SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 15, 1998
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(Exact name of registrant as specified in its charter)
California 333-24111 33-0745418
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3158 Redhill Avenue, Suite 120, Costa Mesa, California 92626
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 662-5565
N/A
Former name or former address, if changed since last report)
wncnat6-10/002
<PAGE>
Item 2. Acquisition or Disposition of Assets
WNC Housing Tax Credit Fund VI, L.P., Series 5 ("Series 5") has
acquired a Local Limited Partnership Interest in El Reno Housing Associates
Limited Partnership, an Oklahoma limited partnership ("EL RENO"), and is
expected to acquire a Local Limited Partnership Interest in each of Hughes
Villas, L.P., an Arkansas limited partnership ("HUGHES") and Mark Twain Senior
Community, L.P., a California limited partnership ("MARK TWAIN"). EL RENO,
HUGHES and MARK TWAIN are sometimes referred to hereinafter as the Local Limited
Partnerships. EL RENO owns the Ashton Place Retirement Community Apartments in
El Reno, Oklahoma; HUGHES owns the Hughes Villas Apartments in Hughes, Arkansas;
and MARK TWAIN owns the Mark Twain Senior Community Apartments in Oakland,
California.
The following tables contain information concerning the Apartment
Complexes and the Local Limited Partnerships identified herein:
<TABLE>
LOCAL
ACTUAL OR LIMITED YEAR
ESTIMATED ESTIMATED PERMANENT PARTNERSHIP'S CREDITS
PROJECT CONSTRUC- DEVELOPMENT MORTGAGE ANTICIPATED TO BE
LOCAL NAME AND TION COST NUMBER OF BASIC LOAN AGGREGATE FIRST
LIMITED NUMBER OF LOCATION OF COMPLETION (INCLUDING APARTMENT MONTHLY PRINCIPAL TAX CREDITS AVAIL-
PARTNERSHIP BUILDINGS PROPERTY DATE LAND COST) UNITS RENTS AMOUNT (1) ABLE
<S> <C> <C> <C> <C> <C> <C> <C>
EL RENO Ashton Place El Reno August 1998 $5,266,619 60 1BR units $387 $2,403,000 $4,406,656 1999
Retirement (Canadian 40 2BR units $462 GAC(3)
Community County),
Apartments Oklahoma
26 buildings (2)
HUGHES Hughes Villa Hughes September $1,000,021 20 2BR units $398 $384,000 $395,600 1997
Apartments (St. Francis 1996 ADFA (4)
County),
4 buildings Arkansas $384,015
RD (5)
MARK TWAIN Mark Twain Oakland July 1996 $2,564,670 100 Efficiency $338-$407 $1,200,000 $1,030,239 1998
Senior (Alameda 6 1BR units $415 HSA (7)
Community County),
Apartments California $295,957
RACO(8)
3 buildings
(2)(6)
<FN>
(1) Low Income Housing Credits are available over a 10-year period. For
the year in which the credit first becomes available, SERIES 5 will
receive only that percentage of the annual credit which corresponds to
the number of months during which SERIES 5 was a limited partner of the
Local Limited Partnership, and during which the Apartment Complex was
completed and in service.
(2) Property designed for senior citizens.
(3) Greystone & Co. ("GAC") will provide the mortgage loan for a term
of 18 years at an annual interest rate of 7.8%. Principal and interest
will be payable monthly, based on a 30-year amortization schedule.
Outstanding principal will be due upon maturity.
(4) Arkansas Development Finance Authority ("ADFA") will provide the
first mortgage loan for a term of 30 years at an annual interest rate
of 6%. Principal and interest will be payable monthly, based on a
30-year amortization schedule.
(5) Rural Development ("RD") will provide the second mortgage loan for
a term of 50 years at an annual interest rate of 1%. Principal and
interest will be payable monthly, based on a 50-year amortization
schedule.
(6) Rehabilitation property.
2
<PAGE>
(7) Home Savings of America ("HSA") will provide the first mortgage
loan for a term of 15 years at an annual interest rate of 8.72%.
Principal and interest will be payable monthly, based on a 30-year
amortization schedule. Outstanding principal will be due upon maturity.
(8) Redevelopment Agency of the City of Oakland ("RACO") will provide
the second mortgage loan for a term of 30 years at an annual interest
rate of 6%. Principal and interest will be payable from cash flow,
based on a 30- year amortization schedule. Outstanding principal will
be due upon maturity.
</FN>
</TABLE>
El Reno (EL RENO): El Reno (population 16,000) is in Canadian County, in central
Oklahoma, at the intersection of Interstate Highway 40 and U.S. Highway 81,
approximately eight miles from the Oklahoma City limits and approximately 27
miles from the center of Oklahoma City. The major employers for El Reno
residents are Federal Aviation Administration, CMI Corporation and Mustang
Independent Schools.
Hughes (HUGHES): Hughes (population 1,800) is in St. Francis County, in
east-central Arkansas, at the intersection of U.S. Highway 79 and State Highway
38, approximately 25 miles southwest of Memphis, Tennessee. The major employers
for Hughes residents are Arkansas Sock and Rag and Bill's Dollar Store.
Oakland (MARK TWAIN): Oakland (population 376,000) is in Alameda County in
northern California, approximately 10 miles east of San Francisco. The major
employers for Oakland residents are Kaiser Permanente, New United Motor
Manufacturing, Inc. and the Port of Oakland.
<TABLE>
SHARING RATIOS: ESTIMATED
ALLOCATIONS (4) SERIES 5's ACQUISITION
LOCAL GENERAL AND CAPITAL FEES PAYABLE
LOCAL LOCAL PARTNER SHARING SALE OR CONTRI- TO FUND
LIMITED GENERAL PROPERTY DEVELOPMENT RATIOS: REFINANCING BUTION MANAGER
PARTNERSHIP PARTNER MANAGER (1) FEE (2) CASH FLOW (3) PROCEEDS (5) (6)
- -------------- -------------------- ---------------- -------------- -------------- ---------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
EL RENO Cowen Properties, Insignia Resident $689,212 WNC: Greater of 99.98/.01/.01 $3,039,985 $282,000
Inc. Group, L.P. 20% or $4,000 40/60
LGP: 70%
The balance:
40/60
HUGHES Billy Bunn Southland Management $161,000 LGP: $1,000 99/1 $215,000 $20,000
Co. The balance: 50/50
50/50
MARK TWAIN Thomas P. Lam Professional Apar $155,000 WNC:Greater of 98.99/.01/1 $683,290 $63,000
Management 15%or $7,000 50/50
LGP: 50%
The balance:
50/50
<FN>
(1) The maximum annual management fee payable to the property manager generally
is determined pursuant to lender regulations. The Local General Partner is
authorized to employ either itself or one of its affiliates, or a third party,
as property manager for leasing and management of the Apartment Complex so long
as the fee therefore does not exceed the amount authorized and approved by the
lender for the Apartment Complex.
(2) The Local Limited Partnership will pay its Local General Partner or an
affiliate of its Local General Partner a development fee in the amount set
forth, for services incident to the development and construction of the
Apartment Complex, which services include: negotiating the financing commitments
for the Apartment Complex; securing necessary approvals and permits for the
development and construction of the Apartment Complex; and obtaining allocations
of Low Income Housing Credits. This payment will be made in installments after
receipt of each installment of the capital contributions made by Series 5.
(3) Reflects the amount of the net cash flow from operations, if any, to be
distributed to Series 5 ("WNC") and the Local General Partner ("LGP") of the
Local Limited Partnership for each year of operations. Generally, to the extent
that the specific dollar amounts which are to be paid to WNC are not paid
annually, they will accrue and be paid from sale or refinancing proceeds as an
obligation of the Local Limited Partnership.
3
<PAGE>
(4) Subject to certain special allocations, reflects the respective percentage
interests in profits, losses and Low Income Housing Credits of (i) Series 5,
(ii) except in the case of HUGHES, WNC Housing, L.P., an Affiliate of the
sponsor which is the special limited partner, and (iii) the Local General
Partner.
(5) Reflects the percentage interests of (i) Series 5, and (ii) the Local
General Partner, in any net cash proceeds from sale or refinancing of the
Apartment Complex, after payment of the mortgage loan and other Local Limited
Partnership obligations (see, e.g., note 3), and the following, in the order set
forth: with respect to EL RENO and MARK TWAIN, the capital contribution of
Series 5; the capital contribution of the special limited partner; and the
capital contribution of the Local General Partner; and, with respect to HUGHES,
5% of sale or refinancing proceeds to the Local General Partner.
(6) Series 5 will make its capital contribution to the Local Limited Partnership
in stages, with each contribution due when certain conditions regarding
construction or operations of the Apartment Complex have been fulfilled.
</FN>
</TABLE>
4
<PAGE>
Item 7. Financial Statements and Exhibits
a. Financial Statements of Businesses Acquired.
To be filed upon availability.
b. Proforma Financial Information
Proforma Balance Sheet, September 30, 1997
Proforma Statement of Operations for the Period July 15, 1997
to September 30, 1997
Notes to Proforma Financial Statements
c. Exhibits
10.1 Amended and Restated Agreement of Limited
Partnership of El Reno Housing Associates
Limited Partnership
10.2 Second Amended and Restated Agreement of Limited
Partnership of Hughes Villas Limited
Partnership
10.3 First Amendment to Second Amended and Restated
Agreement of Limited Partnership of
Hughes Villas Limited Partnership
10.4 Amended and Restated Agreement of Limited Partnership
of Mark Twain Senior Community Limited Partnership
5
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., Series 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
PROFORMA BALANCE SHEET
September 30, 1997
ASSETS
Historical Proforma Proforma
Balance Adjustments Balance
Cash $2,158,837 $6,152,680
(504,805)
117,840 $7,924,552
Subscriptions
receivable 689,000 (117,840) 571,160
Investment in
limited partnerships 231,569 10,708,711
504,805 11,445,085
Other assets 129 0 129
--- - ---
$3,079,535 $16,861,391 $19,940,926
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Notes payable to
limited partnerships $ $10,708,711 $10,708,711
-
Accrued fees and expenses
due to general partner and
affiliates 239,578 0 239,578
------- ----------- -------
239,578 10,708,711 10,948,289
------- ------------ ----------
PARTNERS' EQUITY
General partner (3,371) (10,286) (13,657)
Original limited partner 1,000 1,000
Limited partners 2,842,328 6,162,966 9,005,294
--------- --------- ---------
Total partners' equity 2,839,957 6,152,680 8,992,637
--------- --------- ---------
$3,079,535 $16,861,391 $19,940,926
========== =========== ==========
Unaudited
See Accompanying Notes to Proforma Financial Statements
FS-1
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
PROFORMA STATEMENT OF OPERATIONS
For the Period July 15, 1997 (date operations commenced)
to September 30, 1997
Historical Proforma Proforma
Balance Adjustments Balance
Interest income $ 129 $ 129
----------- --------
Operating expense
Amortization 289 289
Legal and accounting 43 43
--------- -----------
Total operating expense 332 332
------- --------
Loss from operations (203) (203)
Equity in loss
of limited partnerships - (24,600) (24,600)
---------- -------- --------
Net income (loss) $ (203) $ (24,600) $ (24,803)
========= ========= =========
Unaudited
See Accompanying Notes to Proforma Financial Statements
FS-2
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO PROFORMA FINANCIAL STATEMENTS
NOTE 1 - GENERAL
The information contained in the following notes to the proforma financial
statements is condensed from that which appears in the financial statements.
Accordingly, these proforma financial statements should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the WNC Housing Tax Credit Fund VI, L.P., Series 5 financial statements dated
September 30, 1997. WNC Housing Tax Credit Fund VI, L.P., Series 5 is referred
to in these notes as the "Partnership."
NOTE 2 - INTRODUCTION TO PROFORMA ADJUSTMENTS
As of September 30, 1997, the Partnership was not admitted as majority limited
partner in any limited partnerships. Subsequent to September 30, 1997, the
Partnership has acquired a limited partnership interest in five limited
partnerships, Chillicothe Plaza Apartments, L.P. (Chillicothe), El Reno Housing
Associates Limited Partnership (El Reno), Hughes Villa, L.P. (Hughes), Mark
Twain Senior Community, L.P. (Mark Twain) and Spring Valley Terrace Apartments
L.L.C. (Spring Valley) and is negotiating to acquire limited partnership
interests in four other partnerships. The investments commit the Partnership to
capital contributions as follows:
APT HOUSING THEODORE $ 1,312,916
BRADLEY 532,196
CHILLICOTHE 981,049
EL RENO 3,039,985
HUGHES 235,110
MARK TWAIN 683,290
MURFREESBORO 684,474
SPRING VALLEY 716,254
TULSA-CRESTVIEW 2,523,437
---------
$ 10,708,711
In accordance with Article 11, Proforma Financial Information of Regulation S-X
of the Securities and Exchange Commission, the accompanying proforma balance
sheet was computed assuming that the limited partnerships discussed above were
acquired at the end of the period presented. The first adjustment to cash and
the adjustment to partners' equity of $6,152,680 reflect the net proceeds from
October 1 to January 27, 1998 from issuance of 7,563 units of limited partners?
capital ($7,532,795 less notes receivable of $351,500, and commissions and
offering costs of $1,028,615.) The third adjustment to cash and the
FS-3
<PAGE>
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
(A California Limited Partnership)
(A Development-Stage Enterprise)
NOTES TO PROFORMA FINANCIAL STATEMENTS (Continued)
NOTE 2 - INTRODUCTION TO PROFORMA ADJUSTMENTS (Continued)
adjustment to subscriptions receivable of $117,840 reflect the collection of
subscriptions receivable from the above subscriptions. The adjustments to
investment in limited partnerships and notes payable to limited partnerships of
$10,708,711 reflect the Partnership's acquisition of the nine limited
partnership interests as if the Partnership's date of acquisition was September
30, 1997. The second adjustment to investment in limited partnerships and the
second adjustment to cash of $504,805 reflect the acquisition fee for the
acquisition of the identified limited partnerships.
Seven of the nine apartment complexes were under construction or rehabilitation
during the period presented and had no operations which should be reported.
Hughes Villa and Mark Twain had operations during the period presented (July 15,
1996 to September 30, 1996), and a proforma loss of $24,600 has been recorded in
the Proforma Statement of Operations. The Partnership uses the equity method of
accounting to account for its investments in these local limited partnerships.
FS-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES 5
Date: February 2, 1998 By: WNC & Associates, Inc.,
----------------- General Partner
By: /s/ JOHN B. LESTER, JR.
John B. Lester, Jr.,
President
6
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
10.1 Amended and Restated Agreement of Limited Partnership of El
Reno Housing Associates Limited Partnership
10.2 Second Amended and Restated Agreement of Limited Partnership
of Hughes Villas Limited Partnership
10.3 First Amendment to Second Amended and Restated Agreement of
Limited Partnership of Hughes Villas Limited Partnership
10.4 Amended and Restated Agreement of Limited Partnership of Mark
Twain Senior Community Limited Partnership
7
<PAGE>
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
EL RENO HOUSING ASSOCIATES LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP is being entered into effective
as of the date written below by and between COWEN PROPERTIES, INC., AN OKLAHOMA
CORPORATION as the general partner (the "General Partner"), WNC Housing Tax
Credit Fund VI, L.P. Series 5, a California limited partnership, as the limited
partner (the "Limited Partner"), and WNC Housing, L.P., as the special limited
partner (the "Special Limited Partner").
RECITALS
WHEREAS, EL RENO HOUSING ASSOCIATES, A LIMITED PARTNERSHIP, an Oklahoma limited
partnership (the "Partnership") recorded a certificate of limited partnership
with the Oklahoma Secretary of State on June 23, 1997, naming COWEN PROPERTIES,
INC., as the general partner and E. Allen Cowen as Athe sole limited partner@
A(the AOriginal Limited Partner@)@. A partnership agreement dated June 23, 1997
was entered into by and between the General Partner and the Original Limited
Partner.
WHEREAS, the Partners desire to enter into this Agreement to provide
for, among other things, (i) the continuation of the Partnership, (ii) the
admission of the Limited Partner and the Special Limited Partner as partners of
the Partnership, (iii) the liquidation of the Original Limited Partner's
Interest in the Partnership, (iv) the payment of Capital Contributions by the
Limited Partner and the Special Limited Partner to the Partnership, (v) the
allocation of Income, Losses, Tax Credits and distributions of Cash Flow From
Operations and other cash funds 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.
WHEREAS, the Limited Partner, the Special Limited Partner and the
General Partner desire hereby to amend and restate the Limited Partnership
Agreement of the Partnership dated June 23, 1997.
NOW, THEREFORE, in consideration of their mutual agreements herein set forth,
the Partners hereby agree to amend and restate the Agreement of Limited
Partnership of EL RENO HOUSING ASSOCIATES, A LIMITED PARTNERSHIP in its entirety
to provide as follows:
ARTICLE I
DEFINITIONS
Section 1.1 "Accountant" shall mean Melvin Gilbertson, or such other
firm of independent certified public accountants as may be engaged for the
Partnership by the General Partner. Notwithstanding any provision of this
Agreement to the contrary, the Special Limited Partner shall have the discretion
to dismiss the Accountants.
1
<PAGE>
Section 1.2 "Act" shall mean the laws of the State of Oklahoma
governing this limited partnership, as now in effect and as the same may be
amended from time to time.
Section 1.3 "Actual Tax Credit" shall mean as of any point in time, the
total amount of the LIHTC actually allocated by the Partnership to the Limited
Partner, representing 99.98 of the LIHTC actually received by the Partnership,
as shown on the applicable tax returns of the Partnership.
Section 1.4 "Adjusted Capital Account Deficit" shall mean with respect
to any Partner, the deficit balance, if any, in such Partner's Capital Account
as of the end of the relevant fiscal period, after giving effect to the
following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g) (1) and
1.704-2(i) (5); and
(b) Debit to such Capital Account the items described in Sections
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 Treasury 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 Treasury
Regulations and shall be interpreted consistently therewith.
Section 1.5 "Affiliate" shall mean (a) any Person directly or
indirectly controlling, controlled by, or under common control with another
Person; (b) any Person owning or controlling 10% or more of the outstanding
voting securities of such other Person; (c) any officer, director, trustee, or
partner of such other Person; and (d) if such Person is an officer, director,
trustee or general partner, any other Person for which such Person acts in any
such capacity.
Section 1.6 "Agreement" or "Partnership Agreement" shall mean this
Amended and Restated Agreement of Limited Partnership, as it may be amended from
time to time. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," when used with reference to this Agreement, refers to
this Agreement as a whole, unless the context otherwise requires.
Section 1.7 "Assignee" shall mean a Person who has acquired all or a
portion of the Limited Partner's beneficial interest in the Partnership and has
not become a Substitute Limited Partner.
Section 1.8 "Bankruptcy" or "Bankrupt" shall mean the making of an
assignment for the benefit of creditors, becoming a party to any liquidation or
dissolution action or proceeding, the commencement of any bankruptcy,
reorganization, insolvency or other proceeding for the relief of financially
distressed debtors, or the appointment of a receiver, liquidator, custodian or
trustee and, if any of the same occur involuntarily, the same not being
dismissed, stayed or discharged within 90 days; or the entry of an order for
relief 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.
Section 1.9 "Break-even Operations" shall mean when the Partnership has
Cash Flow From Operations as determined by the Accountant and approved by the
Special Limited Partner. The break-even concept is referenced on Page 4, Section
C.2 of the Letter of Understanding dated October 29, 1997 (LOU).
2
<PAGE>
Section 1.10 "Capital Account" shall mean, with respect to each
Partner, the account maintained for such Partner comprised of such Partner's
Capital Contribution as increased by allocations to such Partner of Partnership
Income (or items thereof) and any items in the nature of income or gain which
are specially allocated pursuant to Section 10.3 or 10.4 hereof, and decreased
by the amount of any Distributions made to such Partner, and allocations to such
Partner of Partnership Losses (or items thereof) and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 10.3 or
10.4 hereof.
In the event of any transfer of an interest in the Partnership 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.
The foregoing definition and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704-1(b), as amended or any successor thereto, and
shall be interpreted and applied in a manner consistent with such Treasury
Regulation.
Section 1.11 "Capital Contribution" shall mean the total amount of
money or the Gross Asset Value of property contributed to the Partnership, if
any, by all the Partners or any class of Partners or any one Partner as the case
may be (or by a predecessor-in-interest of such Partner or Partners), reduced by
any of such capital which shall have been returned pursuant to Section 7.3, 7.4
or 7.5 of this Agreement. A loan to the Partnership by a Partner shall not be
considered a Capital Contribution.
Section 1.12 "Cash Flow From Operations" shall mean: (a) the excess of
actual receipts on a cash basis by the Partnership of revenues from operations
of the Partnership, including, without limitation, rental income (but not any
subsidy thereof from the General Partner or an Affiliate thereof), but excluding
prepayments, security deposits and interest thereon, (b) over all cash operating
obligations of the Partnership (other than those covered by insurance) in
accordance with the applicable budget adopted by the Partnership in accordance
with Section 14.3(j) of this Agreement (the "Budget"), including, without
limitation, the payment of the Mortgage, the Management Agent fees (which shall
be deemed to include that portion of such fees which is deferred and not
currently paid) and the funding of reserves in accordance with Article VIII of
this Agreement, and a reserve for all taxes or payments in lieu of taxes and any
other expenses which may reasonably be expected to be paid in a subsequent
period but which on an accrual basis are allocable to the period in question,
such as insurance premiums, audit, tax or accounting expenses (excluding
deductions for cost recovery of buildings, improvements and personal property
and amortization of any financing fees). Without limiting the generality of the
foregoing, the Partnership's gross revenues for purposes of this Section shall
not include Capital Contributions, borrowings, any lump-sum payment or any other
income earned on investment of its funds, and unless otherwise provided in a
Budget, the cash operating obligations of the Partnership shall be deemed to
include real estate taxes for the period at the fully assessed rate.
Section 1.13 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
3
<PAGE>
Section 1.14 "Completion of Construction" shall mean the completion of
construction of the Project substantially in accordance with the Project
Documents in order to obtain the required certificates of occupancy (or the
local equivalent) for all one hundred (100) apartment units as evidenced by the
issuance of the certificate of occupancy by the governmental agency having
jurisdiction over the Project or by the issuance of the inspecting architect's
certification in a form substantially similar to that attached hereto as Exhibit
E. The construction shall be completed in good workmanlike manner, free and
clear of all mechanic's, material men's or similar liens, and all other expenses
and costs, including but not limited to costs of financing, which must be paid
with respect to the Project through completion.
Section 1.15 "Compliance Period" shall mean the period set forth in
Section 42 (i) (1) of the Code, as amended, or any successor statute.
Section 1.16 "Consent of the Special Limited Partner" shall mean the
prior written consent or approval of the Special Limited Partner. Consent shall
not be unreasonable withheld.
Section 1.17 "Construction Contract" shall mean the construction
contract in the amount of $4,156,661.63, entered into between the Partnership
and the Contractor pursuant to which the Project is being constructed.
Section 1.18 "Construction Loan" shall mean the loan obtained from
Local Federal Bank in the principal amount of $3,026,931.00 and shall bear an
interest accrual rate on the principal balance outstanding at Prime plus 1%.
Interest rate will be calculated on a monthly basis using 360 day year for a
term of 18 months to provide funds for the acquisition, construction and
development of the Project. Where the context admits, the term "Construction
Loan" shall include any deed, deed of trust, note, security agreement,
assumption agreement or other instrument executed in connection with the
Construction Loan which is binding on the Partnership.
Section 1.19 "Contractor" shall mean E.A.C. CONSTRUCTION COMPANY ,
L.L.C., which is the general construction contractor for the Project.
Section 1.20 "Debt Service Coverage" shall mean the ratio between the
Cash Flow From Operations (excluding Mortgage payments) and the debt service
required to be paid on the Mortgage(s); as example, a 1.15 Debt Service Coverage
means that for every $1.00 of debt service required to be paid there must be
$1.15 of Cash Flow From Operations. A worksheet for the calculation of Debt
Service Coverage is found in the Report of Operations Attached hereto as Exhibit
AG@ and incorporated herein by this reference.
Section 1.21 "Deferred Management Fee" shall have the meaning set
forth in Section 9.2(c) hereof.
Section 1.22 "Developer" shall mean E. Allen Cowen Ventures.
Section 1.23 "Development Fee" shall mean the fee payable to the
Developer pursuant to Section 9.2(a) of this Agreement for services incident to
the development and construction of the Project in accordance with the
Development Fee Agreement between the Partnership and the Developer dated the
even date herewith and incorporated herein by this reference.
Section 1.24 "Distributions" shall mean the total amount of money, or
the Gross Asset Value of property (net of liabilities securing such distributed
property that such Partner is considered to assume or take subject to under
Section 752 of the Code), distributed to Partners with respect to their
Interests in the Partnership, but shall not include any payments to the General
Partner or its Affiliates for fees or other compensation as provided in this
Agreement or any guaranteed payment within the meaning of Section 707(c) of the
Code, as amended, or any successor thereto.
4
<PAGE>
Section 1.25 "Fair Market Value" shall mean, with respect to any
property, real or personal, the price a ready, willing and able buyer would pay
to a ready, willing and able seller of the property, provided that such value is
reasonably agreed to between the parties in arm's-length negotiations and the
parties have sufficiently adverse interests.
Section 1.26 "First Year Certificate" shall mean the certificate to be
filed by the General Partner with the Secretary of the Treasury as required by
Code Section 42 (1) (1), as amended, or any successor thereto.
Section 1.27 "Force Majeure" shall mean any act of God, strike,
lockout, or other industrial disturbance, act of the public enemy, war,
blockage, public riot, fire, flood, explosion, governmental action, governmental
delay, restraint or inaction and any other cause or event, whether of the kind
enumerated specifically herein, or otherwise, which is not reasonable within the
control of a Partner to this Agreement claiming such suspension.
Section 1.28 "General Partner" shall mean COWEN PROPERTIES, INC., AN
OKLAHOMA CORPORATION and such other Persons as are admitted to the Partnership
as additional or substitute General Partners pursuant to this Agreement.
Section 1.29 "Gross Asset Value" shall mean with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the Fair Market Value of such asset, as determined
by the contributing Partner and the General Partner, provided that, if the
contributing Partner is a General Partner, the determination of the Fair Market
Value of a contributed asset shall be determined by appraisal;
(b) The Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective Fair Market Values, as determined by the General
Partner, as of the following times: (1) 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; (2) 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; and (3) the liquidation of the
Partnership within the meaning of Treasury Regulations Section 1.704-1(b) (2)
(ii) (g); provided, however, that the adjustments pursuant to clauses (1) and
(2) above shall be made only with the Consent of the Special Limited Partner and
only if the General Partner reasonably determines that such adjustments are
necessary or appropriate to reflect the relative economic interests of the
Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on the
date of distribution as determined by the distribute and the General Partner,
provided that, if the distribute is a General Partner, the determination of the
Fair Market Value of the distributed asset shall be determined by appraisal; and
5
<PAGE>
(d) The Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743 (b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b) (2) (iv) (m) and Section
10.3(g) hereof; provided however, that Gross Asset Values shall not be adjusted
pursuant to this Section 1.29(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.29(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.29(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.29(a), Section 1.29(b), or Section 1.29(d) hereof, such
Gross Asset Value shall thereafter be adjusted by the depreciation taken into
account with respect to such asset for purposes of computing Income and Losses.
Section 1.30 "Hazardous Substance" shall mean and include any
substance, material or waste, including asbestos, petroleum and petroleum
products (including crude oil), that is or becomes designated, classified or
regulated as "toxic" or "hazardous" or a "pollutant" or that is or becomes
similarly designated, classified or regulated, under any federal, state or local
law, regulation or ordinance including, without limitation, Compensation and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, and the
regulations adopted and publications promulgated pursuant thereto
Section 1.31 "Improvements" shall mean the construction of a one
hundred (100) unit apartment complex for families in a good and workmanlike
manner substantially in accordance with the plans and specifications and Project
Documents.
Section 1.32 "Incentive Management Fee" shall have the meaning set
forth in Section 9.2(e) hereof.
Section 1.33 "Income and Losses" shall mean, for each fiscal year or
other period, an amount equal to the Partnership's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703 (a) (1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Income or Losses pursuant
to this Section 1.32 shall be added to such taxable income or loss;
(b) Any expenditures of the Partnership described in Code Section 705
(a) (2) (B) or treated as Code Section 705 (a) (2) (B) expenditures pursuant to
Regulation Section 1.704-1(b) (2) (iv) (i), and not otherwise taken into account
in computing Income and Losses pursuant to this Section 1.32 shall be subtracted
from such taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to Section 1.27(a) or (b) hereof, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Income and Losses;
(d) Gain or loss resulting from any disposition of Partnership assets
with respect to which gain or loss is recognized for federal income purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
6
<PAGE>
(f) Notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Sections 10.3 or 10.4 hereof shall not
otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated
as follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery 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 Gross Asset Value using any reasonable method
selected by the General Partner.
Section 1.34 "Insurance" shall mean:
(a) During construction the Insurance shall include builder=s risk
insurance, liability insurance in the minimum amount of $1,000,000.00 per
occurrence with an aggregate of $2,000,000.00, and worker's compensation;
(b) During operations the Insurance shall include business interruption
coverage covering actual sustained loss for 12 months, worker's compensation,
hazard coverage (including but not limited to fire, or other casualty loss to
any structure or building on the Project in an amount equal to the full
replacement value of the damaged property without deducting for depreciation)
and general liability coverage against liability claims for bodily injury or
property damage in the minimum amount of $1,000,000.00 per occurrence and an
aggregate of $2,000,000.00;
(c) all liability coverage shall include umbrella liability coverage in the
minimum amount of $4,000,000.00 per occurrence and an aggregate of
$4,000,000.00;
(d) all Insurance policies shall name the Partnership as the named insured
and the Limited Partner as an additional insured, and WNC & Associates, Inc. as
the certificate holder;
(e) all Insurance policies shall include a provision to notify the insured
prior to cancellation;
(f) hazard coverage must include inflation and building or ordinance
endorsements;
(g) the minimum builder's risk coverage shall be in an amount equal to the
construction contract amount; and
(h) the contractor must also provide evidence of liability coverage equal
to the $1,000,000.00 per occurrence with an aggregate of $2,000,000.00 and shall
name the Partnership as an additional insured and WNC & Associates, Inc. as the
certificate holder.
Section 1.35 "Insurance Company" shall mean any insurance company
engaged by the General Partner for the Partnership, which Insurance Company
shall have an A rating or better for financial safety by A.M. Best or Standard &
Poor's.
7
<PAGE>
Section 1.36 "Interest" shall mean 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 hereunder and
the obligation of such Partner to comply with the terms of this Agreement.
Section 1.37 "Involuntary Withdrawal" means any Withdrawal caused by
the death, adjudication of insanity incompetence, or Bankruptcy of a General
Partner, or the removal of a General Partner pursuant to Section 13.2 hereof.
Section 1.38 "LIHTC" shall mean the low-income housing tax credit
established by TRA 1986 and which is provided for in Section 42 of the Code, as
amended, or any successor thereto
Section 1.39 "Lender" shall mean the bank, institution or person that
provides the Mortgage Loan.
Section 1.40 "Limited Partner" shall mean WNC Housing Tax Credit Fund
VI, L.P., Series 5, a California limited partnership, and such other Persons as
are admitted to the Partnership as additional or Substitute Limited Partners
pursuant to this Agreement.
Section 1.41 "Management Agent" shall mean the property management
company which oversees the property management functions for the Project and
which is on-site at the Project. The initial Management Agent shall be Insignia
Management Group.
Section 1.42 "Management Agreement" shall mean the agreement between
the Partnership and the Management Agent for property management services.
Section 1.43 "Minimum Set-Aside Test" shall mean the 40-60 set-aside
test pursuant to Section 42(g), as amended and any successor thereto, of the
Code with respect to the percentage of apartment units in the Project to be
occupied by tenants whose incomes are equal to or less than the required
percentage of the area median gross income.
Section 1.44 "Mortgage" or "Mortgage Loan" shall mean any source of
permanent financing of the Project by a qualified commercial lender (as defined
in Section 42 of the Code) evidencing the indebtedness of the Partnership and
encumbering the Project. Where the context admits, the term "Mortgage" or
"Mortgage Loan" shall include any mortgage, deed, deed of trust, note,
regulatory agreement, security agreement, assumption agreement or other
instrument executed in connection with the Mortgage Note which is binding on the
Partnership; and in case any Mortgage is replaced or supplemented by any
subsequent mortgage or mortgages, the Mortgage shall refer to any such
subsequent mortgage or mortgages.
Section 1.45 "Mortgage Note" shall mean the nonrecourse promissory note
whereby the Partnership promises to pay the Lender, or its successor or
assignee, the principal sum of $2,403,000.00, plus interest on the principal
amortized over 30 years. The principle amount may be subject to adjustment based
on the performance of the property during stabilization. In the event the terms
of the Mortgage are not as specified herein and the Special Limited Partner
determines in its discretion that the Debt Service Coverage falls below 1.10
then at the request of the Special Limited Partner the General Partner shall
reduce the principal of the Mortgage to an amount the Special Limited Partner
determines is adequate to produce a 1.10 Debt Service Coverage. The Mortgage
funds shall be used to retire the Construction Loan and if there are any funds
remaining the Mortgage funds shall be used to retire any outstanding hard
construction costs including labor and Material.
8
<PAGE>
Section 1.46 "Nonrecourse Deductions" shall have the meaning given it
in Treasury Regulations Section 1.704-2(b) (1)
Section 1.47 "Nonrecourse Liability" shall have the meaning given it
in Treasury Regulations Section 1.704-2(b) (3).
Section 1.48 "Operating Deficit" shall mean for any fiscal year when
the Partnership does not have Cash Flow From Operations as determined by the
Accountant and approved by the Special Limited Partner.
Section 1.49 "Operating Deficit Guarantee Period" shall mean the period
commencing with the Completion of Construction and three months of Break-even
Operations and ending three years thereafter.
Section 1.50 "Operating Loans" shall mean loans made by the General
Partner to the Partnership pursuant to Article VI of this Agreement, which loans
do not bear interest and are repayable only as provided in Article XI of this
Agreement.
Section 1.51 "Original Limited Partner" shall mean E. Allen Cowen II.
Section 1.52 "Partner(s)" shall collectively mean the General Partner,
the Limited Partner and the Special Limited Partner or individually may mean any
partner as the context dictates.
Section 1.53 "Partner Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b) (4) of the Treasury Regulations.
Section 1.54 "Partner Nonrecourse Debt Minimum Gain" shall mean an
amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership
Minimum Gain that would result if such Partner Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Section 1.704-2(i) (3) of
the Treasury Regulations.
Section 1.55 "Partner Nonrecourse Deductions" shall have the meaning
set forth in Sections 1.704-2 (i) (1) and 1.704-2(i) (2) of the Treasury
Regulations.
Section 1.56 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.57 "Partnership Minimum Gain@ shall mean the amount
determined in accordance with the principles of Treasury Regulation Sections
1.704-2(b) (2) and 1.704-2(d).
Section 1.58 "Permanent Mortgage Commencement" shall mean the first
date on which all of the following have occurred: (a) the Construction Loan
shall have been repaid in full; and (b) the closing of the Mortgage shall have
occurred and amortization of the Mortgage shall have commenced.
Section 1.59 "Person" shall mean an individual, proprietorship, trust,
estate, partnership, joint venture, association, company, corporation or other
entity.
9
<PAGE>
Section 1.60 "Project" shall mean the approximately 23 acres of land in
El Reno, Canadian County, Oklahoma, as more fully described in Exhibit "A"
attached hereto and incorporated herein by this reference, and the Improvements.
Section 1.61 "Project Documents" shall mean and include all documents
delivered to or required by the Construction Loan and Mortgage Loan and/or any
governmental agency having jurisdiction over the Project in connection with the
development, construction and financing of the Project, including but not
limited to, the approved plans and specifications for the development and
construction of the Project.
Section 1.62 "Projected Annual Tax Credits" shall mean LIHTC in the
amount of $110,045.00 for 1998, $436,215.00 per year for each of the years 1999
through 2007, and $326,170.00 for 2008, which the General Partner has projected
to be the total amount of LIHTC which will be allocated to the Limited Partner
by the Partnership, constituting 99.98% of the aggregate amount of LIHTC of
$4,406,656.00 to be available to the Partnership; provided, however, that if the
Actual Tax Credit for 1998 is less than $110,056.00, the Projected Tax Credit
for the year 2008 shall be increased by an amount equal to the amount by which
the Actual Tax Credit for 1998 is less than $110,056.00.
Section 1.63 "Projected Tax Credits" shall mean LIHTC in the
aggregate amount of $4,406,656.00.
Section 1.64 "Qualified Tenants" shall mean any tenants who have
incomes of 60% or less of the area median gross income, as adjusted for family
size, so as to make the Project eligible for LIHTC.
Section 1.65 "Rent Restriction Test" shall mean the test pursuant to
Section 42 of the Code whereby the gross rent charged to tenants of the
low-income apartment units in the Project must not exceed 30% of the applicable
income standards.
Section 1.66 "Reporting Fee" shall have the meaning set forth in
Section 9.2(d) hereof.
Section 1.67 "Revised Projected Tax Credits" shall have the meaning
set forth in Section 7.4(a) hereof.
Section 1.68 "Sale or Refinancing" shall mean any of the following
items or transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Project or any part thereof, a claim against a title insurance
company, the refinancing or any Mortgage Note or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
Section 1.69 "Sale or Refinancing Proceeds" shall mean all cash
receipts of the Partnership arising from a Sale or Refinancing (including
principal and interest received on a debt obligation received as consideration
in whole or in part, on a Sale or Refinancing) less the amount paid or to be
paid in connection with or as an expense of such Sale or Refinancing, and with
regard to damage recoveries or insurance or condemnation proceeds, the amount
paid or to be paid for repairs, replacements or renewals resulting from damage
to or partial condemnation of the Project.
Section 1.70 "Special Limited Partner" shall mean WNC Housing, LP., a
California limited partnership, and such other Persons as are admitted to the
Partnership as additional or substitute Special Limited Partners pursuant to
this Agreement.
10
<PAGE>
Section 1.71 "State" shall mean the State of Oklahoma.
Section 1.72 "State Tax Credit Agency" shall mean the state agency of
Oklahoma which has the responsibility and authorization to administer the LIHTC
program in Oklahoma.
Section 1.73 "Substitute Limited Partner" shall mean any Person who is
admitted to the Partnership as a Limited Partner pursuant to Section 12.5 or
acquires the Interest of the Limited Partner pursuant to Section 7.3 of this
Agreement.
Section 1.74 "Tax Credit" shall mean any credit permitted under the
Code or the law of any state against the federal or a state income tax liability
of any Partner as a result of activities or expenditures of the Partnership
including, without limitation, LIHTC.
Section 1.75 "Tax Credit Conditions" shall mean, 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 Tax Credits or to avoid an event of
recapture in respect of the Tax Credits.
Section 1.76 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.77 "Treasury Regulations" shall mean the Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
Section 1.78 "Withdrawing" or "Withdrawal" (including the verb form
"Withdraw" and the adjectival forms "Withdrawing@ and "Withdrawn") shall mean,
as to a General Partner, the occurrence of the death, adjudication of insanity
or incompetence, or Bankruptcy of such Partner, or the withdrawal, removal or
retirement from the Partnership of such Partner for any reason, including any
sale, pledge, encumbering, assignment or other transfer of all or any part of
its General Partner 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.
ARTICLE II
NAME
The name of the Partnership shall be "EL RENO HOUSING ASSOCIATES LIMITED
PARTNERSHIP."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office
of the Partnership is located at 1140 NW 63rd, Suite 400W, Oklahoma City,
Oklahoma 73116, or at such other place or places within the State as the General
Partner may hereafter designate.
11
<PAGE>
Section 3.2 Agent for Service of Process. The name of the agent for
service of process on the Partnership is E. Allen Cowen, II, whose address is
1140 NW 63rd, Suite 400W, Oklahoma City, Oklahoma 73116.
ARTICLE IV
PURPOSE
The purpose of the Partnership is to acquire, construct, own and
operate the Project in order to provide, in part, Tax Credits to the Partners in
accordance with the provisions of the Code and the Treasury Regulations
applicable to LIHTC and to sell the Project. The Partnership shall not engage in
any business or activity which is not incident to the attainment of such
purpose.
ARTICLE V
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of the State, and shall continue until December 11, 2039
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI
GENERAL PARTNER' S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The General
Partner shall make a Capital Contribution in an amount required to make the
General Partner's Capital Account, the Limited Partner's Capital Account and the
Special Limited Partners Capital Account in the ratio of .01% , 99.98% and .01%
respectively.
Contribution shall be made at time of closing of permanent loan
Section 6.2 Construction and Operating Obligations, General Partner
Loans
(a) The General Partner shall cause Completion of Construction in
accordance with the Project Documents, and shall equip the Project or cause the
same to be equipped with all necessary and appropriate fixtures, equipment and
articles of personal property, including refrigerators and ranges. If costs and
expenses necessary to effect Completion of Construction exceed the sum of the
Capital Contributions and the proceeds of the Mortgage Note, the General Partner
shall be responsible for and shall be obligated to pay such deficiencies. Any
12
<PAGE>
such advances shall not be reimbursable or otherwise change the Interest of any
Partner in the Partnership but shall be considered a cost overrun and not be
repayable. In addition, if (1) the Improvements are not completed on or before
April 30, 1999 ("Completion Date") (which date may be extended in the events of
Force Majeure, but in no event longer than three months from the Completion
Date.) (2) prior to completing the Improvements, there is an uncured default
under or termination of the Construction Loan, Mortgage Loan commitment, or
other material documents; or (3) a foreclosure action is commenced against the
Partnership, then at the Special Limited Partner's election, either the General
Partner will be removed from the Partnership and the Special Limited Partner
will be admitted as successor General Partner, all in accordance with Article
XIII hereof, or the General Partner will repurchase the Interests of the Limited
Partner and the Special Limited Partner for an amount equal to the amounts
theretofore paid by the Limited Partner and the Special Limited Partner, and the
Limited Partner and the Special Limited Partner shall have no further Interest
in the Partnership. If the Limited Partner elects to have the General Partner
repurchase the Interest of the Limited Partner then the repurchase shall occur
within 60 days after the General Partner receives written demand from the
Limited Partner.
(b) From Completion of Construction until three consecutive months of
Break-even Operations, the General Partner will personally provide Operating
Loans to pay any Operating Deficits; and for the balance of the Operating
Deficit Guarantee Period the General Partner will provide Operating Loans to pay
any Operating Deficits up to the aggregate maximum amount of one year=s
operating expenses (including debt service and reserves) approved by the General
Partner and the Special Limited Partner. Each Operating Loan shall be
nonrecourse to the Partners, and shall be repayable out of 50% of the available
Cash Flows From Operations or Sale or Refinancing Proceeds in accordance with
Article XI of this Agreement.
Section 6.3 Other General Partner Loans. After expiration of the
Operating Deficit Guarantee Period, the General Partner, with the consent of the
Special Limited Partner, may loan to the Partnership any sums required by the
Partnership and not otherwise reasonably available to it. In the event of an
emergency , as determined by the General Partner, the General Partner may loan
the Partnership any sums required, provided the Special Limited Partner is
notified in writing within 10 days. Any such loan shall bear simple interest
(not compounded) at the rate of 2% per annum above the then prevailing prime or
reference rate charged by CitiBank Corporation, or, if lesser, the maximum legal
rate. The maturity date and repayment schedule of any such loan shall be as
agreed to by the General Partner and the Special Limited Partner. The amount and
terms of any such loan shall be evidenced by a written instrument. The General
Partner shall not charge a prepayment penalty on any such loan.
ARTICLE VII
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL LIMITED PARTNER
Section 7.1 Original Limited Partner. Effective as of the date of this
Agreement, the Original Limited Partner's Interest has been liquidated and the
Partnership has reacquired the Original Limited Partner's Interest in the
Partnership. The Original Limited Partner acknowledges that it has no further
interest in the Partnership as a limited partner as of the date of this
Agreement, and has released all claims, if any, against the Partnership arising
out of its participation as a limited partner.
Section 7.2 Capital Contribution of Limited Partner. The Limited
Partner shall make a Capital Contribution in the amount of $3,039,985.00, as may
13
<PAGE>
be adjusted in accordance with Section 7.4 of this Agreement, in cash on the
dates and subject to the conditions hereinafter set forth.
(a) The obligation of the Limited Partner to pay the aforesaid Capital
Contribution shall be subject to the satisfaction of the following conditions:
(1) prior to the initial payment of the Capital Contribution
only, the issuance to the Limited Partner of an opinion of the Partnership's
legal counsel in a form substantially similar to the form of opinion attached
hereto as Exhibit AB@ and incorporated herein by this reference.
(2) prior to the initial payment of the Capital Contribution
only, the General Partner shall deliver to the Limited Partner a fully executed
Certification and Agreement in the form attached hereto as Exhibit "C" and
incorporated herein by this reference;
(3) prior to the due date of each installment of such Capital
Contribution except the first payment, the General Partner shall deliver to the
Limited Partner a fully executed General Partner Certification, in a form
attached hereto as Exhibit AD@ and incorporated herein by this reference, to the
effect that all of the representations and warranties set forth in Article IX
are accurate;
(4) prior to the Capital Contribution payment referenced in
Section 7.2(b) (3) the General Partner shall deliver to the Limited Partner a
certificate of occupancy on all the apartment units in the Project and a copy of
the recorded grant deed (warranty deed);
(5) prior to the Capital Contribution payment referenced in
Section 7.2(b) (4), the General Partner shall deliver to the Limited Partner a
copy of an ALTA Owner's Title Insurance Policy in an amount equal to the
Mortgage and Capital Contributions and including a non-imputation and fairway
endorsement, copies of all Mortgage Notes and Mortgage Loan documents required
by the Lender to close the Mortgage and disburse Mortgage proceeds to the
Partnership;
(6) prior to the Capital Contribution payment referenced in
Section 7.2(b) (4) the General Partner shall deliver to the Limited Partner the
current rent roll, copies of all initial tenant files including completed
applications, completed questionnaires or checklist of income and assets,
documentation of third party verification of income and assets, income
certification forms (LIHTC specific) and executed lease agreements collected by
the Management Agent, or General Partner, verifying each tenant=s eligibility as
a Qualified Tenant;
(7) prior to each Capital Contribution payment through and
including 7.2(b) (3) the General Partner shall deliver to the Limited Partner
copies of all inspecting architect's application and certificate of payment (AIA
Document G702, or similar form acceptable to the Limited Partner), all
Construction Loan draw requests and a copy of the construction schedule and any
updates to the construction schedule;
(8) prior to the Capital Contribution payment referenced in
Section 7.2(b)(5) the General Partner shall deliver to the Limited Partner a
copy of the Declaration of Restrictive Covenants/Extended Use Agreement entered
into between the Partnership and the State Tax Credit Agency, an audited
14
<PAGE>
construction cost certification with an itemized cost breakdown, Internal
Revenue Code Form 8609, or any successor form and any documents previous
not provided to the Limited Partner but required pursuant to this Section 7.2(a)
and Sections 14.3(a), (b) and (c).
(b) Provided the conditions of Section 7.2(a) of this Partnership
Agreement have been met, the Limited Partner shall make the following Capital
Contributions:
(1) $1,519,835.00 will be payable upon admittance of the
Limited Partner into the Partnership and construction loan closing, provided the
conditions of Section 7.2(a) have been met;
(2) $304,030 will be payable upon 50% construction completion
as evidenced by the inspecting architect=s certification and the construction
draw requests, provided the conditions of 7.2(a) have been met. The Capital
Contribution installment will be paid to the Construction Lender's construction
loan disbursement account and will be disbursed by the Construction Lender to
the Partnership in accordance with their procedures;
(3) $760,075.00 will be payable:
(A) upon Completion of Construction as evidenced by
the inspecting architect's certification in a form substantially similar to the
form attached hereto as Exhibit "E" and incorporated herein by this reference.
(B) the issuance of a permanent certificate of
occupancy (or equivalent evidence of local occupancy approval) for all units;
(C) receipt of a letter from the Contractor stating
all amounts payable to the Contractor have been paid in full and that the
Partnership is not in violation of the Construction Contract.
(D) verification that the Partnership has obtained
Insurance, and;
(E) provided the conditions of Section 7.2(a) have
been met;
(4) $152,015.00 Will be payable:
(A) the date the Project maintains a Debt Service
Coverage of 1.15 for 90 consecutive days;
(B) delivery to the Limited Partner of tenant income
verification that 100% of the occupied apartment units in the Project qualify
under Section 42 of the Code;
(C) delivery to the Limited Partner of a fully
executed set of Mortgage documents and an ALTA Owner's Title Insurance Policy;
(D) delivery to the Limited Partner of the
construction cost certificate which includes an itemized cost breakdown, the
Accountant's final tax credit certification setting forth the Project's
eligible basis with the amount of Tax Credits to which the Partnership is
entitled in a form substantially similar to the form attached hereto as
Exhibit "F" and incorporated herein by this reference.
(E) delivery to the Limited Partner of a copy of the
restrictive covenants/extended use agreement; and
(F) provided the conditions of Section 7.2(a) have
been met; and
15
<PAGE>
(5) $304030 will be payable when all the above conditions
have been met and upon the Limited Partner's receipt of IRS Form 8609 and the
first year tax return in which Tax Credits are taken, provided the conditions of
Section 7.2(a) have been met.
Section 7.3 Repurchase of Limited Partner's Interest Within 60 days
after the General Partner receives written demand from the Limited Partner
and/or the Special Limited Partner, the Partnership shall repurchase the Limited
Partner's Interest and/or the Special Limited Partner's Interest in the
Partnership by refunding to it in cash the full amount of the Capital
Contribution which the Limited Partner and/or the Special Limited Partner has
theretofore made in the event that, for any reason, the Partnership shall fail
to:
(a) receive an allocation of LIHTC no later than the close of the calendar
year during which the Project is placed in service;
(b) cause the Project to be placed in service by April 30, 1999;
(c) achieve 90% occupancy of the Project by Qualified Tenants by October
31, 1999;
(d) obtain Permanent Mortgage Commencement by October 31, 1999;
(e) meet both the Minimum Set-Aside Test and the Rent Restriction Test not
later than December 31 of the first year the Partnership elects the LIHTC to
commence in accordance with the Code; and
(f) obtain a carryover allocation, within the meaning of Section 42 of the
Code, from the State Tax Credit Agency on or before December 31, 1997.
