(l) No Wetland. Except as disclosed in the Due Diligence
Documents, any environmental reports, the Survey and the Title Commitment and in
accordance with Article XIX hereof, Seller has not received any written notice
that any portion of the Land is a wetland designated by the United States Army
Corps of Engineers or other federal, state or local body or agency having
jurisdiction over the Property or any portion thereof.
(m) Lease Prepayments. Rents under the Leases relating to the Property have
not been prepaid by more than thirty-one ----------------- (31) days.
As used herein, "Seller's Knowledge" or words to that effect means
matters which are in fact actually known to W. Edward Walter, a manager of the
general partner of the general partner of Seller, or to Steven R. Forrer, an
advisor to the Seller, and does not mean constructive knowledge. Seller hereby
represents that W. Edward Walter and Steven R. Forrer are the persons with
primary responsibility for the Property during the term of its ownership by
Seller and are the persons who would as a matter of course be made aware of any
such matters. As used herein, "Seller has not received any written notice" or
words to that effect means neither W. Edward Walter nor Steven R. Forrer has
received any such written notice, and does not mean constructive notice. Steven
R. Forrer shall have made reasonable inquiry of the management company having
responsibility for the Property, as to the matters set forth in the warranties
and representations contained herein. With respect to such inquiry, information
need not have been delivered or given in writing. Furthermore, each
representation and warranty made in this Section 4.1 or elsewhere in this
Agreement by Seller shall be deemed modified, to the extent required to make
such representation or warranty materially true and correct, as a result of any
and all documents (including, without limitation, the Due Diligence Documents
and those documents which describe the transactions contemplated by the Bond
Purchase Agreement), materials, reports, studies or other information received
by Purchaser or LEHH from Seller, TEWB, or from any third party, or discovered
by Purchaser or LEHH as a result of Purchaser's or LEHH's own investigation,
tests, inspections, studies or analysis of the Property during the Inspection
Period, as if such representation or warranty were originally made to reflect
such matters. Notwithstanding the foregoing, each representation and warranty of
Seller contained herein or elsewhere in this Agreement shall expire, and be
deemed null and void as if the same had never been given or made, unless and to
the extent Purchaser delivers notice of its intent to file a claim and
thereafter files a claim in respect of such representations and warranties
within six (6) months after the Closing Date. If, at any time prior to Closing,
Seller learns or has reason to believe that any of the aforesaid representations
and warranties is no longer true or valid and will not be true and valid on the
Closing Date, Seller shall notify Purchaser in writing and therein specify the
factors rendering or likely to render such representations or warranties untrue
or invalid. If, at any time prior to Closing, Purchaser learns or has reason to
believe that any of the aforesaid representations and warranties is no longer
true or valid, Purchaser shall notify Seller in writing and therein specify the
factors rendering or likely to render such representations or warranties untrue
or invalid. Within five (5) days of receiving such notice or of learning that
any such representation or warranty is no longer true or valid, Purchaser shall
exercise the option to either (i) waive such invalidity and proceed to Closing;
or (ii) terminate this Agreement and receive the Property Earnest Money
(together with all interest earned thereon) and thereafter neither party shall
have any further rights or obligations hereunder, except the Surviving Duties.
4.2. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows:
(a) Formation and Authority. Purchaser is a Florida
corporation, duly organized, validly existing and in good standing under the
laws of the state of its formation and duly authorized and qualified to perform
all obligations imposed upon it under this Agreement. Purchaser has full power
and authority to execute and deliver, and to perform all of its obligations
under, this Agreement and nothing prohibits or restricts the right or ability of
Purchaser to close the transactions contemplated hereunder or to carry out the
terms hereof.
(b) Due Execution and Enforceability. This Agreement and all
agreements, instruments and documents herein provided to be executed or to be
caused to be executed by Purchaser are duly authorized, executed and delivered
by Purchaser and constitute the legal, valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their terms,
covenants and conditions.
(c) Sophisticated Investor. Purchaser is a sophisticated and
knowledgeable real estate investor that has ready access to any legal and
financial advice which may be necessary to meet its obligations hereunder, and
its decision to purchase the Property is based upon its own independent expert
evaluations of the Property, the Due Diligence Documents, the Survey, the Title
Commitment and any and all other materials deemed relevant by Purchaser and its
agents. Purchaser has not relied in entering into this Agreement upon any oral
or written information from Seller or any of its employees, affiliates, agents
or representatives, except as expressly set forth in Section 4.1 hereof.
Purchaser further acknowledges that no employee or representative of Seller has
been authorized to make, and that Purchaser has not relied upon, any statements
or representations of Seller or any of its employees, affiliates, agents or
representatives, except as expressly set forth in this Agreement.
ARTICLE V.
INTERIM COVENANTS OF SELLER
Until the Closing Date or the earlier termination of this Agreement:
5.1. Ordinary Course of Business. Seller shall conduct, operate,
manage, lease and maintain the Property in the same manner as prior hereto
pursuant to its ordinary course of business.
5.2. Additional Agreements. Seller shall not enter into any additional
business agreements or other contracts or arrangements affecting the Property
without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld, unless such business agreements or other contracts can be
terminated on not more than 30 days notice without penalty.
5.3. Cooperation; Necessary Approvals. Seller agrees (a) to cooperate
reasonably with Purchaser in obtaining any approvals from the Issuer or the
Trustee (the "Necessary Approvals") in connection with (i) the execution and
delivery of this Agreement and the transfer of the Property to Purchaser; and
(ii) any efforts made by LEHH to purchase the Assets pursuant to the Bond
Purchase Agreement and (b) to execute any documents reasonably required to
accomplish the foregoing; provided, however, that Seller shall not be required
to spend any funds in connection with its agreements under this Section 5.3 nor
shall Seller be obligated to execute any indemnity, guaranty or any other
agreement which imposes covenants on Seller that survive Closing.
ARTICLE VI.
INTERIM COVENANTS OF PURCHASER
6.1. The Necessary Approvals. Purchaser hereby expressly covenants and agrees to
use its diligent good faith efforts to secure the Necessary Approvals.
6.2. Notification Obligations. Purchaser hereby further expressly covenants and
agrees to promptly notify each of Seller and TEWB of any action required by
either Seller or TEWB in order to secure the Necessary Approvals.
ARTICLE VII.
PERMITTED ENCUMBRANCES TO TITLE
Purchaser agrees to accept title to the Property subject to the
following encumbrances (collectively, the "Permitted Encumbrances"): (a) the
rights and interests of parties claiming under the Leases, as long as none of
such Leases contains an option to purchase the Property by the lessee or a
provision permitting renewal of the Lease for a term greater than one year; (b)
any easement, right of way, encroachment, conflict, discrepancy, overlapping of
improvements, protrusion, lien, encumbrance, restriction, condition, covenant,
exception or other matter with respect to the Property that is reflected or
addressed on the Survey (as defined in Section 8.1 below) or the Title
Commitment (as defined in Section 8.1 below) to which the Purchaser fails to
timely object pursuant to Section 8.1 of this Agreement; (c) all liens securing
payment of all ad valorem, intangible and other real and personal property
taxes, special and general assessments, school taxes and water and sewer charges
against any of the Property for the tax year in which the Closing Date occurs
and subsequent years, not yet due and payable (subject to proration at Closing
pursuant to Section 12.2 below); and (d) any Objections (as defined in Section
8.1 below) that remain uncured, for whatever reason, at the earlier to occur of
(i) Closing hereunder or (ii) five (5) business days after Seller notifies
Purchaser that Seller is unwilling or unable to cure the Objections to the
reasonable satisfaction of Purchaser, except for those Objections that Seller is
required to cure pursuant to Section 8.1 below.
ARTICLE VIII.
CONDITION OF TITLE AND TITLE INSURANCE
8.1. Title Commitment: Objections. Seller shall obtain from the Title
Company a current title insurance commitment for the Property (the "Title
Commitment") together with legible copies of any restrictive covenants,
easements, and other items listed as title exceptions therein to issue an ALTA
Form B Owner's Policy of Title Insurance (the "Title Policy") for the Property.
Within five (5) business days after the Effective Date, Seller shall provide to
Purchaser, to the extent same are in Seller's possession, copies of the
following: (a) any title commitments or title policies concerning the Property,
including the Title Commitment, (b) a current survey of the Property showing all
Improvements thereon (the "Survey") and (c) a current rent roll reflecting all
Leases that affect the Property. Within fifteen (15) business days after the
receipt of items (a) through (c) referred to in the immediately preceding
sentence (the "Title Review Period"), Purchaser shall give written notice (the
"Objection Notice") to Seller of any item affecting the title or the Survey to
which Purchaser objects (the "Objections") separately specifying and setting
forth each such Objection, and Seller shall notify Purchaser within five (5)
business days after its receipt of Purchaser's written notice of Seller's intent
to not cure one or more of the Objections ("Seller's Notice"). Seller shall then
cure on or before Closing all Objections except those set forth in Seller's
Notice. Seller shall pay or bond over any mechanic's liens, real estate and
personal property taxes and unpaid bills with respect to the Property incurred
or arising with respect to periods prior to Closing. If Purchaser gives Seller
an Objection Notice within the Title Review Period, then all matters disclosed
in the Title Commitment which are not objected to in such Objection Notice shall
be deemed to be Permitted Encumbrances. If Purchaser fails to give Seller an
Objection Notice within the period set forth above, then all matters disclosed
in the Title Commitment shall be deemed to be Permitted Encumbrances. Purchaser
may issue an Objection Notice with respect to any new matters first reflected in
any update of the Title Commitment or Survey, so long as it is given within five
(5) business days of receipt of such update. If Purchaser has any Objections
which Seller has not elected to cure, then Purchaser shall have the right to
notify Seller prior to the later of (i) the expiration of the Title Review
Period or (ii) three (3) business days after receipt of Seller's Notice that
Purchaser has elected to receive a return of the Property Earnest Money
(together with all interest accrued thereon) in accordance with Section 2.2
hereof, and, following Purchaser's receipt thereof, this Agreement shall
terminate and neither party shall have any further obligations to the other
party hereunder, except the Surviving Duties.
8.2. Exclusive Remedy of Purchaser. Except as set forth in Section 8.1
above, Seller shall not be required to expend any money or bring any action or
proceeding or undertake any efforts to cure any Objections in order to deliver
the Property or title to the Property as required by this Agreement, other than
to remove (or provide title insurance coverage against) all monetary
encumbrances other than the Assumed Obligations. Should Seller give Purchaser
notice (the "Response Notice") that Seller is unable to convey the Property or
title to the Property as required by this Agreement, Purchaser may, as its sole
and exclusive remedy, elect by written notice given to Seller within five (5)
days after the Response Notice is given, either (a) to accept such title as
Seller is able to convey without any reduction or abatement of the Purchase
Price, or (b) to terminate this Agreement, in which event the Property Earnest
Money (together with all interest accrued thereon) shall be returned to
Purchaser in accordance with Section 2.2 hereof. If Purchaser fails to notify
Seller of its election to terminate this Agreement within such five (5) day
period, Purchaser shall be deemed to have waived any Objections (except any such
monetary obligations) and to have elected to proceed to the Closing of the
transactions contemplated by this Agreement.
ARTICLE IX.