Section 7.4 Reduction of limited Partner's Capital Contribution
(a) If the anticipated amount of Projected Tax Credits to be allocated
to the Limited Partner and Special Limited Partner as evidenced by IRS Form
8609, Schedule A thereto, and the audited construction cost certification
provided to the Limited Partner is less than $4,406,215.00 (the "Revised
Projected Tax Credits") then the Limited Partner's and Special Limited Partner's
Capital Contribution provided for in Section 7.2 and Section 7.5 respectively
shall be reduced by the amount which will make the total Capital Contribution to
be paid by the Limited Partner and Special Limited Partner to the Partnership
equal to 69% (or as may be adjusted as set out in 7.4(e)) of the Revised
Projected Tax Credits so anticipated to be allocated to the Limited Partner and
Special Limited Partner.
16
<PAGE>
(b) The General Partner is required to use its best efforts to rent
100% of the Project's apartment units to Qualified Tenants throughout the
Compliance Period. If at any time during the first five calendar years following
the year in which the Project is placed in service, the Actual Tax Credit for
any fiscal year or portion thereof is or will be less than the Projected Annual
Tax Credit, or the Revised Projected Tax Credit calculated on an annual basis
("Revised Projected Annual Tax Credit"), if applicable, then, unless the
shortfall shall have previously been addressed under Section 7.4(a), then the
amount of the reduction shall be applied to the next Capital Contribution owed
by the Limited Partner or the Special Limited Partner, if any, and any portion
of such reduction in excess of such Capital Contribution shall be applied to
reduce succeeding Capital Contributions of the Limited Partner or the Special
Limited Partner, if any. If, at the time of determination thereof, the Capital
Contribution reduction referenced in Section 7.4(a) and/or this Section 7.4(b)
is greater than the balance of the Limited Partner's or Special Limited
Partner's Capital Contribution payments which is then due, if any ("Reduction
Shortfall"), then the amount of the Reduction Shortfall shall be paid by the
General Partner to the Limited Partner or the Special Limited Partner within
ninety days of the General Partner receiving notice of the Reduction Shortfall
from the Limited Partner and/or the Special Limited Partner.
(c) In the event that, for any reason, at any time after the first five
calendar years following the year in which the Project is placed in service, the
amount of the Actual Tax Credit is less than the Projected Annual Tax Credit, or
the Revised Projected Annual Tax Credit, if applicable, (the "Annual Credit
Shortfall"), then, unless the Annual Credit Shortfall shall have previously been
addressed under Section 7.4(a) or Section 7.4(b), there shall be a reduction in
the General Partner's share of Cash Flow From Operations in an amount equal to
the Annual Credit Shortfall and said amount instead shall be paid to the Limited
Partner. In the event there are not sufficient funds to pay the full Annual
Credit Shortfall to the Limited Partner at the time of the next Distribution of
Cash Flow From Operations, then the Limited Partner shall be treated as having
made a constructive advance to the Partnership in an amount equal to the Annual
Credit Shortfall (a "Credit Shortfall Loan"), which shall be deemed to have been
made on January 1 of the year in which the Annual Credit Shortfall arises. Each
Credit Shortfall Loan shall bear simple interest (not compounded) from the date
on which such loan is deemed to have been made under this Section 7.4(d) at the
rate equal to the 5-year Treasury money rate at the time of the Credit Shortfall
Loan, or, if lesser, the maximum legal rate. Credit Shortfall Loans or any
portion thereof shall be repaid in the next year in which sufficient monies are
available from the General Partner's Cash Flow From Operations, with interest
payable prior to principal. In the event a Sale or Refinancing of the Project
occurs prior to repayment in full of the Credit Shortfall Loan then the excess
will be paid in accordance with Section 11.2(b).
(d) In the event there is a reduction in the qualified basis of the
Project for income tax purposes following an audit by the Internal Revenue
Service (IRS) resulting in a recapture of Tax Credits previously claimed, then,
in addition to any other payments to which the Limited Partner and Special
Limited Partner is entitled under the terms of this Section 7.4 the General
Partner shall pay to the Limited Partner and the Special Limited Partner the sum
of (1) the deficiency assessed against the Limited Partner or Special Limited
Partner as a result of the Tax Credit recapture, (2) any interest and penalties
imposed on the Limited Partner or Special Limited Partner with respect to such
deficiency, and (3) an amount sufficient to pay any tax liability owed by the
Limited Partner or Special Limited Partner resulting from the receipt of the
amounts specified in (1) and (2).
17
<PAGE>
(e) In the event the Limited Partner and the Special Limited Partner
receive an allocation of LIHTC in 1998 (which credits will be eligible for the
ten year time period referenced in Code Section 42(f) (l)) then the Limited
Partner=s and Special Limited Partner=s Capital Contribution shall be increased
based on the following formula. For every $25,000.00 in LIHTC allocated to the
Limited Partner and the special Limited Partner in 1998 the Limited Partner=s
and Special Limited Partner=s Capital Contribution shall be increased .25% times
the Projected Tax Credit Amount or the Revised Projected Tax Credit amount if
applicable. Be way of illustration only and not indicative of any factual
situation: if the Limited Partner and the Special Limited Partner in the
aggregate receive $25,000.00 in LIHTC in 1998 then the total Capital
Contribution to be paid by the Limited Partner and the Special Limited Partner
to the Partnership shall equal 69.25% of the Projected Tax Credits or the
Revised Projected Tax Credits if applicable; or it the Limited Partner and the
Special Limited Partner in the aggregate receive $50,000.00 in LIHTC in 1998
then the total Capital Contribution to be paid by the Limited Partner and the
Special Limited Partner to the Partnership shall equal 69.50 of the Projected
Tax Credits or the Revised Projected Tax Credits if applicable.
Section 7.5 Capital Contribution of Special Limited Partner. The
Special Limited Partner shall make a Capital Contribution of $315.00 at the time
of the Limited Partner's Capital Contribution payment referenced in Section
7.2(b) (1). The Special Limited Partner shall be in a different class from the
Limited Partner and, except as otherwise expressly stated in this Agreement,
shall not participate in any rights allocable to or exercisable by the Limited
Partner under this Agreement
Section 7.6 Return of Capital Contribution. From time to time the
Partnership may have cash in excess of the amount required for the conduct of
the affairs of the Partnership, and the General Partner may, determine that such
cash should, in whole or in part, be returned to the Limited Partner in
reduction of its Capital Contribution. No such return shall be made unless all
liabilities of the Partnership (except those to Partners on account of amounts
credited to them pursuant to this Agreement) have been paid or there remain
assets of the Partnership sufficient, in the sole discretion of the General
Partner, to pay such liabilities.
Section 7.7 Liability of Limited Partner and Special Limited Partner.
The Limited Partner and Special Limited Partner shall not be liable for any of
the debts, liabilities, contracts or other obligations of the Partnership. The
Limited Partner and Special Limited Partner shall be liable only to make Capital
Contributions in the amounts and on the dates specified in this Agreement and,
except as otherwise expressly required hereunder, shall not be required to lend
any funds to the Partnership or, after their respective Capital Contributions
have been paid, to make any further Capital Contribution to the Partnership.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Operating and maintenance Reserve and Replacement Reserve
Account. The Partnership shall establish an operating and maintenance reserve
account and a replacement reserve account and shall deposit there into an annual
amount equal to $200.00 per residential unit per year for the purpose of
repairs, maintenance and capital repairs. Said deposit shall be made monthly in
equal installments. Any balance remaining in these accounts at the time of a
sale of the Project shall be allocated and distributed equally between the
General Partner and the Limited Partner.
18
<PAGE>
Section 8.2 Other Reserves. The General Partner shall establish out of
funds available to the Partnership a reserve account sufficient in its sole
discretion to pay any unforeseen contingencies which might arise in connection
with the furtherance of the Partnership business including, but not limited to,
(a) any rent subsidy required to maintain rent levels in compliance with the Tax
Credit Conditions; and (b) any real estate taxes, insurance, debt service or
other payments for which other funds are not provided for hereunder or otherwise
expected to be available to the Partnership. The General Partner shall not be
liable for any good-faith estimate which it shall make in connection with
establishing or maintaining any such reserves nor shall the General Partner be
required to establish or maintain any such reserves if, in its sole discretion,
such reserves do not appear to be necessary.
ARTICLE IX
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner. Subject to the
receipt of Consent of the Special Limited Partner or the consent of the Limited
Partner where required by this Agreement, and subject to the other limitations
and restrictions included in this Agreement, the General Partner shall have
complete and exclusive control over the management of the Partnership business
and affairs, and shall have the right, power and authority, on behalf of the
Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, all acts, decisions or consents of the General
Partners shall require the concurrence of all of the General Partners. No
actions taken without the authorization of all the General Partners shall be
deemed valid actions taken by the General Partners pursuant to this Agreement.
No Limited Partner or Special Limited Partner (except one who may also be a
General Partner, and then only in its capacity as General Partner within the
scope of its authority hereunder) shall have any right to be active in the
management of the Partnership's business or investments or to exercise any
control there over, nor have the right to bind the Partnership in any contract,
agreement, promise or undertaking, or to act in any way whatsoever with respect
to the control or conduct of the business of the Partnership, except as
otherwise specifically provided in this Agreement.
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $689,212.00. The Development Fee shall first be paid from available
proceeds referenced in Section 9.2(b) of this Agreement and if not paid in full,
then the Development Fee will be paid in accordance with the Development Fee
Agreement.
(b) Notwithstanding the preceding, the Partnership shall retain the sum
of $3,040,300.00 from the Capital Contributions paid pursuant to Section 7.2(b)
and Section 7.5 of this Agreement to be used for supplemental development costs
including, but not limited to, land costs, architectural fees, survey and
engineering costs, financing costs, loan fees, building materials and labor, but
the amount retained shall in no event be greater than the difference between the
Construction Loan and the Mortgage Loan. If any such funds are remaining after
Completion of Construction and all construction costs are paid in full, then the
remainder, less appropriate reserves as determined by the General Partner, shall
first be paid to the General Partner in an amount equal to any unpaid
Development Fee and the balance, if any, shall be paid to the General Partner as
a reduction of the General Partner's Capital Contribution and/or an incentive
rent-up fee.
19
<PAGE>
(c) The Partnership shall pay to the Management Agent a property
management fee for the leasing and management of the Project in an amount in
accordance with the Management Agreement. The term of the Management Agreement
shall not exceed one year. If the management agent is an Affiliate of the
General Partner then commencing with the termination of the Operating Deficit
Guarantee Period referenced in section 6.2(b), in any year in which the Project
has an Operating Deficit, 40% of the management fee will be deferred ("Deferred
Management Fee"). Deferred Management Fees, if any, shall be paid to the
Management Agent solely in accordance with and to the extent permitted by
Section 11.1 of this Agreement.
(1) In the event the property is noncompliance or is in
default of the Mortgage Loan the General Partner shall, upon receiving any
request of the Mortgage lender requesting such action, dismiss the Management
Agent as the entity responsible for the management of the Project under the
terms of the Management Agreement; or, the General Partner shall dismiss the
Management Agent at the request of the Special Limited Partner.
(2) The appointment of any successor Management Agent is
subject to the Consent of the Special Limited Partner which may only be sought
after the General Partner has provided the Special Limited Partner accurate and
complete disclosure respecting the proposed Management Agent.
(d) The Partnership shall pay to the Special Limited Partner a fee
(the "Reporting Fee") commencing in 1998 equal to 20% of the Cash Flow from
operations but in no event less than $4,000 for the Limited Partner's services
in monitoring the operations of the Partnership and for services in connection
with the Partnership's accounting matters and assisting with the preparation of
tax returns and the reports required in Sections 14.2 and 14.3 of this
Agreement:. The Reporting Fee shall be payable within (seventy five) 75 days
after each calender year and shall be payable from Cash Flow From Operations in
the manner and priority set forth in Section 11.1 of this Agreement; provided,
however, that if in any year Cash Flow From Operations is insufficient to pay
the full $4,000, the unpaid portion thereof shall accrue and be payable on a
cumulative basis in the first year in which there is sufficient Cash Flow From
Operations, as provided in Section 11.1, or sufficient Sale or Refinancing
Proceeds, as provided in Section 11.2.
(e) The Partnership shall pay to the General Partner an Incentive
Management Fee equal to 70% of the available Cash Flow From Operations in
accordance with Section 11.1 of this Agreement for each fiscal year of the
Partnership commencing in 1998 for services incident to the administration of
the business and affairs of the Partnership, which services shall include, but
not limited to, maintaining the books and records of the Partnership, selecting
and supervising the Partnership's Accountants, bookkeepers and other Persons
required to prepare and audit the Partnership's financial statements and tax
returns, preparing and disseminating reports on the status of the Project and
the Partnership, all as required by Article XIV of this Agreement. The Incentive
Management Fee shall be payable after December 31 and June 30 and shall be
payable from Cash Flow From Operations in the manner and priority set forth in
Section 11.1. If the Incentive Management Fee is not paid in any year it shall
not accrue for payment in subsequent years.
Section 9.3 Specific Powers of the General Partner. Subject to the
other provisions of this Agreement, the General Partner shall have the following
powers:
(a) In the Partnership's name and on its behalf, the General Partner
may hold, sell, transfer, lease or otherwise deal with any real, personal or
mixed property, interest therein or appurtenance thereto in accordance with the
purpose of this Agreement as indicated in Article IV hereto;
20
<PAGE>
(b) In the Partnership's name and on its behalf, the General Partner
may employ, contract and otherwise deal with, from time to time, Persons whose
services are necessary or appropriate in connection with management and
operation of the Partnership business, including, without limitation,
contractors, agents, brokers, Accountants and Management Agents and attorneys,
on such terms as the General Partner shall determine;
(c) In the Partnership's name and on its behalf, the General Partner
may bring or defend, pay, collect, compromise, arbitrate, resort to legal action
or otherwise adjust claims or demands of or against the Partnership;
(d) In the Partnership's name and on its behalf, the General Partner
may pay as a Partnership expense any and all costs and expenses associated with
the formation, development, organization and operation of the Partnership,
including the expense of annual audits, tax returns and LIHTC compliance;
(e) In the Partnership's name and on its behalf, the General Partner
may deposit, withdraw, invest, pay, retain and distribute the Partnership's
funds in a manner consistent with the provisions of this Agreement;
(f) In the Partnership's name and on its behalf, the General
Partner is authorized to execute the Construction Loan and the Mortgage;
(g) The General Partner may require in any or all Partnership
contracts that the General Partner shall not have any personal liability
thereunder but that the Person contracting with the Partnership shall look
solely to the Partnership and its assets for satisfaction;
(h) In the Partnership's name and on its behalf, the General
Partner may execute, acknowledge and deliver any and all instruments to
effectuate any of the foregoing; and
(i) The General Partner shall operate the Project and shall cause the
Management Agent to manage the Project in such a manner that the Project will be
eligible to receive a Tax Credit with respect to 100% of the apartment units in
the Project. 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 Tax Credit, to
file Form 8609 with respect to the Project as required, for at least the
duration of the Compliance Period to operate the Project and cause the
Management Agent to manage the Project so as to comply with the requirements of
Section 42 of the Code, as amended, or any successor thereto, including, but not
limited to, Section 42(g) and Section 42(i) (3) of the Code, as amended, or any
successors thereto, to make all certifications required by Section 42(1) of the
Code, as amended, or any successor thereto, and to operate the Project and cause
the Management Agent to manage the Project so as to comply with all other Tax
Credit Conditions.
Section 9.4 Authority Requirements. During the Compliance Period,
the following provisions shall apply:
(a) Each of the provisions of this Agreement shall be subject to, and
the General Partner covenants to act in accordance with, the Tax Credit
Conditions and all applicable federal, state and local laws and regulations;
21
<PAGE>
(b) The Tax 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, successor and assigns, and
they shall control as to any terms in this Agreement which are inconsistent
therewith, and any such inconsistent terms of this Agreement shall be
unenforceable by or against any of the Partners;
(c) Upon any dissolution of the Partnership or any transfer of the
Project, no title or right to the possession and control of the Project and no
right to collect rent therefrom shall pass to any Person who is not, or does not
become, bound by the Tax Credit Conditions in a manner that, in the opinion of
counsel to the Partnership, would not avoid a recapture thereof on the part of
the former owners; and
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to the Tax Credit Conditions and all conditions, approvals or other
requirements of the rules and regulations of any authority applicable thereto.
Section 9.5 Limitations on General Partner's Power and Authority.
Notwithstanding the provisions of this Article IX, the General Partner shall
not:
(a) Except as required by Section 9.4, act in contravention of
this Agreement;
(b) Act in any manner which would make it impossible to carry
on the ordinary business of the Partnership;
(c) Confess a judgment against the Partnership;
(d) Possess Partnership property, or assign the Partner's
right in specific Partnership property, for other than the exclusive
benefit of the Partnership;
(e) Admit a Person as a General Partner except as provided in
this Agreement;
(f) Admit a Person as a Limited Partner except as provided in
this Agreement;
(g) Violate any provision of the Mortgage Loan or Mortgage Note;
(h) Cause the Project apartment units to be rented to anyone
other than Qualified Tenants;
(i) Violate the Minimum Set-Aside Test or the Rent
Restriction Test for the Project;
(j) Cause any recapture of the Tax Credits;
(k) Permit any creditor who makes a nonrecourse loan to the
Partnership to have, or to acquire at any time as a result of making such loan,
any direct or indirect interest in the profits, income, capital or other
property of the Partnership, other than as a secured creditor;
(1) Commingle funds of the Partnership with the funds of another
Person; or
22
<PAGE>
(m) Take any action which requires the Consent of the Special Limited
Partner or the consent of the Limited Partner unless the General Partner has
received the Consent of the Special Limited Partner.
Section 9.6 Restrictions on Authority of General Partner. Without
consent of the Special Limited Partner the General Partner shall not:
(a) Sell, exchange, lease or otherwise dispose of
the Project;
(b) Incur indebtedness other than the Construction Loan
and Mortgage Loan in the name of the Partnership, other than in the ordinary
course of the Partnership's business;
(c) Contract away the fiduciary duty owed to the Limited
Partner and the Special Limited Partner at common law;
(d) Take any action which would cause the Project to fail
to qualify, or which would cause a termination or discontinuance of the
qualification of the Project, as a "qualified low income housing
project" under Section 42(g) (1) of the Code, as amended, or any successor
thereto, or which would cause the Limited Partner to fail to obtain the
Projected Tax Credits or which would cause the recapture of any LIHTC;
(e) Make any expenditure of funds, or commit to make any
such expenditure, other than in response to an emergency, except as provided for
in the annual budget approved by the Special Limited Partner, as provided in
Section 14.3(j) hereof;
(f) Cause the merger or other reorganization of the
Partnership; or
(g) Dissolve the Partnership.
Section 9.7 Duties of General Partner. The General Partner agrees
that it shall at all times:
(a) Diligently and faithfully devote such of its time to the business of
the Partnership as may be reasonable necessary to properly conduct the affairs
of the Partnership;
(b) File and publish all certificates, statements or other instruments
required by law for the formation and operation of the Partnership as a limited
partnership in all appropriate jurisdictions;
(c) Cause the Partnership to carry Insurance from an Insurance Company;
(d) Have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate possession
or control and not employ or permit another to employ such funds or assets in
any manner except for the benefit of the Partnership;
(e) Use its best efforts so that all requirements shall be met which are
reasonably necessary to obtain or achieve (1) compliance with the Minimum
23
<PAGE>
Set-Aside Test, the Rent Restriction Test, and any other requirements necessary
for the Project to initially qualify, and to continue to qualify, for Tax
Credits; (2) issuance of all necessary certificates of occupancy, including all
governmental approvals required to permit occupancy of all of the apartment
units in the Project; (3) compliance with all provisions of the Project
Documents and (4) a reservation and allocation of Tax Credits from the Agency;
(f) Use its best efforts to keep the Project and Project dwelling units, in
decent, safe, sanitary and good condition, repair and working order, ordinary
use and obsolescence excepted, and make or cause to be made from time to time
all necessary repairs thereto (including external and structural repairs) and
renewals and replacements thereof;
(g) Pay, before the same shall become delinquent and before penalties
accrue thereon all Partnership taxes, assessments and other governmental charges
against the Partnership or its properties, and all of its other liabilities,
except to the extent and so long as the same are being contested in good faith
by appropriate proceedings in such manners as not to cause any material adverse
effect on the Partnership's property, financial condition or business
operations, with adequate reserves provided for such payments;
(h) Permit, and cause the Management Agent to permit, the Special Limited
Partner and its representatives to have access to the Project and personnel
employed by the Partnership and by the Management Agent who are concerned with
management of the Project at all reasonable times during normal business hours
and to examine all agreements, Tax Credit compliance data and plans and
specifications and deliver copies thereof and such reports as may reasonably be
required by the Special Limited Partner. The General Partner shall provide the
Special Limited Partner with copies of all correspondence, notices and reports
sent pursuant to or received under the Project Documents or any authority with
respect to the Project at the time such correspondence, notices or reports are
sent or received, copies of all other correspondence of substantial importance
which a prudent investor would wish to examine in connection with the
transaction at the time such correspondence is sent or received, and all reports
required by Article XIV within the required time periods set forth therein.
(i) Exercise good faith in all activities relating to the conduct of the
business of the Partnership, including the development, operation and
maintenance of the Apartment Complex, and it shall take no action with respect
to the business and property of the Partnership which is not reasonably related
to the achievement of the purpose of the Partnership;
(j) Make any Capital Contribution, advances or loans required to be made by
the General Partner under the terms of this Agreement;
(k) Establish and maintain all reserves required to be established and
maintained under the terms of this Agreement;
(l) Comply with each and every covenant, representation and warranty set
forth in Section 9.11; and
(m) Perform such other acts as may be expressly required of it under the
terms of this Agreement.
24
<PAGE>
Section 9.8 Partnership Expenses
(a) All of the Partnership's expenses shall be billed directly to and
paid by the Partnership to the extent practicable. Reimbursements to the General
Partner or any of its Affiliates by the Partnership shall be allowed only for
the Partnership's operating cash expenses and only subject to the limitations on
the reimbursement of such expenses set forth herein. As used in this Section 9.8
the term "operating cash expenses" shall mean, with respect to any fiscal
period, the amount of cash disbursed by the Partnership for Partnership business
in that period in the ordinary course of business for the payment of its
operating expenses, such as expenses for advertising and promotion, management,
utilities, repair and maintenance, Insurance, Partner communications, legal,
accounting, statistical and bookkeeping services, use of computing or accounting
equipment, travel and telephone expenses, salaries and direct expenses of
Partnership employees while engaged in Partnership business, and any other
operational and administrative expenses necessary for the prudent operation of
the Partnership. Without limiting the generality of the foregoing, "operating
cash expenses" shall include fees paid by the Partnership to the General Partner
or any Affiliate of the General Partner permitted by this Agreement and the
actual cost of goods, materials and administrative services used for or by the
Partnership, whether incurred by the General Partner, an Affiliate of the
General Partner or a nonaffiliated Person in performing the foregoing functions.
As used in the preceding sentence, "actual cost of goods and materials" means
the actual cost of goods and materials used for or by the Partnership and
obtained from entities which are not Affiliates of the General Partner, and
actual cost of administrative services means the pro rata cost of personnel (as
if such persons were employees of the Partnership) associated therewith, but in
no event to exceed the amount which would be charged by nonaffiliated Persons
for comparable goods and services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject to
the following:
(1) No such reimbursement shall be permitted for services for which the
General Partner or any of its Affiliates is entitled to compensation by way of a
separate fee; and depreciation,
(2) No such reimbursement shall be made for (A) rent or utilities, capital
equipment or other such administrative items, and (B) salaries, fringe benefits,
travel expenses and other administrative items incurred or allocated to any
"controlling person" of the General Partner or any Affiliate of the General
Partner. For the purposes of this Section 9.8(b) (2), "controlling person"
includes, but is not limited to, any Person, however titled, who performs
functions for the General Partner or any Affiliate of the General Partner
similar to those of: (i) chairman or member of the board of directors; (ii)
executive management, such as president, vice president or senior vice
president, corporate secretary or treasurer; (iii) senior management, such as
the vice president of an operating division who reports directly to executive
management; or (iv) those holding 5% or more equity interest in such General
Partner or any such Affiliate of the General Partner or a person having the
power to direct or cause the direction of such General Partner or any such
Affiliate of the General Partner, whether through the ownership of voting
securities, by contract or otherwise.
Section 9.9 General Partner Expenses. The General Partner or
Affiliates of the General Partner shall pay all Partnership expenses which are
not permitted to be reimbursed pursuant to Section 9.8 and all expenses which
are unrelated to the business of the Partnership.
Section 9.10 Other Business of Partners. Any Partner may engage
independently or with others in other business ventures wholly unrelated to the
Partnership business of every nature and description, including, without
limitation, the acquisition, development, construction, operation and management
25
<PAGE>
of real estate projects and developments of every type on their own behalf or on
behalf of other partnerships, joint ventures, corporations or other business
ventures formed by them or in which they may have an interest, including,
without limitation, business ventures similar to, related to or in direct or
indirect competition with the Project except if prohibited under a
non-competition agreement. Neither the Partnership nor any Partner shall have
any right by virtue of this Agreement or the partnership relationship created
hereby in or to such other ventures or activities or to the income or proceeds
derived therefrom. Conversely, no Person shall have any rights to Partnership
assets, incomes or proceeds by virtue of such other ventures or activities of
any Partner.
Section 9.11 Covenants. Representations and Warranties The General
Partner covenants, represents and warrants that the following are presently true
and will be true during the term of this Agreement, to the extent then
applicable:
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State of Oklahoma and has complied with all
filing requirements necessary for the protection of the limited
liability of the Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof.
(c) Improvements will be completed in a timely and workmanlike manner
in accordance with all applicable requirements of the Mortgage Loan, all
applicable requirements of all appropriate governmental entities and the plans
and specifications of the Project that have been or shall be hereafter approved
by the Lender, if required, and all applicable governmental entities, as such
plans and specifications may be changed from time to time with the approval of
the Lender and any applicable governmental entities, if such approval shall be
required.
(d) The Project is being operated in accordance with standards and
procedures which are prudent and customary for the operation of properties
similar to the Project.
(e) Additional Improvements on the Project, if any, shall be
completed substantially in conformity with the Project Documents and any other
requirements necessary to obtain Completion of Construction.
(f) No Partner has or will have any personal liability with respect
to or has or will have personally guaranteed the payment of the Mortgage.
(g) The Partnership is in compliance with all construction and use
codes applicable to the Project and is not in violation of any zoning,
environmental or similar regulations applicable to the Project.
(h) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Project at the time of first occupancy
and throughout the term of the Partnership.
26
<PAGE>
(i) The Project has obtained, or will obtain before Permanent
Mortgage Commencement, and will maintain throughout the term of this Partnership
Insurance written by an Insurance Company.
(j) The Partnership owns the fee simple interest in the Project.
(k) The Construction Contract has been entered into between the
Partnership and the Contractor; no other consideration or fee shall be paid to
the Contractor other than amounts set forth in the Construction Contract.
(l) A builder's risk insurance policy in favor of the Partnership is
in full force and effect and will remain in full force and effect until
Completion of Construction.
(m) Except as otherwise disclosed to the Limited Partner and the
Special Limited Partner in writing prior to the execution of this Agreement, to
the best of the General Partner's knowledge: (1)No Hazardous Substance has been
disposed of, or released to or from, or otherwise now exists in, on, under or
around, the Project and (2) no aboveground or underground storage tanks are now
or have ever been located on or under the Project. The General Partner will not
install or allow to be installed any aboveground or underground storage tanks on
the Project. The General Partner covenants that the Project shall be kept free
of Hazardous Materials and shall not be used to generate, manufacture, refine,
transport, treat, store, handle, dispose of, transfer, produce or process
Hazardous Materials, except in connection with the normal maintenance and
operation of any portion of the Project. The General Partner shall comply, or
cause there to be compliance, with all applicable Federal, state and local laws,
ordinances, rules and regulations with respect to Hazardous Materials and shall
keep, or cause to be kept, the Project free and clear of any liens imposed
pursuant to such laws, ordinances, rules and regulations. The General Partner
must promptly notify the Limited Partner and the Special Limited Partner in
writing (3) if it knows, or suspects or believes there may be any Hazardous
Substance in or around any part of the Project, any Improvements constructed on
the Project, or the soil, groundwater or soil vapor, (4) if the General Partner
or the Partnership may be subject to any threatened or pending investigation by
any governmental agency under any law, regulation or ordinance pertaining to any
Hazardous Substance, and (5) of any claim made or threatened by any Person,
other than a governmental agency, against the Partnership or General Partner
arising out of or resulting from any Hazardous Substance being present or
released in, on or around any part of the Project
(n) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of this Agreement.
(o) The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits or the Revised Projected Annual Tax Credits,
if applicable.
(p) No charges, liens or encumbrances exist with respect to the
Project other than those which are created or permitted by the Project Documents
or Mortgage or are noted or excepted in the title policy for the Project.
(q) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance the Code, the Project will satisfy the Minimum
Set-Aside Test.
(r) All accounts of the Partnership required to be maintained under
the terms of the Project Documents, including, without limitation, any reserves
in accordance with Article VIII hereof, are currently funded to required levels,
including levels required by any authority.
27
<PAGE>
(s) 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.
(t) No event has occurred which constitutes a default under any of the
Project Documents.
(u) No event has occurred which has caused, and the General Partner
has not acted in any manner which will cause (1) the Partnership to be treated
for federal income tax purposes as an association taxable as a corporation, (2)
the Partnership to fail to qualify as a limited partnership under the Act, or
(3) the Limited Partner to be liable for Partnership obligations, provided
however, that the General Partner shall not be in breach of this representation
if all or a portion of a Limited Partner's agreed upon Capital Contributions are
used to satisfy the Partnership's obligations to creditors of the Partnership
and such action by the General Partner is otherwise authorized under this
Agreement and, provided further, that the General Partner shall not be in breach
of this representation if the action causing the Limited Partner to be liable
for the Partnership obligations is undertaken by the Limited Partner.
(v) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Project, has
occurred the continuing effect of which has: (1) materially or adversely
affected the operation of the Partnership or the Project; (2) materially or
adversely affected the ability of the General Partner to perform its obligations
hereunder or under any other agreement with respect to the Project; or (3)
prevented the completion of construction of the Improvements in substantial
conformity with the Project Documents, other than legal proceedings which have
been bonded against (or as to which other adequate financial security has been
issued) in a manner as to indemnify the Partnership against loss; provided that
the foregoing does not apply to matters of general applicability which would
adversely affect the Partnership, the General Partner, Affiliates of the General
Partner or the Project only insofar as they or any of them are part of the
general public.
(w) Neither the Partnership nor the General Partner has any
liabilities, contingent or otherwise, which have not been disclosed in writing
to the Limited Partner and the Special Limited Partner and which in the
aggregate affect the ability of the Limited Partner to obtain the anticipated
benefits of its investment in the Partnership.
(x) The General Partner, or a guarantor acceptable to the Special
Limited Partner, has and shall maintain a net worth equal to at least $1,000,000
computed in accordance with generally accepted accounting principles.
The General Partner shall be liable to the Limited Partner for any costs,
damages, loss of profits, diminution in the value of its investment in the
Partnership, or other losses, of every nature and kind whatsoever, direct or
indirect, realized or incurred by the Limited Partner as a result of any
material breach of the representations and warranties set forth in this Section
9.11.
28
<PAGE>
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General. All items includable in the calculation of
Income or Loss not arising from a Sale or Refinancing, and all Tax Credits,
shall be allocated 99.98% to the Limited Partner, .01% to the Special Limited
Partner and .01% to the General Partner.
Section 10.2 Allocations From Sale or Refinancing. All Income and
Losses arising from a Sale or Refinancing shall be allocated between the
Partners as follows:
(a) As to Income:
(1) First, an amount of Income equal to the aggregate
negative balances (if any) in the Capital Accounts of all Partners having
negative Capital Accounts (prior to taking into account the Sale or Refinancing
and the Distribution of the related Sale or Refinancing Proceeds, but after
giving effect to Distributions of Cash Flow From Operations and allocations of
other Income and Losses pursuant to this Article X up to the date of the Sale or
Refinancing) shall be allocated to such Partners in proportion to their negative
Capital Account balances until all such Capital Accounts shall have zero
balances; and
(2) Second, an amount of Income sufficient to increase the
Limited Partner's positive Capital Account balance to its Capital Contribution
and to increase the Special Limited Partner's positive Capital Account balance
to an amount equal to its Capital Contribution, shall be allocated to the
Limited Partner and the Special Limited Partner, respectively;
(3) Third, an amount of Income sufficient to increase the
General Partner's positive Capital Account balance to an amount equal to its
Capital Contribution; and
(4) The balance, if any, of such Income shall be allocated
40% to the Limited Partner and 60% to the General Partner.
(b) As to Losses:
(1) an amount of Losses equal to the aggregate positive
balances (if any) in the Capital Accounts of all Partners having positive
Capital Accounts (prior to taking into account the Sale or Refinancing and the
Distribution of the related Sale or Refinancing Proceeds, but after giving
effect to Distributions of Cash Flow From Operations and allocations of Income
and Losses pursuant to Section 10.1 up to the date of the Sale or Refinancing)
shall be allocated to such Partners in proportion to their positive Capital
Account balances until all such Capital Accounts shall have zero balances; and
(2) the balance of any such Losses shall be allocated 99.98%
to the Limited Partner, .01% to the Special Limited Partner and .01% to the
General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and
(b), in no event shall any Losses be allocated to the Limited Partner or the
Special Limited Partner if and to the extent that such allocation would create
or increase an Adjusted Capital Account Deficit for the Limited Partner or the
Special Limited Partner. In the event an allocation of 99.98% or .01% of each
item includable in the calculation of Income or Loss not arising from a Sale or
Refinancing, would create or increase an Adjusted Capital Account Deficit for
the Limited Partner or the Special Limited Partner, respectively, then so much
29
<PAGE>
of the items of deduction other than projected depreciation shall be allocated
to the General Partner instead of the Limited Partner or the Special Limited
Partner as is necessary to allow the Limited Partner or the Special Limited
Partner to be allocated 99.98% and .01%, respectively, of the items of Income
and Project depreciation without creating or increasing an Adjusted Capital
Account Deficit for the Limited Partner or the Special Limited Partner, it being
the intent of the parties that the Limited Partner and the Special Limited
Partner always shall be allocated 99.98% and .01%, respectively, of the items of
Income not arising from a Sale or Refinancing and 99.98% and .01%, respectively,
of the Project depreciation.
Section 10.3 Specia1 Allocations. The following special allocations
shall be made in the following order:
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if there is
a net decrease in Partnership Minimum Gain during any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Person's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Section
1.704-2(f) (6) and 1.704-2(j) (2) of the Treasury Regulations. This Section
10.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i) (4) of the
Treasury Regulations, notwithstanding any other provision of this Article X, if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
a Partner Nonrecourse Debt during any Partnership fiscal year, each Person who
has 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)
of the Treasury Regulations, shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations 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 each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i) (4) and 1.704-2(j) (2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i) (4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b) (2) (ii) (d) (4), Section 1.704-1(b) (2) (ii) (d) (5), or Section
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 Treasury Regulations, the Adjusted
Capital Account Deficit of such Partner as quickly as possible, provided that an
allocation pursuant to this Section 10.3(c) shall be made if and only to the
extent that such Partner would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Section 10.3 have been tentatively
made as if this Section 10.3(c) were not in the Agreement
30
<PAGE>
(d) In the event any Partner has a deficit Capital Account at the end
of any Partnership fiscal year which is in excess of the sum of (i) the amount
such Partner is obligated to restore, and (ii) the amount such Partner is deemed
to be obligated to restore pursuant to the penultimate sentences of Treasury
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 10.3(d) 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 n this Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially
allocated 99.98% to the Limited Partner, .01% to the Special Limited Partner and
.01% to the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i) (1)
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b) (2) (iv) (m) (2)
or Section 1.704-1(b) (2) (iv) (m) (4), to be taken into account in determining
Capital Accounts as the result of a distribution to a Partner in complete
liquidation of his interest in the Partnership, 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
accordance with their interests in the Partnership in the event that Treasury
Regulations Section 1.704-1 (b) (2) (iv) (m) (2) applies, or to the Partner to
whom such distribution was made in the event that Treasury Regulations Section
1.704-1(b) (2) (iv) (m) (4) applies
(h) To the extent the Partnership has taxable interest income with
respect to any promissory note pursuant to Section 483 or Section 1271 through
1288 of the Code:
(1) Such interest income shall be specially allocated
to the Limited Partner to whom such promissory note relates; and
(2) 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.
(i) In the event the adjusted tax basis of any investment tax
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.
(j) Any reduction in the adjusted tax basis (or cost) of
Partnership investment tax 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 Treasury Regulations Section 1.46-3(f) (2) (i)
31
<PAGE>
(k) Any income, gain, loss or deduction realized as a direct or
indirect result of the issuance of an interest in the Partnership by the
Partnership to a Partner (the AIssuance Items") shall be allocated among the
Partners so that, to the extent possible, the net amount of such Issuance Items,
together with all other allocations under this Agreement to each Partner, shall
be equal to the net amount that would have been allocated to each such Partner
if the Issuance Items had not been realized.
(1) If any Partnership expenditure treated as a deduction on its
federal income tax return is disallowed as a deduction and treated as a
distribution pursuant to Section 731(a) of the Code, there shall be a special
allocation of gross income to the Partner deemed to have received such
distribution equal to the amount of such distribution.
(m) The allocation to the General Partner of each material item of
Partnership income, loss, deduction or credit will not be less than .01% of each
such item at all times during the existence of the Partnership.
(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.3 shall be allocated 100% to the General Partner.
Section 10.4 Curative Allocations The allocations set forth in
Sections 10.2(c), 10.3(a), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and
10.3(g) hereof (the "Regulatory Allocations") are intended to comply with
certain requirements of the Treasury Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss, or deduction pursuant to this
Section 10.4. Therefore, notwithstanding any other provision of this Article X
(other than the Regulatory Allocations), with the Consent of the Special Limited
Partner, the General Partner shall make such offsetting special allocations of
Partnership income, gain, loss, or deduction in whatever manner the General
Partner, with the Consent of the Special Limited Partner, determines appropriate
so that, after such offsetting allocations are made, each Partner's Capital
Account balance is, to the extent possible, equal to the Capital Account balance
such Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 10.1,
10.2(a), 10.2(b), 10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(1), 10.3(m), 10.3(n)
and 10.5. In exercising its authority under this Section 10.4, the General
Partner shall take into account future Regulatory Allocations under Section
10.3(a) and 10.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Sections 10.3(e) and 10.3(f).
Section 10.5 Other Allocation Rules
(a) The basis (or cost) of any Partnership investment tax credit
property shall be allocated among the Partners in accordance with Treasury
Regulations Section 1.46-3(f) (2) (i). All Tax Credits (other than the
investment tax credit) shall be allocated among the Partners in accordance with
applicable law. Consistent with the foregoing, the Partners intend that LIHTC
will be allocated 98.99% to the Limited Partner, .01% to the Special Limited
Partner and 1% to the General Partner
(b) In the event Partnership investment tax 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 (1) the reduction in the adjusted tax
basis (or cost) of such property pursuant to Code Section 50(c), over (2) any
32
<PAGE>
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 Section 10.1 and Section 10.2(a) hereof and shall
instead be allocated among the Partners in proportion to their respective shares
of such excess, determined pursuant to Section 10.3(i) and 10.3(j) 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 the 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.
(c) For purposes of determining the Income, Losses, or any other
items allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner, using any permissible method under Code Section 706 and the Treasury
Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate
share of the "excess nonrecourse liabilities" of the Partnership within the
meaning of Treasury Regulations Section 1.752-3(a)(3), the Partners' interests
in Partnership profits are as follows: Limited Partner: 99.98%; Special
Limited Partner: .01%; General Partner: .01%.
(e) To the extent permitted by Section 1.704-2(h) (3) of the
Treasury Regulations, the General Partner shall endeavor to treat Distributions
as having been made from the proceeds of a Nonrecourse Liability or a Partner
Nonrecourse Debt only to the extent that such Distributions would cause or
increase an Adjusted Capital Account Deficit for any Partner who is not a
General Partner.
Section 10.6 Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.25(a) hereof)
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.25(b) hereof, 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 Code Section
704(c) and the Treasury Regulations thereunder.
Any elections or other decisions relating to such allocations shall be made
by the General Partner with the Consent of the Special Limited Partner in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.6 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 Income, Losses, other
items, or distributions pursuant to any provision of this Agreement
Section 10.7 Allocation Among Limited Partners In the event that the
Interest of the Limited Partner hereunder is at any time held by more than one
Limited Partner all items which are specifically allocated to the Limited
33
<PAGE>
Partner for any month pursuant to this Article X shall be apportioned among such
Persons according to the ratio of their respective profit-sharing interests in
the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
among them without amendment to this Agreement or consent of the Limited Partner
or Consent of the Special Limited Partner.
Section 10.9 Modification of Allocations. The provisions of Articles X and
XI and other provisions of this Agreement are intended to comply with Treasury
Regulations Section 1.704 and shall be interpreted and applied in a manner
consistent with such section of the Treasury Regulations. In the event that the
General Partner determines, in its sole discretion, that it is prudent to modify
the manner in which the Capital Accounts of the Partners, or any debit or credit
thereto, are computed in order to comply with such section of the Treasury
Regulations, the General Partner may make such modification, but only with the
Consent of the Special Limited Partner, to the minimum extent necessary, to
effect the plan of allocations and Distributions provided for elsewhere in this
Agreement. Further, the General Partner shall make any appropriate
modifications, but only with the Consent of the Special Limited Partner, in the
event it appears that unanticipated events (e.g., the existence of a Partnership
election pursuant to Code Section 754) might otherwise cause this Agreement not
to comply with Treasury Regulation Section 1.704.
ARTICLE XI
DISTRIBUTION
Section 11.1 Distribution of Cash Flow From Operations. Cash Flow
From Operations shall be distributed within 75 days after December 31 and June
30 and shall be applied in the following order of priority:
(a) To pay the Deferred Management Fee, if any;
(b) To pay the current Reporting Fee and then to pay any accrued
Reporting Fees which have not been paid in full from previous years;
(c) To pay the Development Fee in accordance with the Development
Fee Agreement
(d) To pay the Operating Loans, if any, as referenced in
Section 6.2(b) of this Agreement, limited to 50% of the Cash Flow From
Operations remaining after reduction for the payments made pursuant to
subsections (a) through (c) of this Section 11.1;
(e) To pay the Incentive Management Fee equal to 70% of the Cash
Flow From Operations remaining after reduction for the payments made pursuant
to subsections (a) through (d) of this Section 11.1; and
(f) To the Limited Partner in an amount equal to 40% of the
remaining Cash Flow From Operations and to the General Partner in an amount
equal to 60% of the remaining Cash Flow From Operations.
34
<PAGE>
Section 11.2 Distribution of Sale or Refinancing Proceeds. Sale or
Refinancing Proceeds shall be distributed in the following order:
(a) To the payment of the Mortgage Note and other matured debts and
liabilities of the Partnership, other than accrued payments, debts or other
liabilities owing to Partners or former Partners;
(b) To any accrued payments, debts or other liabilities owing to the
Partners or former Partners, including, but not limited to, accrued Reporting
Fees and Operating Loans, Development fees, to be paid prorata if necessary;
(c) To the establishment of any reserves which the General Partner, with
the Consent of the Special Limited Partner, shall deem reasonably necessary for
contingent, unmatured or unforeseen liabilities or obligations of the
Partnership;
(d) To the Limited Partner in an amount equal to the tax liability
attributed to the Limited Partner upon Sale;
(e) To the Special Limited Partner in an amount equal to the tax liability
attributed to the Special Limited Partner upon Sale;
(f) To the General Partner in an amount equal to the tax liability
attributed to the General Partner upon Sale; and
(g) Thereafter, 50% to the Limited Partner and 50% to the General Partner.
ARTICLE XII
TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Limited Partner's Interest The Limited
Partner and Special Limited Partner shall not have the right to assign all or
any part of their respective Interests in the Partnership to any other Person,
whether or not a Partner, except upon satisfaction of each of the following:
(a) By a written instrument in form and substance satisfactory to the
General Partner and its counsel, setting forth the name and address of the
proposed transferee, the nature and extent of the Interest which is proposed to
be transferred and the terms and conditions upon which the transfer is proposed
to be made, stating that the Assignee accepts and agrees to be bound by all of
the terms and provisions of this Agreement, and providing for the payment of all
reasonable expenses incurred by the Partnership in connection with such
assignment, including but not limited to the cost of preparing any necessary
amendment to this Agreement;
(b) Upon consent of the General Partner to such assignment,
which shall not be unreasonably withheld; and
(c) Upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the Assignee
35
<PAGE>
for the Assignee's own account for long-term investment and not with a view
toward resale, fractionalization, division or distribution thereof
THE LIMITED PARTNERSHIP INTEREST AND THE SPECIAL LIMITED PARTNERSHIP
INTEREST DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AS AMENDED OR UNDER ANY STATE SECURITIES LAW. THESE INTERESTS MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Section 12.2 Effective Date of Transfer. Any assignment of a Limited
Partner's Interest or Special Limited Partner's Interest pursuant to Section
12.1 shall become effective as of the last day of the calendar month in which
the last of the conditions to such assignment are satisfied
Section 12.3 Invalid Assignment. Any purported assignment of an Interest of
a Limited Partner or Special Limited Partner otherwise than in accordance with
Section 12.1 or Section 12.6 shall be of no effect as between the Partnership
and the purported assignee and shall be disregarded by the General Partner in
making allocations and Distributions hereunder.
Section 12.4 Assignee=s Rights to Allocations and Distributions. An
Assignee shall be entitled to receive allocations and Distributions from the
Partnership attributable to the Interest acquired by reason of any permitted
assignment from and after the first day of the calendar month following the
month which ends with the effective date of the transfer of such Interest as
provided in Section 12.2. The Partnership and the General Partner shall be
entitled to treat the assignor of such Partnership Interest as the absolute
owner thereof in all respects, and shall incur no liability for allocations and
Distributions made in good faith to such assignor, until such time as the
written instrument of assignment has been received by the Partnership.
Section 12.5 Substitution of Assignee as Limited Partner or Special Limited
Partner.
(a) An Assignee shall not have the right to become a Substitute
Limited Partner or substitute Special Limited Partner in place of his assignor
unless the written consent of the General Partner to such substitution shall
have been obtained, which consent, in the General Partner's absolute discretion,
may be withheld.
(b) A nonadmitted transferee of a Limited Partner's Interest or Special
Limited Partner's Interest in the Partnership shall only be entitled to receive
that share of allocations, Distributions and the return of Capital Contribution
to which its transferor would otherwise have been entitled with respect to the
Interest transferred, and shall have no right to obtain any information on
account of the Partnership's transactions, to inspect the Partnership's books
and records or have any other of the rights and privileges of a Limited Partner
or Special Limited Partner, provided, however, that the Partnership shall, if a
transferee and transferor jointly advise the General Partner in writing of a
transfer of an Interest in the Partnership, furnish the transferee with
pertinent tax information at the end of each fiscal year of the Partnership.
(c) The General Partner may elect to treat a transferee of a
Partnership Interest who has not become a Substitute Limited Partner or
substitute Special Limited Partner as a Substitute Limited Partner or substitute
36
<PAGE>
Special Limited Partner, as the case may be, in the place of its transferor
should the General Partner determine in its absolute discretion that such
treatment is in the best interest of the Partnership.
Section 12.6 Death, Bankruptcy, Incompetence, etc. of a Limited Partner.
Upon the death, dissolution, adjudication of bankruptcy, or adjudication of
incompetency or insanity of a Limited Partner or Special Limited Partner, such
Partner's executors, administrators or legal representatives shall have all the
rights of a Limited Partner or Special Limited Partner, as the case may be, for
the purpose of settling or managing such Partner's estate, including such power
as such Partner possessed to constitute a successor as a transferee of its
Interest in the Partnership and to join with such transferee in making the
application to substitute such transferee as a Partner. However, such executors,
administrators or legal representatives will not have the right to become
Substitute Limited Partners or substitute Special Limited Partners in the place
of their respective predecessors-in-interest unless the General Partner shall so
consent.
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
Section 13.1 Withdrawal of General Partner
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Special Limited Partner, and,
to the extent required, of the Lender and the State Tax Credit Agency.
Withdrawal shall be conditioned upon the agreement of the Special Limited
Partner to be admitted as a successor General Partner, or if the Special Limited
Partner declines to be admitted as a successor General Partner then on the
agreement of one or more Persons who satisfy the requirements of Section 13.5 of
this Agreement to be admitted as successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the
Partnership and all Partners from its Withdrawal in violation of Section 13.1(a)
hereof. Each General Partner shall be liable for damages to the Partnership
resulting from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of
them, may remove the General Partner for any of the following if not
remedied within 120 days of written notice
(1) For cause if such General Partner has:
(A) Become subject to an event of Bankruptcy;
(B) Commits any fraud, willful misconduct,
breach of fiduciary duty or other negligent conduct in the performance
of its duties under this Agreement;
(C) Becomes convicted of, or entered a
plea of guilty to, a felony;
(D) Made personal use of Partnership
funds or properties;
37
<PAGE>
(E) Violated the terms of the Mortgage,
and such violation prompts the Lender to issue a default letter or acceleration
notice to the Partnership or General Partner;
(F) Failed to provide any loan, advance,
Capital Contribution or any other payment to the Partnership required under
this Agreement;
(G) Failed to obtain the Consent of the
Special Limited Partner prior to any decision, act or omission under
circumstances where this Agreement requires that such consent be obtained;
(H) Breached any representation, warranty
or covenant contained in this Agreement, or failed to perform any other action
which may be required by this Agreement;
(I) Violated any federal or state tax law
which causes a recapture of LIHTC, which cause for recapture was not previously
approved by the Limited Partner or Special Limited Partner and the recaptured
LIHTC exceed 20% of the total LIHTC; or
(J) Failed during any six-month period to
during the Compliance Period to cause at least 85% of the total apartment units
in the Project to qualify for LIHTC, unless such failure is the result of
Force Majeure or unless such failure is cured within 120 days after the end of
the six-month period.