CLOSING
9.1. The Closing Date. The closing of the transactions contemplated
herein (the "Closing") shall be held in the offices of the Title Company (or
such other location as may be mutually agreed upon by Seller and Purchaser) on
the later to occur of: (i) that date which is fifty (50) calendar days after the
Effective Date; or (ii) the tenth business day following that date upon which
all Necessary Approvals shall have been received (such later date, the "Closing
Date"); provided, however, that in no event shall the Closing occur later than
June 10, 1999 (the "Final Termination Date"). Notwithstanding the foregoing,
Purchaser shall have the right to extend the Closing Date (which includes an
extension of the Final Termination Date) for one additional thirty-two (32) day
period (the "Extension Period") by written notice to Seller not later than ten
(10) days prior to the Closing Date and the payment by Purchaser to Seller of a
nonrefundable extension fee equal to $50,000 (which fee shall be applied at
Closing to the Purchase Price and, if such amount exceeds the Cash
Consideration, the excess shall be applied to the Bond Purchase Price). A
payment hereunder also shall extend the Closing Date under the Bond Purchase
Agreement. TIME IS OF THE ESSENCE IN REGARD TO THE PERFORMANCE BY PURCHASER AND
SELLER OF ALL OF THE PROVISIONS OF THIS AGREEMENT.
9.2. The Closing Statement. Upon Purchaser's delivery of all required
documents and instruments and its payment of the Purchase Price and other
amounts required herein, Purchaser and Seller shall prepare and sign a closing
statement reflecting the adjustments and payments made and agreements in
connection therewith (the "Closing Statement"). Seller shall deliver a copy of
the fully executed Closing Statement and all of the aforesaid documents to the
Title Company which shall close in accordance with any escrow instructions
consistent with this Agreement and mutually agreeable to the parties hereto and
such Closing Statement.
9.3. Closing Costs.
(a) Each of the parties hereto shall be responsible for the
payment of (i) any attorneys' fees incurred by it in connection with the
transactions contemplated by this Agreement; (ii) any other fees of any other
professionals retained by it in connection with the transactions contemplated by
this Agreement; and (iii) fifty percent (50%) of (A) all fees owing to the Title
Company as compensation for the services of the Title Company as escrow agent
for the Property Earnest Money, and (B) all recording charges and any costs
necessary in order to update the Survey incurred after Seller's delivery of the
Survey pursuant to Section 8.1 above.
(b) Seller shall be solely responsible for those reasonable
costs associated with the issuance of the Owner's Title Policy, including the
Title Policy Premium, and for all transfer charges (including intangible or
documentary stamp taxes).
(c) Except as otherwise expressly set forth in Sections 9.3(a)
and (b) above, Purchaser shall be solely responsible for all costs and fees
incurred in connection with the transactions contemplated by this Agreement,
expressly including, with respect to the Bond Purchase Agreement, any Bond Party
Costs.
ARTICLE X.
DOCUMENTS TO BE DELIVERED AT CLOSING
10.1. Obligations of Seller. At or prior to the Closing, Seller shall
execute and/or deliver the following to Purchaser or the applicable third party:
(a) One Special Warranty Deed (the "Deed") for the Land and
Improvements substantially in the form set forth on Exhibit C attached hereto
and incorporated herein.
(b) An Assignment and Assumption of Service Contracts,
Warranties and Leases ("Assignment") substantially in the form set forth on
Exhibit D attached hereto and incorporated herein and a Bill of Sale
substantially in the form set forth on Exhibit E attached hereto, pursuant to
which Seller assigns and conveys to Purchaser (i) all Personal Property; (ii)
all Intangible Property; and (iii) any of the other Property described herein
and not covered in the Deed or any other instrument described in this Section
10.1.
(c) Authority documents of Seller authorizing the execution,
delivery and performance by Seller of this Agreement and each document to be
executed and delivered by Seller in connection with this Agreement and
designating one or more officers to execute documents in Seller's name in
connection herewith, certified as correct and complete by Seller, together with
an incumbency certificate for each person executing documents on behalf of
Seller.
(d) All costs and fees required to be paid by Seller pursuant
to this Agreement.
(e) Such other documents and instruments as may be reasonably
required by this Agreement or by the Title Company in order to consummate the
transactions described in this Agreement and to issue the Title Policy to
Purchaser, including a no-lien affidavit in form reasonably satisfactory to
Title Company and Purchaser.
(f) A non-foreign affidavit of Seller complying with the
requirements of Internal Revenue Code Section 1445(f)(3) and the regulations
promulgated thereunder.
(g) To the extent not previously delivered to Purchaser and
within the possession or control of Seller or its affiliates, originals of all
items constituting the Due Diligence Documents, including originals of all
Leases, all service and equipment leasing contracts relating to the Property
which Purchaser has agreed to assume as of the Closing Date (the "Service
Contracts"), all permits, licenses, approvals, entitlements and other
governmental authorizations (including, without limitation, certificates of
occupancy) required in connection with the ownership, use or maintenance of the
Property (the "Permits"), any lease, rental agreement, loan agreement, mortgage,
easement, covenant, restriction or other agreement or instrument relating to the
Property but excluding the Leases (the "Business Agreements"), and copies of all
tenant correspondence and billing files and records. As used herein, the "Due
Diligence Documents" shall have the meaning set forth in Article XIX hereof.
(h) Contemplated and executed state, county and city transfer
tax declarations and any affidavit of Seller relating thereto and required by
applicable laws.
(i) To the extent within Seller's possession, an assignment to
Purchaser of any Permits issued by the appropriate governmental authorities and
utility companies in connection with the Property.
(j) To the extent assignable, an assignment to Purchaser of
all of Seller's right title and interest in and to any plans, credits,
contracts, warranties and guarantees relating to the Property.
(k) All keys to all locks relating to the Property.
(1) Termination of any property management agreements and/or
leasing agreements pertaining to the Property.
(m) A certified copy of the current rent roll.
(n) A certified list of all current litigation, actions or
other proceedings.
(o) A list of all Service Contracts.
(p) If requested by Purchaser, a notice to the tenants of the
Property notifying the tenants of the sale of the Property and confirming the
information in the Notice to Tenants.
10.2. Obligations of Purchaser. At or prior to the Closing, Purchaser shall
execute and/or deliver the following to Seller or the appropriate third parties:
(a) The Cash Consideration.
(b) The Assumption Agreement.
(c) An executed counterpart of the Assignment.
(d) Authority documents of Purchaser authorizing the
execution, delivery and performance by Purchaser of this Agreement and each
document to be executed and delivered by Purchaser in connection with this
Agreement and designating one or more officers to execute documents in
Purchaser's name in connection herewith, certified as correct and complete by
Purchaser, together with an incumbency certificate for each person executing
documents on behalf of Purchaser.
(e) All costs and fees required to be paid by Purchaser
pursuant to this Agreement.
(f) A duly executed notice to the tenants of the Property
substantially in the form set forth on Exhibit F attached hereto and
incorporated herein (the "Notice to Tenants").
(g) Such other documents and instruments as may be reasonably
required by this Agreement or by the Title Company in order to consummate the
transactions contemplated by this Agreement.
ARTICLE XI.
CONDITIONS TO CLOSING
11.1. Conditions to the Obligations of Seller and Purchaser.
(a) No Injunction Etc. The transactions contemplated by this
Agreement to be effected on the Closing Date shall not have been restrained or
prohibited by any injunction or order or judgment rendered by any court or other
governmental agency of competent jurisdiction and no proceeding shall have been
instituted and be pending in which any creditor of Seller or any other person
seeks to restrain such transaction or otherwise to attach any of the Property.
(b) Mutually Dependent Transactions. Purchaser and Seller
expressly acknowledge and agree that the consummation of the transactions
contemplated by this Agreement is expressly dependent upon the consummation of
the transactions contemplated by the Bond Purchase Agreement. Accordingly, and
notwithstanding any provision of this Agreement to the contrary: (i) it shall be
a condition precedent to Seller's obligation to convey the Property to
Purchaser, that LEHH simultaneously acquire the Assets; (ii) it shall be a
condition precedent to Purchaser's obligation to acquire the Property from
Seller, that TEWB convey to LEHH the Assets; (iii) a default by LEHH under the
Bond Purchase Agreement shall constitute a default by Purchaser hereunder; (iv)
a default by TEWB under the Bond Purchase Agreement shall constitute a default
by Seller hereunder; and (v) if Purchaser or LEHH, as the case may be, shall be
entitled to, and shall elect to, terminate this Agreement or the Bond Purchase
Agreement pursuant to the provisions hereof or thereof, this Agreement or the
Bond Purchase Agreement, as the case may be, shall likewise terminate and the
parties hereto shall have no further rights or obligations hereunder, except the
Surviving Duties.
11.2. Conditions to the Obligations of Seller. In addition to the
conditions provided in other provisions of this Agreement, Seller's obligations
to perform its undertakings provided in Section 10.1 of this Agreement
(including its obligation to sell the Property) are conditioned on the
following:
(a) Performance by Purchaser. The due performance by Purchaser
of each and every undertaking and agreement to be performed by it hereunder in
all material respects (including the delivery to Seller of the items specified
to be delivered by Purchaser in Article X hereof) and the truth of each
representation and warranty made by Purchaser in this Agreement in all material
respects at the time as of which the same is made and as of the Closing Date as
if made on and as of the Closing Date.
(b) No Bankruptcy or Dissolution. At no time on or before the
Closing Date shall any Bankruptcy/Dissolution Event, as hereinafter defined,
have occurred with respect to Purchaser. "Bankruptcy/Dissolution Event" means
the occurrence of any of the following: (i) the commencement of a case under
Title 11 of the U.S. Code, as now constituted or hereafter amended, or under any
other applicable federal or state bankruptcy law or other similar law; (ii) the
appointment of a trustee or receiver of any property interest; (iii) an
assignment for the benefit of creditors; (iv) an attachment, execution or other
judicial seizure of a substantial property interest; (v) the taking of, failure
to take, or submission to any action indicating an inability to meet its
financial obligations as they accrue; or (vi) a dissolution or liquidation,
death or incapacity.
11.3. Conditions to the Obligations of Purchaser. In addition to the
conditions provided elsewhere in this Agreement, Purchaser's obligations to
perform its undertakings provided in Section 10.2 of this Agreement (including
its obligation to purchase the Property) are conditioned on the following:
(a) Necessary Approvals. Purchaser shall have obtained all
Necessary Approvals.
(b) Performance by Seller. The due performance by Seller of
each and every undertaking and agreement to be performed by it hereunder in all
material respects and the truth of each representation and warranty made by
Seller in this Agreement in all material respects at the time as of which the
same is made and as of the Closing Date as if made on and as of the Closing
Date.
(c) No Bankruptcy or Dissolution. That at no time on or before
the Closing Date shall a Bankruptcy/Dissolution Event have occurred with respect
to Seller.
If any of the above conditions is not satisfied, Purchaser may, at its option,
(i) waive such condition and proceed to Closing and accept title to the Property
without any offset or deduction from the Purchase Price or (ii) provide written
notice to Seller of Purchaser's election to receive a return of its Property
Earnest Money (together with all interest accrued thereon), and upon Purchaser's
receipt of such Property Earnest Money (together with all interest accrued
thereon), this Agreement shall terminate and the parties hereto shall have no
further rights or obligations hereunder, except the Surviving Duties; provided,
however, if the only condition to Purchaser's obligations not satisfied is the
one specified in Section 11.3(a) above, then Purchaser shall not be entitled to
receive the Property Earnest Money and the interest accrued thereon.
ARTICLE XII.
APPORTIONMENTS AND ADJUSMENTS
12.1. The Adjustment Date. Seller shall be responsible for and pay all
expenses with respect to the Property accruing up to 11:59 p.m. Eastern Time on
the day prior to the Closing Date (the "Adjustment Date") and shall be entitled
to receive and retain all revenue from the Property accruing through the
Adjustment Date.
12.2. Adjustments and Apportionments. On the Closing Date, the
following adjustments and apportionments shall be made in cash as of the
Adjustment Date:
(a) (i) Rents collected under Leases for the month in which
the Closing Date occurs (the "Closing Month"). Purchaser shall have the right to
collect any delinquent rentals, but shall not have the obligation to do so.