(2) As provided in Section 6.2(a) hereof.
(b) Written notice of the removal for cause of the General Partner shall
be served by the Special Limited Partner or the Limited Partner, or both of
them, upon the General Partner either by certified or by registered mail, return
receipt requested, or by personal service. Such notice shall set forth the
reasons for the removal, if any, and the date upon which the removal is to
become effective. Notwithstanding, if the removal for cause is pursuant to
Sections 13.2(a) (1) (B), (E), (F), (G), or (H) then the General Partner shall
have 90 days from receipt of the notice of removal from either the Limited
Partner or the Special Limited Parenter to cure the cause for removal. If the
cause for removal is not cured within the 90 day cure period then the removal of
the General Partner shall be immediately effective on the day following the 90
day cure period.
(c) Upon receipt of such notice of removal for cause, the General
Partner shall cause an accounting to be prepared covering the transactions of
the Partnership from the end of the previous fiscal year through the date of
receipt of such notice, and thereafter it shall not sell or dispose of
Partnership assets under any circumstances. The accounting shall be completed by
the effective date of the removal and shall be in sufficient detail to
accurately and fully reflect the earnings or losses for the period and the
financial condition of the Partnership. If the General Partner fails to cause
the accounting to be prepared within 30 days of receipt of the notice of removal
for cause then the Limited Partner may cause the accounting to be prepared.
The expenses of the accounting shall be borne by the General Partner.
Section 13.3 Effects of a Withdrawal. In the event of a Withdrawal, the entire
Interest of the Withdrawing General Partner shall immediately and automatically
terminate on the effective date of such Withdrawal, and such General Partner
shall immediately cease to be a General Partner, shall have no further right to
participate in the management or operation of the Partnership or the Project or
38
<PAGE>
to receive any allocations or Distributions from the Partnership or any other
funds or assets of the Partnership, except as specifically set forth below. In
the event of a Withdrawal, any or all executory contracts, including but not
limited to the Management Agreement, between the Partnership and the Withdrawing
General Partner or its Affiliates may be terminated by the Partnership, with the
Consent of the Special Limited Partner, upon written notice to the party so
terminated
Furthermore, notwithstanding such Withdrawal, the Withdrawing General
Partner shall be and shall remain, liable as a General Partner for all
liabilities and obligations incurred by the Partnership or by the General
Partner prior to the effective date of the Withdrawal, or which may arise upon
such Withdrawal. Any remaining Partner shall have all other rights and remedies
against the Withdrawing General Partner as provided by law or under this
Agreement.
The General Partner agrees that in the event of its Withdrawal it will
indemnify and hold the Limited Partner and the Special Limited Partner harmless
from and against all losses, costs and expenses incurred in connection with the
Withdrawal, including, without limitation, all legal fees and other expenses of
the Limited Partner and the Special Limited Partner in connection with the
transaction.
The following additional provisions shall apply in the event of a Withdrawal:
(a) In the event of a Withdrawal which is not an Involuntary
Withdrawal, the Withdrawing General Partner shall have no further right to
receive any future allocations or 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 or to be paid any amount for its former
Interest. From and after the effective date of such Withdrawal, the former
rights of the Withdrawing General Partner to receive or to be paid such
allocations, Distributions, funds, assets, fees or repayments shall be assigned
to the other General Partner or General Partners (which may include the Special
Limited Partner), or if there is no other general partner of the Partnership at
that time1 to the Special Limited Partner.
(b) In the event of an Involuntary Withdrawal, except as provided in
Section 13.3(b) (3) below, the Withdrawing General Partner shall have no further
right to receive any future allocations or Distributions from the Partnership or
any other funds or assets of the Partnership, provided that accrued and payable
fees (i.e., fees earned but unpaid as of the date of Withdrawal) owed to the
Withdrawing General Partner, and any outstanding loans of the Withdrawing
General Partner to the Partnership, shall be paid to the Withdrawing General
Partner in the manner and at the times such fees and loans would have been paid
had the Withdrawing General Partner not Withdrawn. The Interest of the General
Partner shall be purchased as follows:
(1) If the Involuntary Withdrawal arises from removal for cause as set forth in
Section 13.2(a) hereof, the Withdrawn General Partner shall be entitled to
receive as its sole compensation for its Interest in the Partnership an amount
equal to its positive Capital Account balance determined as of the effective
date of the removal, if any, payable upon the dissolution and termination of the
Partnership after all of the Partners have been distributed the positive
balances in their Capital Accounts.
(2) If the Involuntary Withdrawal does not arise from removal for cause under
Section 13.2(a) hereof, and if the Partnership is to be continued with one or
39
<PAGE>
more remaining or successor General Partner(s), the Partnership, with the
Consent of the Special Limited Partner, may, but is not obligated to, purchase
the Interest of the Withdrawing General Partner in Partnership allocations,
Distributions and capital. The purchase price of such Interest shall be its Fair
Market Value as determined by agreement between the Withdrawing General Partner
and the Special Limited Partner, or, if they cannot agree, by arbitration in
accordance with the then current rules of the American Arbitration Association.
The cost of such arbitration shall be borne equally by the Withdrawing General
Partner and the Partnership. The purchase price shall be paid by the Partnership
by delivering to the General Partner or its representative the Partnership's
interest bearing unsecured promissory note payable, if at all, upon liquidation
of the Partnership in accordance with Section 11.2(b). The note shall also
provide that the Partnership may prepay all or any part thereof without penalty.
(3) If the Involuntary Withdrawal does not arise from removal for cause under
Section 13.2(a) hereof, and if the Partnership is to be continued with one or
more remaining or successor General Partner(s), and if the Partnership does not
purchase the Interest of the Withdrawing General Partner in Partnership
allocations, Distributions and capital, then the Withdrawing General Partner
shall retain its Interest in such items, but such Interest shall be held as a
special limited partner.
Section 13.4 Successor General Partner. Upon the occurrence of an event
giving rise to a Withdrawal of a General Partner, any remaining General Partner,
or, if there be no remaining General Partner, the Withdrawing General Partner or
its legal representative, shall promptly notify the Special Limited Partner of
such Withdrawal (the "Withdrawal Notice@). Whether or not the Withdrawal Notice
shall have been sent as provided herein, the Special Limited Partner shall have
the right to become a successor General Partner (and to become the successor
managing General Partner if the Withdrawing General Partner was previously the
managing General Partner). In order to effectuate the provisions of this Section
13.4 and the continuance of the Partnership, the Withdrawal of a General Partner
shall not be effective until the expiration of 120 days from the date on which
occurred the event giving rise to the Withdrawal, unless the Special Limited
Partner shall have elected to become a successor General Partner as provided
herein prior to expiration of such 120-day period, whereupon the Withdrawal of
the General Partner shall be deemed effective upon the notification of all the
other Partners by the Special Limited Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner. No
Person shall be admitted as an additional or successor General Partner unless
(a) such Person shall have agreed to become a General Partner by a written
instrument which shall include the acceptance and adoption of this Agreement;
(b) the Consent of the Special Limited Partner to the admission of such Person
as a substitute General Partner, which consent may be withheld in the discretion
of the Special Limited Partner, shall have been given; and (c) such Person shall
have executed and acknowledged any other instruments which the Special Limited
Partner shall reasonably deem necessary or appropriate to affect the admission
of such Person as a substitute General Partner. If the foregoing conditions are
satisfied, this Agreement shall be amended in accordance with the provisions of
the Act, and all other steps shall be taken which are reasonably necessary to
effect the Withdrawal of the Withdrawing General Partner and the substitution of
the successor General Partner. Nothing contained herein shall reduce the Limited
Partner's Interest or the Special Limited Partner's Interest in the Partnership.
Section 13.6 Transfer of Interest Except as otherwise provided herein, the
General Partner may not Withdraw from the Partnership, or enter into any
agreement as the result of which any Person shall become interested in the
Partnership, without the Consent of the Special Limited Partner.
40
<PAGE>
Section 13.7 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.
ARTICLE XIV
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and maintain at
its principal executive office full and complete books and records which shall
include each of the following:
(1) a current list of the full name and last known business or residence address
of each Partner set forth in alphabetical order together with the Capital
Contribution and the share in Income and Losses of each Partner;
(2) a copy of the Certificate of Limited Partnership and all certificates of
amendment thereto, together with executed copies of any powers of attorney
pursuant to which any certificate has been executed;
(3) copies of the Partnership's federal, state and local income tax information
returns and reports, if any, for the six most recent taxable years;
(4) copies of the original of this Agreement and all amendments thereto;
(5) financial statements of the Partnership for the six most recent fiscal
years; and
(6) the Partnership's books and records for at least the current and past three
fiscal years.
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Project at its own expense.
Section 14.2 Accounting Reports
(a) By February 20 of each calendar year the General Partner shall provide
to the Limited Partner and the Special Limited Partner all tax information
necessary for the preparation of their federal and state income tax returns and
other tax returns with regard to the jurisdiction(s) in which the Partnership is
formed and in which the Project is located.
41
<PAGE>
(b) By March 1 of each calendar year the General Partner shall send to
the Limited Partner and the Special Limited Partner: (1) a balance sheet as of
the end of such fiscal year and statements of income, Partners' equity and
changes in cash flow for such fiscal year prepared in accordance with generally
accepted accounting principles and accompanied by an auditor's report containing
an opinion of the Partnership's Accountants; (2) a report (which need not be
audited) of any Distributions made at any time during the fiscal year,
separately identifying Distributions from Cash Flow From Operations for the
fiscal year, Cash Flow From Operations for prior years, Sale or Refinancing
Proceeds, and reserves; (3) a report setting forth the amount of all fees and
other compensation and Distributions and reimbursed expenses paid by the
Partnership for the fiscal year to the General Partner or Affiliates of the
General Partner and the services performed in consideration therefor, which
report shall be verified by the Partnership's Accountants, with the method of
verification to include, at a minimum, a review of the time records of
individual employees, the costs of whose services were reimbursed, and a review
of the specific nature of the work performed by each such employee, all in
accordance with generally accepted auditing standards and, accordingly,
including such tests of the accounting records and such other auditing
procedures as the Accountants consider appropriate in the circumstances; (4) a
copy of the Project's rent roll for the most recent calendar quarter; (5) a
statement signed by the General Partner indicating the number of apartment units
which are occupied by Qualified Tenants; and (6) a report of the significant
activities of the Partnership during the year.
(c) Within 60 days after the end of each fiscal quarter in which a Sale
or Refinancing of the Project occurs, the General Partner shall send to the
Limited Partner and the Special Limited Partner a report as to the nature of the
Sale or Refinancing and as to the Income and Losses for tax purposes and
proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports. The General Partner shall provide to the
Limited Partner and the Special Limited Partner:
(a) During the period of construction, a copy of the initial
construction schedule and any updates to the construction schedule, and by the
tenth day of each month a copy of the previous month's Construction Loan draw
request and the inspecting architect's application and certification of payment
(AlA Document G702, or similar form acceptable to the Limited Partner);
(b) During the rent-up phase, and continuing until the end of the first
six-month period during which the Project has a sustained occupancy of 95% or
better, by the tenth day of each month within such period a copy of the previous
month's rent roll (through the last day of the month) and a tenant LIHTC
compliance worksheet similar to the monthly initial tenant certification
worksheet similar to the monthly initial tenant certification worksheet included
in Exhibit "G" attached hereto and incorporated herein by this reference;
(c) A quarterly tax credit compliance report similar to the worksheet
included in Exhibit "G" due on or before April 30 of each year for the first
quarter, July 31 of each year for the second quarter, October 31 of each year
for the third quarter and January 31 of each year for the fourth quarter. In
order to verify the reliability of the information being provided on the
compliance report the Limited Partner may request a small sampling of tenant
tiles to be provided.The sampling will include, but not be limited to, copies of
tenant applications, certifications and third party verifications used to
qualify tenants. If any inaccuracies are found to exist on the tax credit
compliance report or any items of noncompliance are discovered then the sampling
will be expanded as determined by the Limited Partner.
42
<PAGE>
(d) By September 15 of each year, an estimate of LIHTC for that year;
(e) If the Project receives a reservation of LIHTC in one year but will
not complete the construction and rent-up until a later year, the General
Partner will provide to the Limited Partner by December 31 of the year during
which the reservation is received an audited cost certification together with
the accountant's work papers verifying that the Partnership has expended the
requisite 10% of the reasonably expected cost basis to meet the carryover test
provisions of Section 42 of the Code;
(f) During the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership must
furnish to federal or state governmental authorities administering any Tax
Credit program including, but not limited to, copies of all annual tenant
recertifications required under Section 42 of the Code;
(g) A quarterly report on operations, in the form attached hereto as
Exhibit "G", due on or before April 30 of each year for the first quarter of
operations, July 31 of each year for the second quarter of operations, October
31 of each year for the third quarter of operations and January 31 of each year
for the fourth quarter of operations which shall include, but is not limited to,
an unaudited income statement showing all activity in the reserve accounts
required to be maintained pursuant to Section VIII of this Agreement, statement
of income and expenses, balance sheet, rent roll as of the end of each calendar
quarter of each year, and third party verification of current utility allowance;
(h) By the annual renewal date of each and every year, an executed
original or certified copy of each and every Insurance policy or certificate
required by the terms of this Agreement;
(i) On or before March 15th of each calendar year, the General
Partner's updated financial statement as of December 31 of the previous year;
(j) On or before November 1 of each calendar year, a copy of the
following year's proposed operating budget. Each such budget shall contain an
amount required for reserves in accordance with Article VIII and for the payment
of real estate taxes, insurance, debt service and other payments. Such budget
shall only be adopted with the Consent of the Special Limited Partner; and
(k) Notice of the occurrence, or of the likelihood of occurrence, of
any event which has had or is likely to have a material adverse effect upon the
Project or the Partnership, including, but not limited to, any breach
of any of the representations and warranties set forth in Section 9.11 of this
Agreement, and any inability of the Partnership to meet its cash obligations
as they become payable, within ten days after the occurrence of such even.
Section 14.4 Late Reports. If the General Partner does not fulfill its
obligations under Section 14.2 within the time periods set forth therein, the
General Partner, using its own funds, shall pay as damages the sum of $100 per
day (plus interest at the rate established by Section 6.3 of this Agreement) to
the Limited Partner until such obligations shall have been fulfilled. If the
General Partner does not fulfill its obligations under Section 14.3 within the
time periods set forth therein, the General Partner, using its own funds, shall
pay as damages the sum of $100.00 per week (plus interest at the rate
43
<PAGE>
established by Section 6.3 of this Agreement) to the Limited Partner until such
obligations shall have been fulfilled. Such damages shall be paid forthwith by
the General Partner, and failure to so pay shall constitute a material default
of the General Partner hereunder and cause for removal under Section 13.2
hereof. In addition, if the General Partner shall so fail to pay, the General
Partner and its Affiliates shall forthwith cease to be entitled to any fees
hereunder (other than the Development Fee) and/or to the payment of any Cash
Flow From Operations or Sale or Refinancing Proceeds to which the General
Partner may otherwise be entitled hereunder. Payments of fees and Distributions
shall be restored only upon payment of such damages in full.
Section 14.5 Annual Site Visits. On an annual basis a representative of
the Limited Partner, at the Limited Partner's expense, will conduct a site visit
which will include, in part, an inspection of the property, a review of the
office and tenant files and an interview with the property manager. The Limited
Partner may, in its sole discretion, cancel all or any part of the annual site
visit.
Section 14.6 Tax Returns. The General Partner shall cause income tax
returns for the Partnership to be prepared and timely filed with the
appropriate federal, state and local taxing authorities
Section 14.7 Fiscal Year. The fiscal year of the Partnership shall be
the calendar year or such other period as may be approved by the Internal
Revenue Service for federal income tax purposes.
Section 14.8 Banking. All funds of the Partnership shall be deposited
in a separate bank account or accounts as shall be determined by the General
Partner with the Consent of the Special Limited Partner. All withdrawals
therefrom shall be made upon checks signed by the General Partner or by any
person authorized to do so by the General Partner. The General Partner shall
provide to any Partner who requests same the name and address of the financial
institution, the account number and other relevant information regarding any
Partnership bank account.
Section 14.9 Certificates and Elections.
(a) The General Partner shall file the First Year Certificate within 90
days following the close of the taxable year during which Completion of
Construction occurs and thereafter shall timely file any certificates which the
Partnership must furnish to federal or state governmental authorities
administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner, with the Consent of the Special Limited
Partner, may, but is not required to, cause the Partnership to make or revoke
the election referred to in Section 754 of the Code, as amended, or any similar
provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be dissolved
upon the expiration of its term or the earlier occurrence of any of the
following events:
(a) The effective date of the Withdrawal or removal of the General
Partner, unless (1) at the time there is at least one other General Partner
(which may be the Special Limited Partner if it elects to serve as successor
General Partner under Section 13.4 hereof) who will continue as General Partner,
or (2) within 120 days after the occurrence of any such event the Limited
Partner elects to continue the business of the Partnership;
44
<PAGE>
(b) The sale of the Project and the receipt in cash of the full
amount of the proceeds of such sale; or
(c) The written election to do so of the Limited Partner.
Notwithstanding the foregoing, however, in no event shall the
Partnership terminate prior to the expiration of its term if such termination
would result in a violation of the Mortgage Note or any other agreement with or
rule or regulation of the Lender to which the Partnership is subject.
Section 15.2 Return of Capital Contribution upon Dissolution Except as
provided in Sections 7.3, 7.4 and 7.6 of this Agreement, which provide for a
reduction or refund of the Limited Partner's Capital Contribution under certain
circumstances, and which shall represent the personal obligation of the General
Partner, as well as the obligation of the Partnership, each Partner shall look
solely to the assets of the Partnership for all Distributions with respect to
the Partnership (including the return of its Capital Contribution) and shall
have no recourse therefor (upon dissolution or otherwise) against any General
Partner. No Partner shall have any right to demand property other than money
upon dissolution and termination of the Partnership, and the Partnership is
prohibited from such a distribution of property absent the Consent of the
Special Limited Partner.
Section 15.3 Distributions of Assets. Upon a dissolution of the
Partnership, the General Partner (or, if there is no General Partner then
remaining, such other Person(s) designated as the liquidator of the Partnership
by the Special Limited Partner or by the court in a judicial dissolution) shall
take full account of the Partnership assets and liabilities and shall liquidate
the assets as promptly as is consistent with obtaining the fair value thereof.
(a) Upon dissolution and termination, after payment of, or
adequate provision for, the debts and obligations of the Partnership pursuant
to Section 11.2(a) through and including 11.2(c), the remaining assets of the
Partnership shall be distributed to the Partners in accordance with the positive
balances in their Capital Accounts, after taking into account all allocations
under Article X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the liquidation of the Partnership or its Interest, as
determined after taking into account all Capital Account adjustments for the
Partnership's taxable year in which such liquidation occurs, such General
Partner shall pay to the Partnership the amount necessary to restore such
deficit balance to zero in compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(3).
The deficit make-up shall be paid by the General Partner by the end of
such taxable year and shall, upon liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances. Notwithstanding, if the Special Limited
Partner has become successor General Partner, it shall not be responsible for
any deficit balance in its Capital Account which arose during the time the
former General Partner served as General Partner.
(c) With respect to assets distributed in kind to the Partners in
liquidation or otherwise:
45
<PAGE>
(1) unrealized appreciation or unrealized depreciation in the
values of such assets shall be deemed to be Income and Losses realized by the
Partnership immediately prior to the liquidation or other Distribution event;
and
(2) such Income and Losses shall be allocated to the Partners
in accordance with Section 10.2 hereof, and any property so distributed shall be
treated as a Distribution of an amount in cash equal to the excess of such Fair
Market Value over the outstanding principal balance of and accrued interest on
any debt by which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the
Partnership's adjusted basis in such assets for book purposes. Section 15.3(c)
is merely intended to provide a rule for allocating unrealized Income and Losses
upon liquidation or other Distribution event, and nothing contained in Section
15.3(0) or elsewhere in this Agreement is intended to treat or cause such
Distributions to be treated as sales for value. The Fair Market Value of such
assets shall be determined by an independent appraiser to be selected by the
General Partner with the Consent of the Special Limited Partner.
Section 15.4 Deferral of Liquidation. If at the time of liquidation the
General Partner or other liquidator shall determine that an immediate sale of
part or all of the Partnership assets could cause undue loss to the Partners,
the liquidator may, in order to avoid loss, but only with the Consent of the
Special Limited Partner, either defer liquidation and retain all or a portion of
the assets or distribute all or a portion of the assets to the Partners in kind.
In the event that the liquidator elects to distribute such assets in kind, the
assets shall first be assigned a value (by appraisal by an independent
appraiser) and the unrealized appreciation or depreciation in value of the
assets shall be allocated to the Partners' Capital Accounts, as if such assets
had been sold, in the manner described in Section 10.2, and such assets shall
then be distributed to the Partners as provided herein. In applying the
preceding sentence, the Project shall not be assigned a value less than the
unamortized principal balance of any loan secured thereby.
Section 15.5 Liquidation Statement. Each of the Partners shall be furnished
with a statement prepared or caused to be prepared by the General Partner or
other liquidator, which shall set forth the assets and liabilities of the
Partnership as of the date of complete liquidation. Upon compliance with the
distribution plan as outlined in Sections 15.3 and 15.4, the Limited Partner and
Special Limited Partner shall cease to be such and the General Partner shall
execute, acknowledge and cause to be filed those certificates referenced in
Section 15.6.
Section 15.6 Certificates of Dissolution: Certificate of Cancellation of
Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the Secretary of
State of Oklahoma, a certificate of dissolution. The certificate of dissolution
shall set forth the Partnership's name, the Secretary of State's file number for
the Partnership, the event causing the Partnership's dissolution and the date of
the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs,
the General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of Oklahoma, a certificate of cancellation
of the Certificate of Limited Partnership. The certificate of cancellation of
the Certificate of Limited Partnership shall set forth the Partnership's name,
the Secretary of State's file number for the Partnership, and any other
information which the General Partner determines to include therein.
46
<PAGE>
ARTICLE XVI
AMENDMENTS
This Agreement may be amended at any time by the mutual consent of the Partners.
This Agreement may not be amended by the General Partner absent the Consent of
the Special Limited Partner. Notwithstanding the foregoing, no amendment shall
change the Partnership to a general partnership; extend the term of the
Partnership beyond the date provided for in this Agreement; modify the limited
liability of the Limited Partner and the Special Limited Partner; allow the
Limited Partner to take control of the Partnership's business within the meaning
of the Act; reduce or defer the realization of any Partner's interest in
allocations, Distributions, capital or compensation hereunder, or increase any
Partner's obligations hereunder, without the consent of the Partner so affected;
or change the provisions of this Article XVI.
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. Notwithstanding
the foregoing, the Limited Partner may, without the concurrence of the General
Partner:
(1) Approve or disapprove, but, except as otherwise
expressly provided herein, not initiate, the Sale or Refinancing of the Project;
(2) Remove the General Partner and elect a substitute
General Partner as provided in this Agreement;
(3) Elect a successor General Partner upon the
Withdrawal of the General Partner;
(4) Approve or disapprove, but not initiate, the
dissolution of the Partnership; or
(5) Subject to the provisions of Article XVI hereof,
amend this Agreement.
(b) On any matter where the Limited Partner has the right to vote,
votes may only be cast at a duly called meeting of the Partnership or through
written action without a meeting.
(c) The Special Limited Partner shall have the right to consent to
those actions or inactions of the Partnership and/or General Partner as
otherwise set forth in this Agreement, and the General Partner is prohibited
from any action or inaction requiring such consent unless such consent has been
obtained.
47
<PAGE>
Section 17.2 Meeting of Partnership. Meetings of the Partnership may
be called either (a) at any time by the General Partner; or (b) upon the General
Partner's receipt of a written or facsimile request from the Limited Partner
setting forth the purpose of such meeting. Within ten days after receipt of the
Limited Partner's written or facsimile request for a meeting, the General
Partner shall provide all Partners with written notice of the meeting (which
shall be by telephone conference, or at the principal place of business of the
Partnership or such other location referenced in the notice) to be held not less
than 15 days nor more than 30 days after receipt of such written or facsimile
request from the Limited Partner, which notice shall specify the time and place
of such meeting and the purpose or purposes thereof. If the General Partner
fails to provide the written notice of the meeting within ten days after receipt
of the Limited Partner's request to hold a meeting, then the Limited Partner may
provide the written notice of the meeting to all the Partners, which notice
shall specify the time and place of such meeting and the purpose or purposes
thereof. All meetings and actions of the Limited Partner shall be governed in
all respects, including matters relating to notice, quorum, adjournment,
proxies, record dates and actions without a meeting, by the applicable
provisions of the Act, as it shall be amended from time to time.
Section 17.3 Notices. Any notice given pursuant to this Agreement may
be served personally on the Partner to be notified, or may be mailed, first
class postage prepaid, to the following address, or to such other address as a
party may from time to time designate in writing:
To the General Partner: COWEN PROPERTIES, INC.
1140 NW 63rd, Suite 400W
Oklahoma City, OK 73116
To the Limited Partner: WNC Housing Tax Credit VI, L.P., Series 5
3158 Redhill Avenue, Suite 120
Costa Mesa, CA 92626-3416
To the Special Limited Partner: WNC Housing, L. P.
3158 Redhill Avenue, Suite 120
Costa Mesa, CA 92626-3416
Section 17.4 Successors and Assigns. All the terms and conditions of
this Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the Partners.
48
<PAGE>
Section 17.5 Recording of Certificate of Limited Partnership If the
General Partner should deem it advisable to do so, the Partnership shall record
in the office of the County Recorder of the county in which the principal place
of business of the Partnership is located a certified copy of the Certificate of
Limited Partnership, or any amendment thereto, after such Certificate or
amendment has been filed with the Secretary of State of Oklahoma.
Section 17.6 Amendment of Certificate of Limited Partnership.
(a) The General Partner shall cause to be filed, within 30 days after the
happening of any of the following events, an amendment to the Certificate of
Limited Partnership reflecting the occurrence thereof:
(1) A change in the name of the Partnership.
(2) A change in the street address of the Partnership's principal executive
office.
(3) A change in the address, or the Withdrawal, of a General Partner, or a
change in the address of the agent for service of process, or appointment of a
new agent for service of process.
(4) The admission of a General Partner and that Partner=s address.
(5) The discovery by the General Partner of any false or erroneous material
statement contained in the Certificate of Limited Partnership or any amendment
thereto.
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the General
Partner determines.
(c) The General Partner shall cause the Certificate of Limited Partnership
to be amended, when required or permitted as aforesaid, by filing a certificate
of amendment thereto in the office of, and on a form prescribed by, the
Secretary of State of the State. The certificate of amendment shall set forth
the Partnership's name, the Secretary of State's file number for the Partnership
and the text of the amendment.
Section 17.7 Counterparts This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument which may sufficiently be
evidenced by one counterpart
Section 17.8 Captions. Captions to and headings of the Articles,
Sections and subsections of this Agreement are solely for the conveniences of
the parties, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
Section 17.9 Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
49
<PAGE>
Section 17.10 Tax Matters Partners. All the Partners hereby agree that the
Special Limited 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 the Special Limited Partner shall
withdraw from the Partnership or become Bankrupt, the General Partner shall
thereafter be the "Tax Matters Partner". If the Tax Matters Partner shall
determine to litigate any administrative determination relating to federal
income tax matters, it shall litigate such matter in such court as the Tax
Matters Partner shall decide in its sole discretion. In discharging its duties
and responsibilities, the Tax Matters Partner shall act as a fiduciary (i) to
the Limited Partner (to the exclusion of the other Partners) insofar as tax
matters related to the Tax Credits are concerned, and (ii) to all of the
Partners in other respects. The Limited Partner will make no claim against the
Partnership in respect of any action or omission by the Tax Matters Partner
during such time as the Special Limited Partner acts as the Tax Matters Partner.
Section 17.11 Number and Gender. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the Person or Persons may require.
Section 17.12 Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof and
all prior understandings and agreements between the parties, written or oral,
respecting this transaction are merged in this Agreement.
Section 17.13 Governing Law. This Agreement and its application shall be
governed by the laws of the State of Oklahoma.
Section 17.14 Attorney's Fees If a suit or action is instituted in
connection with an alleged breach of any provision of this Agreement, the
prevailing party shall be entitled to recover, in addition to costs, such sums
as the court may adjudge reasonable as attorney's fees, including fees on any
appeal.
Section 17.15 Receipt of Correspondence. The Partners agree that the
General Partner shall send to the Limited Partner and the Special Limited
Partner a copy of any correspondence relative to the Project's noncompliance
with the Mortgage Note, relative to the acceleration of the Mortgage Note and/or
relative to the disposition of the Project.
Section 17.16 Security Interest and Right of Set-Off. As security for the
performance of the respective obligations to which any Partner may be subject
under this Agreement, the Partnership shall have (and each Partner hereby grants
to the Partnership) a security interest in all funds distributable to said
Partner to the extent of the amount of such obligation.
50
<PAGE>
IN WITNESS WHEREOF, this Agreement of Limited Partnership of EL RENO
HOUSING ASSOCIATES LIMITED PARTNERSHIP, an Oklahoma limited partnership, is made
and entered into as of the 15 day of January, 1998.
GENERAL PARTNER
COWEN PROPERTIES, INC.
By: /s/ E. Allen Cowen, II
E. Allen Cowen, II, President
WITHDRAWING ORIGINAL LIMITED PARTNER
By: /s/ E. Allen Cowen, II
E. Allen Cowen II
LIMITED PARTNER
WNC Housing Tax Credit Fund VI, L.P., Series 5
By: WNC & Associates, Inc.
General Partner
By: /s/ David N. Shafer
President
SPECIAL LIMITED PARTNER
WNC Housing, L.P.
By: WNC & Associates, Inc.
General Partner
By: /s/ David N. Shafer
President
51
<PAGE>
EXHIBIT B TO PARTNERSHIP AGREEMENI'
FORM OF LEGAL OPINION
RE: EL RENO HOUSING ASSOCIATES A LIMITED PARTNERSHIP
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC HOUSING TAX CREDIT FUND VI, L.P., SERIES
5, a California limited partnership (the "Limited Partner") in EL RENO HOUSING
ASSOCIATES A LIMITED PARTNERSHIP (the "Partnership"), a Oklahoma limited
partnership formed to own, develop, construct, finance and operate an apartment
complex for low-income persons (the "Apartment Complex") in El Reno , Canadian
County, Oklahoma. The general partner of the Partnership is COWEN PROPERTIES,
INC., AN OKLAHOMA CORPORATION (the "General Partner").
In rendering the opinions stated below, we have examined and relied
upon the following:
(i) [Certificate of Limited Partnership];
(ii) [Agreement of Limited Partnership] (the "Partnership Agreement");
(iii) A preliminary reservation letter from [State
Allocating Agency] (the "State Agency") dated
____________, 199___ conditionally awarding
$____________, in Federal Tax Credits annually for
each of ten years for the Apartment Complex; and
(iv) Such other documents, records and instruments as we
have deemed necessary in order to enable us to
render the opinions referred to in this letter.
For purposes of rendering the opinions stated below we have assumed
that, in those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, that (a) the document
reviewed by us is an original document, or a true and accurate copy of the
original document, and has not been subsequently amended, (b) the signatures on
each original document are genuine, and (c) each party who executed the document
had proper authority and capacity
B-1
<PAGE>
Based on the foregoing we are of the opinion that:
(a) Cowen Properties, Inc., the General Partner, is a corporation
duly formed and validly existing under the laws of the State of Oklahoma and has
full power and authority to enter into and perform its obligations under the
Partnership Agreement.
(b) The Partnership is a limited partnership duly formed and
validly existing under the laws of the State of Oklahoma.
(c) The Partnership is validly existing under and subject to the laws
of Oklahoma with full power and authority to own, develop,
[construct/rehabilitate], finance and operate the Apartment Complex and to
otherwise conduct business under the Partnership Agreement.
(d) Execution of the Partnership Agreement by the General Partner has
been duly and validly authorized by or on behalf of the General Partner and,
having been executed and delivered in accordance with its terms, the Partnership
Agreement constitutes the valid and binding agreement of the General Partner,
enforceable in accordance with its terms.
(e) The execution and delivery of the Partnership Agreement by the
General Partner does not conflict with and will not result in a breach of any of
the terms, provisions or conditions of any agreement or instrument known to
counsel to which any of the General Partner or the Partnership is a party or by
which any of them may be bound, or any order, rule, or regulation to be
applicable to any of such parties of any court or governmental body or
administrative agency having jurisdiction over any of such parties or over the
property.
(f) To the best of counsel=s knowledge, after due inquiry, there is
no litigation or governmental proceeding pending or threatened against, or
involving the Apartment Complex, the Partnership or any General Partner which
would materially adversely affect the condition (financial or otherwise) or
business of the Apartment Complex, the Partnership or any of the Partners of the
Partnership
(g) The Limited Partner and the Special Limited Partner have been
admitted to the Partnership as limited partners of the Partnership under
Oklahoma law and are entitled to all of the rights of limited partners under the
Partnership Agreement. Except as described in the Partnership Agreement, no
person is a partner of or has any legal or equitable interest in the
Partnership, and all former partners of record or known to counsel have validly
withdrawn from the Partnership and have released any claims against the
Partnership arising out of their participation as partners therein.
(h) Liability of the Limited Partner for obligations of the
Partnership is limited to the amount of the Limited Partner's capital
contributions required by the Partnership Agreement.
(i) Neither the General Partner(s) of the Partnership nor the Limited
Partner nor the Special Limited Partner will have any liability for the Mortgage
Note or the Mortgage Loan represented thereby (as those terms are defined in the
Partnership Agreement, and the lender of the Mortgage Loan will look only to its
security in the Apartment Complex for repayment of the Mortgage Loan.
B-2
<PAGE>
(j) The Partnership owns a fee simple interest in the
Apartment Complex.
(k) To the best of our actual knowledge and belief, after due
inquiry, the Partnership has obtained all consents, permissions, licenses,
approvals, or orders required by all applicable governmental or regulatory
agencies for the development, [construction/rehabilitation] and operation of the
Apartment Complex, and the Apartment Complex conforms to all applicable Federal,
state and local land use, zoning, health, building and safety laws, ordinances,
rules and regulations.
(1) The Apartment Complex has obtained a preliminary reservation of
low income housing tax credits ("LIHTC") from the State Agency. The final
allocation of the LIHTC and ultimately eligibility of the Apartment Complex for
such final allocation are subject to a series of requirements which must be met,
performed or achieved at various times prior to and after such final allocation.
Assuming all such requirements are met, performed or achieved at the time or
times provided by applicable laws and regulations, the Apartment Complex will
qualify for LIHTC.
All of the opinions set forth above are qualified to the extent that
the validity of any provision of any agreement may be subject to or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. We do not express any opinion as to
the availability of any equitable or specific remedy upon any breach of any of
the covenants, warranties or other provisions contained in any agreement. We
have not examined, and we express no opinion with respect to, the applicability
of, or liability under, any Federal, state or local law, ordinance or regulatory
governing or Federal, state or local law, ordinance or regulation governing or
pertaining to environmental matters, hazardous wastes, toxic substances or the
like.
We express no opinion as to any matter except those set forth above. These
opinions are rendered for use by the Limited Partner and its legal counsel which
will rely on this opinion in connection with federal income tax opinions to be
rendered by that firm. This opinion may not be delivered to or relied upon by
any other person or entity without our express written consent.
Sincerely,
_______________________
B-3
<PAGE>
EXHIBIT C TO PARTNERSHIP AGREEMENT
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by EL
RENO HOUSING ASSOCIATES A LIMITED PARTNERSHIP, a Oklahoma limited partnership
(the "Partnership"); COWEN PROPERTIES, INC., AN OKLAHOMA CORPORATION (the
"General Partner"); and E. ALLEN COWEN ("Original Limited Partner") far the
benefit of WNC Housing Tax Credit Fund VI, L.P., Series 5, a California limited
partnership (the "Investment Partnership"), and WNC & Associates, Inc. ("WNC").
WHEREAS, the Partnership proposes to admit the Investment Partnership
as a limited partner thereof pursuant to an Amended Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement"), in accordance with
which the Investment Partnership will make substantial capital contributions to
the Partnership; and
WHEREAS, the Investment Partnership and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partnership in the Partnership;
NOW, THEREFORE, to induce the Investment Partnership to enter into
the Partnership Agreement and become a limited partner of the Partnership, and
for $1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership, the General Partner and the
Original Limited Partner hereby agree as follows for the benefit of the
Investment Partnership and WNC.
1. Representations Warranties and Covenants of the Partnership
the General Partner and the Original Limited Partner
The Partnership, the General Partner and the Original Limited Partner
jointly and severally represent, warrant and certify to the Investment
Partnership and WNC that, with respect to the Partnership, as of the date
hereof:
1.1 The Partnership is duly organized and in good standing as
a limited partnership pursuant to the laws of the state of Oklahoma with full
power and authority to own its apartment
complex (the "Apartment Complex") and conduct its business; the Partnership, the
General Partner and the Original Limited Partner have the power and authority to
enter into and perform this Certification and Agreement; the execution and
delivery of this Certification and Agreement by the Partnership, the General
Partner and the Original Limited Partner have been duly and validly authorized
by all necessary action; the execution and delivery of this Certification and
Agreement , the fulfillment of its terms and consummation of the transactions
contemplated hereunder do not and will not conflict with or result in a
violation, breach or termination of or constitute a default under (or would not
result in such a conflict, violation, breach, termination or default with the
giving of notice or passage of time or both) any other agreement, indenture or
instrument by which the Partnership or any General Partner or Original Limited
Partner is bound or any law, regulation, judgment, decree or order applicable to
the Partnership or any General Partner or Original Limited Partner or any of
their respective properties; this Certification and Agreement constitutes the
valid and binding agreement of the Partnership, the General Partner and the
Original Limited Partner, enforceable against each of them in accordance with
its terms.
C-1
<PAGE>
1.2 The General Partner has delivered to the Investment
Partnership, WNC or their affiliates all documents and information which would
be material to a prudent investor in deciding whether to invest in the
Partnership. All factual information provided to the Investment Partnership, WNC
or their affiliates either in writing or orally, did not, at the time given, and
does not, on the date hereof, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they are made.
1.3 Each of the representations and warranties contained in
the Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership
and the General Partner contained in the Partnership Agreement has been duly
performed to the extent that performance of any covenant or agreement is
required on or prior to the date hereof.
1.5 All conditions to admission of the Investment
Partnership as the investment Limited partner of the Partnership contained in
the Partnership Agreement have been satisfied.
1.6 No default has occurred and is continuing under the
Partnership Agreement or any of the Project Documents (as such term is
defined in the Partnership Agreement) for the Partnership.
1.7 The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits or the revised Annual Tax Credits, if applicable.
1.8 The General Partner agrees to take all actions necessary
to claim the Projected Tax Credit, including, without limitation, the filing of
Form(s) 8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds
any equity interest in the Apartment Complex.
1.10 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.
1.11 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.
1.12 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.
1.13 No General Partner is related in any manner to the
Investment Partnership, nor is any General Partner acting as an agent of the
Investment Partnership.
C-2
<PAGE>
2. Miscellaneous
2.1 This Certification and Agreement is made solely for the
benefit of the Investment Partnership and WNC, and their respective successors
and assignees, and no other person shall acquire or have any right under or by
virtue of this Agreement.
2.2 This Certification and Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, all of
which together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this
Certification Agreement shall have the meanings given to them in the Partnership
Agreement.
IN WITNESS WHEREOF, this Certificate and Agreement is made and
entered into as of the 15 day of January, 1998.
PARTNERSHIP
EL RENO HOUSING ASSOCIATES A LIMITED PARTNERSHIP
COWEN PROPERTIES, INC., AN OKLAHOMA CORPORATION (General Partner)
By: ________________________________
E. Allen Cowen, II
President
GENERAL PARTNER
COWEN PROPERTIES, INC., AN OKLAHOMA CORPORATION
By: _____________________________
E. Allen Cowen II
President
ORIGINAL LIMITED PARTNER
By: ______________________________
E. Allen Cowen II
C-3
<PAGE>
EXHIBIT D TO THE PARTNERSHIP AGREEMENT
GENERAL PARTNER CERTIFICATION
This General Partner Certification is being issued to WNC HOUSING TAX
CREDIT FUND VI, L.P., SERIES 5 ("Limited Partner@) by COWEN PROPERTIES, INC., AN
OKLAHOMA CORPORATION, General Partner of EL RENO HOUSING ASSOCIATES A LIMITED
PARTNERSHIP, a Oklahoma limited partnership ("Partnership") in accordance with
Section 7.2 of the Amended and Restated Agreement of Limited Partnership of the
Partnership ("Partnership Agreement")
Capitalized terms used but not defined in this General Partner
Certification shall have the meanings given to them in the Partnership Agreement
WHEREAS, the Limited Partner is scheduled to make a Capital
Contribution to the Partnership;
WHEREAS, the Partnership Agreement requires the General Partner to
issue this Certification prior to the Limited Partner's payment; and
WHEREAS, the Limited Partner shall rely on this Certification in
evaluating the continued merits of its investment in the Partnership;
NOW, THEREFORE, to induce the Limited Partner to make its scheduled
Capital Contribution to the Partnership, the General Partner represents and
warrants to the Limited Partner that the following are true and correct as of
the date written below:
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof.
(c) Improvements will be completed in a timely and workmanlike manner
in accordance with all applicable requirements of the Mortgage Loan, all
applicable requirements of all appropriate governmental entities and the plans
and specifications of the Project that have been or shall be hereafter approved
by the Lender, if required, and all applicable governmental entities, as such
plans and specifications may be changed from time to time with the approval of
the Lender and any applicable governmental entities, if such approval shall be
required.
(d) The Project is being operated in accordance with standards and
procedures which are prudent and customary for the operation of properties
similar to the Project.
(e) Additional Improvements on the Project, if any, shall be
completed substantially in conformity with the Project Documents and any other
requirements necessary to obtain Completion of Construction.
D-1
<PAGE>
(f) No Partner has or will have any personal liability with respect
to, or has or will have personally guaranteed the payment of, the Mortgage.
(g) The Partnership is in compliance with all construction and use
codes applicable to the Project and is not in violation of any zoning,
environmental or similar regulations applicable to the Project.
(h) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Project at the time of first occupancy
and throughout the term of the Partnership.
(i) The Project has obtained, or will obtain before Permanent
Mortgage Commencement, and will maintain throughout the term of this Partnership
Insurance written by an Insurance Company.
(j) The Partnership owns the fee simple interest in the Project.
(k) The Construction Contract has been entered into between the
Partnership and the Contractor; no other consideration or fee shall be paid to
the Contractor other than amounts set forth in the Construction Contract
(1) A builder's risk insurance policy in favor of the Partnership
will be and is in full force and effect until Completion of Construction.
(m) Except as otherwise disclosed to the Limited Partner and the
Special Limited Partner in writing prior to the execution of the Partnership
Agreement, to the best of the General Partner's knowledge: (1) no Hazardous
Substance has been disposed of, or released to or from, or otherwise now exists
in, on, under or around, the Project and (2) no aboveground or underground
storage tanks are now or have ever been located on or under the Project. The
General Partner will not install or allow to be installed any aboveground or
underground storage tanks on the Project. The General Partner covenants that the
Project shall be kept free of Hazardous Materials and shall not be used to
generate, manufacture, refine, transport, treat, store, handle, dispose of,
transfer, produce or process Hazardous Materials, except in connection with the
normal maintenance and operation of any portion of the project. The General
Partner shall comply, or cause there to be compliance, with all applicable
Federal, state and local laws, ordinances, rules and regulations with respect to
Hazardous Materials and shall keep, or cause to be kept, the Project free and
clear of any liens imposed pursuant to such laws, ordinances, rules and
regulations. The General Partner must promptly notify the Special Limited
Partner in writing (3) if it knows, or suspects or believes there may be any
Hazardous Substance in or around any part of the Project, any Improvements
constructed on the Project, or the soil, groundwater or soil vapor, (4) if the
General Partner or the Partnership may be subject to any threatened or pending
investigation by any governmental agency under any law, regulation or ordinance
pertaining to any Hazardous Substance, and (5) of any claim made or threatened
by any Person, other than a governmental agency, against the Partnership or
General Partner arising out of or resulting from any Hazardous Substance being
present or released in, on or around any part of the Project.
(n) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of the Partnership Agreement.
(o) The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits.
D-2
<PAGE>
(p) No charges or encumbrances exist with respect to the Project
other than those which are created or permitted by the Project Documents or are
noted or excepted in the title policy for the Project.
(q) The buildings on the Project site constitute or shall constitute
a Aqualified low-income housing project" as defined in Section 42(g) of the
Code, and as amplified by the Treasury Regulations thereunder. In this
connection, not later than December 31 of the first year in which the Partners
elect the LIHTC to commence in accordance the Code, the Project will satisfy the
Minimum Set-Aside Test.
(r) All accounts of the Partnership required to be maintained under
the terms of the Project Documents, including, without limitation, any reserves
in accordance with Article VIII hereof, are currently funded to required levels,
including levels required by any authority.
(s) 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.
(t) No event has occurred which constitutes a material default
under any of the Project Documents.
(u) No event has occurred which has caused, and the General Partner
has not acted in any manner which will cause (1) the Partnership to be treated
for federal income tax purposes as an association taxable as a corporation, (2)
the Partnership to fail to qualify as a limited partnership under the Act, or
(3) the Limited Partner to be liable for Partnership obligations, provided
however, that the General Partner shall not be in breach of this representation
if all or a portion of a Limited Partner's agreed upon Capital Contributions are
used to satisfy the Partnership's obligations to creditors of the Partnership
and such action by the General Partner is otherwise authorized under this
Agreement and, provided further, that the General Partner shall not be in breach
of this representation if the action causing the Limited Partner to be liable
for the Partnership obligations is undertaken by the Limited Partner.
(v) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Project, has
occurred the continuing effect of which has: (1) materially or adversely
affected the operation of the Partnership or the Project; (2) materially or
adversely affected the ability of the General Partner to perform its obligations
hereunder or under any other agreement with respect to the Project; or (3)
prevented the completion of construction of the Improvements in substantial
conformity with the Project Documents, other than legal proceedings which have
been bonded against (or as to which other adequate financial security has been
issued) in a manner as to indemnify the Partnership against loss; provided that
the foregoing does not apply to matters of general applicability which would
adversely affect the Partnership, the General Partner, Affiliates of the General
Partner or the Project only insofar as they or any of them are part of the
general public.
(w) Neither the Partnership nor the General Partner has any
liabilities, contingent or otherwise, which have not been disclosed in writing
to the Limited Partner and the Special Limited Partner and which in the
aggregate affect the ability of the Limited Partner to obtain the anticipated
benefits of its investment in the Partnership.
D-3
<PAGE>
(x) The General Partner, or a guarantor acceptable to the Special
Limited Partner, has and shall maintain a net worth equal to at least $1,000,000
computed in accordance with generally accepted accounting principles.
IN WITNESS WHEREOF, the undersigned have set their hands to this
General Partner Certification this 15 day of January 1998.
COWEN PROPERTIES, INC., AN OKLAHOMA CORPORATION
By: _______________________________
E. Allen Cowen, II, President
D-4
<PAGE>
EXHIBIT E TO PARTNERSHIP AGREEMENT
FORM OF COMPLETION CERTIFICATE
(to be used when construction completed)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State of
Oklahoma, has prepared final working plans and detailed specifications for EL
RENO HOUSING ASSOCIATES LIMITED PARTNERSHIP, an Oklahoma limited partnership
(the "Partnership"), between WNC Housing Tax Credit Fund VI, L.P., Series 5, an
California limited partnership ("Limited Partner") and the Partnership in
connection with the construction [rehabilitation] of improvements on certain
real property located in El Reno, Canadian, Oklahoma (the "Improvements").
The undersigned hereby certifies (i) that the Improvements have been completed
in accordance with the aforesaid plans and specifications, (ii) that a permanent
certificate of occupancy and all other permits required for the continued use
and occupancy of the Improvements have been issued with respect thereto by the
governmental agencies having jurisdiction thereof, (iii) that the Improvements
are in compliance with all requirements and restrictions of all governmental
authorities having jurisdiction over the Improvements, including, without
limitation, all applicable zoning, building, environmental, fire, and health
ordinances, rules and regulations and (iv) that all contractors, subcontractors
and workmen who worked on the Improvements have been paid in full except far
normal retainages and amounts in dispute.
Project Architec: _______________________________________
Date:________________
Confirmed by: Cowen Properties, Inc.
General Partner
_________________________________
E. Allen Cowen II, President
Date:______________
E-1
<PAGE>
EXHIBIT F TO THE PARTNERSHIP
[ACCOUNTANT' S CERTIFICATE]
[Accountant's Letterhead]
______________, 199___
RE: Partnership Certification as the Amount of Eligible Tax Credit Base
Gentlemen:
In connection with the acquisition by WNC Housing Tax Credit Fund VI, L.P.,
Series 5 (the "Limited Partner") of a limited partnership interest in EL RENO
HOUSING ASSOCIATES LIMITED PARTNERSHIP, a Oklahoma limited partnership (the
"Partnership") which owns a certain parcel of land located in El Reno, Canadian
County, Oklahoma and improvements thereon (the "Project"), the Limited Partner
has requested our certification as to the amount of low-income housing tax
credits ("Tax Credits") available with respect to the Project under Section 42
of the Internal Revenue Code of 1986, as amended (the "Code") . Based upon our
review of [the financial information provided by the Partnership] of the
Partnership, we are prepared to file the Federal information tax return of the
Partnership claiming annual Tax Credits in the amount of $_______________, which
amount is based on an eligible basis (as defined in Section 42(d) of the Code)
of the Project of $_______________ a qualified basis (as defined in Section
42(c) of the Code) of the Project of $________________ and an applicable
percentage (as defined in Section 42(b) of the Code) of
Sincerely,
___________________________
F-1
<PAGE>
HUGHES VILLA LIMITED PARTNERSHIP
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
This Second Amended and Restated Agreement of Limited Partnership is made
and entered into as of the 1st day of August, 1997, by and among the undersigned
parties.
WHEREAS Billy W. Bunn, an individual resident of the State of Arkansas,
as the partner, and Kathie L. Bunn also an individual resident of the State of
Arkansas, as limited partner, entered into a limited partnership agreement dated
November 15, 1993 pursuant to the Arkansas Revised Limited Partnership Act, to
form Hughes Villa Limited Partnership the "Partnership"), which Agreement was
filed in the of Secretary of State of the State of Arkansas on November 22, 1993
and which agreement was amended by an Amended Limited Partnership Agreement
dated July 14, 1994, which was filed on July 14, 1994; and which agreement was
again amended by an Amended and Restated Agreement of Limited Partnership dated
April 29, 1996, and filed of record on June 4, 1996;
AS the Partnership has been formed to develop, construct, own, maintain
and operate a 21-unit multifamily housing development in Hughes, Arkansas, 40%
of such dwelling units being set aside for rental to persons with incomes of not
more than 60% of the median income for the area in which the Apartment
Development is located ("Eligible Occupants") and the Apartment Development will
be eligible for an annual Tax Credit of approximately 4.00% of the Apartment
Development's estimated Qualified Basis, as provided in Section 42(g) of the
Internal Revenue Code of 1986 (the "Code"), to be known as Hughes Villa (the
"Housing Development"); and
WHEREAS the Partnership has received a construction loan for the Housing
Development in the principal amount of $768,015; and
WHEREAS the Partnership has received a written commitment for a permanent
mortgage loan in the amount of $384,000 for a term of 30 years at an interest
rate of 6% to be provided by Arkansas Development Finance Authority and a second
permanent mortgage loan in the amount of $384,015 for a term of 50 years at an
effective interest rate of 1% to be provided by Rural Housing Community
Development Service ("RHCDS") of the United States Department of Agriculture.
The Apartment Development is expected to be eligible for a low-income housing
credit pursuant to Section 42 of the Internal Revenue Code of 1986 (the "Tax
Credit") as well as certain interest credits and rental assistance payments; and
<PAGE>
WHEREAS the Partnership anticipates that the Housing Development will
qualify for the low-income housing tax credit provided for in Section 42 of the
Code (the "Tax Credit") and it is anticipated that the annual Tax Credit
available to the Partnership (the "Projected Tax Credit") will be (i) $4,451 for
1996; (ii) $39,560 each for years 1997 to 2005; and (iii) $35,109 of the year
2006. The state housing finance agency which has jurisdiction over the
allocation of Tax Credit for the Apartment Development (the "State Agency") has
received an application for Tax Credit for the Apartment Development in an
annual amount of $39,560. The Limited Partner will be allocated 99% of the Tax
Credit, or $39,164. The Tax Credit that will be allocated after the Apartment
Development is placed in service will not exceed $39,560 per year; and
WHEREAS the parties entered into an Amended and Restated Agreement and
Certificate of Limited Partnership to (i) continue the Partnership, (ii) admit
Landau, an Arkansas corporation (the "Investment Corporation"), to the
Partnership as a limited partner pursuant to the conditions set forth herein
relating to its Capital Contribution and qualification of the Housing
Development for the Tax Credit, which is the essence of this Agreement, (iii)
effect the withdrawal of the Initial Limited Partner from the Partnership, (iv)
reallocate certain Interests in the Partnership, (v) restate all of the
provisions governing the Partnership, and (vi) cause the Partnership and its
General Partner to become contractually bound to furnish certain information to,
and cooperate with the Investment Corporation. This Second Amended and Restated
Agreement of Limited Partnership will be filed with the office of the Secretary
of State of the State of Arkansas.
The parties now desire to enter into this Second Amended and Restated
Agreement of Limited Partnership to (i) modify Section 10.06(b) of Amended and
Restated Agreement; (ii) delete Section 4.01(v) of Amended and Restated
Agreement; (iii) accept revised Exhibit C - Legal Opinion to delete provision
(g); (iv) to remove terminology AInvestment Partner/Partnership@; (v) to modify
Section 6.07(a) and (b); and (vi) to modify 4.01(dd). All other terms and
provisions of the Amended and Restated Agreement which are not specifically
stated herein are incorporated herein by this reference.
NOW, THEREFORE, in consideration of the foregoing, of mutual promises of
the parties hereto and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
to continue the Partnership pursuant to the Act, as set forth in this Agreement,
which reads in its entirety as herein provided.
2
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINED TERMS.................................... 5
ARTICLE II CONTINUATION OF THE PARTNERSHIP
2.01 Continuation........................................ 17
2.02 Name................................................ 17
2.03 Principal Executive Offices......................... 17
2.04 Term................................................ 17
2.05 Agent for Service of Process........................ 17
2.06 Filing of Certificate............................... 17
ARTICLE III PURPOSE AND BUSINESS OF THE PARTNERSHIP
3.01 Purpose of the Partnership.......................... 18
3.02 Authority of the Partnership........................ 18
3.03 Certain RHCDS Requirements.......................... 19
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE GENERAL PARTNER
4.01 Representations, Warranties and Covenants Relating to
the Apartment Development and the Partnership....... 20
4.02 No Duty to Investigate.............................. 30
ARTICLE V PARTNERSHIP INTERESTS AND CAPITAL CONTRIBUTIONS
5.01 Original Partners' Partnership Interests............ 30
5.02 Capital Contribution of the Investment Partnership.. 30
5.03 Withholding of Capital Contribution Upon Default.... 34
5.04 Return of Partners' Capital Contributions........... 35
ARTICLE VI RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL
PARTNER
6.01 Management of the Partnership...................... 36
6.02 Limitations Upon the Authority of the General
Partner............................................ 36
6.03 Delegation of Authority............................ 39
6.04 General Partner or Affiliates Dealing with the
Partnership........................................ 39
6.05 Other Activities................................... 40
6.06 Liability for Acts and Omissions................... 40
3
<PAGE>
TABLE OF CONTENTS (continued)
6.07 Indemnities........................................ 41
6.08 Payment of Development Costs and Excess Development
Costs.............................................. 42
6.09 Annual Priority Distributions, Operating Deficit Loans
and Tax Credit Reduction Amount Reimbursement...... 43
6.10 Other Loans to the Partnership..................... 44
6.11 Withholding of Fce Payments........................ 44
6.12 Cost Savings....................................... 45
6.13 Property Management Agent.......................... 45
6.14 Reports to Investment Corporation.................. 46
6.15 Rent Increases..................................... 48
ARTICLE VII CHANGES IN GENERAL PARTNER
7.01 Withdrawal of a General Partner.................... 48
7.02 Effect of Bankruptcy or Legal Disability of a General
Partner............................................ 49
7.03 Removal of General Partner......................... 50
7.04 Admission of a Successor or Additional General
Partner............................................ 52
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNER
8.01 No Management Powers............................... 53
8.02 Limitation on liability of Limited Partner......... 54
8.03 Other Activities................................... 55
ARTICLE IX TRANSFERS OF AND RESTRICTIONS ON TRANSFERS OF
RIGHTS OF LIMITED PARTNER
9.01 Purchase for Investment............................ 55
9.02 Restrictions on Transfer of Limited Partner's
Interests.......................................... 56
9.03 Admission of Substitute Limited Partner............ 56
ARTICLE X PROFITS, LOSSES, CREDITS AND DISTRIBUTIONS
10.01 Capital Accounts................................... 57
10.02 Determination of Profits, Losses and Credits....... 58
10.03 Allocation of Profits, Losses and Credits.......... 60
10.04 Allocations in Case of Transfer of Interests....... 62
10.05 Authority of General Partner to vary Allocations
to Preserve and Protect Partners' Intent........... 62
10.06 Distributions of Net Cash Flow..................... 63
10.07 Distribution of Sale and Refinancing Proceeds...... 64
10.08 Liquidation Proceeds............................... 65
10.09 Tax Matters Partner................................ 66
10.10 Tax Accounting..................................... 67
4
<PAGE>
TABLE OF CONTENTS (continued)
ARTICLE XI DISSOLUTION AND LIQUIDATION
11.01 Dissolution of the Partnership....................68
11.02 Winding Up and Distribution.......................68
ARTICLE XII BOOKS AND RECORDS, ACCOUNTING, TAX ELECTIONS, ETC.
12.01 Books and Records.................................69
12.02 Bank Accounts.....................................69
12.03 Accountants.......................................70
12.04 Reports to Partners...............................70
12.05 Fiscal Year and Accounting Method.................72
ARTICLE XIII GENERAL PROVISIONS
13.01 Arbitration .....................................72
13.02 Amendments........................................72
13.03 Burden and Benefit................................72
13.04 Applicable Law....................................73
13.05 Counterparts......................................73
13.06 Severability of Provisions ......................73
13.07 Entire Agreement..................................73
13.08 Use 0f Singular and Plural........................73
13.09 Notices to the Investment Partnership.............73
5
<PAGE>
ARTICLE I
DEFINED TERMS
In addition to the abbreviations employed in the preamble to this
Agreement, the following defined terms used in this Agreement shall have the
meanings specified below:
"Accountants" means such firm of independent certified public
accountants as may be engaged by the General Partner with the consent of the
Investment Corporation to prepare the Partnership income tax returns and
financial statements.
"Act" means the Revised Limited Partnership Act of the State, as amended
from time to time during the term of the Partnership.
"Actual Credit" means, at any time, the amount of the Tax Credit properly
reportable by the Partnership in a calendar year for federal income tax
purposes.
"ADFA" means Arkansas Development Finance Authority, the construction
lender and a permanent finance lender.
"Affiliate" means any Person who (i) directly or indirectly controls,
is controlled by, or is under common control with another Person referred to
herein, (ii) owns or controls 10% or more of the outstanding voting securities
of such other Person, or (iii) is an officer, partner, or trustee of such other
Person.
"Agreement" means this Amended and Restated Agreement and Certificate
of Limited Partnership, as amended from time to time.
"Apartment Development" means the land and the 21-unit multifamily rental
housing development and other improvements to be constructed, owned and operated
thereon by the Partnership, to be known as Hughes Villa.
"Applicable Percentage" shall have the meaning ascribed to it in
Section 42(b) of the Code.
"Bankruptcy" or "Bankrupt" as to any Person means (i) the filing of a
petition for relief as to any such Person as debtor or bankrupt under the
Bankruptcy Act of 1898 or the Bankruptcy Code of 1978 or like provision of law
(except if such petition is contested by such Person and has been dismissed
within 60 days), (ii) insolvency of such Person as finally determined by a court
proceeding, (iii) filing by such Person of a petition or application to
accomplish the same or for the appointment of a receiver or a trustee for such
6
<PAGE>
Person or a substantial part of his assets, or (iv) commencement of any
proceedings relating to such Person under any other reorganization, arrangement,
insolvency, adjustment of debt or liquidation law of any jurisdiction, whether
now in existence or hereinafter in effect, either by such Person or by another,
provided that if such proceeding is commenced by another, such Person indicates
his approval of such proceeding, consents thereto or acquiesces therein, or such
proceeding is contested by such Person and has not been finally dismissed within
60 days.
"Breakeven Operations" means the receipt by the Partnership during a
period of 24 consecutive calendar months after Final Closing of an amount of
monthly rental income (solely from leases of dwelling units which meet the Rent
Restriction Test and are occupied by Qualifying Individuals) which equals or
exceeds all operating expenses incurred during such period including, but not
limited to, maintenance expenses, management fees provided for in Article VI,
required debt service payments, taxes, other assessments, insurance premiums and
the required funding of any replacement reserve.
"Capital Account" shall have the meaning ascribed to it in Section
10.01.
"Capital Contribution" means the total amount of money or other
property contributed to or for the benefit of the Partnership by each Partner
pursuant to the terms of this Agreement. Any reference to the Capital
Contribution of a Partner shall include the Capital Contribution made by a
predecessor holder of the Interest of such Partner.
"Capital Contribution Period" means the period commencing with the
payment of amounts required under Section 5.02(a)(i) and ending with the payment
of amounts required under Section 5.02(a)(iv).
"Certificate" means any certificate of limited partnership or any other
instrument or document which is required under the Act or this Agreement to be
signed and sworn to by any Partners of the Partnership and filed in the
appropriate public offices within the State to perfect or maintain the
Partnership as a limited partnership under the Act, or to protect the limited
liability of the Limited Partner as a limited partner under the Act, or to
indicate the admission of the Investment Partnership as a limited partner of the
Partnership.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any provisions of succeeding law.
"Compliance Period" means the 15-year period under Section 42(i) of the
Code with respect to which the 40-60 Set-Aside Test and the Rent Restriction
7
<PAGE>
Test apply to each building of the Apartment Development, beginning with the
first full calendar year of the Credit Period.
"Consent" means the written consent of a Person to do the act or thing
for which the consent is solicited, or the act of granting such consent, as the
context may require. All communications relating to a consent under this
Agreement shall be in such form as to constitute a Notice.
"Construction Contract" means the construction contract (including all
exhibits and attachments thereto) entered into between the Partnership and the
Contractor, pursuant to which the Apartment Development is being constructed, or
any amendment or modification or substitution thereof.
"Construction Lender" means Arkansas Development Finance Authority in
its capacity as lender of the Construction Loan, or its successors or assigns in
such capacity, or any successor lender of the Construction Loan.
"Construction Loan" means the construction loan made at Initial Closing
by the Construction Lender in the principal amount of $768,030, to bear interest
at the stated rate per annum, evidenced by a promissory note given by the
Partnership to the Construction Lender and secured by a Mortgage and any related
loan agreements, security agreements and financing statements.
"Contractor" means Champion Builders, Inc., which is the general
contractor for the construction of the Apartment Development.
"Counsel for the Partnership" means Wright, Chaney, Berry & Daniel,
P.A..
"Credit Period" means, beginning with the calendar year in which the
Apartment Development (or any building thereof, as applicable under Section
42(g) of the Code) is placed in service, or if so elected, the following year,
the 10-year period in which the Tax Credit is made available to the Partnership
from the Apartment Development or any building therein pursuant to Section 42 of
the Code.
"Developer" means Billy W. Bunn.
"Development Agreement" means the agreement among the Partnership, the
Developer and Landau for the payment by the Partnership of Development Fees in
consideration of costs incurred and development services rendered by the
Developer to the Partnership In developing the Apartment Development, the
provisions of which are herein incorporated by reference and deemed to be a part
hereof.
8
<PAGE>
"Development Fees" shall mean the fees payable to the Developer as provided
in the Development Agreement.
"Eligible Basis" means the adjusted basis of the Apartment Development as
determined by Section 42(d) of the Code.
"Excess Development Costs" means all costs in excess of the proceeds of the
Construction Loan or the Mortgage Loan which are or will be incurred to (i)
complete construction and development of the Apartment Development and (ii)
achieve Initial Closing and Final Closing including, without limitation, (A)
Construction Loan and/or Mortgage Loan discounts or extension fees, (B)interest,
taxes, property insurance or title insurance premiums not payable from
Construction Loan proceeds, (C) construction cost overruns and the cost of any
change orders which are not funded from Construction Loan or Mortgage Loan
proceeds, (D) escrow deposits and/or any other amounts necessary for local
taxes, utilities, insurance premiums and other purposes which are conditions to
the Final Closing, (E) Operating Deficits incurred by the Partnership prior to
Final Closing, and (F) loan assessment fee, or other such fee or fees, as may be
assessed by the RHCDS and which are not payable out of Construction Loan or
Mortgage Loan proceeds, or revenues and rents of the Partnership available at
Final Closing.
"Final Closing" means the date of the making of the Mortgage Loan.
"40/60 Set-Aside Test" means the minimum set-aside test established by
Section 42 of the Code, whereby at least 40% of the dwelling units in the
Apartment Development (or any building thereof, as applicable under Section
42(g) of the Code) must be occupied by individuals with incomes of 60% or less
of area median income, as adjusted for family size.
"General Partner" or "General Partners" means any general partner or,
collectively, all general partners signatory hereto, as the case may be, who, if
there shall be more than one general partner, shall be jointly and severally
liable for all liabilities and obligations imposed hereunder or by the Act on
any General Partner or General Partners.
"GP Questionnaire" means a document so entitled provided to the General
Partner by the Investment Corporation.
"Gross Rent" shall have the meaning ascribed to it by Section 42(g) of the
Code (including, without limitation, any rent surcharges or other charges by
RHCDS and any required utility allowance).
9
<PAGE>
"Initial Closing" means the date upon which the Construction Loan is closed
and the first disbursement of proceeds of the Construction Loan, approved by the
RHCDS, is made to the Partnership.
"Initial Limited Partner" means Kathie L. Bunn.
"Installment" means an installment of the Investment Partnership's Capital
Contribution paid or payable to the Partnership pursuant to Section 5.02(b).
"Investment Corporation" means Landau, an Arkansas corporation, which is a
limited partner of the Partnership.
"Land" means the tract of land in Hughes, Arkansas, upon which the
Apartment Development will be located.
"Legal Disability", "Legally Disabled or similar terms refer to the death,
adjudication of incompetency (which term shall include, but not be limited to,
insanity), or dissolution of any Person, not including Bankruptcy.
"Limited Partner" means the Investment Partnership or a Substitute Limited
Partner in such Person's capacity as a limited partner of the Partnership under
the Act.
"Liquidation Proceeds" means the gross proceeds to the Partnership
resulting from the liquidation of Partnership assets.
"Liquidator" means the General Partner or, if there are none at the time in
question, such other Person who may be appointed in accordance with applicable
law and who shall be responsible for taking all action necessary or appropriate
to wind up the affairs of, and distribute the assets of, the Partnership upon
its dissolution.
"Loan Agreement" means RHCDS Form 1944-34 or any other loan agreement
governing the RHCDS's control over certain aspects of the Apartment Development.
"Management Agent" means the management and rental agent for the Apartment
Development.
"Managing General Partner" means, if there shall be more than one General
Partner signatory hereto, the Person who executes this Agreement at the place
(if any) marked "Managing General Partner" on the signature page and named as
such in the preamble to this Agreement, so long as the Person remains a General
Partner, and in such case the term General Partner shall refer to the Managing
General Partner in any provisions hereof pertaining to the power, authority,
duties, administration or management functions of the General Partner to the
10
<PAGE>
extent the Act permits any general partner to delegate a general partner's power
of management, and the Managing General Partner shall (acting for and on behalf
of the General Partner and the Partnership, in extension and not in limitation
of rights and powers given by the Act) have the right, power and authority to
manage the Partnership business and, to the extent permitted by the Act, perform
all management and administrative functions set forth herein; provided, however,
that any General Partner signatory hereto shall be jointly and severally liable
for any and all obligations under the Act and liabilities imposed upon the
General Partner.
"Mortgage" means, as the context may require, any mortgage constituting a
lien on the Apartment Development given by the Partnership (i) at the Initial
Closing in favor of the Construction Lender or (ii) at the Final Closing in
favor of the RHCDS, to secure the Construction Loan and the Mortgage Loan,
respectively.
"Mortgage Loan" means the nonrecourse mortgage loans in the total principal
amount of $768,030 to be made to the Partnership by ADFA and RHCDS at Final
Closing, which will be evidenced by a nonrecourse promissory note given by the
Partnership to the ADFA and RHCDS and secured by a Mortgage and other related
security documents and financing statements, including the Loan Agreement.
"Net Cash Flow" means a net amount equal to (i) all cash received by the
Partnership in any year from the Apartment Development (other than Liquidation
Proceeds, Sale or Refinancing Proceeds, loan proceeds, Capital Contributions, or
similar receipts not derived from operations) less (ii) RHCDS approved operating
expenses of the Partnership in such year, required repayments of the Mortgage
Loan in such year, required funding in such year of any replacement reserve, and
any other deposits or escrows required by the RHCDS, which net amount is
allowable for distribution in such year, or in some cases, the following year,
pursuant to RHCDS rules, as a "return to owner." Net Cash Flow is estimated to
be available in an annual amount of $2,329, based upon RHCDS Form 1930-7 as
approved by RHCDS.
"New Allocation" means any allocation pursuant to Section l0.05(a).
"Notice" means a writing containing the information required by this
Agreement to be communicated to a Person and sent by registered or certified
mail, postage prepaid, return receipt requested, or recognized national
overnight delivery service, to such Person at the last known address of such
Person, the date of registry thereof or the date of the certified receipt
therefore being deemed the date of such Notice, and complies with the provisions
of Section 13.09; provided, however, that any written communication or
11
<PAGE>
electronically transmitted facsimile containing such information sent to such
Person actually received by such Person shall constitute Notice for all purposes
of this Agreement.
"Operation Deficit" means the amount by which (a) the sum of (i) rentals
received by the Partnership under leases approved by RHCDS and (ii) any proceeds
available from the Working Capital Loan is exceeded by (b) the sum of all the
operating expenses incurred, including, but not limited to, maintenance
expenses, management fees provided for in Article VI, required debt service
payments, taxes, other assessments, insurance premiums, and the required funding
of any replacement reserve, together with any State Agency fees, expenditures
for Partnership accounting in excess of those approved by RHCDS, and, to the
extent allowed by this Agreement, related Partnership obligations or
expenditures.
"Operation Deficit Loan" shall have the meaning ascribed to it in Section
6.09.
"Partner" means any General Partner or any Limited Partner.
"Partner Nonrecourse Liability" means any Partnership liability (a) that is
considered nonrecourse under Treasury Regulation Section 1.1001-2 or for which
the creditor's right to repayment is limited to one or more assets of the
Partnership and (b) for which no Partner or Related Person bears the economic
risk of loss under Treasury Regulation Section 1.752-2.
"Partner Nonrecourse Debt Minimum Gain" means the amount of partner
nonrecourse debt minimum gain and the net increase or decrease in partner
nonrecourse debt minimum gain determined in a manner consistent with Treasury
Regulation Sections 1.704-2(d) and 1.704-2(g)(3).
"Partnership" means Hughes Villa Limited Partnership.
"Partnership Interest" means the 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 such Partner may be entitled as provided in this
Agreement and in the Act, and subject to the obligations of such Partner to
comply with all the terms and provisions of this Agreement and the Act.
"Partnership Minimum Gain" means the amount determined by computing, with
respect to each Partnership Nonrecourse Liability, the amount of gain, if any,
that would be realized by the Partnership if it disposed of (in a taxable
transaction) the property subject to such liability in full satisfaction of such
liability, and by then aggregating the amounts so computed. Such computations
shall be made in a manner consistent with Treasury Regulation Section
1.704-2(d).
12
<PAGE>
"Partnership Nonrecourse Liability" means any Partnership liability (or
portion thereof for which no Partner or Related Person bears the economic risk
of loss as defined in Treasury Regulation Section 1.752-2.
"Percentage Interest" means the percentage interest of each Partner as set
forth in Sections 5.01 and 5.02.
"Person" means any individual, partnership, corporation, trust or other
entity.
"Profits. Losses and Credits" shall have the meaning ascribed to it in
Section 10.02(a).
"Project Documents" means and includes the documents set forth on Exhibit B
attached hereto, the Consultation and Development Agreements, the completed and
signed General Partner Questionnaire, the Certificate (including amendments
thereto), all documents evidencing or securing the Construction Loan and the
Mortgage Loan, the Property Management Contracts, the Construction Contract and
all other instruments delivered to or required by the Construction Lender or the
RHCDS and all other documents relating to the Apartment Development and by which
the Partnership is bound, as amended or supplemented from time to time.
"Projected Credit" means for any given year the amount of Tax Credit set
forth on Exhibit A hereto.
"Property Management Contract" means the agreement between the Partnership
and the Management Agent providing for the management of the Apartment
Development and permitting payment of fees therefor under this Agreement, and
the management plan approved by the RHCDS.
"Qualified Basis" means the portion of the Eligible Basis attributable to
low-income dwelling units pursuant to Section 42(c) of the Code.
"Qualified Income Offset Item" means (1) an allocation of loss or deduction
that, as of the end of each year, reasonably is expected to be made (a) pursuant
to Section 704(e)(2) of the Code to a donee of an interest in the Partnership,
(b)pursuant to Section 706(d) of the Code as the result of a change in any
Partner's interest in the Partnership, or (c) pursuant to Regulation Section
1.751-1 (b)(2)(ii) as the result of a distribution by the Partnership of
unrealized receivables or inventory items and (2) a distribution that, as of the
end of such year, reasonably is expected to be made to the Partner to the extent
13
<PAGE>
it exceeds offsetting increases to such Partner's Capital Account which
reasonably are expected to occur during or prior to the Partnership taxable year
in which such distribution reasonably is expected to occur.
"Qualifying Individuals" means all those persons occupying a dwelling unit
in the Apartment Development, under a lease having an initial duration of at
least one year, the aggregate income of which persons is less than the income
limitation applicable to such household under Section 42 of the Code, and which
occupancy or terms thereof do not otherwise cause a unit to fail to be treated
as a low-income unit under Section 42 of the Code.
"Related Person" means a person related to a partner within the meaning of
Treasury Regulation Section 1.752-4(b).
"Rent Restriction Test" means the test pursuant to Section 42(g) of the
Code whereby the Gross Rent applicable to each of the dwelling units in the
Apartment Development cannot exceed 30% of the qualifying tenant income levels
designated for such dwelling units.
"Repurchase Event" means an event pursuant to which the General Partner
will be required, at the direction of the Investment Partnership, to repurchase
the Interest of the Investment Partnership in the Partnership as provided in
Section 5.05.
"RHCDS" means Rural Housing Community Development Service of the United
States of America.
"Sale or Refinancing Proceeds" means the gross proceeds to the Partnership
resulting from any sale or refinancing of the Apartment Development (including
any "guaranteed third-party equity loans" made pursuant to the Department of
Housing and Urban Development Reform Act of 1989) and/or any other capital event
except a liquidation, calculated prior to any distributions provided for in
Section 10.07. For purposes of this definition, capital event means the sale by
the Partnership of all or substantially all of its assets, the refinancing of
any mortgage of the Partnership, an event covered by property or liability
insurance, a property condemnation, or any other transaction affecting the
Partnership which is not in the ordinary course of its business, excluding any
Repurchase Event and the receipt of Capital Contributions.
"Special Tax Counsel" means the tax attorneys retained to advise the
Investment Corporation with respect to federal income tax matters.
"State" means the State of Arkansas.
14
<PAGE>
"State Agency" means the Arkansas Development Finance Authority or any
successor agency or department charged with the administration of the Tax Credit
for the State.
"Substantial Completion" means the occurrence of all of the following: (i)
receipt by the Partnership of all necessary certificates of occupancy and use
permits for 100% of the dwelling units in the Apartment Development, (ii)
substantial completion of construction and development of the Apartment
Development as determined by the RHCDS and the Investment Partnership in
accordance with the plans and specifications approved by the RHCDS, and (iii)
release of all liens against the Apartment Development, except the Mortgage.
"Substitute Limited Partner" means any Person admitted to the Partnership as
a limited partner pursuant to Section 9.03.
"Tax Credit" means the low-income housing tax credit available to the
Partnership pursuant to Section 42 of the Code.
"Tax Credit Recapture" means a recapture of Tax Credit pursuant to Section
426) of the Code or any other disallowance of Tax Credit previously allocated to
the Partners, whether such recapture or disallowance is the result of a
determination by the Accountants or of an adjustment made by the Internal
Revenue Service to the Partnership tax return.
"Tax Credit Reduction Amount" ("TCRA") occurs in any calendar year in which
the Tax Credit allocated to the Investment Partnership, less any Tax Credit
Recapture, is less than 99% of the Projected Credit for such year, as determined
by the accountants of the Investment Partnership. The TCRA is the sum of 99% of
(a) the cumulative Projected Credit amount minus the cumulative annual Actual
Credit and (b) the cumulative Tax Credit Recapture Amount. The TCRA shall be
repaid to the Investment Partnership as follows: During the Capital Contribution
Period any TCRA shall be (i) subtracted from any payments otherwise due the
Partnership by the Investment Partnership as set forth in Section 5.02(b), or
(ii) after the Capital Contribution Period shall be returned to the Investment
Partnership by the Partnership as a priority distribution of Net Cash Flow
pursuant to Section 10.06.
"Tax Credit Shortfall" means the cumulative TCRA amount, which sum (to the
extent not previously subtracted, returned or reimbursed as a Tax Credit
Reduction Amount pursuant to Sections 5.03(c), 6.09(d) or 10.06 shall accumulate
with interest at an annual rate of 10%.
"Tax Matters Partner" means the Partner named by the Partnership in Section
10.09 to manage audits of the Partnership by the Internal Revenue Service
15
<PAGE>
pursuant to the audit procedure under the Code and applicable Treasury
Regulations.
"Working Capital Loan" means the loan required by the RHCDS of the General
Partner for initial working capital for the Apartment Development, usually in an
amount equal to 2% of the total cost of the Apartment Development as determined
by RHCDS, which loan shall be repaid solely out of any funds which the RHCDS
designates as a return of such loan or as set forth in Section 10.07 or Section
10.08.
16
<PAGE>
ARTICLE II
CONTINUATION OF PARTNERSHIP
2.01. Continuation. The undersigned hereby continue the Partnership as a
limited partnership under the Act.
2.02. Name. The name of the Partnership is Hughes Villa Limited
Partnership.
2.03. Principal Executive Offices. The principal executive office of the
Partnership shall be 902 Highway 67 South, Arkadelphia, Arkansas 71923. The
Partnership may change the location 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 place or places as the General Partner may from time to time deem
advisable.
2.04. Term. The term of the Partnership commenced as of November 22, 1993,
and shall continue until December 31, 2045, unless the Partnership is sooner
dissolved in accordance with the provisions of this Agreement.
2.05. Agent for Service of Process. The name of the agent for service of
process is Billy W. Bunn, an individual resident of the State of Arkansas,
whose office address is as set forth in Section 2.03.
2.06. Filing of Certificate. Within five days after the execution of this
Agreement by the parties hereto, the General Partner shall take all actions
necessary to assure the prompt filing of this Agreement or an amendment of the
Certificate stating that the Investment Partnership has been admitted as a
limited partner and the Initial Limited Partner has withdrawn, and any other
Certificate required by the Act. All fees for filing shall be paid out of the
assets of the General Partner. The General Partner shall take all other
necessary action required by law to perfect and maintain the Partnership as a
limited partnership under the Act, and shall register the Partnership under any
assumed or fictitious name statute or similar law in force and effect in the
state, and, if necessary, any other state or jurisdiction where the Partnership
may be doing business.
17
<PAGE>
ARTICLE III
PURPOSE AND BUSINESS OF THE PARTNERSHIP
3.01. Purpose of the Partnership. The Partnership has been organized
exclusively to develop the Apartment Development primarily so as to allocate to
the Partners (i) tax losses and Tax Credit in the amount of the Projected
Credit, (ii) Net Cash Flow in the maximum amount allowable for distribution
under RHCDS rules, and (iii) Sale or Refinancing Proceeds or Liquidation
Proceeds in the maximum obtainable amount.
3.02. Authority of the Partnership. The Partnership is empowered and
authorized to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment of
its purpose as contemplated by the Act and all the specific provisions of this
Agreement, and for the protection and benefit of its Partners, including but not
limited to, the following:
(a) acquire ownership of the Land on which the Apartment Development is to
be located;
(b) provide rental housing pursuant to Section 515 of the Housing Act of
1949, as amended, until such time as the Mortgage Loan is no longer in force,
subject to the 40-60 Set-Aside Test and the Rent Restriction Test, and in
accordance with other applicable federal, state and local regulations;
(c) construct, operate, maintain, improve, buy, own, sell, convey, assign,
mortgage, rent or lease any real estate and any personal property necessary to
the ownership, operation and final disposition of the Apartment Development;
(d) borrow money and issue evidences of indebtedness and secure any such
indebtedness by mortgage, pledge, or other lien, provided, however, that the
Mortgage Loan and any evidences of indebtedness thereof and any documents
amending, modifying or replacing it shall have the legal effect that, subject to
Section 6.09, no Partner or Related Person shall have any personal liability
whatsoever for the repayment of, or otherwise bear the economic risk of loss
with respect to, the principal of or interest on the Mortgage Loan or other such
indebtedness, and that the sole recourse of any lender with respect to the
principal thereof, interest thereon or any other obligation thereunder shall be
to the assets of the Partnership securing the Mortgage Loan;
(e) maintain accounts in any financial institution whose accounts are
insured by the Federal Deposit Insurance Corporation or the Federal Savings and
Loan Insurance Corporation or any successor;
18
<PAGE>
(f) bring or defend actions at law or in equity; and
(g) deal with the General Partner, Affiliates of the General Partner and
the Investment Partnership and its Affiliates as herein provided.
3.03. Certain RHCDS Requirements. Until such time as the Mortgage Loan
is no longer held by the RHCDS, the following provisions of this Agreement shall
take precedence over any other provisions of this Agreement:
(a) The Partnership shall execute any documents required by the RHCDS under
Section 515 of the Housing Act of 1949.
(b) Notwithstanding any provisions in this Agreement to the contrary, so
long as the Partnership has a loan made or insured by the United States of
America acting through the RHCDS, membership in the Partnership will not be
changed by either admission or voluntary withdrawal of any General Partner nor
shall the General Partner maintain less than a 5% financial interest in the
Partnership as required by RHCDS regulations, nor cause or permit voluntary
dissolution of the Partnership, nor alter, amend or repeal this Agreement
(except as necessary or advisable to comply with requirements of the Code or
regulations thereunder relating to Tax Credits or allocations of benefit to
Partners) without the prior written consent of the RHCDS. Furthermore, after
payment of the debts and liabilities of the Partnership, not less than 5% of the
remaining assets from the sale or refinancing of any project of the Partnership
shall be distributed to the General Partner as provided in Section 10.07.
(c) The Partnership is authorized to execute all documents required by the
RHCDS with respect to the Mortgage Loan, construction, development, and
operation of the Apartment Development subject to the Loan Agreement and all
other agreements with the RHCDS. Any incoming General Partner, as a condition to
receiving interests in the Partnership, shall, by execution of a counterpart
hereof, agree to be bound by such documents in the same manner and on the same
terms as the other Partners. Upon the Partnership's dissolution, title or right
to possession and control of the Apartment Development and the right to collect
the rents therefrom, shall not pass to any Person not bound by such RHCDS
documents in the same manner as the Partnership and any General Partner. If
there is any inconsistency between this Agreement and such RHCDS documents and
regulations, the RHCDS documents and regulations shall prevail.
19
<PAGE>
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE GENERAL PARTNER
4.01. Representations, Warranties and Covenants Relating to the Apartment
Development and the Partnership. The General Partner hereby represents, warrants
and covenants to (i) the Partnership and to the Partners to induce investment in
the Partnership, and to (ii) Special Tax Counsel to the Investment Partnership
to induce it to issue its opinion to the Investment Partnership with respect to
the allocation of the Tax Credit to the Investment Partnership and other
benefits attributable to the Partnership, that:
(a) this Agreement has been duly and validly amended and restated as set
forth herein and constitutes a valid and binding agreement of the General
Partner;
(b) the General Partner has (i) undertaken and shall continue to take all
acts necessary for the Partnership to operate as a limited partnership in the
State, including, without limitation, the filing of all Certificates and the
payment of all fees, taxes and other sums; (ii) will continue to do all things
necessary to maintain its status as a limited partnership in good standing and
had, has and shall continue to have full power and authority to acquire the Land
and to develop, construct, operate and maintain the Apartment Development in
accordance with the terms of this Agreement; and (iii) has taken and shall
continue to take all action under the laws of the State and any other applicable
jurisdiction that is necessary to protect the limited liability of the Limited
Partner and to enable the Partnership to engage in its business;
(c) the execution of this Agreement, the assumption of the obligations
set forth in this Agreement, and the consummation of the transactions
contemplated by this Agreement do not violate any federal, state, county,
municipal or other governmental statutes, laws or ordinances, or any rules,
regulations or orders of any governmental agencies or authorities, or any
provision of law, any order, judgment or decree of any court binding upon the
Partnership or the General Partner or Affiliates thereof, any indenture,
agreement, or other instrument to which the Partnership or the General Partner
or Affiliates thereof are a party or by which the Partnership or General Partner
or Affiliates thereof or the Apartment Development is affected, and is not in
conflict with, and will not result in a breach of or constitute a default under,
any such indenture, agreement, or other instrument or result in creating or
imposing any lien, charge, or encumbrance of any nature whatsoever upon the
Apartment Development;
20
<PAGE>
(d) the Investment Partnership has acquired a valid and unencumbered
limited partnership interest in the Partnership as of the date hereof; no person
or entity other than the Partners hold any equity interest in or has any lien on
the Apartment Development; no person or entity except the Partnership has the
right to any proceeds, after payment of all indebtedness, of the sale,
refinancing or leasing of the Apartment Development; and no approval of any
government agency or any other Person is required in order to carry out the
provisions of this Agreement except as specifically herein contemplated;
(e) neither the Partnership nor the General Partner has previously
dealt with, and is not under any commitment to, any real estate broker, rental
agent, finder, syndicator, intermediary or broker-dealer with respect to the
Partnership Interest hereby acquired by the Investment Partnership and in the
Apartment Development or any portion thereof, and has not previously dealt with,
and is not under any commitment to, any consultant or lobbyist in connection
with obtaining the Mortgage Loan, rental assistance payments, or reservation or
allocation of the Tax Credit or any other applicable form of government subsidy
or financial assistance, except as previously disclosed in writing to the
Investment Partnership;
(f) the General Partner hereby transfers and assigns to the Partnership
all right, title and interest in (i) all contracts with developers, architects,
contractors and supervising architects and other Persons with respect to the
development of the Apartment Development, (ii) all plans, specifications and
working drawings heretofore prepared or obtained in connection with the
Apartment Development and all governmental approvals obtained, including
planning, zoning and building permits and any and all commitments with respect
to the Construction Loan, the Mortgage Loan and the Tax Credit, and (iii) any
other work product related to the Apartment Development;
(g) the General Partner has heretofore made to the Partnership a Capital
Contribution in the amount of $40,422, which loan the Partnership shall repay to
the General Partner when permitted by the RHCDS.
(h) the General Partner will at all times maintain an aggregate net worth
at the greater of (i) $500,000 (net of home equity), or (ii) as necessary
(together with any other requirements) to assure that all provisions of the Code
(as from time to time amended or interpreted by the Internal Revenue Service,
any other agency of the federal government, or the courts) are met which are
necessary to assure that the Partnership is classified as a partnership for
federal income tax purposes; if the General Partner is a sole corporate general
partner, it will have and maintain a net worth (computed to the satisfaction of
Special Tax Counsel) equal to the greater of (iii) 10% of the Capital
21
<PAGE>
Contribution of the Limited Partner and (iv) 10% of the aggregate capital
contribution of all limited partners in all other limited partnerships of which
such General Partner is a sole corporate general partner; the General Partner
shall not act in any manner which will cause the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation;
(i) no event of bankruptcy has occurred with respect to the General Partner
or an Affiliate thereof;
(j) any General Partner which is a corporation has been duly organized, is
validly existing and in good standing under the laws of its state of
incorporation and, if different, the state in which the Apartment Development is
located, and has all requisite corporate power and authority to be a General
Partner and to perform its duties and obligations as contemplated by this
Agreement and the Project Documents; neither the execution and delivery by such
corporation or any corporate Affiliate of a General Partner of this Agreement or
any of the Project Documents nor the performance of any of the actions of any
such corporation contemplated hereby or thereby has constituted or will
constitute a violation of (i) the articles or certificate of incorporation or
by-laws of any such corporation, (ii) any agreements by which any such
corporation is bound or to which any of its property or assets is subject, or
(iii) any law, regulation or court decree;
(k) there is no default under any agreement, contract, lease or other
commitment affecting the General Partner, the Partnership, their Affiliates or
the Apartment Development, and there is no claim, demand, litigation, proceeding
or governmental investigation pending or threatened against the General Partner,
the Apartment Development or the Partnership, or related to the business or
assets of the Partnership or of the Apartment Development, which action, claim,
demand, litigation, proceeding or governmental investigation could result in any
judgment, order, decree, or settlement except as heretofore disclosed in writing
to the Investment Partnership, and the General Partner has provided or shall
provide the Investment Partnership with true and correct copies of any papers
relevant to any such impending dispute, arbitration or legal action;
(l) at the time of commencement of construction, at the Initial Closing and
as of the date hereof, the Land was and is properly zoned for the Apartment
Development; all consents, permissions and licenses required by appropriate
governmental entities have been obtained; the Apartment Development conformed
and conforms to all applicable federal, state and local land use, zoning,
environmental and other governmental laws and regulations; and all appropriate
22
<PAGE>
public utilities, including sanitary and storm sewers, water, telephone, gas and
electricity, are currently available and, upon the date the first dwelling unit
is occupied, will be operating properly for all dwelling units in the Apartment
Development;
(m) the Construction Contract has been entered into between the Partnership
and the Contractor, and no consideration or fee shall be paid to the Contractor
in its capacity as the Contractor other than as provided in the Construction
Contract;
(n) at Initial Closing, a builder's risk insurance policy, as required by
the Construction Loan in favor of the Partnership, will be in full force and
effect; at the time of initial occupancy of the Apartment Development, fire and
extended coverage insurance for the full replacement value of the Apartment
Development (excluding the value of the Land, site utilities, landscaping and
foundations) and worker's compensation and public liability insurance, all in
favor of the Partnership, will be in full force and effect and will be kept in
full force and effect during the term of the Partnership; all such policies
shall be in amounts and with insurers satisfactory to the RHCDS; and at all
times during the term of the Partnership, the Partnership will maintain at least
$1,000,000 of liability insurance covering the Land and the Apartment
Development;
(o) at Initial Closing, good and marketable fee simple title to the
Apartment Development was held by the Partnership; the Partnership shall
purchase an owner's title insurance policy naming itself as insured issued by a
financially sound institution acceptable to the RHCDS and the Investment
Partnership (initially in the amount of the land value, to be increased from
time to time during the construction period up to the amount of the total
replacement value of the Apartment Development, including all Capital
Contributions set forth in Sections 5.01 and 5.02, together with such
affirmative endorsements deemed necessary or appropriate by the RHCDS or the
Investment Partnership); such title policy shall remain in full force and
effect, subject only to such casements, covenants and restrictions and other
exceptions which are set forth in such policy and which do not interfere with
the purpose of the Partnership or have a material adverse effect on the value of
the Apartment Development and which are otherwise acceptable to the RHCDS and
the Investment Partnership; any proceeds paid on an owner's title insurance
shall be distributed 99% to the Investment Partnership and 1% to the General
Partner;
(p) the construction and development of the Apartment Development has begun
and shall be completed in a timely and workmanlike manner in accordance with (i)
all applicable requirements of the Construction Loan and the Mortgage Loan, (ii)
all applicable requirements of the RHCDS and any other appropriate governmental
entities, and (iii) the plans and specifications of the Apartment Development as
from time to time have been or shall be hereafter approved by the RHCDS and any
23
<PAGE>
other governmental entities, if required, and Consented to by the Investment
Partnership, if a change order pursuant to which any change shall be made may
affect adversely the nature of the business of the Partnership, the Gross Rent
of the Apartment Development, the Projected Credit, and/or the marketability of
the Apartment Development to Qualifying Individuals;
(q) all of (i) the fixtures, maintenance supplies, tools, equipment and
the like now and to be owned by the Partnership or to be appurtenant to, or to
be used in the operation of the Apartment Development, as well as (ii) the
rents, revenues and profits earned from the operation of the Apartment
Development, are and will be free and clear of all security interests and
encumbrances, except for the Construction Loan and the Mortgage Loan;
(r) 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 Development; 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 Development is destroyed or condemned or
there is a diminution in the value of the Apartment Development;
(s) the General Partner has provided or shall provide the Investment
Partnership with true and correct copies of any papers relevant to the
Construction Loan and the Mortgage Loan commitments and all documents evidencing
or securing the Construction Loan and the Mortgage Loan, including, if requested
by the Investment Partnership, a complete set of plans, drawings, specifications
and any change orders for the Apartment Development;
(t) neither the General Partner nor any Related Person to the General
Partner nor the Partnership has entered, or shall enter, into any agreement or
contract for the payment or offset of any Construction Loan or Mortgage Loan
discounts, additional interest, yield maintenance or other interest charges or
financing fees, or any agreement to incur any financial responsibility with
respect to the Apartment Development or providing for any guarantee of payment
of any such interest charges or financing fees relating thereto, other than
those specifically Consented to by the Investment Partnership; in no event will
the General Partner or the Partnership enter into any such agreement or
guarantee of any kind whatsoever (such as an escrow arrangement or letter of
credit arrangement) which would subject the Partnership or any of its Partners
or Related Persons to personal liability or economic risk of loss as to the
Mortgage Loan principal or interest, nor will any General Partner or Related
24
<PAGE>
Person (or Affiliate thereof) make any loan which shall be personally
enforceable against a Partner by the RHCDS or any other lender;
(u) the Partnership shall enter into an Interest Credit Agreement with
ADFA and RHCDS having the effect of reducing the Partnership's monthly loan
payments on the Mortgage Loan to an amount which would be payable if such loan
were bearing interest at a specified percentage rate, the sole recourse of the
mortgagee thereunder with respect to the principal thereof, interest thereon or
any other obligation thereunder shall be to the assets of the Partnership
securing the Mortgage Loan, and at Final Closing the nonrecourse promissory note
given by the Partnership to the ADFA and RHCDS and permanent mortgage loan in
the amount of $384,000 for a term of 30 years at an interest rate of 6% to be
provided by ADFA and a second permanent finance loan in the amount of $384,015
for a term of 50 years at an effective interest rate of 1% to be provided by
RHCDS and shall contain similar nonrecourse provisions;
(v) the Partnership will undertake all acts, filings and other requirements
necessary to qualify the Apartment Development for the Tax Credit; all
information contained in any applications, certifications, and any related
correspondence to the State Agency for reservation and/or allocation of the Tax
Credit is complete and correct in all material respects, and copies thereof have
been furnished to Landau; and the Apartment Development will have an Eligible
Basis of at least $989,521. The Investment Partnership anticipates the Tax
Credit that will be allocated to the Partnership after the Apartment Development
is placed in service will not exceed $39,560, which amount is the basis of the
Projected Tax Credit set forth on Exhibit A attached hereto;
(w) no right of first refusal pursuant to Section 42(i)(7) of the Code or
extended use periods for low-income occupancy pursuant to Section 42(h)(6) of
the Code shall apply to the Apartment Development or any building thereof,
except for the 15-year extended use period previously disclosed in writing to
and hereby approved by the Investment Partnership;
(x) the Apartment Development is a qualified low-income housing project and
each building thereof is a qualified low-income building pursuant to Section 42
of the Code; such Apartment Development and buildings thereof will at all times
satisfy the Rent Restriction Test, the 40-60 Set-Aside Test, and all other
requirements of any federal, state or local law necessary to remain qualified
for Tax Credits;
(y) the Apartment Development shall be managed in all respects (i) in
accordance with all applicable provisions of the Housing Act of 1949 and the
rules and regulations of the RHCDS and any other appropriate governmental agency
including, without limitation, any Section 42 monitoring plan established by the
25
<PAGE>
State Agency in accordance with Proposed Treasury Regulation Section 1.42-5 and
any successor regulation thereto under the Code, (ii) so that no less than 80%
of the gross income from the Apartment Development in every year will be rental
income from dwelling units in the Apartment Development used to provide living
accommodations not on a transient basis, and (iii) so that, if the aggregate
income of the occupants in any dwelling unit of the Apartment Development rises
above 140% of the income limitation applicable to such occupants under Section
42 of the Code, the next available dwelling unit of the Apartment Development
will be rented to a low-income tenant pursuant to Section 42(g) of the Code,
taking all acts necessary so that all dwelling units are rented to persons
classified as Qualifying Individuals;
(z) the General Partner shall, during and after the period in which the
General Partner is a Partner, provide the Accountants with such funds and
information, and sign such documents as are necessary for the Partnership to
make accurate and complete submissions of federal and state income tax returns
no later than March 10 annually;
(aa) the Partnership will use such method of depreciation and make such
elections on IRS Form 8609, which, in the opinion of accountants for the
Investment Partnership, shall be advantageous to the Investment Partnership;
(bb) there are no restrictions on the sale or refinancing of the Apartment
Development, other than the restrictions referred to in this Article IV or which
are the result of applicable provisions of the Housing Act of 1949 and the rules
and regulations of the RHCDS and Section 42(h) of the Code;
(cc) upon written request by any limited partner of the Investment
Partnership, the General Partner will, upon reasonable notice and during regular
business hours, (i) allow such limited partner to visually inspect the Apartment
Development, (ii) answer any questions such limited partner may have concerning
the Apartment Development, (iii) provide such limited partner with annual
financial statements with regard to the Apartment Development's operations as
are then available, including all financial statements and/or annual reports
previously filed with the RHCDS and (iv) if notified by the Investment
Partnership that less than five similar property investments shall have been
made by the Investment Partnership (including the Apartment Development), the
General Partner will furnish to the Investment Partnership automatically and
without request, for forwarding to investors in the Investment Partnership, such
annual financial statements of the Apartment Development operations;
26
<PAGE>
(dd) the General Partner shall furnish to counsel for the Investment
Partnership promptly as and when requested, in connection with the rendering of
any legal opinion concerning federal income tax, partnership law and securities
law matters relating to the Investment Partnership, copies of such documents as
are requested by such counsel and/or additional copies;
(ee) insofar as is reasonably ascertainable by the
Investment Partnership with any information necessary to make the information
provided by the General Partner complete and accurate in all material respects,
or omitted to provide a material fact concerning the Apartment Development or
the Tax Credit allocable to it; and the Investment Partnership is entitled to
rely on the completeness and accuracy of all such information furnished for any
and all purposes;
(ff) all representations, warranties, covenants and obligations in this
Agreement made by the General Partner, if requested by the Investment
Partnership, shall be re-affirmed in any separate writing deemed necessary by it
to carry out the purposes of this Agreement; and
(gg) all general operating accounts and reserve accounts of the
Partnership, including but not limited to reserves for replacements, real estate
taxes, and hazard, liability and mortgage insurance premiums, if any, which are
required to be funded, have been and will continue to be funded to required
levels.