Delinquent rentals under any existing Leases collected by Purchaser, net of the
costs of collection (including attorneys' fees), shall be applied first against
any amount currently due and owing under such Leases and then to amounts most
recently overdue ("Rent Arrearages"). If, as and when Purchaser collects
payments from a tenant on account of Rent Arrearages attributable to the period
Seller owned the Property, Purchaser shall hold such funds for Seller and shall
pay an amount equal to such Rent Arrearages collected to Seller within ten (10)
days after Purchaser or its agent receives each such payment.
(ii) On that date which is six (6) months after the
Closing, Purchaser shall deliver to Seller a collection
report showing the sum, if any, paid by each tenant at the Property and the
unpaid balance owed by such tenant pursuant to its Lease through such date.
Seller shall have the right to review and audit Purchaser's records with respect
to the Rent Arrearages payable to or collected by Purchaser.
(b) Real estate taxes, ad valorem taxes, school taxes,
assessments and personal property, intangible and use taxes, if any, based on
100% of the 1999 taxes due or, if the actual amount is not known, the most
recent ascertainable taxes for the Property (the "Taxes") for the year of
Closing.
(c) Charges under the Service Contracts (provided that same
were delivered to Purchaser during the Inspection Period) affecting the Property
on the Closing Date (except those required to be terminated on or before Closing
pursuant to the terms of this Agreement) and utility charges and deposits
relating to the Property.
(d) Income from users of vending machines, laundry services,
utilities, tenant services, and from any other operations of the Property, if
any.
(e) Any and all prepaid expenses of Seller relating to the
Property.
(f) Seller agrees to make vacant units at the Property rent
ready at Seller's cost and expense prior to Closing in accordance with Seller's
prior practices; provided that Seller shall have no obligation to make units
rent ready that become vacant not more than one week prior to the Closing Date.
12.3. Certain Credits to Purchaser. At the Closing, Purchaser will
receive a credit against the Cash Consideration in an amount equal to any
prepaid rentals and other charges for more than the Closing Month, if any, and
all unapplied security deposits (and interest thereon as required by law)
payable to tenants under Leases in effect on the Closing Date against
Purchaser's receipt and indemnification therefor. Upon making such credit,
Purchaser shall be fully responsible for the same as if a cash amount equal to
such security deposits were actually delivered to Purchaser. Prior to the
Closing, Seller reserves the right to apply all security deposits as provided
under the respective Leases.
12.4. Certain Tax Prorations. The prorations and payments shall be made
on the basis of a written statement approved by Purchaser and Seller. In the
event any prorations or apportionments made under this Article XII shall prove
to be incorrect for any reason, then any party shall be entitled to an
adjustment to correct the same. Any item which cannot be finally prorated
because of the unavailability of information shall be tentatively prorated on
the basis of the best data then available and reprorated when the correct data
is available. As soon as the amount of Taxes on the Property for the year of
Closing is known, Seller and Purchaser will readjust the amount of Taxes to be
paid by each party with the result that Seller shall pay for those Taxes
applicable to the Property prior to the Closing Date and Purchaser shall pay for
those Taxes applicable to the Property on and after the Closing Date. All
special taxes or assessments attributable to any period(s) prior to the Closing
Date shall be paid by Seller and Purchaser shall be liable for the payment of
any special taxes or assessments attributable to any period on and after the
Closing Date. Notwithstanding the foregoing, any reproration shall be made, if
at all, within ninety (90) days after the Closing Date (except with respect to
taxes and assessments, in which case such reproration shall be made within
thirty (30) days after the data necessary to perform such reproration is
available).
12.5. Insurance: Utilities. Seller and Purchaser agree that (a) none of
the insurance policies relating to the Property will be assigned to Purchaser
(and Seller shall pay any cancellation fees resulting from the termination of
such policies) and Purchaser shall be responsible for arranging for its own
insurance as of the Closing Date; (b) utilities, including telephone,
electricity, water and gas, shall be read on the Closing Date to the extent
reasonably feasible; and (c) Seller shall terminate its management contract and
any agreements for the leasing of the units in the Property on the Closing Date.
Accordingly, there will be no prorations for insurance, utilities or payroll.
Notwithstanding the foregoing, in the event a meter reading is unavailable for
any particular utility, such utility shall be prorated on the basis of the last
bill, with a reconciliation to actual billed amounts within fifteen (15) days of
receipt of the actual bills by Purchaser.
12.6. Survivability The provisions of this Article XII shall survive
the Closing.
ARTICLE XIII.
REMEDIES
13.1. Seller's Remedies. If Purchaser or LEHH, as the case may be,
fails to purchase (i) the Property pursuant to this Agreement, or (ii) the
Assets pursuant to the Bond Purchase Agreement because of Purchaser's or LEHH's
failure to perform its obligations hereunder or thereunder (all conditions to
Purchaser's or LEHH's obligations having been satisfied or waived by Purchaser
or LEHH) or there is a breach of any of Purchaser's or LEHH's representations
and warranties herein or therein which prohibits Purchaser's or LEHH's
performance hereunder or thereunder and Seller is not in default under this
Agreement and TEWB is not in default under the Bond Purchase Agreement and
Purchaser or LEHH, as the case may be, fails to cure (or, with respect to a
representation or warranty, fails to commence and effect a cure by the later of
Closing or ten (10) days after written notice thereof from Seller or TEWB) any
such breach or failure within ten (10) days after written notice thereof from
Seller to Purchaser or from TEWB to LEHH, as applicable, specifying such breach
or failure, then as Seller's sole and exclusive remedy hereunder, Seller shall
have the right to terminate this Agreement by giving Purchaser and the Title
Company written notice thereof and Seller shall be entitled to receive, as its
sole remedy, the Property Earnest Money (together with all interest accrued
thereon) as liquidated damages (Seller and Purchaser hereby acknowledging that
the amount of damages resulting from a breach of this Agreement by Purchaser
would be difficult or impossible to accurately ascertain and that the sum
represented by the Property Earnest Money (together with all interest accrued
thereon) is a reasonable estimate of the total net detriment that Seller would
suffer) and upon Seller's receipt of the Property Earnest Money (together with
all interest accrued thereon), this Agreement shall terminate, no party to this
Agreement shall have any further claim, agreement, or obligation to any other
party to this Agreement, except the Surviving Duties, and any lien of Purchaser
against the Property shall automatically cease, terminate and be released.
13.2. Purchaser's Remedies.
(a) If the sale contemplated by this Agreement is not
consummated because of Seller's failure to perform its obligations hereunder or
there is a breach of any of Seller's representations and warranties herein and
Purchaser and LEHH are not in default under this Agreement and the Bond Purchase
Agreement, respectively, and Seller fails to cure (or, with respect to a
representation or warranty, fails to commence and effect a cure by the later of
Closing or ten (10) days after written notice thereof from Purchaser) any such
breach or failure within ten (10) days after written notice thereof from
Purchaser to Seller specifying such breach or failure, Purchaser shall be
entitled, as its exclusive remedies, to elect either (i) to terminate this
Agreement and have the Property Earnest Money (together with all interest
accrued thereon) returned to it or (ii) subject to the provisions of Section
13.2(b) below, to enforce specific performance of Seller's obligations under
this Agreement; provided, however, if specific performance is not available to
Purchaser as a remedy owing to Seller's having conveyed all or a portion of the
Property to another party or some other voluntary act of Seller, then Purchaser,
as its sole remedy, shall be entitled to be reimbursed by Seller for its
reasonable out-of-pocket expenses (including attorneys' fees) in an amount not
to exceed $100,000 and to liquidated damages in the amount of $250,000. In no
event shall Purchaser be entitled to any indirect, consequential or punitive
damages as a remedy hereunder.
(b) In no event shall Purchaser be entitled to enforce
specific performance of Seller's obligations under this Agreement unless
Purchaser notifies Seller of its intention to seek such specific performance
within ten (10) days following the Closing Date.
13.3. Attorneys' Fees. In the event any party hereto is required to
employ an attorney because any litigation or arbitration arises out of this
Agreement between the parties hereto, the nonprevailing party shall pay the
prevailing party, as determined by the court or arbitrator, all reasonable
out-of-pocket costs incurred by the prevailing party (including, without
limitation, reasonable attorneys' fees and expenses) in connection with such
litigation or arbitration.
ARTICLE XIV.
INDEMNIFICATION OBLIGATIONS
Upon the Closing, the parties shall have the following respective
indemnification obligations:
14.1. Indemnification by Seller. Seller shall protect, defend,
indemnify and hold Purchaser harmless from and against any Claim resulting from
an action brought by a third party against Purchaser which results from the
occurrence of any act, omission or event on or relating to the Property prior to
the Closing Date (other than acts or omissions of Purchaser or its agents).
"Claim" means any obligation, liability, claim (including, without limitation,
any claim for damage to property or injury to or death of any persons), lien or
encumbrance, loss, damage, cost or expense (including, without limitation, any
judgment, award, settlement, reasonable attorneys' fees and other costs and
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim (including, without limitation, appellate
proceedings), and any collection costs or enforcement costs).
14.2. Indemnification by Purchaser. In addition to Purchaser's
indemnification of Seller contained in Section 3.2 above and in Article XIX
below, Purchaser shall protect, defend, indemnify and hold Seller harmless from
and against any Claim resulting from an action brought by a third party against
Seller which results from the occurrence of any act, omission or event on or
relating to the Property on or after the Closing Date (other than acts or
omissions of Seller or its agents).
14.3. General Indemnification Provisions. The indemnification obligations
under this Agreement shall be subject to the following provisions:
(a) The party seeking indemnification ("Indemnitee") shall
notify the other party ("Indemnitor") of any Claim against Indemnitee within
fifteen (15) days after it has notice of such Claim, but failure to notify
Indemnitor shall in no case prejudice the rights of Indemnitee under this
Agreement unless Indemnitor shall be prejudiced by such failure and then only to
the extent of such prejudice. Should Indemnitor fail to discharge or undertake
to defend Indemnitee against such Claim (with counsel reasonably approved by
Indemnitee) within twenty (20) days after Indemnitee gives Indemnitor written
notice of the same, then Indemnitee may settle such Claim and Indemnitor's
liability to Indemnitee shall be conclusively established by such settlement,
the amount of such liability to include both the settlement consideration and
the reasonable costs and expenses, including reasonable attorneys' fees,
incurred by Indemnitee in effecting such settlement. Indemnitee shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of Indemnitee unless: (i) the employment of
such counsel shall have been authorized in writing by Indemnitor in connection
with the defense of such action, (ii) Indemnitor shall not have employed counsel
to direct the defense of such action, or (iii) Indemnitee shall have reasonably
concluded that there may be defenses available to it which are different from or
additional to those available to Indemnitor and in fact asserts such defenses
(in which case Indemnitor shall not have the right to direct the defense of such
action or to otherwise direct Indemnitee), in any of which events such fees and
expenses shall be borne by Indemnitor.
(b) The indemnification rights under this Agreement shall also
extend to any present or future advisor, trustee, director, officer, partner,
member, employee, beneficiary, shareholder, participant or agent of or in
Indemnitee or any entity now or hereafter having a direct or indirect ownership
interest in Indemnitee.
ARTICLE XV.
DAMAGE DESTRUCTION OR CONDEMNATION
15.1. Maintenance of Insurance. Seller agrees to maintain its present
policies of insurance covering the Property in full force and effect from the
date of this Agreement through and including the Closing Date.
15.2. Events of Casualty and Condemnation.
(a) Prior to Closing, risk of loss with regard to the Property
shall be borne by Seller. If, on or before the Closing Date, either (i) all or a
substantial part of the Property is damaged or destroyed by fire or the elements
or by any other cause other than by condemnation or other power of eminent
domain (a "Casualty Event"), or (ii) all or a substantial part of the Property
is taken by condemnation or other power of eminent domain (a "Condemnation
Event"), Purchaser may, subject to the provisions of Section 15.2(b) below, by
written notice given to Seller within ten (10) days after Purchaser shall have
received written notice from Seller of any such Casualty Event or any such
Condemnation Event (but in no event after the Closing Date), elect to either (A)
terminate this Agreement or (B) proceed to Closing and (i) in the case of a
Casualty Event, Seller shall credit the Cash Consideration with an amount equal
to (x) any sums of money collected by Seller under its policies of insurance or
renewals thereof insuring against the loss in question (after deducting any
costs that Seller shall have paid for repairs or restoration of the damage) plus
(y) the amount of any deductible applicable to such insurance, and Seller shall
assign, transfer and set over to Purchaser all of Seller's right, title and
interest in and to said policies with respect to the Property and any further
sums payable under said policies, or (ii) in the case of a Condemnation Event,
Seller shall assign, transfer and set over to Purchaser all of Seller's right,
title and interest in and to any awards that may be made for any taking. If
Purchaser elects to terminate this Agreement, Purchaser shall notify Seller of
such election in writing; the Property Earnest Money, together with any interest
accrued thereon, shall be returned to Purchaser and, upon Purchaser's receipt
thereof, this Agreement shall terminate and be of no further force and effect,
except for the Surviving Duties.
(b) Purchaser and Seller hereby expressly agree that,
notwithstanding any other provision of this Agreement to the contrary, in the
event of a Casualty Event or a Condemnation Event which results in a payment or
an award of $14,025,000 or more, Seller shall have the absolute right, in the
exercise of its sole discretion, to terminate this Agreement, upon which
termination Purchaser's sole remedy shall be to receive payment from Seller for
its reasonable out-of-pocket expenses and to have the Property Earnest Money
(together with all interest accrued thereon) returned to it.
15.3. Insubstantial Damages. If, on or before the Closing Date, an
Insubstantial Part, as hereinafter defined, of the Property is subject to a
Casualty Event or Condemnation Event, then Purchaser shall not have the right to
terminate this Agreement based upon such damage, destruction or taking, and on
the Closing Date:
(a) Seller shall credit the Cash Consideration with an amount
equal to (i) any sums of money collected by Seller under its policies of
insurance or renewals thereof insuring against the loss in question (after
deducting any costs that Seller shall have paid for repairs or restoration of
the damage) plus (ii) the amount of any deductible applicable to such insurance,
and Seller shall assign, transfer and set over to Purchaser all of Seller's
right, title and interest in and to said policies with respect to the Property
and any further sums payable under said policies, and
(b) Seller shall assign, transfer and set over to Purchaser
all of Seller's right, title and interest in and to any awards that may be made
for any taking by virtue of a Condemnation Event.
15.4. Certain Definitions. For the purposes of this Article, an
"Insubstantial Part" of the Property shall mean, with respect to (a) a Casualty
Event, a portion of the Property having a value of $500,000 or less or which
would require expenditures of $500,000 or less for repair or restoration, or (b)
a Condemnation Event, an offer or award of $500,000 or less from the authorities
having jurisdiction over any such Condemnation Event, or a taking which would
not materially impair access (ingress or egress) to the Land.
15.5. Survivability. The provisions of this Article XV shall survive the
Closing.
ARTICLE VXI.
BROKER
16.1. Representations of Purchaser. Purchaser represents and warrants
to Seller that, other than Atlantic Realty Partners ("ARP") (who will be paid by
Seller and/or TEWB when and if the transactions contemplated by' this Agreement
and by the Bond Purchase Agreement are consummated), neither Purchaser nor any
entity related to Purchaser has dealt with any broker or other person or entity
(other than ARP) who would be entitled to a commission or other brokerage fee
from Seller in connection with the transactions described in this Agreement.
Purchaser agrees to indemnify, defend and hold Seller harmless of and from any
loss, cost, damage or expense (including reasonable attorneys' fees and court
costs) arising out of any inaccuracy in the representation or warranty made by
Purchaser in the preceding sentence.
16.2. Representations of Seller. Seller represents and warrants to
Purchaser that, other than TEWB neither Seller nor any entity related to Seller
has dealt with any broker or other person or entity (other than ARP) who would
be entitled to a commission or other brokerage fee in connection with the
transactions contemplated by this Agreement. Seller agrees to pay the commission
of ARP pursuant to the terms of a separate agreement upon the Closing hereunder.
Seller agrees to indemnify, defend and hold Purchaser harmless of and from any
loss, cost, damage or expense (including reasonable attorneys' fees and court
costs) arising out of any inaccuracy in the representation or warranty made by
Seller in the preceding sentence.
16.3. Survivability. Notwithstanding any other provision of this
Agreement to the contrary, the provisions of this Article XVI shall survive the
Closing and any prior termination of this Agreement for any reason whatsoever.
ARTICLE XVII.
NOTICES
Any notice given or required to be given pursuant to any provision of this
Agreement shall be in writing and shall either be personally delivered or sent
by a reputable commercial courier service guaranteeing overnight delivery or
sent by telecopy, and shall be deemed to have been given upon receipt (or
refusal of delivery), in any case addressed as follows:
Purchaser: Lakes Edge-Homes Holdings, Inc.
680-3 W. 246th Street
Riverdale, New York 10471
Attn: Robert MacFarlane
Fax: 718/601 -3420
with a copy to: Berman Wolfe & Rennert, P.A.
100 S.E. 2nd Street, Suite 3500
Miami, Florida 33131
Attn: Leon J. Wolfe, Esq.
Fax: 305/373-6036
Seller: Lakes Edge Partners, L.P.
1129 20th Street, N.W., Suite 510
Washington, D.C. 20036
Attn: Steve Forrer
Fax: 202/296-9699
with a copy to: Michael Petersilia, Esq.
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
Fax: 214/756-8690
Either party may, by giving notice to the other in the manner set forth
above, change the address to which notices shall be sent to it, provided that
any such change of address shall be effective three (3) days after it is given.
The attorney for either party to this Agreement may give notices on behalf of
his client with the same force and effect as if such notice were given directly
by such party.
ARTICLE XVIII.
NO ASSIGNMENT
This Agreement, and the terms, covenants, and conditions herein
contained, shall inure to the benefit of and be binding upon the personal
representatives, successors, and assigns of each of the parties hereto.
Purchaser may assign its rights under this Agreement upon the following
conditions: (i) the assignee of Purchaser shall be an affiliate of Purchaser,
(ii) all of the Property Earnest Money shall have been delivered in accordance
with Section 2.2 hereof, (iii) Purchaser shall remain primarily liable for the
performance of Purchaser's obligations hereunder and (iv) a copy of the fully
executed written assignment and assumption agreement shall be delivered to
Seller and to TEWB at least ten (10) days prior to Closing.
ARTICLE XIX.
INSPECTION PERIOD
Within three (3) business days after the Effective Date, Seller shall
make available to Purchaser all information relating to the Property set forth
on Exhibit G hereto (the "Due Diligence Documents") and any other information in
Seller's possession reasonably requested by Purchaser. Purchaser shall have the
right to conduct its physical inspection (the "Inspection") of the Property
commencing with the Effective Date and extending through and including April 27,
1999 (the "Inspection Period"), which Inspection shall be at the sole cost and
expense of Purchaser. Purchaser hereby expressly indemnifies and holds harmless
Seller against all costs, losses or claims arising out of or relating in any way
to the conduct of the Tests by Purchaser or by the Permitted Outside Parties.
Seller shall assist with such Inspection, but shall not be obligated to incur
any cost or expense or to furnish any information other than at the place where
such information is currently maintained. All information received by Purchaser
relating to the Property, Seller or its affiliates shall be kept in strict
confidence and used solely for the purpose of determining the advisability of
proceeding with the transactions contemplated by this Agreement. Purchaser shall
have the right to terminate this Agreement during the Inspection Period if
Purchaser, in its sole discretion, deems the Property or any aspect thereof, to
be unsatisfactory; provided, however, that Purchaser may only exercise such
right by giving Seller written notice of such termination (the "Termination
Notice") on or before 5:00 p.m. on April 27, 1999. If Purchaser exercises such
right of termination, then the Property Earnest Money, together with any
interest accrued thereon, shall be refunded to Purchaser pursuant to the terms
of Section 2.2 hereof. If Purchaser does not give Seller the Termination Notice
on or before the last day of the Inspection Period, Purchaser shall be deemed to
have irrevocably and absolutely waived its right to terminate this Agreement
pursuant to the provisions of this Article and to have agreed to purchase on the
Closing Date the Property in its "AS IS" condition (as such term is used in
Section 3.1 hereof) on the last day of the Inspection Period, except as provided
otherwise in this Agreement and in the Closing Documents. As used in this
Agreement, "Permitted Outside Parties" shall mean Purchaser's consultants,
agents, attorneys, appraisers, engineers, architects, construction contractors,
accountants, lenders, potential credit enhancers or investors.
ARTICLE XX.
MISCELLANEOUS
20.1. Binding Effect. This Agreement is binding upon and shall inure to
the benefit of the parties hereto, their respective successors, legal
representatives and permitted assigns.
20.2. Business Days. Whenever under the terms and provisions of this
Agreement the time for performance falls upon a Saturday, Sunday or legal
holiday, the applicable date or period shall be extended to the first business
day following such Saturday, Sunday or legal holiday.
20.3. Counterparts. This Agreement may be executed in one or more
counterparts, all of which when taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts have been
executed by each of the parties hereto and delivered to each of the other
parties hereto. A facsimile copy of a signature shall have the same effect as an
original signature, provided that the original signature is timely delivered to
the party or parties to whom it is intended to be delivered.
20.4. Section Headings. The captions at the beginning of the several
paragraphs, Sections and Articles are for convenience in locating the text, but
are not part of the text. Unless otherwise specifically set forth in this
Agreement to the contrary, all references to Exhibits contained in this
Agreement refer to the Exhibits which are attached to this Agreement, all of
which Exhibits are incorporated in and made a part of this Agreement by
reference. Unless otherwise specifically set forth in this Agreement to the
contrary, all references to Articles, Sections, paragraphs and clauses refer to
portions of this Agreement.
20.5. Severability. If any term or provision of this Agreement shall be
held to be illegal, invalid, unenforceable or inoperative as a matter of law,
the remaining terms and provisions of this Agreement shall not be affected
thereby, but each such remaining term and provision shall be valid and shall
remain in full force and effect.
20.6. Entire Agreement. This Agreement and the other writings referred
to in, or delivered pursuant to, this Agreement, embody the entire understanding
and contract between the parties hereto with respect to the subject matter
hereof and supersede any and all prior agreements and understandings between the
parties hereto, whether written or oral, formal or informal, with respect to the
subject matter of this Agreement. This Agreement has been entered into after
full investigation by each party and its professional advisors, and neither
party is relying upon any statement, representation or warranty made by or on
behalf of the other which is not expressly set forth in this Agreement.
20.7. Waivers. No extensions, changes, waivers, modifications or
amendments to or of this Agreement, of any kind whatsoever, shall be made or
claimed by Seller or Purchaser, and no notices of any extension, change, waiver,
modification or amendment made or claimed by Seller or Purchaser shall have any
force or effect whatsoever, unless the same is contained in a writing and is
fully executed by the party against whom such matter is asserted.
20.8. Governing Law. This Agreement shall be governed and interpreted
in accordance with the laws of the State of Florida, without regard to the
choice of law or conflicts of laws rules thereof.
20.9. No Third Party Beneficiaries. Purchaser and Seller agree that,
except as otherwise expressly provided herein, this Agreement has been entered
into solely for the benefit of Purchaser and Seller and no other person or
entity, it being the intention of Purchaser and Seller that no person or entity
not a party to this Agreement shall have any right or standing to (a) bring any
action against Purchaser or Seller based on this Agreement, or (b) assume that
any provision of this Agreement will be enforced or remain unmodified or
unwaived, or (c) assert that it or he is or should be or was intended to be a
beneficiary of any provision of this Agreement.