(hh) Certain Partnership Obligations. The Amended Limited Partnership
Agreement will provide, among other obligations, that the Partnership will do
the following:
1. insure the Apartment Development under an all-risk policy in amounts
required by RHCDS, but not less than the full replacement cost of the property,
without deductibles. The Investment Partnership shall be named as a loss payee
on such policy behind ADFA and RHCDS.
2. insure the Partnership under a single limit personal injury and property
damage liability policy in an amount of not less than $3,000,000, with a
deductible of no more than $10,000. The Investment Partnership shall be named as
an additional insured on such policy.
3. maintain reserve required by RHCDS, and these funds are to be deposited
with Landau.
4. operate the Apartment Development in the ordinary course of business and
in such a manner that the Apartment Development will be eligible to receive a
Tax Credit as provided herein and remain in compliance with respect to 100% of
the units in the Apartment Development.
27
<PAGE>
5. enter into an extended use restriction agreement with the State Agency,
cause same to be recorded and comply with the Partnership's obligations
thereunder.
6. pay a Reporting Fee of $500.00 per annum to the Limited Partner due on
the day the Limited Partner receives the annual partnership reports (K-1, Income
Statement, Balance Sheet).
(jj) Certain General Partner Obligations. The General Partner will
assume each of the following obligations and will execute the Amended Limited
Partnership Agreement and carry out its terms and provisions, which will
incorporate, among others, the following provisions:
1. Cause the partnership to perform the obligations it will assume pursuant
to Section 10 hereof.
2. Pay, if the General Partner is the developer, without right of
reimbursement or credit to its capital account, all costs in excess of those
paid by mortgage loan proceeds and Partnership funds of completing construction
of the Apartment Development in accordance with approved plans and
specifications, placing same in service, achieving Final Closing of the RHCDS
loan ad 100% rent up, and Tax Credit qualification of the Apartment Development.
If the General Partner is not the developer, the General Partner shall
unconditionally guarantee the obligations of the developer to pay all such
costs.
3. Take all steps necessary to (i) cause the Apartment Development to
become and remain eligible for a Tax Credit in an annual amount at least equal
to the Projected Tax Credit; (ii) obtain a reservation of the Tax Credit and
carryover allocation agreement, if required, from the State Agency; and (iii)
with the property management agent, use its best efforts to rent units in the
Apartment Development solely to persons classified as Eligible Occupants for the
Tax Credit, consulting with Landau, RHCDS, and ADFA prior to any ineligible
rental if at any time market conditions are deemed to necessitate rental to a
non-Eligible Occupant.
4. Fund operating deficits up to the amount of your working capital reserve
plus $20,000 for a period of 2 years from final closing. If, after the 2 year
period mentioned above, operating deficits occur for three consecutive months,
the General Partner is obligated to seek appropriate RHCDS assistance for the
Apartment to remedy and rectify the shortfalls.
5. Reimburse the Limited Partner, upon its request, in the amount of 100%
of its paid-in Capital Contribution, including the amount advanced upon the
28
<PAGE>
signing of this Agreement, if (i) the Apartment Development has not achieved
Final Closing of the RHCDS loan by November 15, 1996, or occupancy of 95% of its
units by Eligible Occupants by March 15, 1997, or if the State Agency has not
allocated or provided a final allocation of the Tax Credit by December 31, 1996;
or (ii) any financing commitment of RHCDS or another interested governmental
agency shall disapprove the Landau as a limited partner, or (iii) the Apartment
Development shall fail to remain qualified for the Tax Credit under the
set-aside test or tent restriction test applicable to the Apartment Development
during the ten-year Tax Credit period, provided that, at the Limited Partner's
election, the General Partner may be given a period of time in which to remedy
any of the above conditions, during which the period any Capital Contribution
payment due from the Investment Partnership may be withheld.
6. Ensure that good and marketable fee simple title to the Apartment
Development, subject only to such liens and encumbrances which are acceptable to
the RHCDS, ADFA and the Limited Partner, is held by the Partnership, and to
arrange for the purchase by the Partnership of an owner's title insurance policy
in an amount equal to the principal amount of all permanent mortgage loans plus
the Capital Contributions, but not less than the appraised value of the
Apartment Development.
7. Obtain an opinion of local counsel to the Partnership substantially as
provided in Exhibit "C" of the Amended Limited Partnership Agreement, containing
such matters as may be required by special tax counsel to the Partnership
necessary to confirm the ability of the partnership to utilize the Tax Credit as
represented by the General Partner in accordance with the Amended Limited
Partnership Agreement.
8. Represent other facts regarding the Partnership or the Apartment
Development which may be reasonably required by special tax counsel to the
Partnership to render an opinion as to tax consequences.
9. If a carryover allocation agreement with the State Agency is required,
obtain a certification of cost incurred in the year of Tax Credit reservation
from the partnership's CPA, certifying that at least 10% of the estimated
eligible cost of the Apartment Development was incurred in such year, with a
breakdown of such costs and apply for said carryover agreement prior to any
deadline date set by the State Agency.
10. Provide to the Limited Partner, prior to submission to the State
Agency, for review and approval, a final eligible basis cost certification for
the Apartment Development.
11. Provide, among other items, customary general partner representations
and warranties, including representations and warranties with respect to the
29
<PAGE>
status of the Partnership, its right and authority to enter into this
transaction, the status of the construction of the improvements and the accuracy
of the assumptions used in the financial forecasts.
(kk) Reporting Requirements. During the Partnership term, the
Partnership shall furnish to Landau monthly operating statements, reports, and
project worksheets of the Apartment Development and Partnership, as submitted to
the RHCDS, together with necessary reports certifying Tax Credit occupancy and
other financial, tax and accounting data requested by Landau. An annual CPA
compilation report of the Partnership's books and tax returns for each calendar
year are to be provided to Landau by the last day of February following each
said year.
4.02. No Duty to Investigate. The Investment Partnership may rely on the
representations contained and referenced in this Agreement without further duty
of inquiry as to their accuracy and validity.
ARTICLE V
PARTNERSHIP INTERESTS AND CAPITAL CONTRIBUTIONS
5.01. Original Partners' Partnership Interests
(a) The General Partner and the General Partner's principal address,
Capital Contribution (prior to the return of Capital set forth in Section
5.02(b)(i)) and Percentage Interest in Profits, Losses and Credits are as
follows:
Billy W. Bunn $40,422 1%
P.O. Box 636
Arkadelphia, AR 71923
(b) The fair market value of the property transferred and assigned to
the Partnership as represented in Section 4.01(fl shall be deemed to be zero, in
consideration of the Development Services Fee, and shall not represent a Capital
Contribution.
(c) The Initial Limited Partner hereby withdraws from the Partnership
as a limited partner.
5.02. Capital Contribution of the Investment Partnership
(a) The Investment Partnership, as entering Limited Partner, its
principal offices or places of business, its Capital Contribution and its
Percentage Interest in Profits, Losses and Credits are as follows:
30
<PAGE>
Landau $215,000.00 99%
526 Main Street
P. O. Box 515
Arkadelphia, AR 71923
(b) In reliance upon the representations, warranties and covenants of
the General Partner in Article IV, the Investment Partnership shall be obligated
to make its Capital Contribution to the Partnership in installments (the
"Installments"), which shall be payable by the Investment Partnership solely
from capital contributions of limited partners of the Investment Partnership, as
follows:
(i) $55.000 ($40,422 of which, being such amount as shall
reduce the General Partner's Capital to 1%, shall constitute a
return of Capital to the General Partner) upon the signing of
this Agreement and receipt of the basic project documents
marked with an asterisk as noted on attached Schedule B, the
following amount, which will be refunded upon written request
of Landau if the obligations of the General Partner hereunder
and in the Amended Limited Partnership Agreement shall not be
timely fulfilled or if any of t he conditions for payment set
forth in clause (ii) hereof shall not be timely satisfied:
$55,000
(ii) Upon the latest to occur of (a) execution by the General
Partner, the Investment Partnership and the original limited
partner of an Amended Limited Partnership Agreement and filing
of an amendment of the Partnership's certificate of limited
partnership stating that the Investment Partnership is a
limited partner and the original limited partner has
withdrawn; (b) receipt by Landau of the following: (i) copies
of the Project documents set forth in Exhibit B; (ii) a legal
opinion of the partnership's counsel substantially in the form
of Exhibit C of the Amended Limited Partnership Agreement;
(iii) copies of a reservation of Tax Credit in the amount of
the Projected Tax Credit issued by the State Agency and a
carryover allocation agreement if the reservation shall have
been made in a prior year; (iv) an owner's title insurance
policy complying with the requirements of this Agreement; or
(c) Initial Closing: $50,000
31
<PAGE>
(iii) Upon the later to occur of
(A) Final Closing of the RHCDS loan, (B) October 1, 1996, and
(C) Letter from General Partner requesting payment:
$60,000
(iv) Upon the latest to occur of (A) receipt by Landau of
copies of Tenant Certifications evidencing occupancy of 100%
of the Apartment Development's units by Eligible Occupants,
and (B) January 2, 1997:
$35,000
(v) Upon the latest to occur of (A) receipt by the Investment
Partnership of copies of (i) a complete federal tax return of
the Partnership for the calendar year in which the Apartment
Development shall have been placed in service, (ii) IRS form
8609 for the Apartment Development and (iii) a schedule of
final costs certified to the State Agency; (B) four
consecutive months of breakeven operations; or (C) March 1,
1997: $15,000
provided, however, that as a condition precedent to the Investment
Partnership's obligation to pay any Installment (except for the first)
(A) all prior Installments shall have become due and all of
the representations, warranties and covenants of the General
Partner shall be true and correct as of the date of payment of
such Installment,
(B) the General Partner shall have distributed Net Cash Flow
to all Partners pursuant to Section 10.06,
(C) the General Partner shall have provided Landau with all
information required to be provided to it under Section
6.14(a), and
(D) the General Partner shall have provided Landau, by no
later than March 10 of any year, the Partnership's income tax
returns, and supporting documents, for the Investment
Partnership's approval pursuant to Sections 12.03 and 12.04;
if the General Partner does not provide these returns by
February 15, the next Installment of Capital Contribution due
to the Partnership by the Investment Partnership may be
delayed by the same number of days as the number of days the
32
<PAGE>
Partnership tax return is received by the Investment
Partnership after February 15.
(c) Prior to the time any Installment shall become due, if so
requested by the Investment Partnership, the General Partner shall give the
Investment Partnership Notice certifying that as of such date no condition
exists which would, pursuant to Section 5.03, entitle the Investment Partnership
to withhold the payment of an Installment.
(d) In the event the Actual Credit is less than the Projected Credit
by reason of a reduction in (i) Eligible Basis, due to the actions of the RHCDS
or as determined by the Investment Partnership's independent accountants, or
(ii) the Applicable Percentage and/or maximum qualified basis set forth on IRS
Form 8609, Part I lines 2 and 3). or (iii) the original qualified basis (as
determined on IRS Form 8609 Part II line 2A, as filed), the Capital Contribution
due from the Investment Partnership and the Projected Credit shall both be
reduced by a percentage equal to the percentage by which the Actual Credit is
less than the Projected Credit. Any such reduction of Capital Contribution shall
be made by proportionately reducing all unpaid Installments set forth in Section
5.02.
(e) Notwithstanding anything to the contrary contained herein, if
Final Closing and/or admission of the Investment Partnership has not occurred by
February 1, 1997, or the Credit Period has not been elected to have commenced as
of January 1, 1997, or the occupancy requirement of Section 5 .02(b)(iv)(A) has
not been met by April 1, 1997, at the sole election of the Investment
Partnership all Installments shall be due and payable by the Investment
Partnership on a semi-annual basis commencing with the latest of the date of
Final Closing and/or admission of the Investment Partnership, or January 1st of
the first year of the Credit Period, or the date that the occupancy requirement
has been met.
(f) If the Investment Partnership shall default in paying an
Installment, then upon either the agreement of the General Partner and the
Investment Partnership or the final decision of a commercial arbitrator pursuant
to Section 13.01, determining that such Installment is required to be made under
the terms of this Agreement and specifying the date by which the Investment
Partnership shall pay such Installment and said Installment shall not be paid in
full by bank wire transfer or certified bank check on such specified date, the
Interest of the Investment Partnership shall terminate on such specified date
and its Partnership Interest shall be assigned to a designee of the General
Partner; such termination shall be the sole remedy of the Partnership, General
Partner and Developer with respect to the default of the Investment Partnership.
Notwithstanding the foregoing, the Investment Partnership shall retain that
33
<PAGE>
percentage interest in the Partnership which is equal to the ratio of its
Capital Contribution made to the total Capital Contributions set forth in
Section 5.02(a).
(g) Without the Consent of all of the Partners, no additional Persons
may be admitted as additional limited partners and Capital Contributions may be
accepted only as and to the extent expressly provided for in this Article V and
Section 9.03(d).
5.03. Withholding of Capital Contribution Upon Default
(a) In the event: (i) the General Partner, or any successor General
Partner, shall not have complied with any material provision of this Agreement
(including, without limitation, the representations, warranties and covenants of
the General Partner set forth in Article IV and the obligations of the General
Partner under Article VI and Article XII of this Agreement), or (ii) any
commitment of the RHCDS to provide financing, or any agreement entered into by
the Partnership to provide financing related to the completion of construction
of the Apartment Development, shall have terminated prior to its respective
termination date and not been reinstated in a timely manner as determined solely
by counsel for the Investment Partnership, or (iii) the Construction Lender
shall not make a disbursement under the Construction Loan and such disbursement
is not made or the Construction Lender is not replaced within 60 days, or (iv)
less than 60% of the dwelling units in the Apartment Development remain
qualified under the 40-60 Set-Aside Test during the Compliance Period, or (v)
foreclosure proceedings shall have been commenced by the Construction Lender or
the RHCDS against the Apartment Development, or (vi) any required RHCDS
approvals to the admission of the Investment Partnership into the Partnership
and the execution of the Partnership Agreement have not been obtained within 90
days of such admission, then the Partnership and the General Partner shall be in
default of this Agreement and the Investment Partnership, at its sole election,
may withhold payment of any one substantially cured, or (ii) there is a final
arbitration decision under Section 13.01 to the effect that (A) the General
Partner and/or the Partnership have substantially cured the default giving rise
to the withholding under this Section 5.03 or (B) the General Partner and/or the
Partnership were not in fact in default hereunder. Any interest earned thereon,
except in the case of clause (ii)(B) above, shall be paid to the Investment
Partnership.
(c) In the event that any Tax Credit Reduction Amount shall be
determined by accountants for the Investment Partnership during the Capital
Contribution Period, the Investment Partnership shall adjust any Installment
otherwise payable to the Partnership by an amount equal to the Tax Credit
Reduction Amount so determined, dollar-for-dollar.
34
<PAGE>
5.04. Return of Partners' Capital Contributions
(a) Except as provided in this Agreement, no Partner shall be entitled
to demand and receive a return of his Capital Contribution.
(b) If (i) the RHCDS or the Construction Lender shall fail to provide
any required approvals to the admission of the Investment Partnership as a
Partner hereunder within 180 days of its admission to the Partnership; or (ii)
an event of default described in Section 5.03(a)(ii) or (iii) has occurred, or
(iii) Final Closing has not occurred by February 1, 1995 (or such later date as
may be Consented to by the Investment Partnership), or (iv) the Apartment
Development has not achieved occupancy under RHCDS-approved leases of 88% of its
dwelling units by August 1, 1995, or (v) the State Agency has not provided an
IRS Form 8609 or a written certificate of a carryover allocation of the Tax
Credit by or as of December 31, 1993, or (vi) the Apartment Development fails to
become or remain qualified under the 40-60 Set-Aside Test or Rent Restriction
Test during the Credit Period; or (vii) the Tax Credit available to the
Partnership cannot legally be allocated to the Investment Partnership as
required by this Agreement due to a failure of the General Partner or the
Accountants to comply with the requirements of Section 42 of the Code by the
later of Final Closing or issuance of IRS Form 8609 with costs certified to the
State Agency, then a "Repurchase Event" shall exist and the General Partner
shall, within 15 days of the occurrence thereof, send to the Investment
Partnership Notice of such Repurchase Event and of the General Partner's
obligation to purchase the Partnership Interest of the Investment Partnership
hereunder (which shall not be an obligation of the Partnership) and return to
the Investment Partnership its Capital Contribution. Thereafter, upon the sole
election of the Investment Partnership, the General Partner, within 30 days of
the mailing date of Notice by the Investment Partnership of such election, shall
acquire the entire Partnership Interest of the Investment Partnership by making
payment to the Investment Partnership, in cash, of an amount equal to the
aggregate paid-in portion of its Capital Contribution (not including any Capital
Contribution of a prior Partner), whereupon the Partnership Interest of the
Investment Partnership shall terminate and the General Partner shall indemnify
and hold harmless the Investment Partnership from any losses, damages or
liabilities to which the Investment Partnership, as a result of its
participation hereunder, may be subject.
35
<PAGE>
ARTICLE VI
RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER
6.01. Management of the Partnership
(a) Except as otherwise set forth in this Agreement, the General
Partner, within the authority granted under this Agreement, shall have full,
complete and exclusive discretion to manage and control the business of the
Partnership for the purpose herein stated, shall make all decisions affecting
the business of the Partnership and shall manage and control the affairs of the
Partnership in good faith to the best of the ability of the General Partner and
use best efforts to carry out the purpose of the Partnership as set forth in
Section 3.01. In so doing, the General Partner shall take all actions necessary
or appropriate to protect the interests of the Limited Partner and of the
Partnership. The General Partner shall devote such time as is necessary to the
affairs of the Partnership.
(b) If there be more than one General Partner, the administrative
affairs of the Partnership shall be managed by the Managing General Partner. In
furtherance and not in limitation of the foregoing sentence, the Managing
General Partner is hereby specifically authorized and empowered to execute and
deliver, on behalf of the Partnership, the Construction Contract, Construction
Loan or Mortgage Loan and to execute any and all other instruments and documents
and amendments thereto as shall be required in connection therewith, including
any mortgage, note, contract, building loan agreement, bank resolution and
signature card. No Person dealing with the Partnership shall be required to
determine the Managing Partner's authority to make any undertaking on behalf of
the Partnership, or to determine any facts or circumstances bearing upon the
existence of such authority, and all decisions made for and on behalf of the
Partnership by the Managing General Partner pursuant to and within the scope of
the authority herein given shall be binding upon the Partnership. The Managing
General Partner shall be the Tax Matters Partner referred to in Section 10.09.
6.02. Limitations Upon the Authority of the General Partner
(a) The General Partner shall not have any authority to directly or
indirectly:
(i) perform any act in violation of any applicable law or
regulation thereunder; or
(ii) perform any act in violation of the provisions of the
Construction Loan or Mortgage Loan, or any other RHCDS
documents executed by or on behalf of the Partnership, or the
Construction Contract; or
36
<PAGE>
(iii) do any act required to be Consented to or ratified in
writing by the Limited Partner hereunder or under the Act
unless the right to do so is expressly otherwise given in this
Agreement; or
(iv) rent apartments in the Apartment Development so that the
Apartment Development would not meet the requirements of the
Rent Restriction Test or 40-60 Set-Aside Test; or
(v) borrow from the Partnership or commingle Partnership funds
with the funds of any Person; or
(vi) borrow on the general credit of the Partnership;
or
(vii) perform any act which would make it impossible to carry
on the ordinary business of the Partnership; or
(viii) confess a judgment against the Partnership; or
(ix) change or reorganize the Partnership into any other
legal form; or
(x) require the Limited Partner to make any contribution to
the capital of the Partnership not provided for herein; or
(xi) permit the Partnership to acquire property in exchange
for an Interest in the Partnership; or
(xii) permit the Partnership to grant the General Partner an
exclusive right to sell the Partnership's property; or
(xiii) engage in activities directly competitive with those
of the Partnership; or
(xiv) permit the Partnership to directly or indirectly pay the
General Partner a commission or fee in connection with the
reinvestment or distribution of Sale or Refinancing Proceeds
or Liquidation Proceeds except as provided for herein; or
(xv) receive any rebates or give-ups or participate in any
37
<PAGE>
reciprocal business arrangements in circumvention of this
Agreement; or
(xvi) charge or receive any fees for management services
except as expressly provided herein.
(b) The General Partner shall not, without the Consent of the
Investment Partnership, directly or indirectly,
(i) terminate the Partnership for federal income tax purposes or dissolve
or wind up the Partnership; or
(ii) permit the Partnership to acquire any property from another
partnership in which a General Partner or Affiliate thereof has an Interest; or
(iii) incur any indebtedness by the Partnership other than in the ordinary
course of its business as described herein; or
(iv) make application for or accept any increase in the Construction Loan
or the Mortgage Loan or materially modify the Mortgage Loan if such increase or
modification may affect the Gross Rent of the Apartment Development and/or its
marketability to Qualifying Individuals; or
(v) change the nature of the Partnership's business, including, without
limitation, acquiring any real property on behalf of the Partnership in addition
to the Apartment Development or constructing any new or replacement capital
improvements on the Apartment Development or on any land owned by the
Partnership; or
(vi) sell, exchange, lease, mortgage, pledge or otherwise transfer all or
substantially all of the assets of the Partnership, or any portion of the Land
owned by the Partnership; or
(vii) possess Partnership property or assign any rights in specific
Partnership property for other than Partnership purposes; or
38
<PAGE>
(viii) place any liens or restrictions or other title exceptions on the
Apartment Development; or
(ix) permit a General Partner to withdraw from the Partnership, or to admit
a new or substitute general partner or limited partner; or
(x) make any material amendment to the Certificate or this Agreement,
unless required by law;
provided, however, that in the judgment of counsel to the Investment
Partnership, the giving of any such Consent shall be permitted by the Act as the
exercise of a power not constituting participation in the control of the
business so as to convert the limited partner Interest of the Investment
Partnership into a general partner Interest for any purpose or to any extent.
The General Partner shall, at the request of the Investment
Partnership, perform all acts necessary to obtain an equity takeout loan
pursuant to Section 515(t) of the U.S. Housing Act of 1949 as amended.
6.03. Delegation of Authority
Subject to the Act, the General Partner may delegate all or any of the
powers of the General Partner, 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 supervision of the
General Partner, perform any acts or services for the Partnership as the General
Partner may approve, provided that management fees and/or expenses are not
increased thereby, nor the Limited Partner's shares of Net Cash Flow, Sale or
Refinancing Proceeds, or Liquidation Proceeds decreased thereby.
6.04. General Partner or Affiliates Dealing with the Partnership
(a) The General Partner or any Affiliate may act as Developer and/or
Management Agent of the Apartment Development on such terms and conditions
permitted hereby and by applicable RHCDS regulations, and may receive
compensation at the rates so approved, including, without limitation, the
Development Services Fce.
(b) The General Partner, or any Affiliate thereof, shall have the
right to contract or otherwise deal with the Partnership for the sale of goods
or services to the Partnership in addition to those set forth herein if (i)
compensation paid or promised for such goods or services is reasonable (i.e., at
39
<PAGE>
fair market value) and is paid only for goods or services actually furnished to
the Partnership, (ii) the goods or services to be furnished are reasonable for
and necessary to the Partnership, (iii) the fees, terms and conditions of such
transaction are at least as favorable to the Partnership as would be obtainable
in an arm's-length transaction, (iv) the purpose of the Partnership is advanced,
(v) any contract covering such transactions is in writing and terminable without
penalty on 60 days Notice, (vi) any payment made to the General Partner or any
Affiliate for such goods or services shall have been fully disclosed to all
Partners in the required by Section 1204 and reports circumvented the provisions
of this Section 6.04 or Section 6.03, and (vii) any other required Consent
(including the Consent of the RHCDS) is obtained. The General Partner hereby
Consents and agrees that NCPPS or any Affiliate shall also have the right to
contract or otherwise deal with the Partnership for the sale of goods or
services.
(c) Notwithstanding the provisions of this Section 6.04, the General
Partner or any Affiliate thereof shall not:
(i) receive any insurance brokerage fee or write any insurance policy
covering the Apartment Development or the Partnership; or
(ii) compensate on behalf of the Partnership any agent, attorney,
accountant or other independent consultant or contractor that also is employed
on a full-time basis by the General Partner or any Affiliate thereof without the
Consent of the Investment Partnership.
6.05. Other Activities
The General Partner and any Affiliate may engage in or possess
interests in other business ventures of every kind and description for their own
account, including, without limitation, serving as general partner of other
partnerships which own, either directly or through interests in other
partnerships, government-assisted housing projects similar to the Apartment
Development. Neither the Partnership nor any of the Partners shall have any
rights by virtue of this Agreement in or to such other business ventures or to
the income or profits derived therefrom.
40
<PAGE>
6.06. Liability for Acts and Omissions
The General Partner shall not be liable, responsible or accountable in
damages or otherwise to any of the Partners for any act or omission performed or
omitted in good faith on behalf of the Partnership and in a manner reasonably
believed to be within the scope of the authority granted to the General Partner
by this Agreement and in the best interest of the Partnership, except for
negligence, misconduct, fraud or any breach of fiduciary duty with respect to
such acts or omissions. Any loss or damage incurred by the General Partner by
reason of any act or omission performed or omitted by the General Partner in
good faith on behalf of the Partnership and in a manner reasonably believed by
the General Partner to be within the scope of the authority granted to the
General Partner by this Agreement and in the best interests of the Partnership
(but not, in any event, any loss or damage incurred by the General Partner by
reason of negligence, misconduct, fraud or any breach of fiduciary duty with
respect to such acts or omissions) shall be paid from Partnership assets to the
extent available (but the Limited Partner shall not have any personal liability
to the General Partner under any circumstances on account of any such loss or
damage incurred by the General Partner or on account of the payment thereafter.
6.07. Indemnities
(a) The General Partner hereby indemnifies and holds the Partnership,
the Investment Partnership and the partners thereof, First Sterling, and any
Affiliates, agents and assignees thereof, free and harmless from any injury,
diminution in value of the Partnership Interest of the Investment Partnership,
loss or damage (including, but not limited to, reasonable attorneys' fees, court
costs, and amounts paid in settlement of any claims which have been mutually
agreed to by the General Partner and the party against whom such claim has been
made, resulting from the claims of any Person with respect to any liability
arising under the Securities Act of 1933 or the Securities Exchange Act of 1934
or the securities laws or regulations of any state or other jurisdiction), with
respect to claims based upon alleged fraud, deceit or untrue statement of a
material fact made by the General Partner or omission by the General Partner to
state a material fact required to be stated or necessary to make the statements
not misleading, with respect to or based upon information furnished or
statements made by the General Partner to the Investment Partnership, or their
agents, in connection with the acquisition by the Investment Partnership from or
through them of a Partnership Interest or the offer or sale of limited partner
interests in the Investment Partnership (it being understood that, except as set
forth above, the General Partner shall not be liable for any matters relating to
federal or state securities laws applicable to the Investment Partnership).
41
<PAGE>
(b) The General Partner hereby indemnifies and holds harmless the
Partnership, the Investment Partnership, and their Affiliates, agents and
assignees from any and all claims (to the extent that any such claim arises out
of the General Partner's action or failure to act) of any real estate broker,
rental agent, finder, syndicator or other intermediary with respect to the
acquisition of the Apartment Development or any Interest in the Partnership and
shall assume the defense of any judicial action that might arise in connection
with any such claims, provided that the Investment Partnership shall have the
right to assume the defense of any claim or counterclaim against itself.
(c) The General Partner hereby indemnifies and holds the Investment
Partnership and Special Tax Counsel harmless from all claims, damages and losses
arising any way out of breach of the representations, warranties and covenants
contained herein or from any claim arising in any way out of the operation or
ownership of the Apartment Development.
(d) In the event the provisions of this Section or any portion thereof
or the application thereof to any Person or circumstances shall to any extent be
invalid or unenforceable, the parties hereto hereby agree that a right to
receive contribution shall exist on the part of the party or parties who
otherwise would have been an indemnified party under the aforesaid provisions
(hereinafter collectively referred to as the "contribution recipient") in the
amount of 90% of any and all losses, claims, damages, expenses or liabilities to
which a contribution recipient may become liable. The parties hereby agree
further that, in such event, and upon the incurring by a contribution recipient
of any such loss, claim, damage, expense or liability, and the giving by such
contribution recipient of written notice thereof to the party or parties who
otherwise would have been an indemnifying party under the aforesaid provisions
(hereinafter collectively referred to as "contributor"), the contributor shall
promptly pay to such contribution recipient an amount equal to 90% of any such
loss, claim, damage, expense or liability incurred by such contribution
recipient as aforesaid.
6.08. Payment of Development Costs and Excess Development Costs
(a) The General Partner shall be responsible, without limitation, and
without right of reimbursement by the Partnership (except as may be required by
Section 10.07(h) or a return of Capital Contribution to the General Partner
pursuant to Section 5.02(b)(i)), for:
(i) achieving Initial Closing, Substantial Completion and
Final Closing of the Apartment Development, as set forth in
this Agreement, and providing any funds necessary to achieve
42
<PAGE>
such closings and completion, including without limitation any
Excess Development Costs; and
(ii) fulfilling all actions and providing any funds required
of the Partnership to assure that the Apartment Development
becomes qualified for Tax Credit under Section 42 of the Code,
substantially in the amount of the Projected Credit. Any such
additional payments made pursuant to this Section shall not be
included in the cost of assets of the Partnership or credited
to the Capital Account of the General Partner unless the
accountants for the Investment Partnership shall otherwise
advise.
6.09. Annual Priority Distributions, Operating Deficit Loans and Tax
Credit Reduction Amount Reimbursement
(a) The General Partner will pay to the Investment Partnership the
amount of the annual priority distribution specified in Section 10.06(a), no
later than 45 days after the close of any fiscal year after the first year of
operations, without regard to the sufficiency of Net Cash Flow to provide for
such distribution in such year; such payments, to the extent Net Cash Flow is
insufficient for their provision, shall constitute a loan by the General
Partner, which shall be repaid in the same manner as an Operating Deficit Loan.
(b) The General Partner shall pay all Operating Deficits during a
period ending the later of the date of termination of the Capital Contribution
Period or the last day of the period of Breakeven Operations, which payments
shall constitute a loan to the Partnership (the "Operating Deficit Loan"),
subject to all requirements and restrictions of the RHCDS; the Operating Deficit
Loan shall bear no interest, and shall be repaid only as set forth in Section
10.07, provided, however, that such obligation shall be limited to the total
amount of Capital Contributions minus the amount of the Consultation Fee, and
provided further that with respect to any particular taxable year (i) such
obligation shall be limited to the payment of an amount equal to the interest
portion only of such debt service; (ii) such obligation shall not be enforceable
at any time by any party, including the RHCDS, except the Partnership and the
Limited Partner; (iii) the General Partner shall, to the maximum extent provided
by law, have discretion in applying the proceeds of any such loan first to other
debts and obligations of the Partnership and second to the Mortgage Loan; and
(iv) such application shall not constitute a guarantee of the Mortgage Loan.
43
<PAGE>
(c) Notwithstanding the foregoing, the General Partner hereby agrees
to request assistance from the RHCDS and to notify NCPPS in the event that at
any time after six months following Substantial Completion, Operating Deficits
shall have continued for a period of three consecutive months.
(d) The General Partner shall reimburse the Partnership for any TCRA
not subtracted from any installment of Capital Contribution or returned from Net
Cash Flow during the first five full years of Projected Credit.
6.10. Other Loans to the Partnership
If additional funds are required by the Partnership for any
purpose relating to the business of the Partnership or for any of its
obligations, expenses, costs or expenditures (other than additional Capital
Contributions or Operating Deficit Loans required by Sections 6.08 and 6.09),
the Partnership may borrow such funds as are needed and approved by the RHCDS
from any Partner or other Person or organization, including the General Partner,
for such period of time and on such terms as the General Partner and the RHCDS
may agree at the rate of interest then prevailing for comparable loans,
provided, however, that no such additional loans shall be secured by any
mortgage or other encumbrance on the property of the Partnership, except in the
case of the hypothecation of personal property purchased by the Partnership and
not included in the security agreements executed by the Partnership at the time
of Initial Closing or Final Closing, and otherwise in accordance with this
Agreement. Loans made under this Section shall be repaid as provided in Section
10.07(d).
6.11. Withholding of Fee Payments
In the event of a default described in Section 5.03, the
Partnership, at the sole election of the Investment Partnership, shall withhold
payment of any installment of the Development Services Fee. Any installment so
withheld shall be promptly released to the Developer upon a determination or
final arbitration decision pursuant to Section 5.03(b) that such default has
been substantially cured. Any interest earned thereon shall be paid pursuant to
Section 5.03(b).
44
<PAGE>
6.12. Cost Savings
Any cost savings realized during the construction of the
Apartment Development, including any net interim income, which result in any
undrawn amounts under the Construction Lean shall be applied in the following
priority and to the following extent, subject to the approval of the RHCDS:
(a) to enhance the Apartment Development through additional
construction;
(b) to reimburse the General Partner or the Partnership for any Excess
Development Costs for which funds were previously advanced by them; and
(c) to reduce the amount of the Mortgage Loan.
6.13. Property Management Agent
(a) The Partnership, with the approval of the RHCDS, shall initially
engage such Management Agent as the General Partner may select to manage the
operation of the Apartment Development during the rent-up period and all times
thereafter. The Management Agent shall be paid a management fee in an amount
subject to the approval of the RHCDS. The Management Agreement for the Apartment
Development shall be in a form acceptable to the RHCDS. Southland Management
Corp. hereby is approved by the parties hereto as the Management Agent.
(b) The General Partner
(i) may, upon receiving any required approval or order of the
RHCDS, dismiss the Management Agent as the entity responsible
for the Apartment Development under the terms of the
Management Agreement;
(ii) shall, at the request of the Investment Partnership,
remove a Management Agent for (A) any conflict of interest, if
Affiliated, or (B) failure to produce Tax Credit in the amount
of the specified percentage of the Projected Credit set forth
in the definition of "Tax Credit Reduction Amount" in Article
I, or (C) failure to produce Net Cash Flow sufficient to
provide for repayment of the annual priority distribution due
to the Investment Partnership in any year;
(iii) shall, after consulting with the Investment Partnership,
remove a Management Agent Affiliated with a Bankrupt, Legally
45
<PAGE>
Disabled, withdrawn, or removed General Partner, or in the
event that the Management Agent is Bankrupt or Legally
Disabled; and
(iv) shall remove the Management Agent for intentional
misconduct or failure to exercise reasonable care in the
discharge of its duties and obligations as Management Agent,
including, without limitation, any action
or failure to take any action which:
(A) violates in any material respect any provision of the Management
Agreement and any provision of the Construction Loan or Mortgage Loan; or
(B) falls to cure substantial building code violations in the
Apartment Development within six months after Notice from the applicable
governmental agency or department, or violates any other provision of law
applicable to the Apartment Development; or
(C) violates in any material respect any provision of this Agreement,
including, without limitation, (i) permitting occupancy of dwelling units by
persons not classified as Qualifying Individuals, or (ii) failing to produce
reports required by Section 6.14.
All Partners shall give such Consents, take such actions and execute
such documents as shall be legally necessary and sufficient to effectuate all of
the foregoing provisions of this Section 6. 13.
(c) Upon the removal of the Management Agent as the entity responsible
for the management of the Apartment Development pursuant to Section 6.13, a
substitute Management Agent which is not an Affiliate of the General Partner
shall be promptly designated by the General Partner to act hereunder and the
Partnership shall enter into a Management Agreement with the substitute
Management Agent with the approval of the RHCDS and the Investment Partnership.
6.14. Reports to Investment Corporation
(a) The General Partner shall furnish or shall cause to be furnished
to Landau
(i) on a Quarterly basis, and as a condition to the payment
of each Installment, a copy of the most recent
46
<PAGE>
(A) RHCDS Form 1944-29 (Project Worksheet for Interest Credit and
Rental Assistance),
(B) RHCDS Form 1930-6 (Monthly Report), and
(C)RHCDS Form 1944-8 (Tenant Certification) for tenant households
currently or last in occupancy of each of the dwelling units of the Apartment
Development;
(ii) concurrently with their timely submission to the RHCDS,
copies of any and all financial reports that may be requested
by the RHCDS and/or any other governmental agencies having
jurisdiction with regard to the Partnership or the Apartment
Development including, but not limited to, RHCDS Form 1930-7
(Statement of Budget and Cash Flow) and RHCDS Form 1930-8
(Year-End Report and Analysis);
(iii) a set of photographs of the Apartment Development with
the date taken noted thereon that reasonably depicts its
condition as of the date taken; and
(iv) any other information as from time to time is requested
by NCPPS or is material with respect to the financial and
physical conditions of the Apartment Development, and/or the
financial and administrative affairs of the Partnership
including, but not limited to, copies of correspondence with
the State Agency, certificates of occupancy, insurance
policies and/or insurance certificates as applicable to the
Apartment Development, service contracts, any income
statements which compare actual and budgeted expenses for the
quarter and for the current "year-to-date" annual itemized
lists of all rent delinquencies, statements of receipts and
disbursements, schedules of accounts receivable and payable
and reconciled bank statements so long as these statements
are required by RHCDS.
47
<PAGE>
(b) At least 21 days prior to Final Closing, any documents to be
executed by the Partnership at Final Closing providing for a modification in the
terms of the Mortgage Loan, or evidencing any material change as to the
Apartment Development or its financing or regulation, shall be submitted by the
General Partner to the Investment Partnership for its approval, if such
modification or change may affect the purpose of the Partnership and/or the
ability of the Investment Partnership to receive the Tax Credit in the amount of
the Projected Credit. The General Partner shall provide copies of all documents
executed and/or delivered at Final Closing to the Investment Partnership
promptly after Final Closing.
(c) The General Partner shall, within 10 days after receipt thereof,
forward to the Investment Partnership a copy of any notice received by the
General Partner or the Partnership of any default with respect to any material
instrument to which the Partnership is a party or which affects the assets of
the Partnership, and/or notice of the commencement of any foreclosure or similar
proceedings, and shall report to the Investment Partnership any other
significant developments affecting the Partnership, its business or assets, as
soon as practicable following the occurrence of any such event.
(d) In no event shall the failure of the Investment Partnership to
disapprove any document or report provided to it or to NCPPS be deemed to
constitute its Consent or the Consent of the Investment Partnership to any
violation of or change in any provision of this Agreement or to any violation of
any regulation of the RHCDS or of any applicable law.
6.15 Rent Increases The Investment Partnership at any time
shall have the right to require the General Partner to use best efforts to apply
to the RHCDS for increases in authorized rents.
ARTICLE VII
CHANGES IN GENERAL PARTNER
7.01. Withdrawal of a General Partner
(a) The General Partner may withdraw from the Partnership or sell,
transfer or assign the General Partner's Partnership Interest only after (i)
Consent of the Investment Partnership; (ii) Consent by all necessary parties as
provided in Section 7.04 of any new General Partner to be substituted therefor
or to receive all or part of a withdrawing General Partner's Partnership
Interest; (iii) counsel for the Investment Partnership shall have delivered to
48
<PAGE>
the Partnership its opinion that any substitute General Partner, either
separately or together with any non-withdrawing General Partner, has sufficient
net worth and meets all other published requirements of the Code and the
Internal Revenue Service necessary to assure that the Partnership will continue
to be classified as a partnership and (iv) counsel for the Investment
Partnership each shall have rendered an opinion that none of the actions taken
in connection with such withdrawal will cause the termination or dissolution of
the Partnership or will cause it to be classified other than as a partnership
for federal income tax purposes or be in violation of the Act.
(b) The withdrawal of a General Partner without the Consent of the
Investment Partnership shall have the same effect as a removal of a General
Partner under Section 7.03. A General Partner who shall voluntarily withdraw as
General Partner of the Partnership without meeting the conditions for withdrawal
set forth in Section 7.01 (a) shall be deemed to be in breach of this Agreement,
shall be liable for any damages to the Partnership at law or in equity, and
shall forfeit his entire Partnership Interest, including without limitation any
residual share of Sale or Refinancing Proceeds or Liquidation Proceeds.
(c) In the event of a withdrawal or removal of a General Partner, or
sale, transfer or assignment of the Partnership Interest of any General Partner,
or conversion under Section 7.02 of such Interest to a limited partnership
interest, the General Partner shall remain liable for all obligations and
liabilities (including, but not limited to, Operating Deficits and Excess
Development Costs) incurred as General Partner before such withdrawal, removal,
sale, transfer, assignment or conversion shall have become effective under this
Agreement, whether or not any such obligations or liabilities were known or had
matured, but shall be free of any obligation or liability incurred on account of
the activities of the Partnership from and after the time such withdrawal,
removal, sale, transfer, assignment or conversion shall have become effective.
7.02. Effect of Bankruptcy or Legal Disability of a General Partner
(a) Upon the Bankruptcy or Legal Disability of a General Partner, the
business of the Partnership shall be continued by any other General Partner,
provided, however, that if a Bankrupt or Legally Disabled General Partner is
then a sole General Partner or if any event occurs with respect to a sole
General Partner which causes a termination of the Partnership under the Act, the
Partnership shall be terminated unless reconstituted pursuant to Section 11.01
and the Partners appoint at least one successor General Partner satisfactory to
the RHCDS and as herein provided.
49
<PAGE>
(b) Upon the Bankruptcy or Legal Disability of a General Partner, such
General Partner shall immediately cease to be a General Partner and his
Partnership Interest shall, without further action, be converted to a limited
partner interest, provided, however, that if such Bankrupt or Legally Disabled
General Partner is the sole remaining General Partner, or the remaining General
Partner has less than a combined 1% Percentage Interest in the Partnership, the
converted Partnership Interest of such replaced General Partner shall be ratably
reduced and transferred to the remaining General Partner to the minimum extent
necessary to insure that any remaining or substitute General Partner (i) hold a
combined 1% Percentage Interest, and (ii) will receive Net Cash Flow pursuant to
Section 10.06 and a distribution of Sale or Refinancing proceeds pursuant to
Section 10.07 or Liquidation Proceeds pursuant to Section 10.08, in such amounts
as the Investment Partnership, in its sole discretion, deems necessary to ensure
that at least one General Partner of suitable quality may be obtained in order
to achieve the purpose of the Partnership.
(c) If, at the time of the Bankruptcy or Legal Disability of a General
Partner, the Bankrupt or Legally Disabled General Partner was not the sole
General Partner of the Partnership, any remaining General Partner shall
immediately (i) give Notice to the Limited Partner of such Bankruptcy or Legal
Disability, (ii) make, execute and file such amendments hereto or documents or
instruments as are deemed necessary to reflect the conversion of the Partnership
Interest of the Bankrupt or Legally Disabled General Partner and the General
Partner having ceased to be a general partner. Any remaining General Partner is
hereby granted an irrevocable power of attorney to execute any or all documents
on behalf of the Partners and the Partnership and to file such documents as may
be required to effectuate the provisions of this Article VII.
7.03. Removal of General Partner
(a) The Investment Partnership, subject to the approval of the RHCDS
if required, shall have the right to remove any General Partner for intentional
misconduct, gross negligence or breach of fiduciary obligation to a Limited
Partner under the Act or hereunder, provided that any such conduct results in,
or is likely to result in, a material detriment to or an impairment of the
Apartment Development, other assets of the Partnership, or the rights or
benefits of the Investment Partnership, or upon the occurrence of any of the
following:
(i) allocation to the Investment Partnership of Tax Credit
substantially less than the amount of the Projected Credit;
50
<PAGE>
(ii) commencement of foreclosure proceedings against the
Apartment Development;
(iii) violation in a material respect of any provisions of the
Construction Loan or Mortgage Loan, or any material provisions
of the RHCDS or other governmental regulations, agreements or
law applicable to the Apartment Development, and such
violation shall continue for a period of 30 days after the
giving of written Notice thereof;
(iv) failure in a material way to assure the continued
accuracy of the General Partner's representations and
warranties under this Agreement or violation of any material
provision of this Agreement, including, without limitation,
(A) a violation of Partnership purposes or authority as set
forth in Sections 3.01 or 3.02, (B) violation of any
obligations of the General Partner under Article VI of this
Agreement (including, without limitation, (i) failure to pay
Excess Development Costs, make Operating Deficit Loans, or
provide the annual priority distribution as required under
Sections 6.08 or 6.09, or (ii) failure to remove the
Management Agent if so required under Section 6.13, (C)
failure to furnish tax returns to the Investment Partnership
for its approval prior to February 15 of any year pursuant to
Section 12.03 and 12.04, (D) termination of the Partnership
for federal income tax purposes without the Consent of the
Investment Partnership (E) treatment of the Partnership for
federal income tax purposes as an association taxable as a
corporation or
(v) in the written opinion of counsel for the Investment
Partnership, the General Partner fails to meet the General
Partner's representations and warranties set forth in Section
4.01(h) (evidenced by a Notice to the General Partner to such
effect and based upon current financial
statements of the General Partner, which shall be promptly
furnished to the Investment Partnership at any time upon
request).
(b) The Investment Partnership shall give Notice to all Partners of
its determination that the General Partner or any specific General Partner shall
be removed. The General Partner named in such Notice shall have 30 days after
receipt of such Notice to cure any default or other reason for such removal,
while remaining as General Partner (including, only in the event of a default
under subsection (a) above, the admission of a successor or additional General
Partner in compliance with Section 7.04). If at the end of 30 days such default
has not been cured to the satisfaction of the Investment Partnership, such
General Partner shall cease to be General Partner and the powers and authorities
conferred on such General Partner under this Agreement shall cease, and the
Partnership Interests of any such General Partner shall be transferred to an
un-Affiliated designee of the Investment Partnership, which designee shall
(after the removal of any General Partner) become a General Partner, or, at its
sole election, may nominate another person or organization to become a new
General Partner of the Partnership and upon its admission to the Partnership
pursuant to Section 7.04, such Person shall become a General Partner.
(c) Except in the event of a default under subsection (a)(v) above,
the Partnership Interest of any removed General Partner shall without further
action be terminated, and all of its rights to unpaid Development Services Fees
(if any), Net Cash Flow, Sale or Refinancing Proceeds or Liquidation Proceeds
shall be forfeited.
51
<PAGE>
(d) The Investment Partnership hereby is granted an irrevocable power
of attorney, coupled with an interest, to execute any and all documents on
behalf of the Partners and the Partnership as shall be legally necessary and
sufficient to effect all of the foregoing provisions of this Section 7.03. An
election by the Investment Partnership to remove any General Partner hereunder
shall not limit or restrict the availability and use of any other remedy which
the Investment Partnership or any other Partner might have in connection with
any General Partner's undertakings and responsibilities under this Agreement,
and they are understood by the parties hereto to be permitted by the Act as the
exercise of powers not constituting participation in the control of the business
so as to convert the limited partner interest of the Investment Partnership into
a general partner interest for any purpose or to any extent.
7.04. Admission of a Successor or Additional General Partner
The General Partner may, at any time, designate additional Person(s)
to be General Partner(s), whose Partnership Interests shall be such as are
agreed upon by the General Partner and such additional Persons, provided that
the Partnership Interests of the Limited Partner shall not be affected thereby
and subject to the following conditions:
(a) Except in the case of the removal of any General Partner, the
admission of such Person shall have been Consented to by the General Partner or
the General Partner's successors and the Investment Partnership and, if
required, by the RHCDS;
(b) any such successor or additional General Partner shall have
accepted and agreed to be bound by (i) all the terms and provisions of this
Agreement by executing a counterpart hereof and (ii) all the terms and
provisions of the Construction Loan or Mortgage Loan by executing a counterpart
thereof;
(c) as evidence of the admission of any additional or successor
General Partner, this Agreement shall have been duly amended and (if required by
the Act, filed) and all other actions required by this Agreement or deemed
necessary by Counsel in connection therewith shall have been performed;
(d) if any successor or additional General Partner is a corporation,
it shall have provided the Partnership evidence satisfactory to Counsel of its
authority to become a General Partner, to do business in the State and to be
bound by the terms and provisions of this Agreement; and
52
<PAGE>
(e) counsel for any incoming General Partner shall have rendered an
opinion that the admission of the successor or additional Person is in
conformity with the Act and that none of the actions taken in connection with
the admission of the successor or additional General Partner will cause the
termination or dissolution of the Partnership or will cause it to be classified
other than as a partnership for federal income tax purposes.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNER
8.01. No Management Powers
No Limited Partner shall take part in the management or control of the
business of the Partnership nor transact any business in its name. Except as
otherwise expressly provided either in this Agreement or in the Act, no Limited
Partner shall have the power or authority to bind the Partnership or to sign any
agreement or document in the name of the Partnership. No Limited Partner shall
have any power or authority with respect to the Partnership except insofar as
the Consent of the Limited Partner shall be expressly required and except as
otherwise expressly provided either in this Agreement or in the Act, provided,
however, that if and to the extent permitted by the Act, the Investment
Partnership, in its capacity as a limited partner under the Act and without
being treated under the Act as a general partner for any purpose or to any
extent, shall have and may exercise the following powers:
(1) be a contractor for, or agent, or employee of the
Partnership or the General Partner;
(2) consult with and advise a General Partner with respect to
the business of the Partnership;
(3) act as surety for the Partnership or guarantee or assume
one or more specific obligations
of the Partnership;
(4) take any action required or permitted by law to bring or
pursue a derivative action in the right of the Partnership;
(5) request or attend a meeting of Partners;
(6) propose, approve or disapprove, by voting, Consenting or
otherwise, one or more of the following matters:
(i) the dissolution and winding up of the Partnership;
53
<PAGE>
(ii) the sale, exchange, lease, mortgage, pledge, or other
transfer of all or substantially all of the assets of the
Partnership;
(iii) the occurrence of indebtedness by the Partnership other
than in the ordinary course of its business;
(iv) a change in the nature of the business;
(v) the removal of a General Partner or Limited Partner;
(vi) the admission of a General Partner or Limited Partner;
(vii) a transaction involving an actual or potential conflict
of interest between any General Partner and the Partnership
or the Limited Partner; or
(viii) an amendment to this Agreement or any Certificate of
Limited Partnership; or
(7) wind up the Partnership pursuant to Article XII.