20.10. No Affiliate Liability.
(a) No present or future partner, member, director, officer,
shareholder, employee, advisor, affiliate or agent of or in Purchaser or any
affiliate of Purchaser shall have any personal liability, directly or
indirectly, under or in connection with this Agreement or any agreement made or
entered into under or in connection with the provisions of this Agreement, or
any amendment or amendments to any of the foregoing made at any time or times,
heretofore or hereafter, and Seller and its successors and assigns and, without
limitation, all other persons and entities, shall look solely to Purchaser's
assets for the payment of any Claim or for any performance, and Seller hereby
waives any and all such personal liability. The limitations of liability
contained in this paragraph are in addition to, and not in limitation of, any
limitation on liability applicable to Purchaser provided elsewhere in this
Agreement or by law or by any other contract, agreement or instrument.
(b) No present or future partner, member, director, officer,
shareholder, employee, advisor, affiliate or agent of or in Seller or any
affiliate of Seller shall have any personal liability, directly or indirectly,
under or in connection with this Agreement or any agreement made or entered into
under or in connection with the provisions of this Agreement, or any amendment
or amendments to any of the foregoing made at any time or times, heretofore or
hereafter, and Purchaser and its successors and assigns and, without limitation,
all other persons and entities, shall look solely to Seller's assets (including
the proceeds of the sale of the Property) for the payment of any Claim or for
any performance, and Purchaser hereby waives any and all such personal
liability. The limitations of liability contained in this paragraph are in
addition to, and not in limitation of, any limitation on liability applicable to
Seller provided elsewhere in this Agreement or by law or by any other contract,
agreement or instrument.
20.11. Waiver of Jury Trial. To the extent permitted by applicable law,
the parties hereto hereby irrevocably waive their respective rights to a jury
trial of any claim or cause of action based upon or arising out of this
Agreement. This waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to this Agreement. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court.
20.12. Press Releases. Any press release issued with respect to the
transactions contemplated by this Agreement shall be subject to the prior
approval of Purchaser and Seller.
20.13. Statutory Disclosures Regarding the Property.
(a) Radon Gas Disclosure. In accordance with the requirements
of Section 404.056(8), Florida Statutes, the following notice is hereby given:
RADON GAS: Radon is a naturally occurring radioactive gas
that, when it is accumulated in a building in sufficient
quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may
be obtained from the local County Public Health Center.
(b) Energy-Efficiencv Rating Disclosure. In accordance with
the provisions of Section 553.996, Florida Statutes, Purchaser is advised that
Purchaser may have the energy-efficiency rating of the Property determined, and
that such rating shall be provided upon written request of Purchaser made at the
time of, or prior to, Purchaser's execution of this Agreement. Purchaser
acknowledges that, with the execution of this Agreement, Seller has provided to
Purchaser a copy of an information brochure regarding energy-efficiency rating
prepared by the Florida Department of Community Affairs.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers or agents as of the date first above written.
Seller: LAKES EDGE PARTNERS L.P.,
a Delaware limited partnership
By: Lakes Edge, L.P.,
a Delaware limited partnership
By: Lakes Edge, L.L.C.,
a Delaware limited liability company
By: -------------------------------
W. Edward Walter, Manager
Purchaser: LAKES EDGE-HOMES HOLDINGS, INC.,
a Florida corporation
By: ________________________________
Name:Robert A. MacFarlane
Title: President
<PAGE>
JONDER BY TITLE COMPANY
Ticor Title Insurance Company, referred to in this Agreement as the "Title
Company," hereby acknowledges that it received this Agreement executed by Seller
and Purchaser on the day of March, 1999, and accepts the obligations of the
Title Company as set forth herein. It further acknowledges that it received the
Property Earnest Money on the day of March, 1999. The Title Company hereby
agrees to hold and distribute the Property Earnest Money in accordance with the
terms and provisions of this Agreement.
TICOR TITLE INSURANCE COMPANY
By:
Name:
Title:
Address: Attn: Commercial Escrow Department
2701 Gateway Drive
Pompano Beach, Florida 33069
Facsimile: 954/971-2050
<PAGE>
EXHIBIT A
TO PROPERTY PURCHASE AGREEMENT
PROPERTY LEGAL DESCRIPTION
All that tract or parcel of land located in Miami-Dade County, Florida and being
more particularly described as follows:
A portion of section 35, Township 51 South, Range 41 East, Dade County Florida
according to the Plat of NEWMAN's SURVEY of the East one half of Township 51
South, Range 41 East, recorded in Plat Book 1 at Page 118, all of Lots 1 and 2
Block 5 and all of Lot 2 Block 1 of the Plat MIAMI TURF SECTION "A" as recorded
in Plat Book 96 at Page 46 both of the Public Records of Dade County, Florida,
being more particularly described as follows:
Commence at the Northeast corner of said Section 35; thence run
S01(degree)31'40"E along the East Line of said section 35 and the East boundary
line of said MIAMI TURF SECTION "A" Plat for a distance of 1113.30 feet to a
point on the Southerly Right-of-Way of Northwest 210th Street; thence
S87(degree)26'23"W along said Right-of-Way Line a distance of 930.15 feet;
thence NO1 (degree) 31'40"W along the Westerly Right-of-Way Line of Northwest
8th Place a distance of 10.00 feet to the POINT OF BEGINNING; thence continue
N01(degree)31'40"W along the last mentioned Right-of-Way for a distance of
471.34 feet to a point of curvature of a circular curve concave to the
Southwest, having for its elements a radius of 335.00 feet and a central angle
of 89(degree)42'52"; thence Northerly, Northwesterly and Westerly along the arc
of said curve for a distance of 524.55 feet to a point of tangency; thence
S88(degree)45'28"W for a distance of 157.46 feet to a point of curvature of a
circular curve concave to the South having for its elements a radius of 1040.27
feet and a central angle of 08(degree)46'08"; thence Westerly along the arc of
said curve for a distance of 159.21 feet to a point; thence N01(degree)31'40"W
for a distance of 80.82 feet to a point of intersection with a curve concave to
the South having for its elements a radius of 1120.27 feet and a central angle
of 08(degree)09'33"; said point bears N09(degree)24'05"W radially from the
center of said curve; thence Easterly along the arc of said curve, and along the
Northerly Right-of-Way Line of N.W. 214th Street for a distance of 159.53 feet
to a Point of tangency; thence N88(degree)45'28"E along the North Right-of-Way
Line of N.W. 214th Street for a distance of 157.46 feet to a point of curvature
of a curve concave to the Southwest having for its elements a radius of 415.00
feet and a central angle of 37(degree)00'31"; thence southeasterly along the arc
of said curve and the North Right-of-Way line of N.W. 214th Street for a
distance of 268.06 feet to a point of reverse curvature of a curve concave to
the North having for its elements a radius of 25.00 feet and a central angle of
66(degree)44'25;"; thence Northerly along the arc of said curve and along the
North Right-of-Way Line of N.W. 214th Street for a distance of 29.12 feet to a
point; thence N01(degree)14'32"W for a distance of 225.44 feet to a point of
intersection with the South Right-of-Way Line of N.W. 215th Street (S.R. 856);
thence S88(degree)45'48"W along the South Right-of-Way Line of N.W. 215th Street
(S.R. 856) for a distance of 811.82 feet to a point; thence S01(degree)31'40"E
for a distance of 112.17 feet to a point of curvature of a circular curve
concave to the Northwest having for its elements a radius of 120.14 feet and a
central angle of 25(degree)52'12"; thence Southwesterly along the arc of said
curve for a distance of 54.25 feet to a point of intersection with a circular
curve concave to the North, said point bears S01(degree)59'56"W from the center
of the next described curve; thence run Westerly through a central angle of
07(degree)52'26" and a radius of 1001.74 feet for an arc distance of 137.66 feet
to a point; thence run S09(degree)52'22"W for a distance of 80.00 feet to a
point of intersection with a circular curve concave to the North, said point
bears S09(degree)52'22"W from the center of the next described curve; thence run
Easterly through a central angle of 04(degree)41'30" and a radius of 1081.74
feet for an arc distance of 88.58 feet to a point; thence S43(degree)13'50"W for
a distance of 85.78 feet to a point; thence S43(degree)15'00"W for a distance of
213.61 feet to a point; thence S36(degree)46'00"E for a distance of 978.40 feet
to a point; thence S62(degree)05'58"E, radial to the next described curve, for
80.0Q feet to a point on a circular curve concave to the Southeast, having for
its elements a radius of 510.00 feet and central angle of 59(degree)32'21:":
thence Northeasterly along the arc of said curve for a distance of 529.97 feet
to a point of tangency; thence N87(degree)26'23"E for a distance of 85.25 feet
to the POINT OF BEGINNING lying and being in Miami-Dade County, Florida.
EXHIBIT A
PROPERTY LEGAL DESCRIPTION - Page 2
<PAGE>
EXHIBIT B
TO PROPERTY PURCHASE AGREEMENT
PERSONAL PROPERTY INVENTORY AS OF SEPTEMBER 1998
ITEM QUANTITY
INTERIORS:
Full size washers 40
Full size dryers 40
Washer/dryer stackable sets 360
Refrigerators 400
Ranges 400
Dishwashers 400
MAINTENANCE/EXTERIOR:
Property Truck 1
Golf carts 4
Motorola Two-way Radios 6
Pressure Washer 1
Key cutting machine 1
Grounds blower 1
Wet/Dry Vacuum 1
Freon Recovery Unit 1
Freon Recovery Tank 35 lb. 1
Freon Recovery Tank 50 lb. 1
Air Vacuum Pump 1
Electronic Charging Scale 1
A/C Pump 1
Pelouze Scale 1
OFFICE/CLUBHOUSE:
Computers (includes printers) 2
Telecommunication System 1
Fax machine 1
Typewriter 2
Office desks 4
Desk chairs 4
Credenza 1
File cabinet 2
Couch 1
Chairs 12
Pedestal table 1
Coffee table 2
Sofa table 1
Pictures 4
Weight machines 3
Meeting chairs 8
Pool tables 2
Pool table chairs 8
Pool lounges 14
MODEL FURNITURE:
Dining room table 1
Dining chairs 4
Living room table 4
Living room chairs 4
Floor lamp 1
Sofa 2
Living room chair 1
Bookshelf/hutch 1
Table lamps 4
Trunk 1
Dresser 1
Bed end tables 2
Double bed w/coverings 1
Pictures 10
Together with all other attached equipment, fixtures, floor and wall coverings,
and items of personal property now located on the Property and owned by Seller.
<PAGE>
EXHIBIT C
TO PROPERTY PURCHASE AGREEMENT
SPECIAL WARRANTY DEED
Prepared BY
Michael P. Petersilia, Esq.
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite
2200
Dallas, Texas 75201-6776
When Recorded Return To:
==========================
==========================
SPECIAL WARRANTY DEED
STATE OF FLORIDA
COUNTY OF MIAMI - DADE
THIS INDENTURE, made as of ----------------- 1999, between Lakes Edge
Partners, L.P., a Delaware limited partnership, whose mailing address is
- -------------------, (herein the "Grantor"), and ---------------------, a
- ------------------------------- whose mailing address is
- ------------------------------------------------ and whose taxpayer
identification number is ------------------------------- (herein the "Grantee").
WITNESSETH:
That the Grantor, for and in consideration of the sum of $10.00, and other
valuable consideration to it in hand paid by the Grantee, the receipt whereof is
hereby acknowledged, hereby grants, bargains and sells to the Grantee, its
successors and assigns forever, the following described land, situate, lying and
being in the County of Miami- Dade, State of Florida:
See Exhibit A attached hereto and made a part hereof,
[The property appraiser's parcel identification
number for such land is RE No.--------------------
Together with all improvements and fixtures thereon and all the tenements,
hereditaments, easements and appurtenances thereto belonging or in anywise
appertaining. This conveyance is made subject to the matters set forth on
Exhibit B attached hereto and made a part hereof for all purposes.
TO HAVE AND TO HOLD, the same in fee simple forever.
The Grantor does hereby warrant and will defend the title to said land
against the lawful claims of all persons whomsoever claiming by, through or
under Grantor, but against none other.
IN WITNESS WHEREOF, Grantor has executed this Deed
- ----------------------, 1999, to be effective as of this _____ day of
- ---------------------, 1999.
GRANTOR: LAKES EDGE PARTNERS, L.P.,
a Delaware limited partnership
By: ---------------------------------
Name: ---------------------------------
Title: ---------------------------------
Signed, Sealed and Delivered in the presence of:
- --------------------------------
Print Name:
- --------------------------------
Print Name:
<PAGE>
STATE OF FLORIDA
COUNTY OF MIAMI-DADE
This instrument was acknowledged before me this ----------------------day
of ---------------------------------, 1999, by
- ---------------------------------, ---------------------------------of
- ---------------------------------, a ---------------------------------on behalf
of said corporation. He is personally known to me or has produced a drivers
license as identification.
(SEAL)
Notary Public in and for
the State of ---------------------------------
- ----------------------------------
Print name of notary
My Commission Expires:---------------------------------
<PAGE>
EXHIBIT D
TO PROPERTY PURCHASE AGREEMENT
ASSIGNMENT AND ASSUMPTION OF
SERVICE CONTRACTS, WARRANTIES AND LEASES
STATE OF FLORIDA
COUNTY OF MIAMI - DADE
Lakes Edge Partners, L.P., a Delaware limited partnership ("Grantor"), for and
in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good
and valuable consideration to it in hand paid by , a
("Grantee"), the receipt and sufficiency of which are hereby acknowledged, has
Granted, Sold, Assigned, Transferred, Conveyed, and Delivered and does by these
presents Grant, Sell, Assign, Transfer, Convey and Deliver unto Grantee, all of
Grantor's rights, titles, and interests in and to the following described
properties located in, affixed to, and/or arising or used in connection with the
improved property with parking and other amenities (the "Property") situated on
the land in the County of Miami - Dade, State of Florida, more particularly
described on Exhibit A attached hereto and made a part hereof for all purposes
(the "Land," which together with the Property is sometimes hereinafter called
the "Property"):
(a) Any leases for space in the Property (the "Leases"), together with
security and other deposits owned or held by Grantor pursuant to the Leases,
which Leases and security deposits are described on Exhibit B attached hereto;
(b) The assignable service, or maintenance contracts relating to the
ownership and operation of the Property (the "Service Contracts") attached
hereto as Exhibit C; and
(c) Any assignable warranties and guaranties relating to the Property
or any portion thereof (collectively, the "Warranties"); and
Grantor and Grantee hereby covenant and agree as follows:
(i) Grantee accepts the aforesaid assignment and Grantee
assumes and agrees to be bound by and timely perform, observe, discharge, and
otherwise comply with each and every one of the agreements, duties, obligations,
covenants and undertakings upon the lessor's part to be kept and performed under
the Leases and any obligations of Grantor under the Service Contracts arising
after the date hereof
(ii) Grantee hereby indemnifies and agrees to hold harmless
Grantor from and against any and all liabilities, claims, demands, obligations,
assessments, losses, costs, damages, and expenses of any nature whatsoever
(including, without limited the generality of the foregoing, reasonable
attorneys' fees and court costs) which Grantor may incur, sustain, or suffer, or
which may be asserted or assessed against Grantor on or after the date hereof,
arising out of, pertaining to or in any way connected with the obligations,
duties, and liabilities under the Leases and the Service Contracts, or any of
them, arising from and after the date hereof.
(iii) Grantor hereby indemnifies and agrees to hold harmless
Grantee from and against any and all liabilities, claims, demands, obligations,
assessments, losses, costs, damages, and expenses of any nature whatsoever
(including, without limited the generality of the foregoing, reasonable
attorneys' fees and court costs) which Grantee may incur, sustain, or suffer, or
which may be asserted or assessed against Grantee on or after the date hereof,
arising out of, pertaining to or in any way connected with the obligations,
duties, and liabilities under the Leases and the Service Contracts, or any of
them, arising before the date hereof.
(iv) The burden of the indemnity made in paragraph (ii) hereof
shall not be assigned. Except as aforesaid, this Agreement shall bind and inure
to the benefit of the parties and their respective successors, legal
representatives and assigns.
(v) Neither this Agreement nor any term, provision, or
condition hereof may be changed, amended or modified, and no obligation, duty or
liability or any party hereby may be released, discharged or waived, except in a
writing signed by all parties hereto.
<PAGE>
IN WITNESS WHEREOF, Grantor and Grantee have executed this Assignment and
Assumption of Service Contracts, Warranties and Leases on
- ---------------------------------, 1999 to be effective as of
the----------------day of---------------------------------, 1999.
GRANTOR: LAKES EDGE PARTNERS, L.P.,
a Delaware limited partnership
By: ---------------------------------
Name:---------------------------------
Title: ---------------------------------
Signed, Sealed and Delivered in the presence of:
-------------------------------
Print Name: ---------------------------------
-------------------------------
Print Name : ---------------------------------
GRANTEE: HOMES FOR AMERICA HOLDINGS, INC.
a Nevada Corporation
By: ---------------------------------
Name:---------------------------------
Title: ---------------------------------
Signed, Sealed and Delivered in the presence of:
Print Name: ---------------------------------
<PAGE>
STATE OF FLORIDA
COUNTY OF MIAMI-DADE
This instrument was acknowledged before me this ----------------------day
of ---------------------------------, 1999, by
- ---------------------------------, ---------------------------------of
- ---------------------------------, a ---------------------------------on behalf
of said corporation. He is personally known to me or has produced a drivers
license as identification.
(SEAL)
Notary Public in and for
the State of ---------------------------------
- ----------------------------------
Print name of notary
My Commission Expires:---------------------------------
STATE OF FLORIDA
COUNTY OF MIAMI-DADE
This instrument was acknowledged before me this ----------------------day
of ---------------------------------, 1999, by
- ---------------------------------, ---------------------------------of
- ---------------------------------, a ---------------------------------on behalf
of said corporation. He is personally known to me or has produced a drivers
license as identification.
(SEAL)
Notary Public in and for
the State of ---------------------------------
- ----------------------------------
Print name of notary
My Commission Expires:---------------------------------
<PAGE>
EXHIBIT E
TO PROPERTY PURCHASE AGREEMENT
BILL OF SALE
The undersigned, Lakes Edge Partners, L.P., a Delaware limited partnership
(the "Seller"), hereby sells, transfers, assigns, conveys and delivers to
- -------------------------, a ------------------------- ("Buyer"), all property
described on Schedule 1 attached hereto (the "Assets") in connection with the
property more particularly described on Exhibit "A" attached hereto and
incorporated herein.
TO HAVE AND TO HOLD all of the Assets hereby sold, transferred,
conveyed and delivered unto Buyer, its successors and assigns, to its and their
own use and behalf forever.
Seller warrants to Buyer that Seller owns all of said Assets; that no
other party has any rights or claim to the Assets; that the Assets are
unencumbered and free from liens; and that Seller will defend the title to the
Assets against the claims and demands of all persons whomsoever.
This Bill of Sale and the covenants and agreements herein contained
shall inure to the benefit of Buyer, its successors and assigns, and shall be
binding, jointly and severally, upon Seller, and its successors and assigns.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed
as of the ------------- day of -------------------------, 1999.
LAKES EDGE PARTNERS, L.P.,
a Delaware limited partnership
By: Lakes Edge, L.P.
a Delaware limited partnership
By: Lakes Edge, L.L.C.
a Delaware limited liability company
By:-------------------------
W. Edward Walter, Manager
<PAGE>
STATE OF FLORIDA
COUNTY OF MIAMI-DADE
This instrument was acknowledged before me this ----------------------day
of ---------------------------------, 1999, by
- ---------------------------------, ---------------------------------of
- ---------------------------------, a ---------------------------------on behalf
of said corporation. He is personally known to me or has produced a drivers
license as identification.
(SEAL)
Notary Public in and for
the State of ---------------------------------
- ----------------------------------
Print name of notary
My Commission Expires:---------------------------------
<PAGE>
SCHEDULE 1
PERSONAL PROPERTY INVENTORY AS OF SEPTEMBER 1998
ITEM QUANTITY
INTERIORS:
Full size washers 40
Full size dryers 40
Washer/dryer stackable sets 360
Refrigerators 400
Ranges 400
Dishwashers 400
MAINTENANCE/EXTERIOR:
Property Truck 1
Golf carts 4
Motorola Two-way Radios 6
Pressure Washer 1
Key cutting machine 1
Grounds blower 1
Wet/Dry Vacuum 1
Freon Recovery Unit 1
Freon Recovery Tank 35 lb. 1
Freon Recovery Tank 50 lb. 1
Air Vacuum Pump 1
Electronic Charging Scale 1
A/C Pump 1
Pelouze Scale 1
OFFICE/CLUBHOUSE:
Computers (includes printers) 2
Telecommunication System 1
Fax machine 1
Typewriter 2
Office desks 4
Desk chairs 4
Credenza 1
File cabinet 2
Couch 1
Chairs 12
Pedestal table 1
Coffee table 2
Sofa table 1
Pictures 4
Weight machines 3
Meeting chairs 8
Pool tables 2
Pool table chairs 8
Pool lounges 14
MODEL FURNITURE:
Dining room table 1
Dining chairs 4
Living room table 4
Living room chairs 4
Floor lamp 1
Sofa 2
Living room chair 1
Bookshelf/hutch 1
Table lamps 4
Trunk 1
Dresser 1
Bed end tables 2
Double bed w/coverings 1
Pictures 1 0
Together with all other attached equipment, fixtures, floor and wall coverings,
and items of personal property now located on the Property and owned by Seller.
<PAGE>
EXHIBIT F
TO PROPERTY PURCHASE AGREEMENT
TENANT NOTIFICATION LETTER
To: Resident of Apartment No. ----------------
From: ----------------
Dear Resident:
This letter shall inform you that the undersigned has purchased the
apartment complex known as Lakes Edge Apartments. Please be notified that the
undersigned has assumed all obligations for your security deposit in accordance
with the terms of your lease.
All obligations to pay rent after the date hereof shall be made to the
purchaser at:
Should you have any questions regarding your security deposits or any
other matter, please stop by our leasing office.
Very truly yours,
By: ----------------
Name: ----------------
Title: ----------------
ACKNOWLEDGED
AND AGREED:
LAKES EDGE PARTNERS, L.P.
a Delaware limited partnership
- -------------------------------
Name: -------------------------
Title:-------------------------
<PAGE>
EXHIBIT G
TO PROPERTY PURCHASE AGREEMENT
DUE DILIGENCE DOCUMENTS
1. A copy of the existing ALTA title report or title policy currently covering
the Property.
2. A current survey of the Property.
3. If available, the final plans and a complete set of specifications for the
Property.
4. An inventory of the Personal Property.
5. A list of all capital improvements at the Property from January 1, 1996
through January 31, 1999 including replacements of any appliances,
carpeting, driveways, . roofs, mechanical equipment, plumbing and
electrical systems.
6. Certified Rent Roll for most recent month including: apartment number,
unit type, unit status, tenant names, commencement and termination
dates, market rent, lease rent, amount of security and any other
deposits and details of any concessions or specials.