8.02. Limitation on LiabilIty of Limited Partner
(a) The liability of the Limited Partner shall be limited to his
Capital Contribution as and when payable under the provisions of this Agreement.
Except as expressly provided by the Act, no Limited Partner or any limited or
general partner of a Limited Partner shall have any other liability to
contribute money to, or in respect of any debts, contracts or other liabilities
or obligations of, the Partnership, nor shall any Limited Partner or any limited
or general partner of a Limited Partner be personally liable for any debts,
contracts or other liabilities or obligations of the Partnership. No Limited
Partner shall be obligated to make loans to the Partnership.
(b) Notwithstanding anything to the contrary contained herein, except
as expressly provided by the Act, the partners, general or limited, of the
Investment Partnership shall have no personal liability to any of the parties to
this Agreement with regard to the representations and covenants extended, or
their obligations undertaken, by the Investment Partnership under this
Agreement, In the event the Investment Partnership shall be in default under any
of the terms of this Agreement, the sole recourse of any party hereto for any
indebtedness due hereunder, or for any damages resulting from any such default
54
<PAGE>
by the Investment Partnership, shall be against the assets of the Investment
Partnership allocated to and remaining for investment in the Partnership,
provided, however, that under no circumstances shall the liability of the
Investment Partnership for any such default be in excess of the amount of
Capital Contribution payable by the Investment Partnership to the Partnership
under the terms of this Agreement at the time of such default.
8.03. Other Activities
The Limited Partners may engage in or possess interests in other
business ventures of every kind and description for their own accounts,
including without limitation serving as general or limited partner of other
partnerships which own, either directly or through interests in other
partnerships, governmental housing projects similar to the Apartment
Development. Neither the Partnership nor any of the Partners shall have any
right by virtue of this Agreement in or to such other business ventures or to
the income or profits derived therefrom.
ARTICLE IX
TRANSFERS OF AND RESTRICTIONS ON TRANSFERS
OF INTERESTS OF LIMITED PARTNERSHIP
9.01. Purchase for Investment
(a) The Limited Partner hereby represents and warrants to the General
Partner and to the Partnership that the acquisition of its Partnership Interest
is made as principal for investment purposes only and not with a view to the
resale or distribution thereof, except insofar as the Securities Act of 1933,
55
<PAGE>
Regulation D thereunder, and any applicable securities law of any state or other
jurisdiction, permit such acquisition to be made for the account of others or
with a view to the resale or distribution of such Interests.
(b) The Limited Partner agrees that it will not sell, assign or
otherwise transfer an Interest or any fraction thereof to any Person who does
not represent, warrant and agree that their acquisition of such interests or any
portion shall be made for investment purposes only and not with a view to resale
and distribution.
9.02. Restrictions on Transfer of Limited Partner's Interests
(a) Under no circumstances will any offer, sale, transfer, assignment,
hypothecation or pledge of the Limited Partner Interest be permitted unless the
General Partner and the Investment Partnership shall have Consented in their
sole discretion and given notice thereof.
(b) A Limited Partner whose Partnership Interest is being
transferred shall pay such reasonable expenses as may be incurred by the
Partnership in connection with such transfer.
(c) Any Person who is the assignee of a Limited Partner's Partnership
Interest, but does not become a Substitute Limited Partner, and desires to make
a further assignment of such Partnership Interest, shall be subject to all the
provisions of this Article IX to the same extent and in the same manner as any
Limited Partner desiring to make an assignment of his Interest.
9.03. Admission of Substitute Limited Partner
(a) Subject to the other provisions of this Article IX, an assignee of
the Interest of a Limited Partner (which shall be understood to include any
purchaser, transferee, donee, or other recipient of any disposition of such
Interest) shall be deemed admitted as a Substitute Limited Partner of the
Partnership only upon the satisfactory completion of the following:
(i) Consent of the General Partner (which may be withheld in
the General Partner's sole discretion) and the Consent of the
RHCDS, if required, shall have been given, which Consent may
be evidenced by the execution by the General Partner of an
amended Certificate (if required by the Act) evidencing the
admission of such Person as a Limited Partner;
(ii) the assignee shall have accepted and agreed to be bound
by the terms and provisions of this Agreement by executing a
counterpart thereof or an appropriate amendment hereto, and
such other documents or instruments as the General Partner may
require in order to effect the admission of such Person as a
Limited Partner;
(iii) the assignee shall have complied with Section 9.01(b);
(iv) if the assignee is a corporation, the assignee shall have
provided the General Partner with evidence satisfactory to
counsel for the Partnership of its corporate authority to
become a Limited Partner hereunder; and
56
<PAGE>
(v) the assignee or the assignor shall have reimbursed the
Partnership for all reasonable expenses, including all
reasonable legal fees and recording charges, incurred by the
Partnership in connection with such assignment.
(b) For the purpose of allocation of Profits, Losses and
Credits, and for the purpose of distributing cash of the Partnership, a
Substitute Limited Partner shall be treated as having become, and as appearing
in, the records of the Partnership as a Partner as of the effective date of an
amendment or counterpart to this Agreement.
(c) The General Partner shall cooperate with the Person seeking to
become a Substitute Limited Partner by promptly preparing the documentation
required by this Section and promptly making any official filings, recordings
and publications.
(d) Notwithstanding anything to the contrary contained herein, at any
time prior to Final Closing the Investment Partnership may assign its rights and
obligations as a Limited Partner to another similarly structured investment
limited partnership of which First Sterling Capital Resources, Inc. or an
Affiliate is the general partner without the Consent of the General Partner,
subject only to the Consent if required by the RHCDS.
ARTICLE X
PROFITS, LOSSES, CREDITS AND DISTRIBUTIONS
10.01 Capital Accounts
A Capital Account shall be maintained for each Partner, consisting of
the aggregate of (a) the amount of cash such partner has contributed to the
Partnership, (b) the fair market value of any property such Partner has
contributed to the Partnership net of liabilities assumed by the Partnership or
to which such property is subject and (c) the amount of profits and tax-exempt
income allocated to such Partner, less the aggregate of (w) the amount of losses
allocated to such Partner, (x) the amount of cash distributed to such Partner,
(y) the fair market value of any property distributed to such Partner net of
liabilities assumed by such Partner or to which such property is subject, and
(z) such Partner's share of any other expenditures which are not deductible by
the Partnership for federal income tax purposes or which are not allowable as
additions to the basis of Partnership property, and subject to such other
adjustments as may be required under the Code.
57
<PAGE>
10.02. Determination of Profits, Losses and Credits
(a) Profits, Losses and Credits for all purposes of this Agreement
shall be determined in accordance with the provisions of Treasury Regulation
Section 1.704-1(b), utilizing the accounting method followed by the Partnership
for federal income tax purposes, except that any adjustments made pursuant to
Section 754 of the Code shall not be taken into account. Every item of income,
gain, loss, deduction, credit or tax preference entering into the computation of
Profits, Losses and Credits or applicable to the period during which such
Profits, Losses and Credits were realized, shall be considered allocated to each
Partner in the same proportion as Profits, Losses and Credits are allocated to
such Partner. Profits, losses and credits for tax purposes shall be allocated in
the same manner as Profits, Losses and Credits as set forth in this Article X,
except as provided in Section 10.02(i).
(b) Subject to the provisions of Section 10.02(c) and Section 10.04,
each Limited Partner shall be entitled to receive its share of all Profits,
Losses and Credits at the close of business on the last day of each year.
(c) For the year during which a Limited Partner is admitted to the
Partnership, there shall be allocated to each Limited Partner a share of the
Profits, Losses and Credits and Net Cash Flow beginning with the first day of
the month in which the Limited Partner is admitted to the Partnership.
(d) If there is a determination that Section 483 or Sections 1271
through 1288 (relating to imputed interest with respect to deferred payment
sales of property) or Section 7872 of the Code is applicable to any loan between
a Partner and the Partnership, any income or deduction of the Partnership
attributable to interest on such loan (whether stated or unstated) shall be
allocated solely to such Partner.
(e) If the deduction of all or a portion of any fee paid or accrued
from earnings of the Partnership to a Partner or an Affiliate of a Partner is
disallowed for federal income tax purposes by the Internal Revenue Service with
respect to a taxable year of the Partnership, the Partnership shall then
allocate to such Partner an amount of gross income of the Partnership for such
year equal to the amount of such fee with respect to which the deduction is
disallowed.
(f) If any Partner's Partnership Interest is reduced but not
eliminated because of the admission of new Partners or otherwise, or if any
Partner is treated as receiving any items of property described in Section
751(a) of the Code, the Partner's interest in such items of Section 751(a)
58
<PAGE>
property shall not be reduced, but shall be retained by the Partner so long as
the Partner has a Partnership Interest and so long as the Partnership has an
interest in such property.
(g) Notwithstanding any other provision of this Agreement, no
allocation of loss or deduction (or item thereof shall be made to a Partner if
such allocation would cause the deficit Capital Account balance of such Partner
(excluding the portion of such deficit balances that must be restored to the
Partnership upon liquidation) to exceed such Partner's share of Partnership
Minimum Gain and Partner Nonrecourse Debt Minimum Gain determined at the end of
the Partnership taxable year to which the allocation relates. For purposes of
this Section, a Partner's capital account shall be deemed to be reduced by
Qualified Income Offset Items.
(h) In the event any Partner unexpectedly receives any adjustments,
allocation or distributions described in Treasury Regulation Section 1.704-1
(b)(2)(ii)(d)(4), (5) or (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 under Code Section 704(b))
the deficit balance in each such Partner's Capital Account as quicKly as
possible. For purposes of this Section, a Partner's Capital Account shall be
deemed to be reduced by Qualified Income Offset Items.
(i) Notwithstanding the foregoing provisions of this Article X,
income, gain, loss and deduction with respect to property which has a variation
between its basis computed in accordance with Treasury Regulation Section
1.704-1(b) and its basis computed for federal income tax purposes shall be
shared among the Partners so as to take account of such variation in a manner
consistent with the principles of Section 704(c) of the Code and Treasury
Regulation Section 1.704-l(b)(2)(iv)(g).
6) Tax credits under Section 42 of the Code shall be allocated among
the Partners in the same manner as the deductions attributable to the
expenditures creating the tax credit are allocated among the Partners in
accordance with Treasury Regulation section 1.704-1 (b)(4)(ii).
10.03. Allocation of Profits, Losses and Credits
(a) Subject to Sections 10.02 and 10.03(b) through 10.03(h) all
Profits, Losses and Credits shall be allocated 1% to the General Partner and 99%
to the Investment Partnership.
(b) Gains recognized by the Partnership upon the sale, exchange or
other disposition of all or any substantial portion of the property owned by the
Partnership shall be allocated as follows: (i) first, that portion of gains
(including any gains treated as ordinary income for federal income tax purposes)
59
<PAGE>
which is equal in amount to such Partners' negative Capital Accounts shall be
allocated to the Partners with negative Capital Account balances, in proportion
to such balances, and (ii) second, gain in excess of the amount allocated under
(i) shall be allocated to the Partners in an amount necessary to increase their
Capital Accounts as nearly as possible to the amount of cash each Partner would
receive under Section 10.07 solely in its capacity as a Partner if the aggregate
balance of all Capital Accounts were cash available for distribution under such
Section.
(c) Losses recognized by the Partnership upon the sale, exchange or
other disposition of all or any substantial portion of the property owned by the
Partnership shall be allocated (i) first, to the extent and in such proportions
as shall be necessary such that, after giving effect thereto, the respective
balances in all Partners' Capital Accounts are proportionate to the Partners'
Interests in the Partnership; (ii) second, to the Partners until each Partner's
Capital Account equals his Capital Contribution to the Partnership; (iii) third,
to the Partners to the extent of and in proportion to each Partner's Capital
Account (after the adjustment in clause (ii)); and (iv) fourth, any remaining
loss to the Partners in accordance with the manner in which they bear the
economic risk of loss.
(d) Any portion of the gains treated as ordinary income for federal
income tax purposes under Sections 1245 and 1250 of the Code shall be allocated
on a dollar for dollar basis to those Partners to whom the items of Partnership
deduction or loss giving rise to the amount recaptured had been previously
allocated.
(e) If (i) the Partnership incurs recourse obligations or Partner
Nonrecourse Debt (including, without limitation, Operating Deficit Loans and the
Working Capital Loan made pursuant to Section 6.09) or (ii) the Partnership
incurs losses from extraordinary events which are not recovered from insurance
or otherwise (collectively, "Recourse Obligations") in respect of any
Partnership taxable year, then the calculation and allocation of profits and
losses shall be adjusted as follows: first, an amount of deductions attributable
to the Recourse Obligations shall be allocated to the General Partner with
respect to such obligations in the ratio in which the General Partner bears the
economic risk of loss, and second, the balance of such deductions shall be
allocated as provided in Section l0.03(a).
(f) If the General Partner shall make any payment to the Investment
Partnership pursuant to Section 6.09(a) in respect of any Partnership taxable
year, then the calculation and allocation of profits and losses shall be
adjusted as follows: first, an amount of deductions attributable to such payment
60
<PAGE>
shall be allocated to the General Partner, and second, the balance of such
deductions shall be allocated as provided in Section 10.03(a).
(g) If there is a net decrease in Partnership Minimum Gain during a
Partnership taxable year, each Partner will be allocated items of income and
gain for such year (and, if necessary, subsequent years) in the proportion to,
and to the extent of, an amount equal to such Partner's share of the net
decrease in Partnership Minimum Gain during the year. A Partner is not subject
to this Partnership Minimum Gain chargeback to the extent that any of the
exceptions provided in Treasury Regulation Section 1. 704-2(fl(2)-(5) apply.
Such allocations shall be made in a manner consistent with the requirements of
Treasury Regulation Section 1.704-2(fl under Section 704 of the Code.
(h) If there is a net decrease in Partner Nonrecourse Debt Minimum
Gain during a Partnership taxable year, then each Partner with a share of the
minimum gain attributable to such debt at the beginning of such year will be
allocated items of income and gain for such year (and, if necessary, subsequent
years) in proportion to, and to the extent of, an amount equal to such Partner's
share of the net decrease in Partner Nonrecourse Debt Minimum Gain during the
year. A Partner is not subject to this Partner Nonrecourse Debt Minimum Gain
chargeback to the extent that any of the exceptions provided in Treasury
Regulation Section 1.704-2(i) (4) applied consistently with Treasury Regulation
Section 1. 704-2(fl(2)-(5) apply. Such allocations shall be made in a manner
consistent with the requirements of Treasury Regulation Section 1. 704-2(i)(4)
under Section 704 of the Code.
61
<PAGE>
10.04. Allocations in Case of Transfer of Interests
(a) In any year in which a Limited Partner sells, assigns or transfers
all or any portion of an Interest to any Person who, during such year, is
admitted as a Substitute Limited Partner, the share of all Profits, Losses and
Credits allocable to, and of all Net Cash Flow and Sale and Refinancing Proceeds
and Liquidating Proceeds distributable under Sections 10.06, 10.07 and 10.08, to
any such Substitute Limited Partner that is attributable to the Interest sold,
assigned or transferred, shall be allocated and distributed to the assignee from
and after the first day of the calendar month following the month in which the
assignee executes this Agreement as a Substitute Limited Partner, provided,
however, that the assignor and the assignee may by agreement make special
provisions for the allocation of items of Profits, Losses and Credits as may
from time to time be permitted under the Code, and for the distribution of Net
Cash Flow, Sale and Refinancing Proceeds and Liquidating Proceeds distributable
under Sections 10.06, 10.07 and 10.08, but such allocation shall be binding as
to the Partnership only after it shall have received Notice thereof from the
assignor and assignee.
(b) In any year in which, pursuant to Article VI, the Interest of a
General Partner shall terminate, the Profits, Losses and Credits allocable to
and the Net Cash Flow, Sale and Refinancing Proceeds and Liquidating Proceeds
distributable under Sections 10.06, 10.07 and 10.08, as applicable, shall be
allocated and distributed to the successor General Partner from and after the
first day of the calendar month following the month in which the termination of
the Interest of the predecessor General Partner occurred, provided, however,
that the terminating General Partner and any successor or remaining General
Partner may, by agreement, make such provisions for the allocation of Profits,
Losses and Credits and for the distribution of Net Cash Flow, Sale or
Refinancing Proceeds and Liquidation Proceeds as are permitted by the Code.
10.05. Authority of General Partner to Vary Allocations to Preserve
and Protect Partners' Intent
(a) It is the intent of the Partners that each Partner's distributive
share of income, gain, loss, deduction or credit (or item thereof shall be
determined and allocated in accordance with this Article X and Article V to the
fullest extent permitted by Section 704(b) of the Code. To preserve and protect
the determinations and allocations provided for in this Article X, the General
Partner is hereby authorized and directed to allocate Profits, Losses and
Credits (or items thereof) arising in any year differently from that otherwise
provided for in this Article X to the extent that allocating Profits, Losses and
Credits (or items thereof) in the manner provided for in Article X in the
62
<PAGE>
opinion of Special Tax Counsel or the Accountants would cause the determinations
and allocations of each Partner's allocable share of Profits, Losses and Credits
(or items thereof) not to be permitted by Section 704(b) of the Code and
Treasury Regulations promulgated thereunder. Any allocation made pursuant to
this Section 10.05 shall be deemed to be a complete substitute for any
allocation otherwise provided for in this Article X and no formal amendment of
this Agreement or approval of any Partner shall be required. In making any New
Allocation under Section 10.05(a), the General Partner is to act only in
reliance upon the advice of the Accountants or Special Tax Counsel that, under
Section 704(b) of the Code and the Treasury Regulations thereunder, (i) the New
Allocation is necessary, and (ii) the New Allocation is the minimum modification
of the allocations otherwise provided for in this Article X necessary in order
to assure that, either in the then current year or in any preceding year, each
Partner's allocable share of Profits, Losses and Credits (or item thereof) is
determined and allocated in accordance with this Article X to the fullest extent
permitted by Section 704(b) of the Code and the Treasury Regulations thereunder.
(c) If the General Partner determines under Section 10.05(a) to make
any New Allocation in a manner less favorable to the Limited Partner than is
otherwise provided for in this Article X, then the General Partner is authorized
and directed, only after having received the Consent of the Investment
Partnership and insofar as they are advised by the Accountants or Special Tax
Counsel that it is permitted by Section 704(b) of the Code, to allocate Profits,
Losses and Credits (or items thereof) arising in later years in such manner so
as to bring the allocations of Profits, Losses and Credits (or items thereof) to
the Limited Partner as nearly as possible to the allocations thereof otherwise
contemplated by this Article X.
(d) New Allocations made by the General Partner under Section 10.05(a)
in reliance upon the advice of the Accountants and allocations made by the
General Partner under Section 10.05(c) in reliance upon the advice of the
Accountants or Special Tax Counsel shall be deemed to be made pursuant to the
fiduciary obligation of the General Partner to the Partnership and the Limited
Partner, and no such allocation shall give rise to any claim or cause of action
by the Limited Partner.
10.06. Distributions of Net Cash Flow
All Net Cash Flow of the Partnership for each calendar year
shall be distributed to all Partners simultaneously, but in the following order
of priority:
63
<PAGE>
(a) to the General Partner, an annual management incentive fee in the
amount of $1,000, provided, however, that no such fee shall be paid in the event
that any provision of Section 12.04 has not been met; and
(b) the balance, 50%, to the General Partner
and 50% to the Limited Partner.
10.07. Distribution of Sale and Refinancing Proceeds
Except as may be required under Section 10.08, Sale and
Refinancing Proceeds shall be distributed and applied in the following order of
priority:
(a) to the payment of all debts and liabilities of the Partnership
(including amounts due pursuant to the Mortgage Loan and all expenses of the
Partnership incident to any such sale or refinancing), excluding (i) debts and
liabilities of the Partnership to Partners or any Affiliates, and (ii) all
unpaid fees owing to the General Partner or Affiliates of the General Partner
under this Agreement;
(b) to the setting up of any reserves which the Liquidator (or
the General Partner, with the Consent of the Investment Partnership, if the
distribution is not pursuant to the liquidation of the Partnership) deems
reasonably necessary for contingent, unmatured or unforeseen liabilities or
obligations of the Partnership;
(c) pursuant to RHCDS Instruction 1944-E, Section 1944.21 1(a)(12)
(ii), the balance of any remaining sum 5% to the General Partner;
(d) to the repayment of any unrepaid debts and liabilities owed to the
Partners or any Affiliates by the Partnership for Partnership obligations,
including any Operating Deficit Loans and other loans made pursuant to Sections
6.09 and 6.10, and any amounts not distributed to the Investment Partnership
pursuant to Section 10.06(a);
(e) to the Investment Partnership, any cumulative Tax Credit
Shortfall due to it, to the extent not previously returned under Section
10.07(e);
(f) to the payment of a refinancing and disposition fee in the amount
of 5% of the Sale and Refinancing Proceeds, payable 50% to the General Partner
and 50% to Landau.
(g) the balance of any remaining sum 50% to the General Partner and
50% to the Investment Partnership.
Notwithstanding anything in this Section 10.07 to the
contrary, Sale and Refinancing Proceeds resulting from an event covered by
64
<PAGE>
property or liability insurance shall first be applied, to the extent required,
to repair or restore the damage or destruction resulting from the event, with
the balance, if any, subject to the provisions of the Mortgage or the
requirements of the RHCDS. The amount so applied shall not be considered when
calculating the refinancing and disposition fee under subsection (e) of this
Section 10.07.
10.08. Liquidation Proceeds
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership, Liquidation
Proceeds shall be distributed to the Partners in accordance with the positive
balances in their Capital Accounts after taking into account all Capital Account
adjustments for the Partnership taxable year, including adjustments to Capital
Accounts pursuant to Sections 10.03 and 10.08(b). If a General Partner has a
negative balance in his Capital Account following the liquidation of the
Partnership or liquidation of his interest in the Partnership after taking into
account all Capital Account adjustments for the Partnership taxable year in
which the liquidation occurs, such General Partner shall pay to the Partnership
in cash an amount equal to the negative balance in his Capital Account. Such
payment shall be made by the end of such taxable year (or, if later, within 90
days after the date of such liquidation) and shall, upon liquidation of the
Partnership, be paid to recourse creditors of the Partnership or distributed to
other Partners in accordance with the positive balances in their Capital
Accounts.
(b) With respect to assets distributed in kind to the Partners in
liquidation or otherwise, (i) any unrealized appreciation or unrealized
depreciation in the values of such assets shall be deemed to be Profits, Losses
and Credits realized by the Partnership immediately prior to the liquidation or
other distribution event and (ii) such Profits, Losses and Credits shall be
allocated to the Partners in accordance with subsections (b) and (c) of Section
10.03; any property so distributed shall be treated as a distribution of an
amount in cash equal to the excess of such fair market value over the
outstanding principal balance of and accrued interest on any debt by which the
property is encumbered. For the purposes of this Section 10.08(b), "unrealized
appreciation" or "unrealized depreciation" shall mean the difference between the
fair market value of such assets, taking into account the fair market value of
the associated financing (but subject to Section 7701(g) of the Code), and the
Partnership's adjusted basis for such assets as determined under Regulation
Section 1.704-1(b). This Section 10.08(b) is intended to provide a rule for
allocating unrealized gains and losses upon liquidation or other distributions
to be treated as sales for value, and nothing contained in this Section 10.08(b)
or elsewhere herein is intended to treat or cause such distributions to be
65
<PAGE>
treated as sales for value. The fair market value of such assets shall be
determined by an appraiser to be selected by the General Partner and the
Investment Partnership.
10.09. Tax Matters Partner
(a) The sole General Partner or, if there is more than one General
Partner, the Managing General Partner, hereby is designated as Tax Matters
Partner of the Partnership, and shall engage in such undertakings as are
required of the Tax Matters Partner of the Partnership, as provided in
regulations pursuant to Section 6231 of the Code. Each Partner, by the execution
of this Agreement, Consents to such designation of the Tax Matters Partner and
agrees to execute, certify, acknowledge, deliver, swear to, file and record at
the appropriate public offices such documents as may be necessary or appropriate
to evidence such Consent.
(b) The Tax Matters Partner is hereby authorized, but not required,
subject to its fiduciary obligations to the Limited Partner:
(i) to enter into any settlement with the Internal Revenue
Service or the Secretary of the Treasury with respect to any
tax audit or judicial review, provided that the Tax Matters
Partner first receives the written consent of the Investment
Partnership to such settlement;
(ii) if a notice of a final administrative adjustment at the
Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment")
is mailed to the Tax Matters Partner, to seek judicial review
of such final adjustment, including the filing of a petition
for readjustment, without the prior written Consent of the
Investment Partnership, with the Tax Court, the District Court
of the United States or the United States Claims Court;
(iii) to intervene in any action brought by any other Partner
for judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with
said Secretary at any time and, if any part of such request is
not allowed by said Secretary, to file a petition for judicial
review with respect to such request;
66
<PAGE>
(v) to enter into an agreement with the Internal Revenue
Service to extend the period for assessing any tax which is
attributable to any item required to be taken into account by
a Partner for tax purposes, or an item affected by such item;
and
(vi) to take any other action on behalf of the Partners or the
Partnership in connection with any administrative or judicial
tax proceeding to the extent permitted by applicable law or
regulations.
The Tax Matters Partner, however, shall take none of the above
actions without Notice to and the Consent of the Investment Partnership and
shall furnish the Investment Partnership copies of all relevant documents.
(c) The Partnership shall reimburse the Tax Matters Partner for all
expenses, including legal and accounting fees, claims, liabilities, losses and
damages, incurred in connection with any administrative or judicial proceeding
with respect to the tax liability of the Partners. The payment of all such
expenses shall be made as a priority distribution of Net Cash Flow or pursuant
to Section 10.07(d). Neither the General Partner, nor any Affiliate thereof, nor
any other Person shall have any obligation to provide funds for such purpose.
The taking of any action and the incurring of any expense by the Tax Matters
Partner in connection with any such proceeding, except to the extent required by
law, is a matter in the sole discretion of the Tax Matters Partner and the
provisions on limitations of liability of the General Partner and
indemnification set forth in Section 6.06 shall be fully applicable to the Tax
Matters Partner in his capacity as such.
10.10. Tax Accounting
In the event of a transfer of all or any part of the Interest
of a General Partner or of a Limited Partner (or the interest of any partner of
the Investment Partnership), the Partnership shall elect, if requested by the
Investment Partnership, pursuant to Sections 734, 743 and 754 of the Code (or
any corresponding provision of succeeding law), to adjust the basis of the
Partnership property if, in the opinion of the Investment Partnership, based
upon the advice of the Accountants, such election would be most advantageous to
the Investment Partnership. Each Partner agrees to furnish the Partnership with
all information necessary to give effect to such election. The Partnership,
67
<PAGE>
however, shall take none of the above actions without prior Notice to and the
written Consent of the Investment Partnership and shall furnish the Investment
Partnership with copies of all relevant documents.
ARTICLE XI
DISSOLUTION AND LIQUIDATION
11.01. Dissolution of the Partnership
The Partnership shall be dissolved upon the earlier of (a) the
expiration of the term of the Partnership or (b) the election of the Investment
Partnership pursuant to the Act, or (c) upon the happening of any of the
following:
(i) the withdrawal, Bankruptcy or Legal Disability of a
General Partner who is, at that time, the sole General
Partner, unless the Partnership is reconstituted by agreement
of all their remaining partners within a 90-day period; or
(ii) any other event causing the dissolution of the
Partnership under the Act unless the Partnership is
reconstituted by agreement of all its remaining Partners
within a 90-day period.
11.02. Winding Up and Distribution
(a) Upon the dissolution of the Partnership pursuant to Section 11.01,
(i) a certificate of cancellation shall be filed in such offices within the
State as may be required or appropriate and (ii) the Partnership business shall
be wound up and its assets liquidated as provided in this Section 11.02 and the
net proceeds of such liquidation shall be distributed in accordance with Section
10.08.
(b) The Liquidator shall file all certificates and Notices of the
dissolution of the Partnership required by law. The Liquidator shall proceed
without any unnecessary delay to sell and otherwise liquidate the Partnership's
property and assets, provided, however, that if the Liquidator shall determine
that an immediate sale of part or all of the Partnership property would cause
undue loss to the Partners, then to avoid such loss, the Liquidator may, except
to the extent provided by the Act, defer the liquidation as may be necessary to
satisfy the debts and liabilities of the Partnership to Persons other than the
Partners. Upon the complete liquidation and distribution of the Partnership
assets, the Partners shall cease to be Partners of the Partnership, and the
68
<PAGE>
Liquidator shall execute, acknowledge and cause to be filed all certificates and
notices required by law to terminate the Partnership.
(c) Upon the dissolution of the Partnership pursuant to Section 11.01,
the Accountants shall promptly prepare, and the Liquidator shall furnish to each
Partner, a statement setting forth the assets and liabilities of the Partnership
upon its dissolution. Promptly following the complete liquidation and
distribution of the Partnership property and assets, the Accountants shall
prepare, and the Liquidator shall furnish to each Partner, a statement showing
the manner in which the Partnership assets were liquidated and distributed.
ARTICLE XII
BOOKS AND RECORDS, ACCOUNTING, TAX ELECTIONS, ETC.
12.01. Books and Records
The books and records of the Partnership shall be maintained
on an accrual basis in accordance with sound federal income tax accounting
principles. The General Partner shall comply with all document retention
requirements of the State Agency, the RHCDS and the IRS relating to Qualifying
Individuals or any other aspect of the Apartment Development. These and all
other records of the Partnership, including information relating to the status
of the Apartment Development and information with respect to the sale by the
General Partner or any Affiliate of goods or services to the Partnership, shall
be kept at the principal office of the Partnership and shall be available for
examination there by any Partner, or his duly authorized representative, or any
limited partner of the Investment Partnership, at any and all reasonable times.
Any Partner, or his duly authorized representative, upon paying the costs of
collection, duplication and mailing, shall be entitled to a copy of the name and
address of each Limited Partner.
12.02. Bank Accounts
(a) All funds of the Partnership not otherwise invested shall be
deposited in one or more accounts maintained in such banking institutions as the
General Partner shall determine, and withdrawals shall be made only in the
regular course of Partnership business on such signature or signatures as the
General Partner may, from time to time, determine. No funds of the Partnership
shall be deposited in any financial institution in which any Partner is an
officer, director or holder of any proprietary interest.
(b) The General Partner shall have fiduciary responsibility
for the safekeeping and use of all funds and assets of the Partnership, whether
or not in the immediate possession or control of the General Partner. The funds
69
<PAGE>
of the Partnership shall not be commingled with the funds of any other Person,
and the General Partner shall not employ, nor permit any other Person to employ,
such funds in any manner except for the benefit of the Partnership.
12.03. Accountants
The Accountants shall be such firm of certified public
accountants as shall be designated by the General Partner. The Accountants shall
annually prepare for execution by the General Partner all tax returns of the
Partnership with all supporting schedules and shall annually review or audit the
books of the Partnership as required by the RHCDS. The Accountants shall prepare
RHCDS Forms 1930-7 and 1930-8 together with any related financial statements
including a copy of all adjustments, reconciling the financial statements
submitted to the RHCDS to the tax return. The Investment Partnership expressly
reserves the right to direct the General Partner to remove the Accountants if in
its sole discretion there has been evidence of malfeasance on the part of the
Accountants.
12.04. Reports to Partners
(a) In addition to the reporting requirements set forth in Section
6.14, by March 10 of every year, the General Partner shall furnish to the
Investment Partnership:
(i) a copy of the Partnership's federal income tax returns,
including all schedules, for the Investment Partnership's
approval prior to filing, making such elections on IRS form
8609 as directed by any accountants for the Investment
Partnership;
(ii) copies of paid tax bills and paid bills for insurance
premiums;
(iii) a statement describing all transactions during the year
between the Partnership and the General Partner and Investment
Partnership which shall include a schedule showing all amounts
payable or paid during such year to the aforementioned
parties;
(iv) a copy of the Accountants' detailed depreciation schedule
as of December 31;
(v) a reconciliation of Partners' capital accounts as of
December 31 which details the Capital Contribution and
distributions to General and Limited Partners;
70
<PAGE>
(vi) a schedule of amounts due to/from General and Limited
Partners as of December 31;
(vii) a reconciliation of the reserve account as of December
31; and
(viii) an annual financial statement of each corporate General
Partner, if any, prepared by an accountant, with (1) a balance
sheet prepared on a "classified basis", (2) income statement
prepared on a "classified basis", (3) statement of cash flow,
(4) notes to financial statements, (5) and a balance sheet
prepared on a "classified basis" of every other limited
partnership of which the corporate General Partner is a
partner; and
The General Partner shall also mail:
(ix) by March 10 of every year, to all Persons who were
Partners at any time during the Partnership's prior fiscal
year, all tax information regarding the Partnership and its
operations during the prior fiscal year which are reasonably
necessary to the Partners for the preparation of their tax
returns, together with a report of the Accountants containing
financial statements as furnished to the RHCDS certified by
the General Partner, and a report of the General Partner with
respect to the Partnership and its operations during the prior
fiscal year, including a statement of cash flow (i.e. a
reconciliation of the balance sheet and income statement) and
a calculation of the cash flow available to the Partners; and
(x) by November 1 of every year, beginning with the calendar
year first above written, to all Persons who are or have been
Partners at any time during the Partnership's current fiscal
year, preliminary tax information regarding the Partnership
and its operations during the current fiscal year, to the
extent that the tax credits and results of operations are
expected to be more than ten percent different from the
preceding year or as projected.
71
<PAGE>
(b) Any expense for such returns or reports shall be paid out of the
assets of the General Partner, to the extent not included in the RHCDS-approved
budget.
(c) All Partners shall have the right and power to examine and copy,
at any and all reasonable times, the books, records and accounts of the
Partnership.
(d) Any Partner shall have the right to object to the Accountant's
reports by giving Notice to the other Partners within 15 days after any such
report is received by such Partner, setting forth in reasonable detail the
objections of such Partner and the basis for such objections.
12.05. Fiscal Year and Accounting Method
The fiscal year of the Partnership shall be the calendar year.
All Partnership accounts shall be determined on the accrual basis.
ARTICLE XIII
GENERAL PROVISIONS
13.01. Arbitration. Any dispute, controversy or claim arising
out of or in connection with or relating to this Agreement or any breach or
alleged breach hereof shall, upon the request of any party involved, be
submitted to and settled by arbitration in the State pursuant to the Commercial
Arbitration Rules then in effect of the American Arbitration Association (or at
any other place or under any other form of arbitration rules mutually acceptable
to the parties so involved). Any award rendered shall be final and conclusive
upon the parties and a judgment thereon may be entered in the highest court of
the forum, state or federal, having jurisdiction. The expenses of the
arbitration shall be borne equally by the parties to the arbitration, provided
that each party shall pay for and bear the cost of its own experts, evidence and
counsel's fees, except that in the discretion of the arbitrators any award may
include the cost of a party's counsel if the arbitrator expressly determines
that the party against whom such award is entered has caused the dispute,
controversy or claim to be submitted to arbitration as a dilatory tactic.
13.02. Amendments. No modification shall be made to this
Agreement except by written amendment signed by all Partners, provided, however,
that in the case of a scrivener s error acknowledged as such by the General
Partner or Counsel for the Partnership and by the Investment Partnership, this
Agreement shall be amended to correct such error, and if required as a result
thereof under the Act, the amendment shall be promptly filed or recorded.
72
<PAGE>
13.03. Burden and Benefit. The covenants and agreements
contained herein shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors and (to the extent permitted hereunder)
assigns of the respective parties hereto.
13.04. Applicable Law. This Agreement shall be construed
and enforced in accordance with the laws of the State.
13.05. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy and all of
which together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties shall not have signed the same counterpart.
13.06. Severability of Provisions. Each provision of this
Agreement shall be considered severable and if for any reason any provision
which is not essential to the effectuation of the basic purposes of this
Agreement is determined to be invalid and contrary to any existing or future
law, such invalidity shall not impair the operation of or affect those
provisions of this Agreement which are valid.
13.07. Entire Agreement. This Agreement sets forth all (and is
intended by all parties to be an integration of all) the representations,
promises, agreements and understandings among the parties hereto with respect to
the Partnership, the Partnership business and the property of the Partnership,
and there are no representation s, promises, agreements or understandings, oral
or written, express or implied, among them other than as set forth or
incorporated herein.
13.08. Use of Singular and Plural. All uses of singular and
plural herein, generally, shall be deemed to read as the context may require.
13.09. Notices to the Investment Partnership. Any Notice required by
the provisions of this Agreement to be given to the Investment Partnership
shall be addressed as follows:
Landau
526 Main Street
P. O. Box 515
Arkadelphia, AR 71923
73
<PAGE>
IN WITNESS WHEREOF, the parties have affixed their signatures
and seals to this Agreement as of the date first written above.
GENERAL PARTNER:
WITNESS:
____________________ _________________________
BILLY W. BUNN
LIMITED PARTNER:
LANDAU
WITNESS:
By _______________________
IT'S AUTHORIZED AGENT
74
<PAGE>
EXHIBIT A
HUGHES VILLA LIMITED PARTNERSHIP
PROJECTED CREDIT
1996 4,451
1997 39,560
1998 39,560
1999 39,560
2000 39,560
2001 39,560
2002 39,560
2003 39,560
2004 39,560
2005 39,560
2006 35,109
TOTAL $395,600
75
<PAGE>
EXHIBIT B
PROJECT DOCUMENTS (For 515 Projects - New Construction)
STAGE 1: PRIOR TO CONSTRUCTION CLOSING
TAX All Tax Credit documents with state agency:
application, reservation,
carryover allocation
B1 Estimate and Certificate of Actual Cost (form
#1924-13), fully executed.
B2 Statement of Budget and Cash Flow (form #1930-7),
executed by RHCDS.
B3-B4 Obligation of Funds (signed by RHCDS - form
#1944-51; if prior to obligation,
RHCDS form AD 622).
B6 Utility Allowances (RHCDS Instruction #1944-E
Exhibit A-5).
B7 Identification number of partnership (federal I.D.
number).
B8-B9 Construction contract and architect's contract
(executed by RHCDS).
B10-B14 Name/address/telephone number of partnership s
accounting and law firms,
managing agent, RHCDS district loan officer, and
construction lender.
B15 Original partnership agreement and all amendments
showing filing date.
B16 Liability/casualty policies or (prior to
construction) binders.
B19-B20 Construction Loan commitment and RHCDS Closing
Instructions.
B2 1 RHCDS Loan Agreement (form #1944-34).
B22 Option to purchase.
4NY-F6 Registrant Information Form (from #RI-l) and GP
Questionnaire (on forms
provided).
B23 For Individual General Partner: Current statement
of financial condition which
should include a breakout of current assets and liabilities
and a statement signed by the General Partner(s)
reasonably similar to "I certify that the above statement
contained herein as a true and accurate
statement of my financial condition as of the date states
herein."
For Corporate General Partner: Current financial statement of
the general partners prepared by an accountant with (i)
balance sheet prepared on a classified" basis, (ii)
income statement prepared on a "classified" basis,
(iii) statement of cash flow, (iv) notes to financial
statements, and a list of all other limited partnerships in
which the corporate general partner is a general partner
with a balance sheet of each prepared by an accountant on a
"classified" basis showing capital contributions, including
complete information on any contingent liabilities.
76
<PAGE>
B24 RHCDS Previous Participation Certificate (form #1944-37 -
fully executed).
B25 Resume or biographical sketch of G.P. (for a corporate G.P.,
Please include articles of incorporation and corporate bylaws,
certificate of good standing, latest
annual financial statement, prepared by an accountant with (i)
balance sheet prepared on a "classified" basis, (ii) income
statement prepared on a "classified" basis, (iii) statement
of cash flow, (iv) notes on financial statements, or, for a
partnership as G.P., all filed agreements and amendments).
F6a Market study or survey (as submitted to RHCDS).
F6a Community Profile (on form provided).
STAGE 2: CONSTRUCTION CLOSING
B40 Fully executed promissory note.
B4 1 Recorded mortgage or deed of trust.
B42 Fully executed side agreements.
B43 Evidence of recent construction draw or
Architect's certification that construction
has begun.
B45 Owner's title insurance binder.
B47 Deed (recorded).
B49 Property management contract (executed by RHCDS).
STAGE 3: FINAL CLOSING
B50 Fully executed promissory note.
B5 1 Recorded mortgage or deed of trust.
B52 Fully executed side agreements.
B58 Owner's title insurance policy.
B59 Certificate of Occupancy or equivalent (as
applicable for locality).
B60 Certificate of Actual Cost (form #1924-13) with
accountant's certification attached
or all Partial Payment Requests and Statement of
Deposits and Withdrawals from RHCDS (if there is
not an identity of interest and 1924-13 is not
available).
STAGE 4: INITIAL RENT-UP
F4 RHCDS Tenant Certifications (as they become
available).
77
<PAGE>
TAX IRS Form 8609 and extended use agreement.
PHOTOS Photos of landscaped project (include negatives).
PARTNERSHIP DOCUMENTS
- - Recorded Limited Partnership Agreement
- - Development and Administration Agreement
- - Consultation Agreement
- - Legal Opinion
78
<PAGE>
FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
HUGHES VILLAS LIMITED PARTNERSHIP
This First Amendment to the Second Amended and Restated Agreement of
Limited Partnership of Hughes Villas Limited Partnership, an Arkansas limited
partnership (the "First Amendment") is being entered into as of the date written
below by and between Billy Wayne Bunn as the general partner (the "General
Partner"), WNC Housing Tax Credit Fund VI, L.P., Series 5, a California limited
partnership as the limited partner (the "Limited Partner"), and Landau, an
Arkansas corporation as the withdrawing limited partner (the "Landau"). The
General Partner, Limited Partner and Landau may collectively be referred to as
the Partners or may individually be referred to as a Partner.
RECITALS
WHEREAS, on November 15, 1993, a Limited Partnership Agreement was
entered into by and between the General Partner and Kathie L. Bunn as the
limited partner (the "Original Partnership Agreement"). The Original Partnership
Agreement was filed with the Arkansas Secretary of State on November 22, 1993.
WHEREAS, on July 14, 1994, an Amended Limited Partnership Agreement was
entered into by and between the General Partner and Kathie L. Bunn as the
limited partner to provide for (i) the change in the Partners' capital
contribution, and (ii) the addition of sections 22 and 23 of the agreement (the
"Amended Partnership Agreement"). The Amended Partnership Agreement was filed
with the Arkansas Secretary of State on July 14, 1994.
WHEREAS, on April 29, 1996, the Hughes Villas Limited Partnership
Amended and Restated Agreement of Limited Partnership was entered into to
provide for (i) the liquidation of Kathie L. Bunn's interest as the limited
partner, (ii) the admission of Landau, an Arkansas corporation as the successor
limited partner of the partnership, (iii) reallocate certain Interests in the
Partnership (iv) restate all of the provisions governing the Partnership, and
(v) cause the Partnership and its General Partner to become contractually bound
to furnish certain information to, and cooperate with the Investment Corporation
(the "Amended and Restated Partnership Agreement"). The Amended and Restated
Partnership Agreement was filed with the Arkansas Secretary of State on June 4,
1996.
WHEREAS, on August 1, 1997, a Second Amended and Restated Agreement of
Limited Partnership was entered into to provide for (i) the modification of
sections 10.06(b), 6.07(a) and (b), and 4.01(dd) of the Amended and Restated
Partnership Agreement, (ii) the removal of section 4.01(v) of the Amended and
Restated Partnership Agreement, (iii) removal of the terminology "Investment
Partner/Partnership" of the Amended and Restated Partnership Agreement, and (iv)
the addition of the revised Exhibit C - Legal Opinion to delete provision (the
"Second Amended and Restated Partnership Agreement"). The Second Amended and
1
<PAGE>
Restated Partnership Agreement was filed with the Arkansas Secretary of State on
September 25, 1997. Any capitalized terms not defined in this First Amendment
shall have the meaning ascribed in the Second Amended and Restated Partnership
Agreement.
NOW THEREFORE, in consideration of the foregoing Recitals, which are a
part of this First Amendment, and the mutual promises, covenants and
undertakings herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Partners do
hereby agree to amend, in part, the Second Amended and Restated Partnership
Agreement as follows:
Withdrawal of Landau
Effective as of the date of this First Amendment, Landau has withdrawn from
Hughes Villas Limited Partnership (the "Partnership") and WNC Housing Tax Credit
Fund V, L.P., Series 5 has succeeded Landau as the sole limited partner of the
Partnership. Any reference to Landau or Limited Partner in the Amended and
Restated Partnership Agreement shall hereinafter refer to WNC Housing Tax Credit
Fund V, L.P., Series 5. Landau acknowledges that it has no further interest in
the Partnership as of the date of this First Amendment, and has released all
claims, if any, against the Partnership arising out of its participation as a
partner. Landau shall be, and shall remain, liable for all obligations and
liabilities incurred as a partner prior to the effective date of such event to
the extent the time for performance thereof has accrued by such date, but shall
otherwise be free of any obligation or liability incurred as a partner.
Section 4.01 (hh) shall be amended in its entirety as follows:
1. During operations the Insurance shall include business interruption
coverage covering actual sustained loss for 12 months, worker's compensation,
hazard coverage (including but not limited to fire, or other casualty loss to
any structure or building on the Project in an amount equal to the full
replacement value of the damaged property without deducting for depreciation)
and general liability coverage against liability claims for bodily injury or
property damage in the minimum amount of $1,000,000 per occurrence and an
aggregate of $2,000,000.
2. All liability coverage shall include an umbrella liability
coverage in a minimum amount of $4,000,000 per occurrence and an aggregate of
$4,000,000.
3. All insurance polices shall name the Partnership as the
named insured and the Limited Partner as an additional insured, and WNC &
Associates, Inc. as the certificate holder.
4. All insurance policies shall include a provision to notify
the insured prior to cancellation.
5. Hazard coverage must include inflation and building or
ordinance endorsements.
6. The General Partner shall maintain a reserve required by RHDS,
and these funds are to be deposited with the Limited Partner.
2
<PAGE>
7. The General Partner shall operate the Apartment Development in the
ordinary course of business and in such manner that the Apartment Development
will be eligible to receive a Tax Credit as provided herein and remain in
compliance with respect to 100% of the units in the Apartment Development.
8. The General Partner shall enter into an extended use restriction
agreement with the State Agency, cause the same to be recorded and comply with
the Partnership's obligations thereunder,
9. The General Partner shall pay a Reporting Fee of $500.00 per annum
to the Limited Partner due on the day the Limited Partner receives the annual
partnership reports (K-1, Income Statement, Balance Sheet).
The Partnership shall be continued pursuant to the Act and on the same
terms and conditions as set forth in the Second Amended and Restated Partnership
Agreement amended only as specifically set forth herein.