7. All loan and bond documents relating to or evidencing any financing on
the Property and/or other indebtedness to which the Property is
subject.
8. A complete set of all current reports from the Seller's on-site system at the
Property for the prior month.
9. Copies of all Service Contracts.
10. A certificate of insurance which describes all present property, fire,
extended risk, liability and other insurance policies covering the
Property.
11. A list and complete copies. of all current licenses and permits
(specifically including but not limited to the original certificates of
occupancy, or appropriate governmental substitution) issued by a
governmental authority with respect to the operation of the Property.
12. Copies of the last three years tax bills and all current tax bills
including, but not limited to, Property, personal, rental taxes and
special assessments.
13. Unaudited operating statements for the Property for calendar years 1996,
1997 and 1998.
14. A copy of the report with respect to the Property's security deposits trust
account as of February 28, 1999.
15. Copies of the last 12 months of utility bills (gas, electric, water and
sewer).
<PAGE>
EXHIBIT H
TO PROPERTY PURCHASE AGREEMENT
OUTSTANDING LITIGATION
1. Pierre Ellis v. Lakes Edge Partners, L.P., (child scalded by boiling
water on stove).
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
/s/ Robert A. MacFarlane
- ----------------------------------- ------------------------------
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
PROMISSORY NOTE
FOR VALUE RECEIVED, Homes For America Holdings, Inc., a Nevada
corporation ("Maker") promises to pay to the order of William Marovitz,
("Holder"), the following sum, in accordance with the terms of this Promissory
Note ("Note").
I. INDEBTEDNESS. The Maker shall pay the Holder Two Hundred, Twenty Five
Thousand Dollars ($225,000.00), that being the amount advanced by Holder as a
loan to the Company (the "Loan").
II. INTEREST CHARGES. An interest rate of nine and a half percent (9.5%)
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 one (1) installment, due one year and one month after
the date of this Note, July 23, 2000 ("Due Date").
Repayment of the Note will be made in accordance with the provisions of
Section IV of this agreement. Holder will notify Maker, in writing and no later
than June 23, 2000, of the method of repayment that Holder has selected.
The Interest portion of the obligation evidenced by the Note shall be paid
monthly, in arrears, on the last day of every month (the "Interest Due Date")
commencing July 31, 1999.
IV. REPAYMET OPTIONS. The Holder shall have the option of choosing one of
the following methods of repayment of the loan.
1. Accept repayment in cash of the full amount of the loan, Two Hundred
Twenty Five Thousand Dollars ($225,000.00). In addition to the cash payment,
Holder will receive options or warrants, as mutually agreed, for Seventy Five
Thousand (75,000) shares of common stock, exercisable at a price of $1 per
share, and expiring five (5) years from the date of repayment.
2. In lieu of cash repayment, Holder may accept as payment in full of the
indebtedness evidenced by this Note, Two Hundred Twenty Five Thousand (225,000)
shares of common stock.
V. COLLATERALIZATION. The Loan shall be collateralized by the following:
1. The Promissory Note on the Putnam Square Apartments in Bridgeport,
Connecticut (the ("Putnam Note") between the Company and TVMJG-Putnam
Square Limited Partnership. 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.
2. The First Mortgage on the Putnam Square Apartments in Bridgeport,
Connecticut, (the "Putnam Mortgage"), between the company and TVMJG-Putnam
Square Limited Partnership. The Putnam Mortgage is a senior debt that
totals Four Hundred Thousand Dollars ($400,000) of which the company is
entitled to receive Two Hundred Thousand Dollars ($200,000).
3. In order to ensure the collateralization of the Promissory Note and the
first Mortgage 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 Holders.
VI. ADDITIONAL PROPVISIONS. This Note shall be subject to the following
additional provisions:
1. If the Holder elects to accept repayment of the Note by the receipt of
common stock, as described in section IV 2 above, and if the bid price of
the stock as hereinafter defined, is less than $1.25 per share, then the
Holder will receive options to purchase an additional Eleven Thousand Two
Hundred Fifty (11,250) shares of common stock, exercisable at a price of
Sixty Cents ($.60) per share, expiring three (3) years from the date of
repayment under the terms of Section IV 2, above.
The bid price will be the average of the closing bid prices for the
final three (3) days of the term of the loan.
2. Unless otherwise required by law, all common stock referred to above
will be unrestricted.
3. All stock and options for stock included herein shall be given full and
complete anti-dilution protection commencing immediately upon the execution
of this Note and will remain in effect for the duration of this Note. There
will be no further anti-dilution protection subsequent to the Repayment
Date of the Note
In the event of a reverse split, or other reduction in the number of
issued shares, the stock and the options for stock included herein
shall be reduced proportionately.
VII. GRACE PERIOD. This Holder will grant the Maker a ten-day (10) grace
period after each monthly Interest Due Date and the 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. 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.
X. 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.
XI. CONSTRUCTION. This Note shall be governed by and construed in
accordance with the laws of the State of New York.
Dated this 23rd day of June 1999.
MAKER HOLDER
/s/ Robert A. MacFarlane
- ------------------------------- -------------------------------
Robert A. MacFarlane, President William Marovitz
Homes For America Holdings, Inc.
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 sum, in accordance with the terms of this Promissory
Note ("Note").
I. INDEBTEDNESS. The Maker shall pay the Holder Two Hundred, Twenty Five
Thousand Dollars ($225,000.00), that being the amount
advanced by Holder as a loan to the Company (the "Loan").
II. INTEREST CHARGES. An interest rate of nine and a half percent (9.5%)
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 one (1) installment, due one year and
one month after the date of this Note, July 23, 2000 ("Due
Date").
Repayment of the Note will be made in accordance with the
provisions of Section IV of this agreement. Holder will notify
Maker, in writing and no later than June 23, 2000, of the
method of repayment that Holder has selected.
The Interest portion of the obligation evidenced by the Note
shall be paid monthly, in arrears, on the last day of every
month (the "Interest Due Date") commencing July 31, 1999.
IV. REPAYMET OPTIONS. The Holder shall have the option of choosing
one of the following methods of repayment of the loan.
1. Accept repayment in cash of the full amount of
the loan, Two Hundred Twenty Five Thousand
Dollars ($225,000.00). In addition to the cash
payment, Holder will receive options or warrants,
as mutually agreed, for Seventy Five Thousand
(75,000) shares of common stock, exercisable at a
price of $1 per share, and expiring five (5)
years from the date of repayment.
2. In lieu of cash repayment, Holder may accept as
payment in full of the indebtedness evidenced by
this Note, Two Hundred Twenty Five Thousand
(225,000) shares of common stock.
V. COLLATERALIZATION. The Loan shall be collateralized by the following:
1. The Promissory Note on the Putnam Square
Apartments in Bridgeport, Connecticut (the
("Putnam Note") between the Company and
TVMJG-Putnam Square Limited Partnership. 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.
2. The First Mortgage on the Putnam Square
Apartments in Bridgeport, Connecticut, (the
"Putnam Mortgage"), between the company and
TVMJG-Putnam Square Limited Partnership. The
Putnam Mortgage is a senior debt that totals Four
Hundred Thousand Dollars ($400,000) of which the
company is entitled to receive Two Hundred
Thousand Dollars ($200,000).
3. In order to ensure the collateralization of the
Promissory Note and the first Mortgage 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
Holders.
VI. ADDITIONAL PROPVISIONS. This Note shall be subject to the following
additional provisions:
1. If the Holder elects to accept repayment of the
Note by the receipt of common stock, as described
in section IV 2 above, and if the bid price of
the stock as hereinafter defined, is less than
$1.25 per share, then the Holder will receive
options to purchase an additional Eleven Thousand
Two Hundred Fifty (11,250) shares of common
stock, exercisable at a price of Sixty Cents
($.60) per share, expiring three (3) years from
the date of repayment under the terms of Section
IV 2, above.
The bid price will be the average of the closing
bid prices for the final three (3) days of the
term of the loan.
2. Unless otherwise required by law, all common stock referred to above will be
unrestricted.
3. All stock and options for stock included herein
shall be given full and complete anti-dilution
protection commencing immediately upon the
execution of this Note and will remain in effect
for the duration of this Note. There will be no
further anti-dilution protection subsequent to
the Repayment Date of the Note
In the event of a reverse split, or other
reduction in the number of issued shares, the
stock and the options for stock included herein
shall be reduced proportionately.
VII. GRACE PERIOD. This Holder will grant the Maker a ten-day (10)
grace period after each monthly Interest Due Date and the 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. 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.
X. 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.
XI. CONSTRUCTION. This Note shall be governed by and construed in
accordance with the laws of the State of New York.
Dated this 23rd day of June 1999.
MAKER HOLDER
/s/ Robert A. MacFarlane
- ------------------------------- -------------------------------
Robert A. MacFarlane, President William Koplovitz, Jr.
Homes For America Holdings, Inc.
Trade Acceptance Program
Buyer Acknowledgment
(Buyer) Homes for America Holdings, Inc.
(Address) 1 Odell Plaza
(Address) Yonkers, NY 10701
Federal ID Number: 88-0355-4480000
Name and Title of Person(s)
Authorized to Sign on Behalf of Buyer: Robert MacFarlane
President
Buyer in its business purchases products, goods and/or services and/or borrows
money in connection with either a commercial or financial transactions
(collectively referred to as the "Merchandise") from commercial providers of
such Merchandise (hereafter "Sellers"). Buyer has been introduced to the Trade
Acceptance Draft Program (the "TAD Program") offered by Actrade Capital Inc.
("Actrade").
Signing this Acknowledgment Form imposes no obligation upon Buyer to use the TAD
Program at any time. By signing this Acknowledgment Form, Buyer confirms that,
IF IT ELECTS TO USE THE TAD PROGRAM IN THE FUTURE, then Buyer, by issuing one or
more TADs (as defined below) prepared in connection with transactions with its
commercial Sellers, and in consideration of Actrade's purchase thereof from such
commercial Sellers, confirms its agreement that the following general terms
shall apply:
1. The TAD: A "Trade Acceptance Draft" ("TAD") is a draft prepared in
connection with a commercial or financial transaction on the account of the
Buyer, which is issued and signed by the Buyer as payment for Merchandise.
By issuing a TAD, Buyer hereby agrees to pay such TAD at a designated bank
when it becomes due. A TAD identifies a specific amount due on a specific
date in the future, as agreed to by Buyer, and is payable from a specific,
designated bank account of Buyer. A TAD is an instrument evidencing Buyer's
obligation to make a specific payment for Merchandise under the Uniform
Commercial Code of the State of New York and on its due date serves as a
pre-authorized payment draft against the designated account in exactly the
same fashion as an ordinary check.
2. Purchase: The Merchandise for which Buyer has, or will, issue one or more
TADs shall have been purchased from Sellers in the ordinary course of
Buyers business;
3. Full Delivery: By Buyer's participation in Actrade's TAD Program, Buyer
agrees to deem the Merchandise for which it has paid by issuing any TAD or
TADs to have been received as ordered and Actrade may rely upon delivery of
the TADs as evidence of full performance by Seller;
4. Inspection: By Buyer's participation in Actrade's TAD Program, Buyer agrees
that it will have, if appropriate, duly inspected the Merchandise for which
it has paid by issuing any TAD or TADs and found it to be acceptable;
5. No Commercial Dispute: Buyer has no, and will not in the future claim any,
commercial dispute, defense, claim or offset, against Seller or Actrade,
which would cause or permit it to refuse payment of a TAD when presented to
the bank designated by Buyer for payment of such TAD (the "Paying Bank") on
the due date;
6. Available Funds: On the due date of any TAD, Buyer will have available
funds on deposit at the Paying Bank to permit payment of such the TAD when
presented;
7. Negotiability: The TADs are negotiable instruments as defined in the
Uniform Commercial Code of the State of New York, and in particular under
Sections 3-104 end 3-409 thereof, and can be transferred by the endorsement
of Seller or any subsequent holder of the TAD.
8. Change of Paying Bank: If Buyer changes the designated account and/or
Paying Bank, such change must be made on at least 10 days prior written
notice to Actrade; If the Paying Bank shall refuse payment on any TAD,
Actrade may change the Paying Bank on any or all TADs purchased by Actrade
to any bank where Buyer maintains an account or take any other action to
enforce such TAD.
9. DEFAULT: If Buyer defaults in the payment of any of the TAD(s) purchased by
Actrade:
a) Acceleration of Due Date: Actrade may accelerate the due dates of all
other TADs it has purchased from the Seller which received such TADs
from Buyer so that payment on all such TADs shall be due 10 days
following the acceleration date.
b) Default Fees: Buyer agrees that the face amount of each TAD which is
not paid for any reason on the due date thereof (including without
limitation, a due date accelerated pursuant to Paragraph 9(a)) shall
bear interest at the rate of 1.5% per cent per month from the due date
of such TAD through and including the date of payment and Buyer agrees
to pay Actrade such interest together with the face amount of such
TAD. Buyer shall also pay any actual charges incurred by Actrade in
collecting defaulted TADs, including bank charges. return fees and
legal fees.
c) No Further Business With Seller: Upon a default in payment of any TAD,
Buyer shall immediately relinquish its' right to purchase, order or
request any further Merchandise from the Seller to which the defaulted
TAD was delivered. At Actrade's request, such Seller shall cease to
make any further sales of Merchandise to Buyer until such time as all
defaulted TADs have been paid in full, together with all applicable
default fees and charges due to Actrade.
10. Payment Authorization: Actrade (including any party to whom the TADs are
sold, assigned, pledged or otherwise transferred) is authorized by Buyer to
add to the TADs required or appropriate endorsements, signatures or
encoding of bank routing and payment information to permit payment of
amounts due to Actrade on the due dates by debit from Buyer's account at
the specified Paying Bank;
11. Authorized Signature: Buyer shall ensure that all TADs are signed and that
the signatures on TADs shall be of persons authorized as a signatory on the
designated account at the Paying Bank and to execute instruments such as
TADs. Actrade may rely upon the authority of the person executing this
Agreement and TADs delivered in the future.
12. Valid Corporate Obligation: Buyer confirms, warrants and represents that
the terms, conditions and provisions herein with respect to Buyers use of
TADs and its participation in the TAD Program, have been duly approved by
all necessary corporate action on the part of Buyer and that this
acknowledgement and each of the TADs issued by the Buyer shall be the
valid, legal and binding obligation of Buyer and that all required
corporate action has been duly taken as required by Buyers charter, bylaws
or any applicable provisions of law in connection with this acknowledgement
and the TADs to be issued in conjunction herewith.
13. Arbitration: At the sole discretion of Actrade, all disputes and claims
arising in connection with the use of the TAD Program between Buyer and
Actrade may be submitted to arbitration in accordance with the provisions
of the rules of the American Arbitration Association, by three (3) arbitors
appointed in accordance with such rules. If Actrade so elects, the site of
such arbitration shall be New York City, New York and the parties hereto
each submit to such jurisdiction. Any award of the American Arbitration
Association shall be final and binding upon both parties concerned.
14. Applicable Law, Venue, Jurisdiction and Service of Process: Buyer agrees
that the laws of the State of New York shall apply to this Agreement and
any dispute between Buyer and Actrade. Further, Buyer confirms its
understanding that the TAD Program and the use of TADs is specifically
subject to the provisions of the Uniform Commercial Code, of the State of
New York, and in particular (but not exclusively) the definitional
provisions of Section 3-104 and 3-409 thereof. Should Actrade not elect to
submit any dispute hereunder to arbitration, you agree that any legal
action or proceeding arising out of or relating to this Agreement or the
relationship between Buyer and Actrade shall be instituted solely in the
courts of the State of New York, within the City and County of New York,
and the parties hereby submit to the jurisdiction of each such court in any
such action or proceeding. Furthermore, Buyer consents to the service of
process upon you in any such legal action or proceeding by means of either
service upon the Secretary of the State of New York hereby designated as
Agent for service of process or by certified mail, return receipt
requested, addressed to Buyer at the address first above written, or such
other address as Buyer may from time to time designate in writing.
15. Disclosure. Actrade is hereby authorized to release financial statements
and related information pertaining to Buyer for the purpose of assessing
security on Actrade's behalf.
16. FOR BUYERS ENGAGED IN THE CONSTRUCTION INDUSTRY: If the TADs signed by
Buyer are related to the construction industry, then the following
provisions shall also apply:
a) Acceptance of Merchandise. Acceptance by Buyer of the TADs constitutes
acceptance of the Merchandise, regardless of any provision of the
primary contract or subcontract to the contrary and regardless of any
subsequent rejection of the Merchandise by the owner of the property;
b) Sale of TADs and Assignment of Claim. Seller may sell, assign or
transfer any or all TAD's received to Actrade and in connection
therewith, may also provide Actrade with an Assignment of Claim
Agreement which assigns Seller's right to receive payment from the
Buyer, or Buyer's general contractor or the owner of the property,
under the construction contract. Buyer shall confirm the Assignment of
Claim Agreement and will take all other action required by applicable
law to effect the purpose thereof;
c) Mechanic's Lien. In the event of a default in payment of any TAD, the
foregoing Assignment of Claim Agreement may be filed with any other
party, including Buyer's general contractor or the owner of the
property or project, and Actrade may take any permitted action under
the applicable law to enforce the Assignment of Claim Agreement
17. 7 - 12 MONTH MERCHANDISE PURCHASE OPTION: In situations involving financing
the initial purchase of identifiable Merchandise Buyer may be offered the
option of extended terms of up to 12 months. The terms and conditions of
such a transaction shall be detailed in a separate Addendum which, when
approved by Actrade, shall be affixed to and made a part hereof. When Buyer
selects this option, and the transaction qualifies and is approved, the
following additional terms will apply:
a) Merchandise Purchase Financing. TADs to be accepted by Buyer must be
issued to Seller in payment of the initial purchase price of specific
Merchandise identifiable by serial number or other designation
permitting the filing of appropriate UCC-1 financing statements.
b) Location of Merchandise. During the term of the TADs the Merchandise
must remain in the United States and Actrade must receive 30 day
advance written notice of any proposed change of location thereof and
Actrade must agree in writing to such change of location.
c) First Lien. Actrade shall receive a first lien for the face amount of
TADs issued and accepted by Buyer for the Merchandise until all TADs
are paid in full. Actrade shall have the right, in its sole
discretion, to perfect such first lien by filing appropriate UCC-1
Financing Statements. In connection therewith Buyer confirms that this
Agreement, together with the Addendum relating to the specific
transaction, constitute a "Security Agreement" as required under the
Uniform Commercial Code. Further, Buyer authorizes Actrade to affix
Buyer's name and its signature, as an authorized signatory for Buyer,
on such UCC-1 Financing Statement for filing of such Statement. Upon
payment of TADs in full Actrade shall release its security interest by
delivery of a UCC-3 Termination Statement.
d) TAD Terms. The terms of the TADs to he delivered to Seller in
connection with the proposed Merchandise purchase transaction will be
as set forth in the Bill of Sale delivered in connection with
Actrade's purchase thereof.
18. Assignment. Buyer agrees that it shall not assign this Acknowledgment.
Buyer agrees that Actrade may assign all of its rights, remedies, powers
and privileges hereunder.
This acknowledgment contains the entire agreement of the parties,
supersedes all prior ones and may only be changed by a written agreement
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. Further, you confirm that
the headings used in this Letter are solely for reference and our
convenience and do not change the meaning of any provision hereof.
Company: Homes for America Holdings, Inc.
Paying Bank: Chase Manhattan Bank
Account/ABA Number:
Signature: /s/ Robert A. MacFarlane
-------------------------
Print Name: Robert A. MacFarlane
Title: CEO
Sworn To Before Me this---- day of -------------, 19--------
Notary: ----------------------------------------
HOMES FOR AMERICA
HOLDINGS, INC.
CORPORATIONS, PARTNERSHIPS, JOINT VENTURES
& OTHER BUSINESS ASSOCIATIONS
CORPORATIONS
Briar Meadows Homes For America, Inc.: Homes For America Holdings, Inc. owns
100% of this operating entity.
Arlington Homes For America, Inc.: Homes For America Holdings, Inc. owns 100% of
this operating entity.
LEHH, Inc.: Homes For America Holdings, Inc. owns 100% of this entity, formed
solely to purchase and sell bonds in association with the Lake's Edge
transaction in North Miami, Florida.
Homes For America Real Estate Services, Inc.: Homes For America Holdings, Inc.
owns 100% of this newly formed operating entity.
Lake's Edge Homes For America, Inc.: Homes For America Holdings, Inc. owns 100%
of this operating entity.
LIMITED PARTNERSHIPS
Glen Hills Homes For America, Inc.: Homes For America Holdings, Inc. owns
100% of the General Partner, Glen Hills Homes For America, Inc. The General
Partner owns .01% of Dallas/Glen Hills LP (aka Willow Pond). Because Homes For
America Holdings, Inc. exerts full and complete control over the Limited
Partnership, it is treated as a wholly owned subsidiary.
Prairie Village Homes For America, Inc.: Homes For America Holdings, Inc.
owns 100% of the General Partner, Prairie Village Homes For America, Inc. The
General Partner owns 0.1% of Middlebury/Elkhart LP (aka Prairie Village).
Because Homes For America Holdings, Inc. exerts full and complete control over
the Limited Partnership, it is treated as a wholly owned subsidiary. Putnam
Homes For America, Inc.: Homes For America Holdings, Inc. owns 100% of the
General Partner, Putnam Homes For America, Inc. The General Partner owns 1.0% of
TVMJG1996-Putnam Square LP (aka Putnam Square). Because Homes For America
Holdings, Inc. exerts full and complete control over the Limited Partnership, it
is treated as a wholly owned subsidiary.
JOINT VENTURES
MasterBuilt America, Inc.: Homes For America Holdings, Inc. owns 50% of
this newly formed joint venture with MasterBuilt Companies, Inc. of Fairfax,
Virginia.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001011417
<NAME> Homes For America Holdings, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 766293
<SECURITIES> 0
<RECEIVABLES> 468639
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1806634
<PP&E> 10630624
<DEPRECIATION> 739098
<TOTAL-ASSETS> 16780555
<CURRENT-LIABILITIES> 1047740
<BONDS> 0
0
0
<COMMON> 8352
<OTHER-SE> 2009787
<TOTAL-LIABILITY-AND-EQUITY> 16780555
<SALES> 4122247
<TOTAL-REVENUES> 4233867
<CGS> 0
<TOTAL-COSTS> 2732454
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 558293
<INCOME-PRETAX> 1186623
<INCOME-TAX> 398700
<INCOME-CONTINUING> 787923
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 787923
<EPS-BASIC> .11
<EPS-DILUTED> .11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001011417
<NAME> Homes For America Holdings, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 280839
<SECURITIES> 0
<RECEIVABLES> 469198
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1388921
<PP&E> 11699357
<DEPRECIATION> 855948
<TOTAL-ASSETS> 17382800
<CURRENT-LIABILITIES> 1115734
<BONDS> 0
0
0
<COMMON> 8374
<OTHER-SE> 1893213
<TOTAL-LIABILITY-AND-EQUITY> 17382800
<SALES> 878924
<TOTAL-REVENUES> 906944
<CGS> 0
<TOTAL-COSTS> 967801
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167731
<INCOME-PRETAX> (228588)
<INCOME-TAX> (52000)
<INCOME-CONTINUING> (134105)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (134105)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