IN WITNESS WHEREOF, this First Amendment to the Second Amended and
Restated Agreement of Limited Partnership of Hughes Villas Limited Partnership,
an Arkansas limited partnership, is made and entered into as of
____________________, 1998.
GENERAL PARTNER
_______________________
Billy W. Bunn,
General Partner
WITHDRAWING LIMITED PARTNER
Landau, an Arkansas corporation,
Withdrawing Limited Partner
By: ________________________
Chris M. Wewers,
It's Authorized Agent
3
<PAGE>
LIMITED PARTNER
WNC Housing Tax Credit Fund VI, L.P., Series 5
By: WNC & Associates, Inc.,
General Partner
By: ____________________
David N. Shafer
Senior Vice President
4
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
MARK TWAIN SENIOR COMMUNITY LIMITED PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
Page
I. DEFINITIONS ......................................... 1
1.1 "Accountant" ................................... 1
1.2 "Act" .......................................... 2
1.3 "Actual Tax Credit"............................. 2
1.4 "Adjusted Capital Account Deficit" ............. 2
1.5 "Affiliate" .................................... 2
1.6 "Agreement" or "Partnership Agreement".......... 2
1.7 "Assignee" ..................................... 2
1.8 "Bankruptcy" or "Bankrupt"...................... 2
1.9 "Break-even Operations"......................... 3
1.10 "Capital Account" .............................. 3
1.11 "Capital Contribution" ......................... 3
1.12 "Code" ......................................... 3
1.13 "Completion of Construction".................... 3
1.14 "Compliance Period"............................. 4
1.15 "Consent of the Special Limited Partner"........ 4
1.16 "Construction Contract"......................... 4
1.17 "Construction Loan" ............................ 4
1.18 "Contractor" ................................... 4
1.19 "Debt Service Coverage"......................... 4
1.20 "Deferred Management Fee"....................... 4
1.21 "Developer"..................................... 4
1.22 "Development Fee" .............................. 4
1.23 "Distributions" ................................ 5
1.24 "Fair Market Value" ............................ 5
1.25 "First Year Certificate" ....................... 5
1.26 "Force Majeure"................................. 5
1.27 "General Partner" .............................. 5
1.28 "Gross Asset Value" ............................ 5
1.29 "Hazardous Substance"........................... 6
1.30 "Improvements".................................. 6
1.31 "Incentive Management Fee"...................... 6
1.32 "Income and Losses"............................. 7
1.33 "Insurance" .................................... 8
1.34 "Insurance Company" ............................ 8
1.35 "Interest" ..................................... 8
1.36 "Involuntary Withdrawal"........................ 8
1.37 "LIHTC"......................................... 8
1.38 "Limited Partner"............................... 8
1.39 "Management Agent".............................. 8
1.40 "Management Agreement".......................... 9
1.41 "Minimum Set-Aside Test"........................ 9
1.42 "Mortgage" or "Mortgage Loan"................... 9
1.43 "Net Operating Income........................... 9
1.44 "Nonrecourse Deductions"........................ 10
1.45 "Nonrecourse Liability"......................... 10
1.46 "Operating Deficit" ............................ 10
1.47 "Operating Deficit Guarantee Period"............ 10
1.48 "Operating Loans"............................... 10
i
<PAGE>
1.49 "Original Limited Partner" ..................... 10
1.50 "Partner(s)" ................................... 10
1.51 "Partner Nonrecourse Debt" ..................... 10
1.52 "Partner Nonrecourse Debt Minimum Gain" ........ 10
1.53 "Partner Nonrecourse Deductions" ............... 10
1.54 "Partnership" .................................. 11
1.55 "Partnership Minimum Gain" ..................... 11
1.56 "Permanent Mortgage Commencement" .............. 11
1.57 "Person" ....................................... 11
1.58 "Project" ...................................... 11
1.59 "Project Documents" ............................ 11
1.60 "Projected Annual Tax Credits" ................. 11
1.61 "Projected Tax Credits" ........................ 11
1.62 "Qualified Tenants" ............................ 11
1.63 "Rent Restriction Test" ........................ 11
1.64 "Reporting Fee"................................. 11
1.65 "Revised Projected Tax Credits"................. 12
1.66 "Sale or Refinancing"........................... 12
1.67 "Sale or Refinancing Proceeds" ................. 12
1.68 "Special Limited Partner"....................... 12
1.69 "State" ........................................ 12
1.70 "State Tax Credit Agency" ...................... 12
1.71 "Substitute Limited Partner" ................... 12
1.72 "Tax Credit" ................................... 12
1.73 "Tax Credit Conditions"......................... 12
1.74 "Tax Credit Period.............................. 12
1.75 "TRA 1986" ..................................... 13
1.76 "Treasury Regulations" ......................... 13
1.77 "Withdrawing" or "Withdrawal"................... 13
II. NAME ................................................ 13
III. PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE ........ 13
3.1 Principal Executive Office ..................... 13
3.2 Agent for Service of Process ................... 13
IV. PURPOSE ............................................. 13
V. TERM ................................................ 14
VI. GENERAL PARTNER'S CONTRIBUTIONS AND LOANS............ 14
6.1 Capital Contribution of General Partner......... 14
6.2 Construction and Operating Obligations;
General Partner Loans......................... 14
6.3 Other General Partner Loans..................... 15
VII. CAPITAL CONTRIBUTIONS OF LIMITED PARTNER............. 15
7.1 Original Limited Partner........................ 15
7.2 Capital Contribution of Limited Partner......... 15
7.3 Repurchase of Limited Partner's Interest........ 17
7.4 Reduction of Limited Partner's
Capital Contribution.......................... 18
7.5 Capital Contribution of Special Limited Partner. 20
ii
<PAGE>
7.6 Return of Capital Contribution.................. 20
7.7 Liability of Limited Partner and Special
Limited Partner................................. 21
VIII. WORKING CAPITAL AND RESERVES ....................... 21
8.1 Operation and Maintenance Reserve and
Replacement Reserve Account..................... 21
8.2 Other Reserves.................................. 21
IX. MANAGEMENT AND CONTROL .............................. 21
9.1 Power and Authority of General Partner ......... 21
9.2 Payments to the General Partners and Others .... 22
9.3 Specific Powers of the General Partner ......... 24
9.4 Authority Requirements.......................... 24
9.5 Limitations on General Partner's
Power and Authority ............................ 25
9.6 Restrictions on Authority of General Partner.... 26
9.7 Duties of General Partner ...................... 26
9.8 Partnership Expenses ........................... 28
9.9 General Partner Expenses ....................... 30
9.10 Other Business of Partners ..................... 30
9.11 Covenants, Representations and Warranties....... 30
X. ALLOCATIONS OF INCOME, LOSSES AND CREDITS ........... 33
10.1 General ........................................ 33
10.2 Allocations From Sale or Refinancing............ 34
10.3 Special Allocations............................. 38
10.4 Curative Allocations............................ 38
10.5 Other Allocation Rules.......................... 38
10.6 Tax Allocations: Code Section 704(c)........... 39
10.7 Allocation Among Limited Partners............... 40
10.8 Allocation Among General Partners .............. 40
10.9 Modification of Allocations .................... 40
XI. DISTRIBUTION ........................................ 40
11.1 Distribution of Net Operating Income ........... 40
11.2 Distribution of Sale or Refinancing Proceeds.... 41
XII. TRANSFERS OF LIMITED PARTNER'S INTEREST
IN THE PARTNERSHIP................................... 42
12.1 Assignment of Limited Partner's Interest ....... 42
12.2 Effective Date of Transfer ..................... 42
12.3 Invalid Assignment ............................. 42
12.4 Assignee's Rights to Allocations
and Distributions .............................. 43
12.5 Substitution of Assignee as Limited Partner
or Special Limited Partner........................ 43
12.6 Death, Bankruptcy, Incompetency, etc.
of a Limited Partner ............................. 43
iii
<PAGE>
XIII. WITHDRAWAL, REMOVAL AND REPLACEMENT OF GENERAL
PARTNER ............................................ 44
13.1 Withdrawal of General Partner .................. 44
13.2 Removal of General Partner ..................... 44
13.3 Effects of a Withdrawal......................... 46
13.4 Successor General Partner....................... 48
13.5 Admission of Additional or Successor
General Partner ................................ 48
13.6 Transfer of Interest ........................... 48
13.7 No Goodwill Value............................... 48
XIV. BOOKS AND ACCOUNTS, REPORTS, TAX RETURNS,
FISCAL YEAR AND BANKING ............................. 49
14.1 Books and Accounts ............................. 49
14.2 Accounting Reports ............................. 49
14.3 Other Reports .................................. 50
14.4 Late Reports ................................... 52
14.5 Annual Site Visits.............................. 52
14.6 Tax Returns..................................... 53
14.7 Fiscal Year .................................... 53
14.8 Banking ........................................ 53
14.9 Certificates and Elections ..................... 53
XV. DISSOLUTION, WINDING UP, TERMINATION AND
LIQUIDATION OF THE PARTNERSHIP ...................... 53
15.1 Dissolution of Partnership ..................... 53
15.2 Return of Capital Contribution upon
Dissolution .................................... 54
15.3 Distributions of Assets ........................ 54
15.4 Deferral of Liquidation......................... 55
15.5 Liquidation Statement .......................... 56
15.6 Certificates of Dissolution; Certificate of
Cancellation of Certificate of Limited
Partnership .................................... 56
XVI. AMENDMENTS .......................................... 56
XVII. MISCELLANEOUS ...................................... 57
17.1 Voting Rights .................................. 57
17.2 Meeting of Partnership ......................... 57
17.3 Notices ........................................ 58
17.4 Successors and Assigns ......................... 58
17.5 Recording of Certificate of Limited
Partnership. ................................... 59
17.6 Amendment of Certificate of Limited
Partnership .................................... 58
17.7 Counterparts ................................... 59
17.8 Captions ....................................... 59
17.9 Saving Clause................................... 59
17.10 Tax Matters Partners........................... 59
17.11 Expiration of Compliance Period................ 60
iv
<PAGE>
17.12 Number and Gender ............................. 61
17.13 Entire Agreement .............................. 61
17.14 Governing Law ................................. 61
17.15 Attorney's Fees ............................... 61
17.16 Receipt of Correspondence ..................... 61
17.17 Security Interest and Right of Set-Off ........ 61
EXHIBIT A - Legal Description...................... A-1
EXHIBIT B - Form of Legal Opinion.................. B-1 - B-4
EXHIBIT C - Certification and Agreement............ C-1 - C-4
EXHIBIT D - General Partner Certification.......... D-1 - D-5
EXHIBIT E - Form of Completion Certificate......... E-1
EXHIBIT F - Accountant's Certificate............... F-1
EXHIBIT G - Contractor's Letter.....................G-1
EXHIBIT H - Report of Operations................... H-1 - H-10
v
<PAGE>
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
MARK TWAIN SENIOR COMMUNITY LIMITED PARTNERSHIP
This Amended and Restated Agreement of Limited Partnership is being
entered into effective as of the date written below by and between Thomas P. Lam
and Marilyn S. Lam, husband and wife as the general partners (collectively
referred to herein as the "General Partner"), WNC Housing Tax Credit Fund VI,
L.P., Series 5, a California limited partnership as the limited partner (the
"Limited Partner"), WNC Housing, L.P., as the special limited partner (the
"Special Limited Partner"), and Thomas P. Lam and Marilyn S. Lam, husband and
wife, as the withdrawing limited partner (collectively the "Withdrawing Limited
Partner").
RECITALS
WHEREAS, Mark Twain Senior Community Limited Partnership, a California
limited partnership (the "Partnership") recorded a certificate of limited
partnership with the California Secretary of State on April 8, 1994. A
partnership agreement dated April 1, 1992 was entered into by and among the
General Partner, Maoyeh Lu and Elsie Go Lu, husband and wife, Thomas G. Lu
Chrien and Nadine C. Lu Chrien, husband and wife, as the original general
partners (collectively referred to as the "Original General Partner"), and David
Lam and Sabina Lam, husband and wife, Zhong Fu and Mei Hang Chi, husband and
wife, Jack Lu and Edna Lu, husband and wife, Sally Feng, an unmarried woman, and
Sabrina F. Lu, an unmarried woman, as the original limited partners
(collectively referred to as the "Original Limited Partner").
WHEREAS, on ________________, a First Amendment to Limited Partnership
Agreement of Mark Twain Senior Community Limited Partnership was entered into by
and among the General Partner, the Original General Partner, the Original
Limited Partner and the Withdrawing Limited Partner to provide for the
withdrawal of the Original General Partner and Original Limited Partner of the
Partnership (the "First Amendment"). This First Amendment was filed with the
Secretary of State on _____________, 1997.
WHEREAS, the Partners desire to enter into this Agreement to provide
for, among other things, (i) the continuation of the Partnership, (ii) the
admission of the Limited Partner and the Special Limited Partner as partners of
the Partnership, (iii) the liquidation of the Withdrawing Limited Partner's
Interest in the Partnership, (iv) the payment of Capital Contributions by the
Limited Partner and the Special Limited Partner to the Partnership, (v) the
allocation of Income, Losses, Tax Credits and distributions of Net Operating
Income and other cash funds 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.
1
<PAGE>
WHEREAS, the Partners desire hereby to amend and restate the Original
Partnership Agreement.
NOW, THEREFORE, in consideration of their mutual agreements herein set
forth, the Partners hereby agree to amend and restate the Original Partnership
Agreement in its entirety to provide as follows:
ARTICLE I
DEFINITIONS
Section 1.1 "Accountant" shall mean Michael D. Miller, or such other
firm of independent certified public accountants as may be engaged for the
Partnership by the General Partner with the Consent of the Special Limited
Partner. Notwithstanding any provision of this Agreement to the contrary, the
Special Limited Partner shall have the discretion to dismiss the Accountants for
cause if such Accountant fails to provide, or inaccurately provides, the
information required in Section 14.2 and 14.3 of this Agreement.
Section 1.2 "Act" shall mean the laws of the State governing limited
partnerships, as now in effect and as the same may be amended from time to time.
Section 1.3 "Actual Tax Credit" shall mean as of any point in time, the
total amount of the LIHTC actually allocated by the Partnership to the Limited
Partner, representing 98.99% of the LIHTC actually received by the Partnership,
as shown on the applicable tax returns of the Partnership.
Section 1.4 "Adjusted Capital Account Deficit" shall mean with respect
to any Partner, the deficit balance, if any, in such Partner's Capital Account
as of the end of the relevant fiscal period, after giving effect to the
following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Sections
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 Treasury 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 Treasury
Regulations and shall be interpreted consistently therewith.
2
<PAGE>
Section 1.5 "Affiliate" shall mean (a) any Person directly or
indirectly controlling, controlled by, or under common control with another
Person; (b) any Person owning or controlling 10% or more of the outstanding
voting securities of such other Person; (c) any officer, director, trustee, or
partner of such other Person; and (d) if such Person is an officer, director,
trustee or general partner, any other Person for which such Person acts in any
such capacity.
Section 1.6 "Agreement" or "Partnership Agreement" shall mean this
Amended and Restated Agreement of Limited Partnership, as it may be amended from
time to time. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," when used with reference to this Agreement, refers to
this Agreement as a whole, unless the context otherwise requires.
Section 1.7 "Assignee" shall mean a Person who has acquired all or a
portion of the Limited Partner's beneficial interest in the Partnership and has
not become a Substitute Limited Partner.
Section 1.8 "Bankruptcy" or "Bankrupt" shall mean the making of an
assignment for the benefit of creditors, becoming a party to any liquidation or
dissolution action or proceeding, the commencement of any bankruptcy,
reorganization, insolvency or other proceeding for the relief of financially
distressed debtors, or the appointment of a receiver, liquidator, custodian or
trustee and, if any of the same occur involuntarily, the same not being
dismissed, stayed or discharged within 90 days; or the entry of an order for
relief 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.
Section 1.9 "Break-even Operations" shall mean such time as the
Partnership has Net Operating Income as determined by the Accountant and
approved by the Special Limited Partner.
Section 1.10 "Capital Account" shall mean, with respect to each
Partner, the account maintained for such Partner comprised of such Partner's
Capital Contribution as increased by allocations to such Partner of Partnership
Income (or items thereof) and any items in the nature of income or gain which
are specially allocated pursuant to Section 10.3 or 10.4 hereof, and decreased
by the amount of any Distributions made to such Partner, and allocations to such
Partner of Partnership Losses (or items thereof) and any items in the nature of
expenses or losses which are specially allocated pursuant to Section 10.3 or
10.4 hereof.
In the event of any transfer of an interest in the Partnership 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.
The foregoing definition and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704-1(b), as amended or any successor thereto, and
3
<PAGE>
shall be interpreted and applied in a manner consistent with such Treasury
Regulation.
Section 1.11 "Capital Contribution" shall mean the total amount of
money, or the Gross Asset Value of property contributed to the Partnership, if
any, by all the Partners or any class of Partners or any one Partner as the case
may be (or by a predecessor-in-interest of such Partner or Partners), reduced by
any such capital which shall have been returned pursuant to Section 7.2, 7.3 or
7.5 of this Agreement. A loan to the Partnership by a Partner shall not be
considered a Capital Contribution.
Section 1.12 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
Section 1.13 "Completion of Construction" shall mean the completion of
rehabilitation of the Project substantially in accordance with the Project
Documents in order to obtain the required certificates of occupancy (or the
local equivalent) for all one hundred six (106) apartment units as evidenced by
the issuance of the certificate of occupancy by the governmental agency having
jurisdiction over the Project or by the issuance of the inspecting architect's
certification, in a form substantially similar to that attached hereto as
Exhibit "E" and incorporated herein by this reference.
Section 1.14 "Compliance Period" shall mean the period set forth in
Section 42 (i)(1) of the Code, as amended, or any successor statute.
Section 1.15 "Consent of the Special Limited Partner" shall mean the
prior written consent or approval of the Special Limited Partner.
Section 1.16 "Contractor" shall mean Tom Lam & Associates, which is the
general construction contractor for the Project.
Section 1.17 "Debt Service Coverage" shall mean the ratio between the
Net Operating Income (excluding Mortgage payments) and the debt service required
to be paid on the Mortgage(s); as example, a 1.15 Debt Service Coverage means
that for every $1.00 of debt service required to be paid there must be $1.15 of
Net Operating Income available. A worksheet for the calculation of Debt Service
Coverage is found in the Report of Operations attached hereto as Exhibit "H" and
incorporated herein by this reference.
Section 1.18 "Deferred Management Fee" shall have the meaning set
forth in Section 9.2(c) hereof.
Section 1.19 "Developer" shall mean Tom Lam.
Section 1.20 "Development Fee" shall mean the fee payable to the
Developer pursuant to Section 9.2(a) of this Agreement for services incident to
the development and construction of the Project in accordance with the Amended
4
<PAGE>
Development Fee Agreement between the Partnership and the Developer dated the
even date herewith and incorporated herein by this reference.
Section 1.21 "Distributions" shall mean the total amount of money, or
the Gross Asset Value of property (net of liabilities securing such distributed
property that such Partner is considered to assume or take subject to under
Section 752 of the Code), distributed to Partners with respect to their
Interests in the Partnership, but shall not include any payments to the General
Partner or its Affiliates for fees or other compensation as provided in this
Agreement or any guaranteed payment within the meaning of Section 707(c) of the
Code, as amended, or any successor thereto.
Section 1.22 "Fair Market Value" shall mean, with respect to any
property, real or personal, the price a ready, willing and able buyer would pay
to a ready, willing and able seller of the property, provided that such value is
reasonably agreed to between the parties in arm's-length negotiations and the
parties have sufficiently adverse interests.
Section 1.23 "First Year Certificate" shall mean the certificate to be
filed by the General Partner with the Secretary of the Treasury as required by
Code Section 42(1)(1), as amended, or any successor thereto.
Section 1.24 "Force Majeure" shall mean any act of God, strike,
lockout, or other industrial disturbance, act of the public enemy, war,
blockage, public riot, fire, flood, explosion, governmental action, governmental
delay, restraint or inaction and any other cause or event, whether of the kind
enumerated specifically herein, or otherwise, which is not reasonably within the
control of a Partner to this Agreement claiming such suspension.
Section 1.25 "General Partner" shall collectively mean Thomas P. Lam
and Marilyn S. Lam and such other Persons as are admitted to the Partnership as
additional or substitute General Partners pursuant to this Agreement.
Section 1.26 "Gross Asset Value" shall mean with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the Fair Market Value of such asset, as determined
by the contributing Partner and the General Partner, provided that, if the
contributing Partner is a General Partner, the determination of the Fair Market
Value of a contributed asset shall be determined by appraisal;
(b) The Gross Asset Values of all Partnership assets shall be adjusted
to equal their respective Fair Market Values, as determined by the General
5
<PAGE>
Partner, as of the following times: (1) 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; (2) 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; and (3) the liquidation of the
Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that the adjustments pursuant to
clauses (1) and (2) above shall be made only with the Consent of the Special
Limited Partner and only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be adjusted to equal the Fair Market Value of such asset on the
date of distribution as determined by the distributee and the General Partner,
provided that, if the distributee is a General Partner, the determination of the
Fair Market Value of the distributed asset shall be determined by appraisal; and
(d) The Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and Section
10.3(g) hereof; provided however, that Gross Asset Values shall not be adjusted
pursuant to this Section 1.26(d) to the extent the General Partner determines
that an adjustment pursuant to Section 1.26(b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 1.26(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.26(a), Section 1.26(b), or Section 1.26(d) hereof, such
Gross Asset Value shall thereafter be adjusted by the depreciation taken into
account with respect to such asset for purposes of computing Income and Losses.
Section 1.27 "Hazardous Substance" shall mean and include any
substance, material or waste, including asbestos, petroleum and petroleum
products (including crude oil), that is or becomes designated, classified or
regulated as "toxic" or "hazardous" or a "pollutant" or that is or becomes
similarly designated, classified or regulated, under any federal, state or local
law, regulation or ordinance including, without limitation, Compensation and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, and the
regulations adopted and publications promulgated pursuant thereto.
6
<PAGE>
Section 1.28 "Improvements" shall mean the one hundred six (106) unit
apartment complex for elderly built in accordance with the Project Documents.
Section 1.29 "Incentive Management Fee" shall have the meaning set
forth in Section 9.2(e) hereof.
Section 1.30 "Income and Losses" shall mean, for each fiscal year or
other period, an amount equal to the Partnership's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Income or Losses pursuant
to this Section 1.30 shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Income and Losses pursuant to this Section 1.30 shall be subtracted
from such taxable income or loss;
(c) in the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to Section 1.26(a) or (b) hereof, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Income and Losses;
(d) gain or loss resulting from any disposition of Partnership assets
with respect to which gain or loss is recognized for federal income purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(e) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account depreciation for such fiscal year or other period,
computed as provided below; and
(f) notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Sections 10.3 or 10.4 hereof shall not
otherwise be taken into account in computing Income or Losses.
Depreciation for each fiscal year or other period shall be calculated
as follows: an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
7
<PAGE>
period for federal income tax purposes, except that if the Gross Asset Value of
an asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, depreciation shall be an amount which
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis; provided, however,
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 Gross Asset Value using any reasonable method selected by the
General Partner.
Section 1.31 "Insurance" shall mean:
(a) during operations the Insurance shall include business
interruption coverage covering actual sustained loss for 12 months, worker's
compensation, hazard coverage (including but not limited to fire, or other
casualty loss to any structure or building on the Project in an amount equal to
the full replacement value of the damaged property without deducting for
depreciation) and general liability coverage against liability claims for bodily
injury or property damage in the minimum amount of $1,000,000 per occurrence and
an aggregate of $2,000,000;
(b) all liability coverage shall include an umbrella liability
coverage in a minimum amount of $4,000,000 per occurrence and an aggregate of
$4,000,000;
(c) all Insurance polices shall name the Partnership as the
named insured, the Limited Partner as an additional insured, and WNC &
Associates, Inc. as the certificate holder;
(d) all Insurance policies shall include a provision to notify
the insured prior to cancellation; and
(e) hazard coverage must include inflation and building or
ordinance endorsements.
Section 1.32 "Insurance Company" shall mean any insurance company
engaged by the General Partner for the Partnership with the Consent of the
Special Limited Partner which Insurance Company shall have an A rating or better
for financial safety by A.M. Best or Standard & Poor's.
Section 1.33 "Interest" shall mean 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 hereunder and
the obligation of such Partner to comply with the terms of this Agreement.
Section 1.34 "Involuntary Withdrawal" means any Withdrawal caused by
the death, adjudication of insanity or incompetence, or Bankruptcy of a General
Partner, or the removal of a General Partner pursuant to Section 13.2 hereof.
8
<PAGE>
Section 1.35 "LIHTC" shall mean the low-income housing tax credit
established by TRA 1986 and which is provided for in Section 42 of the Code, as
amended, or any successor thereto.
Section 1.36 "Limited Partner" shall mean WNC Housing Tax Credit Fund
VI, L.P., Series 5, a California limited partnership, and such other Persons as
are admitted to the Partnership as additional or Substitute Limited Partners
pursuant to this Agreement.
Section 1.37 "Management Agent" shall mean the property management
company which oversees the property management functions for the Project and
which is on-site at the Project. The initial Management Agent shall be
Professional Apt. Management, Inc.
Section 1.38 "Management Agreement" shall mean the agreement between
the Partnership and the Management Agent for property management services. The
management fee shall equal ________ of gross revenues. Neither the Management
Agreement nor ancillary agreement shall provide for an initial rent-up fee nor a
set-up fee, nor any other similar pre-management fee payable to the Management
Agent.
Section 1.39 "Minimum Set-Aside Test" shall mean the 40-60 set-aside
test pursuant to Section 42(g), as amended and any successor thereto, of the
Code with respect to the percentage of apartment units in the Project to be
occupied by tenants whose incomes are equal to or less than the required
percentage of the area median gross income. Notwithstanding, the General Partner
has agreed that all the apartment units shall be rented to tenants whose incomes
are equal to or less than 40% of the area median income, as adjusted for family
size.
Section 1.40 "Mortgage" or "Mortgage Loan" shall collectively mean the
source of permanent nonrecourse financing wherein the Partnership promises to
pay the following: (a) Home Savings of America, FSB, or its successor or
assignee, the principal sum of $1,200,000, plus interest on the principal at
______ per annum over a term of _____ years and amortized over _____ years.
Where the context admits, the term "Mortgage" or "Mortgage Loan" shall include
any mortgage, deed, deed of trust, note, regulatory agreement, security
agreement, assumption agreement or other instrument executed in connection with
the Mortgage which is binding on the Partnership; and in case any Mortgage is
replaced or supplemented by any subsequent mortgage or mortgages, the Mortgage
shall refer to any such subsequent mortgage or mortgages. In the event the terms
of the Mortgage are not as specified herein and the Special Limited Partner
determines in its discretion that the Debt Service Coverage falls below 1.15
9
<PAGE>
then at the request of the Special Limited Partner the General Partner shall
reduce and/or refinance the principal of the Mortgage to an amount the Special
Limited Partner determines is adequate to produce a 1.15 Debt Service Coverage.
Section 1.41 "Net Operating Income" shall mean the excess of revenues
over expenses determined as follows: (a) the excess of actual cash received on a
cash basis by the Partnership from operating revenues of the Partnership,
including, without limitation, rental income (but not any subsidy thereof from
the General Partner or an Affiliate thereof) and laundry income, but excluding
prepayments, security deposits and interest thereon; (b) over all cash operating
obligations of the Partnership (other than those covered by Insurance) in
accordance with the applicable budget adopted by the Partnership in accordance
with Section 14.3(k) of this Agreement (the "Budget"), including, without
limitation, the payment of the Mortgage, the Management Agent fees (which shall
be deemed to include that portion of such fees which is deferred and not
currently paid) and the funding of reserves in accordance with Article VIII of
this Agreement, and a reserve for all taxes or payments in lieu of taxes and any
other expenses which may reasonably be expected to be paid in a subsequent
period but which on an accrual basis are allocable to the period in question,
such as insurance premiums, audit, tax or accounting expenses (excluding
deductions for cost recovery of buildings, improvements and personal property
and amortization of any financing fees). Without limiting the generality of the
foregoing, the Partnership's gross revenues for purposes of this Section shall
not include Capital Contributions, borrowings, any lump-sum payment or any other
extraordinary receipt of funds thereby, or interest or any other income earned
on investment of its funds, and unless otherwise provided in a Budget, the cash
operating obligations of the Partnership shall be deemed to include real estate
taxes for the period at the fully assessed rate.
Section 1.42 "Nonrecourse Deductions" shall have the meaning given it
in Treasury Regulations Section 1.704-2(b)(1).
Section 1.43 "Nonrecourse Liability" shall have the meaning given it in
Treasury Regulations Section 1.704-2(b)(3).
Section 1.44 "Operating Deficit" shall mean at any time when the
Partnership does not have Net Operating Income as determined by the Accountant
and approved by the Special Limited Partner.
Section 1.45 "Operating Deficit Guarantee Period" shall mean the period
commencing from the date of this Agreement through five years following
Break-even Operations.
Section 1.46 "Operating Loans" shall mean loans made by the General
Partner to the Partnership pursuant to Article VI of this Agreement, which loans
do not bear interest and are repayable only as provided in Article XI of this
Agreement.
10
<PAGE>
Section 1.47 "Partner(s)" shall collectively mean the General Partner,
the Limited Partner and the Special Limited Partner or individually may mean any
Partner as the context dictates.
Section 1.48 "Partner Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.49 "Partner Nonrecourse Debt Minimum Gain" shall mean an
amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership
Minimum Gain that would result if such Partner Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Treasury Regulations.
Section 1.50 "Partner Nonrecourse Deductions" shall have the meaning
set forth in Sections 1.704-2 (i)(1) and 1.704-2(i)(2) of the Treasury
Regulations.
Section 1.51 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.52 "Partnership Minimum Gain" shall mean the amount
determined in accordance with the principles of Treasury Regulation Sections
1.704-2(b)(2) and 1.704-2(d).
Section 1.53 "Permanent Mortgage Commencement" shall mean the first
date on which all of the following have occurred: (a) the closing of the
Mortgage shall have closed and funded; and (b) amortization of the Mortgage
shall have commenced.
Section 1.54 "Person(s)" shall collectively mean an individual,
proprietorship, trust, estate, partnership, joint venture, association, company,
corporation or other entity.
Section 1.55 "Project" shall mean the approximately 1.07 acres of land
in Oakland, Alameda County, California, as more fully described in Exhibit "A"
attached hereto and incorporated herein by this reference, and the Improvements.
Section 1.56 "Project Documents" shall mean all documents relating to
the Mortgage Loan. It shall also include all documents required by any
governmental agency having jurisdiction over the Project in connection with the
financing of the Project.
Section 1.57 "Projected Annual Tax Credits" shall mean LIHTC in the
amount of $113,315 per year for each of the years 1998 through 2006 which the
General Partner has projected to be the total amount of LIHTC which will be
allocated to the Limited Partner by the Partnership, constituting 98.99% of the
aggregate amount of LIHTC of $1,030,239 to be available to the Partnership.
11
<PAGE>
Section 1.58 "Projected Tax Credits" shall mean LIHTC in the
aggregate amount of $1,030,239.
Section 1.59 "Qualified Tenants" shall mean any tenants who have
incomes of 60% or less of the area median gross income, as adjusted for family
size, so as to make the Project eligible for LIHTC.
Section 1.60 "Rent Restriction Test" shall mean the test pursuant to
Section 42 of the Code whereby the gross rent charged to tenants of the
low-income apartment units in the Project must not exceed 30% of the applicable
income standards.
Section 1.61 "Reporting Fee" shall have the meaning set forth in
Section 9.2(d) hereof.
Section 1.62 "Revised Projected Tax Credits" shall have the meaning
set forth in Section 7.3(a) hereof.
Section 1.63 "Sale or Refinancing" shall mean any of the following
items or transactions: a sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Partnership, a condemnation of or
casualty at the Project or any part thereof, a claim against a title insurance
company, the refinancing or any Mortgage or other indebtedness of the
Partnership and any similar item or transaction; provided, however, that the
payment of Capital Contributions by the Partners shall not be included within
the meaning of the term "Sale or Refinancing."
Section 1.64 "Sale or Refinancing Proceeds" shall mean all cash
receipts of the Partnership arising from a Sale or Refinancing (including
principal and interest received on a debt obligation received as consideration
in whole or in part, on a Sale or Refinancing) less the amount paid or to be
paid in connection with or as an expense of such Sale or Refinancing, and with
regard to damage recoveries or insurance or condemnation proceeds, the amount
paid or to be paid for repairs, replacements or renewals resulting from damage
to or partial condemnation of the Project.
Section 1.65 "Special Limited Partner" shall mean WNC Housing, L.P., a
California limited partnership, and such other Persons as are admitted to the
Partnership as additional or substitute Special Limited Partners pursuant to
this Agreement.
Section 1.66 "State" shall mean the State of California.
Section 1.67 "State Tax Credit Agency" shall mean the state agency of
California which has the responsibility and authorization to administer the
LIHTC program in California.
Section 1.68 "Substitute Limited Partner" shall mean any Person who is
admitted to the Partnership as a Limited Partner pursuant to Section 12.5 or
acquires the Interest of the Limited Partner pursuant to Section 7.2 of this
Agreement.
12
<PAGE>
Section 1.69 "Tax Credit" shall mean any credit permitted under the
Code or the law of any state against the federal or a state income tax liability
of any Partner as a result of activities or expenditures of the Partnership
including, without limitation, LIHTC.
Section 1.70 "Tax Credit Conditions" shall mean, 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 LIHTC or to avoid an event of
recapture in respect of the LIHTC.
Section 1.71 "Tax Credit Period" shall mean the ten year time period
referenced in Code Section 42(f)(1) over which the Projected Tax Credits are
allocated to the Partners. It is the intent of the Partners that the Projected
Tax Credits will be allocated during the Tax Credit Period and not a longer
term.
Section 1.72 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.73 "Treasury Regulations" shall mean the Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
Section 1.74 "Withdrawing" or "Withdrawal" (including the verb form
"Withdraw" and the adjectival forms "Withdrawing" and "Withdrawn") shall mean,
as to a General Partner, the occurrence of the death, adjudication of insanity
or incompetence, or Bankruptcy of such Partner, or the withdrawal, removal or
retirement from the Partnership of such Partner for any reason, including any
sale, pledge, encumbering, assignment or other transfer of all or any part of
its General Partner 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.
ARTICLE II
NAME
The name of the Partnership shall be "Mark Twain Senior Community Limited
Partnership."
13
<PAGE>
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office
of the Partnership is located at 3525 Lyon Avenue, Oakland, California 94601, or
at such other place or places within the State as the General Partner may
hereafter designate.
Section 3.2 Agent for Service of Process. The name of the agent for
service of process on the Partnership is Patrick Sabelhaus whose address is 1001
Sixth Street, Suite 402, Sacramento, California 95814.
ARTICLE IV
PURPOSE
The purpose of the Partnership is to acquire, rehabilitate, own and
operate the Project in order to provide, in part, Tax Credits to the Partners in
accordance with the provisions of the Code and the Treasury Regulations
applicable to LIHTC and to sell the Project. The Partnership shall not engage in
any business or activity which is not incident to the attainment of such
purpose.
ARTICLE V
TERM
The Partnership term commenced upon the filing of the Certificate of
Limited Partnership in the office of, and on the form prescribed by, the
Secretary of State of the State, and shall continue until December 31, 2055
unless terminated earlier in accordance with the provisions of this Agreement or
as otherwise provided by law.
ARTICLE VI
GENERAL PARTNER'S CONTRIBUTIONS AND LOANS
Section 6.1 Capital Contribution of General Partner. The
General Partner shall make a Capital Contribution in the amount of $221,000.
Section 6.2 Operating Obligations and General Partner Loans.
(a) From the date of this Agreement through five years of Break-even
Operations, the General Partner will personally provide Operating Loans to pay
any Operating Deficits. Each Operating Loan shall be nonrecourse to the
Partners, and shall be repayable out of 50% of the available Net Operating
Income or Sale or Refinancing Proceeds in accordance with Article XI of this
Agreement.
14
<PAGE>
Section 6.3 Other General Partner Loans. After expiration of the
Operating Deficit Guarantee Period, with the Consent of the Special Limited
Partner, the General Partner may loan to the Partnership any sums required by
the Partnership and not otherwise reasonably available to it. Any such loan
shall bear simple interest (not compounded) at the rate of 2% per annum above
the then prevailing prime or reference rate charged by Bank of America N.T. &
S.A., Main Office, San Francisco, California, or, if lesser, the maximum legal
rate. The maturity date and repayment schedule of any such loan shall be as
agreed to by the General Partner and the Special Limited Partner. The terms of
any such loan shall be evidenced by a written instrument. The General Partner
shall not charge a prepayment penalty on any such loan. Any loan in
contravention of this Section shall be deemed an invalid action taken by the
General Partner and such advance will be classified as a General Partner Capital
Contribution.
ARTICLE VII
CAPITAL CONTRIBUTIONS OF LIMITED PARTNER
AND SPECIAL LIMITED PARTNER
Section 7.1 Capital Contribution of Limited Partner. The Limited
Partner shall make a Capital Contribution in the amount of $683,290, as may be
adjusted in accordance with Section 7.3 of this Agreement, in cash on the dates
and subject to the conditions hereinafter set forth.
(a) The obligation of the Limited Partner to pay the
aforesaid Capital Contribution shall be subject to the satisfaction of the
following conditions.
(1) Prior to the initial Capital Contribution payment the
General Partner shall deliver to the Limited Partner:
(A) a legal opinion in a form substantially
similar to the form of opinion attached hereto as Exhibit "B" and incorporated
herein by this reference;
(B) a fully executed Certification and Agreement
in the form attached hereto as Exhibit "C" and incorporated herein by this
reference; and
(C) delivery to the Limited Partner a copy of
the recorded grant deed (warranty deed).
(2) Prior to the due date of each Capital Contribution
installment, except the first payment, the General Partner shall deliver to the
Limited Partner a fully executed General Partner Certification in the form
attached hereto as Exhibit "D" and incorporated herein by this reference.
15
<PAGE>
(3) Prior to the Capital Contribution payment referenced in
Section 7.1(b)(2) the General Partner shall deliver to the Limited Partner:
(A) a certificate of occupancy (or equivalent
evidence of local occupancy approval if a permanent certificate is not
available) on all the apartment units in the Project;
(B) the draw request information referenced in
Section 14.3(a) of this Agreement, if not previously provided;
(C) verification that the Partnership has
obtained Insurance required during operations;
(D) the current rent roll; copies of all
initial tenant files including completed applications, completed
questionnaires or checklist of income and assets, documentation of third
party verification of income and assets, and income certification forms
(LIHTC specific) collected by the Management Agent, or General Partner,
verifying each tenant's eligibility as a Qualified Tenant; and copies of the
executed lease agreement with the tenants;
(E) copies of all Mortgage documents;
(F) Title Insurance in an amount equal to the
Mortgage and the Limited Partner's Capital Contribution;
(G) a copy of the declaration of restrictive
covenants/extended use agreement entered into between the Partnership and the
State Tax Credit Agency;
(H) an audited construction cost certification
(which includes an itemized cost breakdown);
(I) the Accountant's final tax credit
certification in a form substantially similar to the form attached hereto as
Exhibit "F" and incorporated herein by this reference;
(J) Internal Revenue Code Form 8609, or any
successor form; and
(K) any documents previous not provided to the
Limited Partner but required pursuant to this Section 7.1(a) and
Sections 14.3(a), (b) and (c).
(b) Provided the conditions of Section 7.1(a) of this Partnership
Agreement have been met, the Limited Partner shall make the following Capital
Contributions:
(1) $555,322 shall be payable upon:
(a) admittance of the Limited Partner into the
Partnership; and
16
<PAGE>
(b) receipt by the Limited Partner of the fully
executed First Amendment providing the withdrawal of all the Original
Limited Partners and Original General Partners; provided
(c) the conditions set forth in Section 7.1(a) of this
Agreement have been met; and
(2) $127,968 shall be payable upon:
(a) achievement by the Partnership of a Debt Service
Coverage of 1.15 for 90 consecutive days; and
(b) receipt by the Limited Partner of the first year
tax return in which Tax Credits are taken; provided
(c) the conditions set forth in Section 7.1(a) of this
Agreement have been met.
Section 7.2 Repurchase of Limited Partner's Interest. Within 60 days
after the General Partner receives written demand from the Limited Partner
and/or the Special Limited Partner, the Partnership shall repurchase the Limited
Partner's Interest and/or the Special Limited Partner's Interest in the
Partnership by refunding to it in cash the full amount of the Capital
Contribution which the Limited Partner and/or the Special Limited Partner has
theretofore made in the event that, for any reason, the Partnership shall fail
to:
(a) receive an allocation of LIHTC no later than the close of the calendar
year during which the Project is placed in service;
(b) achieve 90% occupancy of the Project by Qualified Tenants by the
admittance of the Limited Partner;
(c) obtain Permanent Mortgage Commencement by the admittance of the Limited
Partner;
(d) meet both the Minimum Set-Aside Test and the Rent Restriction Test not
later than December 31 of the first year the Partnership elects the LIHTC to
commence in accordance with the Code;
(e) admit a qualified not-for-profit co-general partner into the
Partnership by May 15, 1998, which admission shall be approved by the Special
Limited Partner; and
(f) obtain a carryover allocation, within the meaning of Section 42 of the
Code, from the State Tax Credit Agency on or before December 31, 1994.
Section 7.3 Reduction of Limited Partner's Capital Contribution.
17
<PAGE>
(a) If the anticipated amount of Projected Tax Credits to be allocated
to the Limited Partner and Special Limited Partner as evidenced by IRS Form
8609, Schedule A thereto, and the audited construction cost certification
provided to the Limited Partner and Special Limited Partner are less than
$1,019,937 (the "Revised Projected Tax Credits") then the Limited Partner's and
Special Limited Partner's Capital Contribution provided for in Section 7.1 and
Section 7.4 respectively shall be reduced by the amount which will make the
total Capital Contribution to be paid by the Limited Partner and Special Limited
Partner to the Partnership equal to 70% of the Revised Projected Tax Credits so
anticipated to be allocated to the Limited Partner and Special Limited Partner.
If the Capital Contribution reduction referenced in this Section 7.3(a) is
greater than the remaining Capital Contribution to be paid by the Limited
Partner and the Special Limited Partner then the General Partner shall have
ninety days from the date the General Partner receives notice from either the
Limited Partner or the Special Limited Partner to pay the shortfall.
(b) The General Partner is required to use its best efforts to rent
100% of the Project's apartment units to Qualified Tenants throughout the
Compliance Period. If at the end of each calendar year during the first five
calendar years following the year in which the Project is placed in service, the
Actual Tax Credit for any fiscal year or portion thereof is or will be less than
the Projected Annual Tax Credit, or the Revised Projected Tax Credit calculated
on an annual basis ("Revised Projected Annual Tax Credit"), if applicable (the
"Annual Credit Shortfall"), then, unless the Annual Credit Shortfall shall have
previously been addressed under Section 7.3(a), the next Capital Contribution
owed by the Limited Partner or the Special Limited Partner shall be reduced by
the Annual Credit Shortfall amount, and any portion of such Annual Credit
Shortfall in excess of such Capital Contribution shall be applied to reduce
succeeding Capital Contributions of the Limited Partner or the Special Limited
Partner. If the Annual Credit Shortfall is greater than the Limited Partner's
and Special Limited Partner's remaining Capital Contributions then the General
Partner shall pay to the Limited Partner and Special Limited Partner the excess
of the Annual Credit Shortfall over the remaining Capital Contributions. The
General Partner shall have ninety days to pay the Annual Credit Shortfall from
the date the General Partner receives notice from either the Limited Partner or
the Special Limited Partner.
(c) In the event that, for any reason, at any time after the first five
calendar years following the year in which the Project is placed in service,
there is an Annual Credit Shortfall, then, unless the Annual Credit Shortfall
shall have previously been addressed under Section 7.3(a) or Section 7.3(b),
there shall be a reduction in the General Partner's share of Net Operating
Income in an amount equal to the Annual Credit Shortfall and said amount instead
shall be paid to the Limited Partner. In the event there are not sufficient
funds to pay the full Annual Credit Shortfall to the Limited Partner at the time
18
<PAGE>
of the next Distribution of Net Operating Income, then the unpaid Annual Credit
Shortfall shall be repaid in the next year in which sufficient monies are
available from the General Partner's Net Operating Income. In the event a Sale
or Refinancing of the Project occurs prior to repayment in full of the Annual
Credit Shortfall then the excess will be paid in accordance with Section
11.2(b).
(d) The Partners recognize and acknowledge that the Limited Partner and
the Special Limited Partner are making their Capital Contribution, in part, on
the expectation that the Projected Tax Credits are allocated to the Partners
over the Tax Credit Period. If the Projected Tax Credits are not allocated to
the Partners during the Tax Credit Period then the Limited Partner's and Special
Limited Partner's Capital Contribution shall be reduced by an amount agreed upon
by the Partners, in good faith, to provide the Limited Partner and the Special
Limited Partner with their anticipated internal rate of return.
(e) In the event there is a reduction in the qualified basis of the
Project for income tax purposes following an audit by the Internal Revenue
Service (IRS) resulting in a recapture of Tax Credits previously claimed, then,
in addition to any other payments to which the Limited Partner and Special
Limited Partner are entitled under the terms of this Section 7.3, the General
Partner shall pay to the Limited Partner and the Special Limited Partner the sum
of (1) the deficiency assessed against the Limited Partner or Special Limited
Partner as a result of the Tax Credit recapture, (2) any interest and penalties
imposed on the Limited Partner or Special Limited Partner with respect to such
deficiency, and (3) an amount sufficient to pay any tax liability owed by the
Limited Partner or Special Limited Partner resulting from the receipt of the
amounts specified in (1) and (2).
Section 7.4 Capital Contribution of Special Limited Partner. The
Special Limited Partner shall make a Capital Contribution of $68 at the time of
the Limited Partner's Capital Contribution payment referenced in Section
7.1(b)(1) upon the same conditions. The Special Limited Partner shall be in a
different class from the Limited Partner and, except as otherwise expressly
stated in this Agreement, shall not participate in any rights allocable to or
exercisable by the Limited Partner under this Agreement.
Section 7.5 Return of Capital Contribution. From time to time the
Partnership may have cash in excess of the amount required for the conduct of
the affairs of the Partnership, and the General Partner may, with the Consent of
the Special Limited Partner, determine that such cash should, in whole or in
part, be returned to the Partners, pro rata, in reduction of their Capital
Contribution. No such return shall be made unless all liabilities of the
Partnership (except those to Partners on account of amounts credited to them
pursuant to this Agreement) have been paid or there remain assets of the
Partnership sufficient, in the sole discretion of the General Partner, to pay
such liabilities.
19
<PAGE>
Section 7.6 Liability of Limited Partner and Special Limited Partner.
The Limited Partner and Special Limited Partner shall not be liable for any of
the debts, liabilities, contracts or other obligations of the Partnership. The
Limited Partner and Special Limited Partner shall be liable only to make Capital
Contributions in the amounts and on the dates specified in this Agreement and,
except as otherwise expressly required hereunder, shall not be required to lend
any funds to the Partnership or, after their respective Capital Contributions
have been paid, to make any further Capital Contribution to the Partnership.
ARTICLE VIII
WORKING CAPITAL AND RESERVES
Section 8.1 Operating and Maintenance Account. The General Partner, on
behalf of the Partnership, shall establish an operating and maintenance account
and shall deposit thereinto an annual amount equal to $200 per residential unit
per year for the purpose of repairs, maintenance and capital repairs. Said
deposit shall be made monthly in equal installments. Withdrawals from such
account shall be made only with the Consent of the Special Limited Partner. Any
balance remaining in the account at the time of a sale of the Project shall be
allocated and distributed equally between the General Partner and the Limited
Partner.
Section 8.2 Tax and Insurance Account.The General Partner, on behalf of
the Partnership, shall establish a tax and insurance account ("T & I Account")
for the purpose of making the requisite Insurance premium payments and the real
estate tax payments. The annual deposit to the T & I Account shall equal the
total annual Insurance payment and the total annual real estate tax payment.
Said amount shall be deposited monthly in equal installments. Withdrawals from
such account shall be made only for its intended purpose. Any balance remaining
in the account at the time of a sale of the Project shall be allocated and
distributed equally between the General partner and the Limited Partner.
Section 8.3 Operating Deficit Reserve.The Special Limited Partner on
behalf of the Partnership shall retain the sum of $25,000 of the second capital
contribution payment specified in Section 7.1(b) of this Agreement into a
reserve account under the Partnership's name. Such reserve fund shall only be
released to the General Partner upon the earlier of: (a) the Project's
achievement of a Debt Service Coverage of 1.15 for 12 consecutive months in
1998; or (b) on December 31, 1999.
Section 8.4 Other Reserves. The General Partner on behalf of the
Partnership shall establish out of funds available to the Partnership a reserve
account sufficient in its sole discretion to pay any unforeseen contingencies
which might arise in connection with the furtherance of the Partnership business
including, but not limited to, (a) any rent subsidy required to maintain rent
20
<PAGE>
levels in compliance with the Tax Credit Conditions; and (b) any debt service or
other payments for which other funds are not provided for hereunder or otherwise
expected to be available to the Partnership. The General Partner shall not be
liable for any good-faith estimate which it shall make in connection with
establishing or maintaining any such reserves nor shall the General Partner be
required to establish or maintain any such reserves if, in its sole discretion,
such reserves do not appear to be necessary.
ARTICLE IX
MANAGEMENT AND CONTROL
Section 9.1 Power and Authority of General Partner. Subject to the
Consent of the Special Limited Partner or the consent of the Limited Partner
where required by this Agreement, and subject to the other limitations and
restrictions included in this Agreement, the General Partner shall have complete
and exclusive control over the management of the Partnership business and
affairs, and shall have the right, power and authority, on behalf of the
Partnership, and in its name, to exercise all of the rights, powers and
authority of a partner of a partnership without limited partners. If there is
more than one General Partner, all acts, decisions or consents of the General
Partners shall require the concurrence of all of the General Partners. No
actions taken without the authorization of all the General Partners shall be
deemed valid actions taken by the General Partners pursuant to this Agreement.
No Limited Partner or Special Limited Partner (except one who may also be a
General Partner, and then only in its capacity as General Partner within the
scope of its authority hereunder) shall have any right to be active in the
management of the Partnership's business or investments or to exercise any
control thereover, nor have the right to bind the Partnership in any contract,
agreement, promise or undertaking, or to act in any way whatsoever with respect
to the control or conduct of the business of the Partnership, except as
otherwise specifically provided in this Agreement.
Section 9.2 Payments to the General Partners and Others.
(a) The Partnership shall pay to the Developer a Development Fee in the
amount of $155,000. The Development Fee shall first be paid from available
proceeds in accordance with Section 9.2(b) of this Agreement and if not paid in
full then the Development Fee will be paid to the extent permitted in Section
11.1 of this Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.1(b) and Section 7.4 of this Agreement
to pay any outstanding construction costs. Any remainder of the Capital
Contribution proceeds shall: first be paid to the Developer in payment of the
Development Fee; second be paid to the General Partner as a reduction of the
21
<PAGE>
General Partner's Capital Contribution; and any remaining Capital Contribution
proceeds shall be paid to the General Partner as a Partnership oversight fee.
(c) The Partnership shall pay to the Management Agent a property
management fee for the leasing and management of the Project in an amount in
accordance with the Management Agreement. The term of the Management Agreement
shall not exceed one year, and the execution or renewal of any Management
Agreement shall be subject to the prior Consent of the Special Limited Partner.
If the Management Agent is an Affiliate of the General Partner then commencing
with the termination of the Operating Deficit Guarantee Period, in any year in
which the Project has an Operating Deficit, 40% of the management fee will be
deferred ("Deferred Management Fee"). Deferred Management Fees, if any, shall be
paid to the Management Agent in accordance with Section 11.1 of this Agreement.
(1) The General Partner shall, upon receiving any request of
the Mortgage lender requesting such action, dismiss the Management Agent as the
entity responsible for management of the Project under the terms of the
Management Agreement; or, the General Partner shall dismiss the Management Agent
at the request of the Special Limited Partner.
(2) The appointment of any successor Management Agent is
subject to the Consent of the Special Limited Partner which may only be sought
after the General Partner has provided the Special Limited Partner with accurate
and complete disclosure respecting the proposed Management Agent.
(d) The Partnership shall pay to the Limited Partner a fee (the
"Reporting Fee") commencing in 1998 equal to 15% of the Net Operating Income but
in no event less than $7,000 for the Limited Partner's services in monitoring
the operations of the Partnership and for services in connection with the
Partnership's accounting matters and assisting with the preparation of tax
returns and the reports required in Sections 14.2 and 14.3 of this Agreement.
The Reporting Fee shall be payable within seventy-five (75) days following each
calendar year and shall be payable from Net Operating Income in the manner and
priority set forth in Section 11.1 of this Agreement; provided, however, that if
in any year Net Operating Income is insufficient to pay the full $7,000, the
unpaid portion thereof shall accrue and be payable on a cumulative basis in the
first year in which there is sufficient Net Operating Income, as provided in
Section 11.1, or sufficient Sale or Refinancing Proceeds, as provided in Section
11.2.
(e) The Partnership shall pay to the General Partner an Incentive
Management Fee equal to 50% of the available Net Operating Income in accordance
with Section 11.1 of this Agreement for each fiscal year of the Partnership
commencing in 1998 for services incident to the administration of the business
and affairs of the Partnership, which services shall include, but not limited
to, maintaining the books and records of the Partnership, selecting and
supervising the Partnership's Accountants, bookkeepers and other Persons
22
<PAGE>
required to prepare and audit the Partnership's financial statements and tax
returns, and preparing and disseminating reports on the status of the Project
and the Partnership, all as required by Article XIV of this Agreement. The
Incentive Management Fee shall be payable within seventy-five (75) days
following each calendar year and shall be payable from Net Operating Income in
the manner and priority set forth in Section 11.1. If the Incentive Management
Fee is not paid in any year it shall not accrue for payment in subsequent years.
Section 9.3 Specific Powers of the General Partner. Subject to the
other provisions of this Agreement, the General Partner, in the Partnership's
name and on its behalf, may:
(a) hold, sell, transfer, lease or otherwise deal with any real,
personal or mixed property, interest therein or appurtenance thereto in
accordance with the purpose of this Agreement as indicated in Article IV hereto;
(b) employ, contract and otherwise deal with, from time to time,
Persons whose services are necessary or appropriate in connection with
management and operation of the Partnership business, including, without
limitation, contractors, agents, brokers, Accountants and Management Agents
(provided that the selection of any Accountant or Management Agent has received
the Consent of the Special Limited Partner) and attorneys, on such terms as the
General Partner shall determine;
(c) bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the
Partnership;
(d) pay as a Partnership expense any and all costs and expenses
associated with the formation, development, organization and operation of the
Partnership, including the expense of annual audits, tax returns and LIHTC
compliance;
(e) deposit, withdraw, invest, pay, retain and distribute the
Partnership's funds in a manner consistent with the provisions of this
Agreement;
(f) execute the Mortgage; and
(g) execute, acknowledge and deliver any and all instruments to
effectuate any of the foregoing.
Section 9.4 Authority Requirements. During the Compliance Period,
the following provisions shall apply.
(a) Each of the provisions of this Agreement shall be subject to, and
the General Partner covenants to act in accordance with, the Tax Credit
Conditions and all applicable federal, state and local laws and regulations.
23
<PAGE>
(b) The Tax 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, successor and assigns, and
they shall control as to any terms in this Agreement which are inconsistent
therewith, and any such inconsistent terms of this Agreement shall be
unenforceable by or against any of the Partners.
(c) Upon any dissolution of the Partnership or any transfer of the
Project, no title or right to the possession and control of the Project and no
right to collect rent therefrom shall pass to any Person who is not, or does not
become, bound by the Tax Credit Conditions in a manner that, in the opinion of
counsel to the Partnership, would not avoid a recapture thereof on the part of
the former owners.
(d) Any conveyance or transfer of title to all or any portion of the
Project required or permitted under this Agreement shall in all respects be
subject to the Tax Credit Conditions and all conditions, approvals or other
requirements of the rules and regulations of any authority applicable thereto.
Section 9.5 Limitations on General Partner's Power and Authority.
Notwithstanding the provisions of this Article IX, the General Partner shall
not:
(a) except as required by Section 9.4, act in contravention of
this Agreement;
(b) act in any manner which would make it impossible to carry
on the ordinary business of the Partnership;
(c) confess a judgment against the Partnership;
(d) possess Partnership property, or assign the Partner's right
in specific Partnership property, for other than the exclusive benefit of the
Partnership;
(e) admit a Person as a General Partner except as provided in
this Agreement;
(f) admit a Person as a Limited Partner except as provided in
this Agreement;
(g) violate any provision of the Mortgage;
(h) cause the Project apartment units to be rented to anyone other
than Qualified Tenants;
(i) violate the Minimum Set-Aside Test or the Rent Restriction
Test for the Project;
(j) cause any recapture of the Tax Credits;
24
<PAGE>
(k) permit any creditor who makes a nonrecourse loan to the Partnership
to have, or to acquire at any time as a result of making such loan, any direct
or indirect interest in the profits, income, capital or other property of the
Partnership, other than as a secured creditor;
(l) commingle funds of the Partnership with the funds of another
Person; or
(m) take any action which requires the Consent of the Special Limited
Partner or the consent of the Limited Partner unless the General Partner has
received said Consent.
Section 9.6 Restrictions on Authority of General Partner.
Without consent of the Special Limited Partner the General Partner shall not:
(a) sell, exchange, lease or otherwise dispose of the Project;
(b) incur indebtedness other than the Mortgage Loan in the name
of the Partnership, other than in the ordinary course of the Partnership's
business;
(c) engage in any transaction not expressly contemplated by this
Agreement in which the General Partner has an actual or potential conflict of
interest with the Limited Partner or the Special Limited Partner;
(d) contract away the fiduciary duty owed to the Limited Partner
and the Special Limited Partner at common law;
(e) take any action which would cause the Project to fail to
qualify, or which would cause a termination or discontinuance of the
qualification of the Project, as a "qualified low income housing project"
under Section 42(g)(1) of the Code, as amended, or any successor thereto, or
which would cause the Limited Partner to fail to obtain the Projected Tax
Credits or which would cause the recapture of any LIHTC;
(f) make any expenditure of funds, or commit to make any such
expenditure, other than in response to an emergency, except as provided for in
the annual budget approved by the Special Limited Partner, as provided in
Section 14.3(i) hereof;
(g) cause the merger or other reorganization of the Partnership; or
(h) dissolve the Partnership, except as provided in this Agreement.
Section 9.7 Duties of General Partner. The General Partner
agrees that it shall at all times:
25
<PAGE>
(a) diligently and faithfully devote such of its time to the
business of the Partnership as may be necessary to properly conduct the
affairs of the Partnership;
(b) file and publish all certificates, statements or other
instruments required by law for the formation and operation of the Partnership
as a limited partnership in all appropriate jurisdictions;
(c) cause the Partnership to carry Insurance from an Insurance
Company;
(d) have a fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate possession
or control and not employ or permit another to employ such funds or assets in
any manner except for the benefit of the Partnership;
(e) use its best efforts so that all requirements shall be met which
are reasonably necessary to obtain or achieve (1) compliance with the Minimum
Set-Aside Test, the Rent Restriction Test, and any other requirements necessary
for the Project to initially qualify, and to continue to qualify, for LIHTC; (2)
issuance of all necessary certificates of occupancy, including all governmental
approvals required to permit occupancy of all of the apartment units in the
Project; (3) compliance with all provisions of the Project Documents and (4) a
reservation and allocation of LIHTC from the State Tax Credit Agency;
(f) use its best efforts to keep the Project in decent, safe, sanitary
and good condition, repair and working order, ordinary use and obsolescence
excepted, and make or cause to be made from time to time all necessary repairs
thereto (including external and structural repairs) and renewals and
replacements thereof;
(g) pay, before the same shall become delinquent and before penalties
accrue thereon all Partnership taxes, assessments and other governmental charges
against the Partnership or its properties, and all of its other liabilities,
except to the extent and so long as the same are being contested in good faith
by appropriate proceedings in such manners as not to cause any material adverse
effect on the Partnership's property, financial condition or business
operations, with adequate reserves provided for such payments;
(h) permit, and cause the Management Agent to permit, the Special
Limited Partner and its representatives: (1) to have access to the Project and
personnel employed by the Partnership and by the Management Agent at all times
during normal business hours after reasonable notice; (2) to examine all
agreements, LIHTC compliance data and plans and specifications; and (3) to make
copies thereof;
26
<PAGE>
(i) exercise good faith in all activities relating to the conduct of
the business of the Partnership, including the operation and maintenance of the
Project, and shall take no action with respect to the business and property of
the Partnership which is not reasonably related to the achievement of the
purpose of the Partnership;
(j) make any Capital Contributions, advances or loans required to
be made by the General Partner under the terms of this Agreement;
(k) establish and maintain all reserves required to be established
and maintained under the terms of this Agreement;
(l) cause the Management Agent to manage the Project in such a manner
that the Project will be eligible to receive LIHTC with respect to 100% of the
apartment units in the Project. To that end, the General Partner agrees, without
limitation: (1) 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 Tax Credit; (2) to file Form 8609 with respect to the Project as required,
for at least the duration of the Compliance Period; (3) to operate the Project
and cause the Management Agent to manage the Project so as to comply with the
requirements of Section 42 of the Code, as amended, or any successor thereto,
including, but not limited to, Section 42(g) and Section 42(i)(3) of the Code,
as amended, or any successors thereto; (4) to make all certifications required
by Section 42(l) of the Code, as amended, or any successor thereto; (5) and to
operate the Project and cause the Management Agent to manage the Project so as
to comply with all other Tax Credit Conditions; and
(m) perform such other acts as may be expressly required of it under
the terms of this Agreement.
Section 9.8 Partnership Expenses.
(a) All of the Partnership's expenses shall be billed directly to and
paid by the Partnership to the extent practicable. Reimbursements to the General
Partner or any of its Affiliates by the Partnership shall be allowed only for
the Partnership's operating cash expenses and subject to the limitations on the
reimbursement of such expenses set forth herein. As used in this Section 9.8 the
term "operating cash expenses" shall mean, with respect to any fiscal period,
the amount of cash disbursed by the Partnership for Partnership business in that
period in the ordinary course of business for the payment of its operating
expenses, including, but not limited to expenses for advertising and promotion,
management, utilities, repair and maintenance, Insurance, Partner
communications, legal, accounting, statistical and bookkeeping services, use of
computing or accounting equipment, travel and telephone expenses, salaries and
direct expenses of Partnership employees while engaged in Partnership business,
27
<PAGE>
and any other operational and administrative expenses necessary for the prudent
operation of the Partnership. Without limiting the generality of the foregoing,
"operating cash expenses" shall include fees paid by the Partnership to the
General Partner or any Affiliate of the General Partner permitted by this
Agreement and the actual cost of goods, materials and administrative services
used for or by the Partnership, whether incurred by the General Partner, an
Affiliate of the General Partner or a nonaffiliated Person in performing the
foregoing functions. As used in the preceding sentence, "actual cost of goods
and materials" means the actual cost of goods and materials used for or by the
Partnership and obtained from entities which are not Affiliates of the General
Partner, and actual cost of administrative services means the pro rata cost of
personnel (as if such persons were employees of the Partnership) associated
therewith, but in no event to exceed the amount which would be charged by
nonaffiliated Persons for comparable goods and services.
(b) Reimbursement to the General Partner or any of its Affiliates of
operating cash expenses pursuant to Subsection (a) hereof shall be subject to
the following:
(1) no such reimbursement shall be permitted for services
for which the General Partner or any of its Affiliates is entitled to
compensation by way of a separate fee; and
(2) no such reimbursement shall be made for (A) rent or
depreciation, utilities, capital equipment or other such administrative items,
and (B) salaries, fringe benefits, travel expenses and other administrative
items incurred or allocated to any "controlling person" of the General Partner
or any Affiliate of the General Partner. For the purposes of this Section
9.8(b)(2), "controlling person" includes, but is not limited to, any Person,
however titled, who performs functions for the General Partner or any Affiliate
of the General Partner similar to those of: (i) chairman or member of the board
of directors; (ii) executive management, such as president, vice president or
senior vice president, corporate secretary or treasurer; (iii) senior
management, such as the vice president of an operating division who reports
directly to executive management; or (iv) those holding 5% or more equity
interest in such General Partner or any such Affiliate of the General Partner or
a person having the power to direct or cause the direction of such General
Partner or any such Affiliate of the General Partner, whether through the
ownership of voting securities, by contract or otherwise.
Section 9.9 General Partner Expenses. The General Partner or Affiliates
of the General Partner shall pay all Partnership expenses which are not
permitted to be reimbursed pursuant to Section 9.8 and all expenses which are
unrelated to the business of the Partnership.
Section 9.10 Other Business of Partners. Any Partner may engage
independently or with others in other business ventures wholly unrelated to the
Partnership business of every nature and description, including, without
28
<PAGE>
limitation, the acquisition, development, construction, operation and management
of real estate projects and developments of every type on their own behalf or on
behalf of other partnerships, joint ventures, corporations or other business
ventures formed by them or in which they may have an interest, including,
without limitation, business ventures similar to, related to or in direct or
indirect competition with the Project. Neither the Partnership nor any Partner
shall have any right by virtue of this Agreement or the partnership relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom. Conversely, no Person shall have any rights to
Partnership assets, incomes or proceeds by virtue of such other ventures or
activities of any Partner.
Section 9.11 Covenants, Representations and Warranties. The General
Partner covenants, represents and warrants that the following are presently true
and will be true during the term of this Agreement, to the extent then
applicable.
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof.
(c) The Project is being operated in accordance with standards and
procedures which are prudent and customary for the operation of properties
similar to the Project.
(d) Additional Improvements on the Project, if any, shall be completed
substantially in conformity with plans and specifications approved by the
Special Limited Partner.
(e) No Partner has or will have any personal liability with respect to
or has or will have personally guaranteed the payment of the Mortgage.
(f) The Partnership is in compliance with all codes applicable to the
Project and is not in violation of any zoning, environmental or similar
regulations applicable to the Project.
(g) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Project at the time of first occupancy
and throughout the term of the Partnership.
(h) The Partnership has obtained Insurance written by an Insurance
Company.
29
<PAGE>
(i) The Partnership owns the fee simple interest in the Project.
(j) To the best of the General Partner's knowledge: (1) no Hazardous
Substance has been disposed of, or released to or from, or otherwise now exists
in, on, under or around, the Project and (2) no aboveground or underground
storage tanks are now or have ever been located on or under the Project. The
General Partner will not install or allow to be installed any aboveground or
underground storage tanks on the Project. The General Partner covenants that the
Project shall be kept free of Hazardous Materials and shall not be used to
generate, manufacture, refine, transport, treat, store, handle, dispose of,
transfer, produce or process Hazardous Materials, except in connection with the
normal maintenance and operation of any portion of the Project. The General
Partner shall comply, or cause there to be compliance, with all applicable
Federal, state and local laws, ordinances, rules and regulations with respect to
Hazardous Materials and shall keep, or cause to be kept, the Project free and
clear of any liens imposed pursuant to such laws, ordinances, rules and
regulations. The General Partner must promptly notify the Limited Partner and
the Special Limited Partner in writing (3) if it knows, or suspects or believes
there may be any Hazardous Substance in or around any part of the Project, any
Improvements constructed on the Project, or the soil, groundwater or soil vapor,
(4) if the General Partner or the Partnership may be subject to any threatened
or pending investigation by any governmental agency under any law, regulation or
ordinance pertaining to any Hazardous Substance, and (5) of any claim made or
threatened by any Person, other than a governmental agency, against the
Partnership or General Partner arising out of or resulting from any Hazardous
Substance being present or released in, on or around any part of the Project.
(k) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of this Agreement.
(l) The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits, or the Revised Projected Tax Credits, if
applicable.
(m) No charges, liens or encumbrances exist with respect to the Project
other than those which are created or permitted by the Project Documents or
Mortgage or are noted or excepted in the title policy for the Project.
(n) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance with the Code, the Project will satisfy the Minimum
Set-Aside Test.
30
<PAGE>
(o) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves in
accordance with Article VIII hereof, are currently funded to required levels,
including levels required by any authority.
(p) 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.
(q) No event has occurred which constitutes a default under any of the
Project Documents.
(r) No event has occurred which has caused, and the General Partner has
not acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2) the
Partnership to fail to qualify as a limited partnership under the Act, or (3)
the Limited Partner to be liable for Partnership obligations; provided however,
the General Partner shall not be in breach of this representation if all or a
portion of a Limited Partner's agreed upon Capital Contributions are used to
satisfy the Partnership's obligations to creditors of the Partnership and such
action by the General Partner is otherwise authorized under this Agreement and;
provided further, however, the General Partner shall not be in breach of this
representation if the action causing the Limited Partner to be liable for the
Partnership obligations is undertaken by the Limited Partner.
(s) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
jurisdiction over the zoning or land use laws applicable to the Project, has
occurred the continuing effect of which has: (1) materially or adversely
affected the operation of the Partnership or the Project; (2) materially or
adversely affected the ability of the General Partner to perform its obligations
hereunder or under any other agreement with respect to the Project; or (3)
prevented the Completion of Construction of the Improvements in substantial
conformity with the Project Documents, other than legal proceedings which have
been bonded against (or as to which other adequate financial security has been
issued) in a manner as to indemnify the Partnership against loss; provided,
however, the foregoing does not apply to matters of general applicability which
would adversely affect the Partnership, the General Partner, Affiliates of the
General Partner or the Project only insofar as they or any of them are part of
the general public.
(t) Neither the Partnership nor the General Partner has any
liabilities, contingent or otherwise, which have not been disclosed in writing
to the Limited Partner and the Special Limited Partner and which in the
31
<PAGE>
aggregate affect the ability of the Limited Partner to obtain the anticipated
benefits of its investment in the Partnership.
(u) The General Partner and/or an acceptable guarantor has and shall
maintain a net worth equal to at least $1,000,000 computed in accordance with
generally accepted accounting principles.
The General Partner shall be liable to the Limited Partner for any
costs, damages, loss of profits, diminution in the value of its investment in
the Partnership, or other losses, of every nature and kind whatsoever, direct or
indirect, realized or incurred by the Limited Partner as a result of any
material breach of the representations and warranties set forth in this Section
9.11.
ARTICLE X
ALLOCATIONS OF INCOME, LOSSES AND CREDITS
Section 10.1 General. All items includable in the calculation of Income
or Loss not arising from a Sale or Refinancing, and all Tax Credits, shall be
allocated 98.99% to the Limited Partner, .01% to the Special Limited Partner,
and 1% to the General Partner.
Section 10.2 Allocations From Sale or Refinancing. All Income and
Losses arising from a Sale or Refinancing shall be allocated between the
Partners as follows:
(a) As to Income:
(1) first, an amount of Income equal to the aggregate negative
balances (if any) in the Capital Accounts of all Partners having negative
Capital Accounts (prior to taking into account the Sale or Refinancing and the
Distribution of the related Sale or Refinancing Proceeds, but after giving
effect to Distributions of Net Operating Income and allocations of other Income
and Losses pursuant to this Article X up to the date of the Sale or Refinancing)
shall be allocated to such Partners in proportion to their negative Capital
Account balances until all such Capital Accounts shall have zero balances;
(2) second, an amount of Income sufficient to increase the
Limited Partner's positive Capital Account balance to its Capital Contribution
and to increase the Special Limited Partner's positive Capital Account balance
to an amount equal to its Capital Contribution, shall be allocated to the
Limited Partner and the Special Limited Partner, respectively;
(3) third, an amount of Income sufficient to increase the
General Partner's positive Capital Account balance to an amount equal to its
Capital Contribution; and
32
<PAGE>
(4) the balance, if any, of such Income shall be allocated
50% to the Limited Partner and 50% to the General Partner.
(b) As to Losses:
(1) an amount of Losses equal to the aggregate positive
balances (if any) in the Capital Accounts of all Partners having positive
Capital Accounts (prior to taking into account the Sale or Refinancing and the
Distribution of the related Sale or Refinancing Proceeds, but after giving
effect to Distributions of Net Operating Income and allocations of Income and
Losses pursuant to Section 10.1 up to the date of the Sale or Refinancing) shall
be allocated to such Partners in proportion to their positive Capital Account
balances until all such Capital Accounts shall have zero balances; and
(2) the balance of any such Losses shall be allocated 98.99%
to the Limited Partner, .01% to the Special Limited Partner and 1% to the
General Partner.
(c) Notwithstanding the foregoing provisions of Section 10.2(a) and
(b), in no event shall any Losses be allocated to the Limited Partner or the
Special Limited Partner if and to the extent that such allocation would create
or increase an Adjusted Capital Account Deficit for the Limited Partner or the
Special Limited Partner. In the event an allocation of 98.99% or .01% of each
item includable in the calculation of Income or Loss not arising from a Sale or
Refinancing, would create or increase an Adjusted Capital Account Deficit for
the Limited Partner or the Special Limited Partner, respectively, then so much
of the items of deduction other than projected depreciation shall be allocated
to the General Partner instead of the Limited Partner or the Special Limited
Partner as is necessary to allow the Limited Partner or the Special Limited
Partner to be allocated 98.99% and .01%, respectively, of the items of Income
and Project depreciation without creating or increasing an Adjusted Capital
Account Deficit for the Limited Partner or the Special Limited Partner, it being
the intent of the parties that the Limited Partner and the Special Limited
Partner always shall be allocated 98.99% and .01%, respectively, of the items of
Income not arising from a Sale or Refinancing and 98.99% and .01%, respectively,
of the Project depreciation.
Section 10.3 Special Allocations. The following special
allocations shall be made in the following order.
(a) Except as otherwise provided in Section 1.704-2(f) of the Treasury
Regulations, notwithstanding any other provisions of this Article X, if there is
a net decrease in Partnership Minimum Gain during any Partnership fiscal year,
each Partner shall be specially allocated items of Partnership income and gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Person's share of the net decrease in Partnership Minimum Gain,
33
<PAGE>
determined in accordance with Treasury Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Section
1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Except as otherwise provided in Section 1.704-2(i)(4) of the
Treasury Regulations, notwithstanding any other provision of this Article X, if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to
a Partner Nonrecourse Debt during any Partnership fiscal year, each Person who
has 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) of
the Treasury Regulations, shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Person's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations 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 each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section
10.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.
(c) In the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5), or Section
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 Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible, provided that an allocation
pursuant to this Section 10.3(c) shall be made if and only to the extent that
such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 10.3 have been tentatively made as if
this Section 10.3(c) were not in the Agreement.
(d) In the event any Partner has a deficit Capital Account at the end
of any Partnership fiscal year which is in excess of the sum of (i) the amount
such Partner is obligated to restore, and (ii) the amount such Partner is deemed
to be obligated to restore pursuant to the penultimate sentences of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
34
<PAGE>
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 10.3(d) 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 Section 10.3 have been tentatively made as if this Section
10.3(d) and Section 10.3(c) hereof were not in the Agreement.
(e) Nonrecourse Deductions for any fiscal year shall be specially
allocated 98.99% to the Limited Partner, .01% to the Special Limited Partner and
1% to the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation of
his interest in the Partnership, 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 accordance with
their interests in the Partnership in the event that Treasury Regulations
Section 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Partner to whom such
distribution was made in the event that Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) To the extent the Partnership has taxable interest income with
respect to any promissory note pursuant to Section 483 or Section 1271 through
1288 of the Code:
(1) such interest income shall be specially allocated to the
Limited Partner to whom such promissory note relates; and
(2) 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.
(i) In the event the adjusted tax basis of any investment tax 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.
35
<PAGE>
(j) Any reduction in the adjusted tax basis (or cost) of Partnership
investment tax 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 Treasury Regulations Section 1.46-3(f)(2)(i).
(k) Any income, gain, loss or deduction realized as a direct or
indirect result of the issuance of an interest in the Partnership by the
Partnership to a Partner (the "Issuance Items") shall be allocated among the
Partners so that, to the extent possible, the net amount of such Issuance Items,
together with all other allocations under this Agreement to each Partner, shall
be equal to the net amount that would have been allocated to each such Partner
if the Issuance Items had not been realized.
(l) If any Partnership expenditure treated as a deduction on its
federal income tax return is disallowed as a deduction and treated as a
distribution pursuant to Section 731(a) of the Code, there shall be a special
allocation of gross income to the Partner deemed to have received such
distribution equal to the amount of such distribution.
(m) The allocation to the General Partner of each material item of
Partnership income, loss, deduction or credit will not be less than 1% of each
such item at all times during the existence of the Partnership.
(n) Interest deduction on the Partnership indebtedness referred to in
Section 6.3 shall be allocated 100% to the General Partner.
Section 10.4 Curative Allocations. The allocations set forth in
Sections 10.2(c), 10.3(a), 10.3(b), 10.3(c), 10.3(d), 10.3(e), 10.3(f), and
10.3(g) hereof (the "Regulatory Allocations") are intended to comply with
certain requirements of the Treasury Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss, or deduction pursuant to this
Section 10.4. Therefore, notwithstanding any other provision of this Article X
(other than the Regulatory Allocations), with the Consent of the Special Limited
Partner, the General Partner shall make such offsetting special allocations of
Partnership income, gain, loss, or deduction in whatever manner the General
Partner, with the Consent of the Special Limited Partner, determines appropriate
so that, after such offsetting allocations are made, each Partner's Capital
Account balance is, to the extent possible, equal to the Capital Account balance
such Partner would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to Sections 10.1,
10.2(a), 10.2(b), 10.3(h), 10.3(i), 10.3(j), 10.3(k), 10.3(l), 10.3(m), 10.3(n)
36
<PAGE>
and 10.5. In exercising its authority under this Section 10.4, the General
Partner shall take into account future Regulatory Allocations under Section
10.3(a) and 10.3(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Sections 10.3(e) and 10.3(f).
Section 10.5 Other Allocation Rules.
(a) The basis (or cost) of any Partnership investment tax credit
property shall be allocated among the Partners in accordance with Treasury
Regulations Section 1.46-3(f)(2)(i). All Tax Credits (other than the investment
tax credit) shall be allocated among the Partners in accordance with applicable
law. Consistent with the foregoing, the Partners intend that LIHTC will be
allocated 98.99% to the Limited Partner, .01% to the Special Limited Partner and
1% to the General Partner.
(b) In the event Partnership investment tax 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 (1) the reduction in the adjusted tax
basis (or cost) of such property pursuant to Code Section 50(c), over (2) 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 Section 10.1 and Section 10.2(a) hereof and shall
instead be allocated among the Partners in proportion to their respective shares
of such excess, determined pursuant to Section 10.3(i) and 10.3(j) 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 the 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.
(c) For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner with the Consent of the Special Limited Partner, using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.
(d) Solely for purposes of determining a Partner's proportionate
share of the "excess nonrecourse liabilities" of the Partnership within the
meaning of Treasury Regulations Section 1.752-3(a)(3), the Partners'
interests in Partnership profits are as follows: Limited Partner: 98.99%;
Special Limited Partner: .01%; General Partner: 1%.
(e) To the extent permitted by Section 1.704-2(h)(3) of the Treasury
Regulations, the General Partner shall endeavor to treat Distributions as having
been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
37
<PAGE>
Debt only to the extent that such Distributions would cause or increase an
Adjusted Capital Account Deficit for any Partner who is not a General Partner.
Section 10.6 Tax Allocations: Code Section 704(c). In accordance with
Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss,
and deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.26(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 1.26(b) hereof, 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 Code Section
704(c) and the Treasury Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the General Partner with the Consent of the Special Limited Partner in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.6 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 Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
Section 10.7 Allocation Among Limited Partners. In the event that the
Interest of the Limited Partner hereunder is at any time held by more than one
Limited Partner all items which are specifically allocated to the Limited
Partner for any month pursuant to this Article X shall be apportioned among such
Persons according to the ratio of their respective profit-sharing interests in
the Partnership at the last day of such month.
Section 10.8 Allocation Among General Partners. In the event that the
Interest of the General Partner hereunder is at any time held by more than one
General Partner all items which are specifically allocated to the General
Partner for any month pursuant to this Article X shall be apportioned among such
Persons in such percentages as may from time to time be determined by agreement
among them without amendment to this Agreement or consent of the Limited Partner
or Consent of the Special Limited Partner.
Section 10.9 Modification of Allocations. The provisions of Articles X
and XI and other provisions of this Agreement are intended to comply with
Treasury Regulations Section 1.704 and shall be interpreted and applied in a
manner consistent with such section of the Treasury Regulations. In the event
that the General Partner determines, in its sole discretion, that it is prudent
38
<PAGE>
to modify the manner in which the Capital Accounts of the Partners, or any debit
or credit thereto, are computed in order to comply with such section of the
Treasury Regulations, the General Partner may make such modification, but only
with the Consent of the Special Limited Partner, to the minimum extent
necessary, to effect the plan of allocations and Distributions provided for
elsewhere in this Agreement. Further, the General Partner shall make any
appropriate modifications, but only with the Consent of the Special Limited
Partner, in the event it appears that unanticipated events (e.g., the existence
of a Partnership election pursuant to Code Section 754) might otherwise cause
this Agreement not to comply with Treasury Regulation Section 1.704.
ARTICLE XI
DISTRIBUTION
Section 11.1 Distribution of Net Operating Income. Net Operating Income
for each fiscal year shall be distributed within seventy-five (75) days
following each calendar year and shall be applied in the following order of
priority:
(a) to pay the Deferred Management Fee, if any;
(b) to pay the current Reporting Fee and then to pay any accrued
Reporting Fees which have not been paid in full from previous years;
(c) to pay the Development Fee and any General Partner advances
in an amount not to exceed an aggregate of $275,000;
(d) to pay the Operating Loans, if any, as referenced in Section
6.2(b) of this Agreement, limited to 50% of the Net Operating Income remaining
after reduction for the payments made pursuant to subsections (a) through (c)
of this Section 11.1;
(e) to pay the Incentive Management Fee from Net Operating
Income remaining after reduction for the payments made pursuant to subsections
(a) through (d) of this Section 11.1; and
(f) to the Limited Partner in an amount equal to 50% of the
remaining Net Operating Income and to the General Partner in an amount equal to
50% of the remaining Net Operating Income.
Section 11.2 Distribution of Sale or Refinancing Proceeds.
Sale or Refinancing Proceeds shall be distributed in the following order:
(a) to the payment of the Mortgage and other matured debts and
liabilities of the Partnership, other than accrued payments, debts or other
liabilities owing to Partners or former Partners;
(b) to any accrued payments, debts or other liabilities owing to the
Partners or former Partners, including, but not limited to, accrued Reporting
Fees and Operating Loans, to be paid prorata if necessary;
39
<PAGE>
(c) to the Limited Partner in an amount equal to its Capital
Contribution;
(d) to the Special Limited Partner in an amount equal to its
Capital Contribution;
(e) to the General Partner in an amount equal to its Capital
Contribution; and
(f) thereafter, 50% to the Limited Partner and 50% to the General
Partner.
ARTICLE XII
TRANSFERS OF LIMITED
PARTNER'S INTEREST IN THE PARTNERSHIP
Section 12.1 Assignment of Limited Partner's Interest. Except
assignments to the National Bank of Southern California to secure capital
contribution loans, the Limited Partner and Special Limited Partner shall not
have the right to assign all or any part of their respective Interests to any
other Person, whether or not a Partner, except upon satisfaction of each of the
following:
(a) by a written instrument in form and substance satisfactory to the
General Partner and its counsel, setting forth the name and address of the
proposed transferee, the nature and extent of the Interest which is proposed to
be transferred and the terms and conditions upon which the transfer is proposed
to be made, stating that the Assignee accepts and agrees to be bound by all of
the terms and provisions of this Agreement, and providing for the payment of all
reasonable expenses incurred by the Partnership in connection with such
assignment, including but not limited to the cost of preparing any necessary
amendment to this Agreement;
(b) upon consent of the General Partner to such assignment, which
shall not be unreasonably withheld; and
(c) upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by the Assignee
for the Assignee's own account for long-term investment and not with a view
toward resale, fractionalization, division or distribution thereof.
THE LIMITED PARTNERSHIP INTEREST AND THE SPECIAL LIMITED PARTNERSHIP
INTEREST DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AS AMENDED OR UNDER ANY STATE SECURITIES LAW. THESE INTERESTS MAY NOT BE
40
<PAGE>
SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Section 12.2 Effective Date of Transfer. Any assignment of a Limited
Partner's Interest or Special Limited Partner's Interest pursuant to Section
12.1 shall become effective as of the last day of the calendar month in which
the last of the conditions to such assignment are satisfied.
Section 12.3 Invalid Assignment. Any purported assignment of an
Interest of a Limited Partner or Special Limited Partner otherwise than in
accordance with Section 12.1 or Section 12.6 shall be of no effect as between
the Partnership and the purported assignee and shall be disregarded by the
General Partner in making allocations and Distributions hereunder.
Section 12.4 Assignee's Rights to Allocations and Distributions. An
Assignee shall be entitled to receive allocations and Distributions from the
Partnership attributable to the Interest acquired by reason of any permitted
assignment from and after the first day of the calendar month following the
month which ends with the effective date of the transfer of such Interest as
provided in Section 12.2. The Partnership and the General Partner shall be
entitled to treat the assignor of such Partnership Interest as the absolute
owner thereof in all respects, and shall incur no liability for allocations and
Distributions made in good faith to such assignor, until such time as the
written instrument of assignment has been received by the Partnership.
Section 12.5 Substitution of Assignee as Limited Partner or Special
Limited Partner.
(a) An Assignee shall not have the right to become a Substitute Limited
Partner or substitute Special Limited Partner in place of his assignor unless
the written consent of the General Partner to such substitution shall have been
obtained, which consent, in the General Partner's absolute discretion, may be
withheld.
(b) A nonadmitted transferee of a Limited Partner's Interest or Special
Limited Partner's Interest in the Partnership shall only be entitled to receive
that share of allocations, Distributions and the return of Capital Contribution
to which its transferor would otherwise have been entitled with respect to the
Interest transferred, and shall have no right to obtain any information on
account of the Partnership's transactions, to inspect the Partnership's books
and records or have any other of the rights and privileges of a Limited Partner
or Special Limited Partner, provided, however, that the Partnership shall, if a
transferee and transferor jointly advise the General Partner in writing of a
transfer of an Interest in the Partnership, furnish the transferee with
pertinent tax information at the end of each fiscal year of the Partnership.
41
<PAGE>
(c) The General Partner may elect to treat a transferee of a
Partnership Interest who has not become a Substitute Limited Partner or
Substitute Special Limited Partner as a Substitute Limited Partner or substitute
Special Limited Partner, as the case may be, in the place of its transferor
should the General Partner determine in its absolute discretion that such
treatment is in the best interest of the Partnership.
Section 12.6 Death, Bankruptcy, Incompetency, etc. of a Limited
Partner. Upon the death, dissolution, adjudication of bankruptcy, or
adjudication of incompetency or insanity of a Limited Partner or Special Limited
Partner, such Partner's executors, administrators or legal representatives shall
have all the rights of a Limited Partner or Special Limited Partner, as the case
may be, for the purpose of settling or managing such Partner's estate, including
such power as such Partner possessed to constitute a successor as a transferee
of its Interest in the Partnership and to join with such transferee in making
the application to substitute such transferee as a Partner. However, such
executors, administrators or legal representatives will not have the right to
become Substitute Limited Partners or substitute Special Limited Partners in the
place of their respective predecessors-in-interest unless the General Partner
shall so consent.
ARTICLE XIII
WITHDRAWAL, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
Section 13.1 Withdrawal of General Partner.
(a) The General Partner may not Withdraw (other than as a result of an
Involuntary Withdrawal) without the Consent of the Special Limited Partner, and,
to the extent required, of Home Savings of America, FSB and the State Tax Credit
Agency. Withdrawal shall be conditioned upon the agreement of the Special
Limited Partner to be admitted as a successor General Partner, or if the Special
Limited Partner declines to be admitted as a successor General Partner then on
the agreement of one or more Persons who satisfy the requirements of Section
13.5 of this Agreement to be admitted as successor General Partner(s).
(b) Each General Partner shall indemnify and hold harmless the
Partnership and all Partners from its Withdrawal in violation of Section 13.1(a)
hereof. Each General Partner shall be liable for damages to the Partnership
resulting from its Withdrawal in violation of Section 13.1(a).
Section 13.2 Removal of General Partner.
(a) The Special Limited Partner or the Limited Partner, or both of
them, may remove the General Partner for cause if such General Partner has:
42
<PAGE>
(1) been subject to Bankruptcy in accordance with this
Agreement;
(2) committed any fraud, willful misconduct, breach of
fiduciary duty or other negligent conduct in the performance of its duties
under this Agreement;
(3) been convicted of, or entered into a plea of guilty to,
a felony;
(4) made personal use of Partnership funds or properties;
(5) violated the terms of the Mortgage and such violation
prompts Home Savings of America, FSB to issue a default letter or acceleration
notice to the Partnership or General Partner and such violation has not been
cured within 30 days of such letter or notice;
(6) failed to provide any loan, advance, Capital
Contribution or any other payment to the Partnership required under this
Agreement;
(7) failed to obtain the Consent of the Special Limited
Partner prior to any decision, act or omission under circumstances where this
Agreement requires that such consent be obtained;
(8) breached any representation, warranty or covenant
contained in this Agreement, or failed to perform any other action which may
be required by this Agreement;
(9) caused the Projected Tax Credits to be allocated to the
Partners for a term longer than the Tax Credit Period unless the provisions of
Section 7.4(e) of this Agreement apply;
(10) violated any federal or state tax law which causes a
recapture of LIHTC; or
(11) failed during any six-month period during the Compliance
Period to cause at least 85% of the total apartment units in the Project to
qualify for LIHTC, unless such failure is the result of Force Majeure or unless
such failure is cured within 120 days after the end of the six-month period.
(b) Written notice of the removal for cause of the General Partner
shall be served by the Special Limited Partner or the Limited Partner, or both
of them, upon the General Partner either by certified or by registered mail,
return receipt requested, or by personal service. Such notice shall set forth
the reasons for the removal, if any, and the date upon which the removal is to
become effective.
43
<PAGE>
(c) Upon receipt of such notice of removal for cause, the General
Partner shall cause an accounting to be prepared covering the transactions of
the Partnership from the end of the previous fiscal year through the date of
receipt of such notice, and thereafter it shall not sell or dispose of
Partnership assets under any circumstances. The accounting shall be completed by
the effective date of the removal and shall be in sufficient detail to
accurately and fully reflect the earnings or losses for the period and the
financial condition of the Partnership. If the General Partner fails to cause
the accounting to be prepared within 30 days of receipt of the notice of removal
for cause then the Limited Partner may cause the accounting to be prepared. The
expenses of the accounting shall be borne by the General Partner.
Section 13.3 Effects of a Withdrawal. In the event of a Withdrawal, the
entire Interest of the Withdrawing General Partner shall immediately and
automatically terminate on the effective date of such Withdrawal, and such
General Partner shall immediately cease to be a General Partner, shall have no
further right to participate in the management or operation of the Partnership
or the Project or to receive any allocations or Distributions from the
Partnership or any other funds or assets of the Partnership, except as
specifically set forth below. In the event of a Withdrawal, any or all executory
contracts, including but not limited to the Management Agreement, between the
Partnership and the Withdrawing General Partner or its Affiliates may be
terminated by the Partnership, with the Consent of the Special Limited Partner,
upon written notice to the party so terminated.
Furthermore, notwithstanding such Withdrawal, the Withdrawing General
Partner shall be and shall remain, liable as a General Partner for all
liabilities and obligations incurred by the Partnership or by the General
Partner prior to the effective date of the Withdrawal, or which may arise upon
such Withdrawal. Any remaining Partner shall have all other rights and remedies
against the Withdrawing General Partner as provided by law or under this
Agreement.
The General Partner agrees that in the event of its Withdrawal it will
indemnify and hold the Limited Partner and the Special Limited Partner harmless
from and against all losses, costs and expenses incurred in connection with the
Withdrawal, including, without limitation, all legal fees and other expenses of
the Limited Partner and the Special Limited Partner in connection with the
transaction.
The following additional provisions shall apply in the event of a
Withdrawal.
(a) In the event of a Withdrawal which is not an Involuntary
Withdrawal, the Withdrawing General Partner shall have no further right to
receive any future allocations or Distributions from the Partnership or any
other funds or assets of the Partnership, nor shall it be entitled to receive or
44
<PAGE>
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 or to be paid any amount for its former
Interest. From and after the effective date of such Withdrawal, the former
rights of the Withdrawing General Partner to receive or to be paid such
allocations, Distributions, funds, assets, fees or repayments shall be assigned
to the other General Partner or General Partners (which may include the Special
Limited Partner), or if there is no other general partner of the Partnership at
that time, to the Special Limited Partner.
(b) In the event of an Involuntary Withdrawal, except as provided in
Section 13.3(b)(3) below, the Withdrawing General Partner shall have no further
right to receive any future allocations or Distributions from the Partnership or
any other funds or assets of the Partnership, provided that accrued and payable
fees (i.e., fees earned but unpaid as of the date of Withdrawal) owed to the
Withdrawing General Partner, and any outstanding loans of the Withdrawing
General Partner to the Partnership, shall be paid to the Withdrawing General
Partner in the manner and at the times such fees and loans would have been paid
had the Withdrawing General Partner not Withdrawn. The Interest of the General
Partner shall be purchased as follows.
(1) If the Involuntary Withdrawal arises from removal for
cause as set forth in Section 13.2(a) hereof, the Withdrawn General Partner
shall be entitled to receive as its sole compensation for its Interest in the
Partnership an amount equal to its positive Capital Account balance determined
as of the effective date of the removal, if any, payable upon the dissolution
and termination of the Partnership after all of the Partners have been
distributed the positive balances in their Capital Accounts.
(2) If the Involuntary Withdrawal does not arise from removal
for cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s), the
Partnership, with the Consent of the Special Limited Partner, may, but is not
obligated to, purchase the Interest of the Withdrawing General Partner in
Partnership allocations, Distributions and capital. The purchase price of such
Interest shall be its Fair Market Value as determined by agreement between the
Withdrawing General Partner and the Special Limited Partner, or, if they cannot
agree, by arbitration in accordance with the then current rules of the American
Arbitration Association. The cost of such arbitration shall be borne equally by
the Withdrawing General Partner and the Partnership. The purchase price shall be
paid by the Partnership by delivering to the General Partner or its
representative the Partnership's non-interest bearing unsecured promissory note
payable, if at all, upon liquidation of the Partnership in accordance with
Section 11.2(b). The note shall also provide that the Partnership may prepay all
or any part thereof without penalty.
45
<PAGE>
(3) If the Involuntary Withdrawal does not arise from removal
for cause under Section 13.2(a) hereof, and if the Partnership is to be
continued with one or more remaining or successor General Partner(s), and if the
Partnership does not purchase the Interest of the Withdrawing General Partner in
Partnership allocations, Distributions and capital, then the Withdrawing General
Partner shall retain its Interest in such items, but such Interest shall be held
as a special limited partner.
Section 13.4 Successor General Partner. Upon the occurrence of an event
giving rise to a Withdrawal of a General Partner, any remaining General Partner,
or, if there be no remaining General Partner, the Withdrawing General Partner or
its legal representative, shall promptly notify the Special Limited Partner of
such Withdrawal (the "Withdrawal Notice"). Whether or not the Withdrawal Notice
shall have been sent as provided herein, the Special Limited Partner shall have
the right to become a successor General Partner (and to become the successor
managing General Partner if the Withdrawing General Partner was previously the
managing General Partner). In order to effectuate the provisions of this Section
13.4 and the continuance of the Partnership, the Withdrawal of a General Partner
shall not be effective until the expiration of 120 days from the date on which
occurred the event giving rise to the Withdrawal, unless the Special Limited
Partner shall have elected to become a successor General Partner as provided
herein prior to expiration of such 120-day period, whereupon the Withdrawal of
the General Partner shall be deemed effective upon the notification of all the
other Partners by the Special Limited Partner of such election.
Section 13.5 Admission of Additional or Successor General Partner. No
Person shall be admitted as an additional or successor General Partner unless
(a) such Person shall have agreed to become a General Partner by a written
instrument which shall include the acceptance and adoption of this Agreement;
(b) the Consent of the Special Limited Partner to the admission of such Person
as a substitute General Partner, which consent may be withheld in the discretion
of the Special Limited Partner, shall have been given; and (c) such Person shall
have executed and acknowledged any other instruments which the Special Limited
Partner shall reasonably deem necessary or appropriate to affect the admission
of such Person as a substitute General Partner. If the foregoing conditions are
satisfied, this Agreement shall be amended in accordance with the provisions of
the Act, and all other steps shall be taken which are reasonably necessary to
effect the Withdrawal of the Withdrawing General Partner and the substitution of
the successor General Partner. Nothing contained herein shall reduce the Limited
Partner's Interest or the Special Limited Partner's Interest in the Partnership.
Section 13.6 Transfer of Interest. Except as otherwise provided herein,
the General Partner may not Withdraw from the Partnership, or enter into any
agreement as the result of which any Person shall become interested in the
46
<PAGE>
Partnership, without the Consent of the Special Limited Partner.
Section 13.7 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.
ARTICLE XIV
BOOKS AND ACCOUNTS, REPORTS,
TAX RETURNS, FISCAL YEAR AND BANKING
Section 14.1 Books and Accounts.
(a) The General Partner shall cause the Partnership to keep and
maintain at its principal executive office full and complete books and records
which shall include each of the following:
(1) a current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together with
the Capital Contribution and the share in Income and Losses of each Partner;
(2) a copy of the Certificate of Limited Partnership and all
certificates of amendment thereto, together with executed copies of any powers
of attorney pursuant to which any certificate has been executed;
(3) copies of the Partnership's federal, state and local
income tax information returns and reports, if any, for the six most recent
taxable years;
(4) copies of the original of this Agreement and all
amendments thereto;
(5) financial statements of the Partnership for the six most
recent fiscal years; and
(6) the Partnership's books and records for at least the
current and past three fiscal years.
(b) Upon the request of the Limited Partner, the General Partner shall
promptly deliver to the Limited Partner, at the expense of the Partnership, a
copy of the information set forth in Section 14.1(a) above. The Limited Partner
47
<PAGE>
shall have the right upon reasonable request and during normal business hours to
inspect and copy any of the foregoing, or any of the other books and records of
the Partnership or the Project at its own expense.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall
provide to the Limited Partner and the Special Limited Partner all tax
information necessary for the preparation of their federal and state income tax
returns and other tax returns with regard to the jurisdiction(s) in which the
Partnership is formed and in which the Project is located.
(b) By March 1 of each calendar year the General Partner shall send to
the Limited Partner and the Special Limited Partner: (1) a balance sheet as of
the end of such fiscal year and statements of income, Partners' equity and
changes in cash flow for such fiscal year prepared in accordance with generally
accepted accounting principles and accompanied by an auditor's report containing
an opinion of the Partnership's Accountants; (2) a report (which need not be
audited) of any Distributions made at any time during the fiscal year,
separately identifying Distributions from Net Operating Income for the fiscal
year, Net Operating Income for prior years, Sale or Refinancing Proceeds, and
reserves; and (3) a report setting forth the amount of all fees and other
compensation and Distributions and reimbursed expenses paid by the Partnership
for the fiscal year to the General Partner or Affiliates of the General Partner
and the services performed in consideration therefor, which report shall be
verified by the Partnership's Accountants, with the method of verification to
include, at a minimum, a review of the time records of individual employees, the
costs of whose services were reimbursed, and a review of the specific nature of
the work performed by each such employee, all in accordance with generally
accepted auditing standards and, accordingly, including such tests of the
accounting records and such other auditing procedures as the Accountants
consider appropriate in the circumstances.
(c) Within 60 days after the end of each fiscal quarter in which a Sale
or Refinancing of the Project occurs, the General Partner shall send to the
Limited Partner and the Special Limited Partner a report as to the nature of the
Sale or Refinancing and as to the Income and Losses for tax purposes and
proceeds arising from the Sale or Refinancing.
Section 14.3 Other Reports. The General Partner shall
provide to the Limited Partner and the Special Limited Partner the following
reports:
(a) During the rent-up phase, and continuing until the end of the first
six-month period during which the Project has a sustained occupancy of 95% or
better, by the tenth day of each month within such period a copy of the previous
month's rent roll (through the last day of the month) and a tenant LIHTC
48
<PAGE>
compliance worksheet similar to the monthly initial tenant certification
worksheet included in Exhibit "H" attached hereto and incorporated herein by
this reference.
(b) A quarterly tax credit compliance report similar to the worksheet
included in Exhibit "H" due on or before April 30 of each year for the first
quarter, July 31 of each year for the second quarter, October 31 of each year
for the third quarter and January 31 of each year for the fourth quarter. In
order to verify the reliability of the information being provided on the
compliance report the Limited Partner may request a small sampling of tenant
files to be provided. The sampling will include, but not be limited to, copies
of tenant applications, certifications and third party verifications used to
qualify tenants. If any inaccuracies are found to exist on the tax credit
compliance report or any items of noncompliance are discovered then the sampling
will be expanded as determined by the Limited Partner.
(c) By September 15 of each year, an estimate of LIHTC for that year.
(d) During the Compliance Period, no later than the day any such
certification is filed, copies of any certifications which the Partnership must
furnish to federal or state governmental authorities administering the Tax
Credit program including, but not limited to, copies of all annual tenant
recertifications required under Section 42 of the Code.
(e) A quarterly report on operations, in the form attached hereto as
Exhibit "H", due on or before April 30 of each year for the first quarter of
operations, July 31 of each year for the second quarter of operations, October
31 of each year for the third quarter of operations and January 31 of each year
for the fourth quarter of operations which shall include, but is not limited to,
an unaudited income statement showing all activity in the reserve accounts
required to be maintained pursuant to Section VIII of this Agreement, statement
of income and expenses, balance sheet, rent roll as of the end of each calendar
quarter of each year, and third party verification of current utility allowance.
(f) By the annual renewal date each and every year, an executed
original or certified copy of each and every Insurance policy or certificate
required by the terms of this Agreement.
(g) By the payment date of the real estate property taxes each and
every year, a verification that the same has been paid in full.
(h) On or before March 15th of each calendar year, the General
Partner's updated financial statement as of December 31 of the previous year.
49
<PAGE>
(i) On or before November 1 of each calendar year, a copy of the
following year's proposed operating budget. Each such budget shall contain an
amount required for reserves in accordance with Article VIII and for the payment
of real estate taxes, insurance, debt service and other payments. Such budget
shall only be adopted with the Consent of the Special Limited Partner.
(j) If the Limited Partner is required by the Securities and Exchange
Commission to file a post-effective amendment to its offering document, an
audited operating statement for the Project within 30 days of the request
therefor by the Limited Partner, covering the Project's operating history from
the Completion of Construction to the date requested by the Limited Partner and
in a form required by the Securities and Exchange Commission.
(k) Notice of the occurrence, or of the likelihood of occurrence, of
any event which has had a material adverse effect upon the Project or the
Partnership, including, but not limited to, any breach of any of the
representations and warranties set forth in Section 9.11 of this Agreement, and
any inability of the Partnership to meet its cash obligations as they become
payable, within ten days after the occurrence of such event.
Section 14.4 Late Reports. If the General Partner does not fulfill its
obligations under Section 14.2 within the time periods set forth therein, the
General Partner, using its own funds, shall pay as damages the sum of $100 per
week (plus interest at the rate established by Section 6.3 of this Agreement) to
the Limited Partner until such obligations shall have been fulfilled. If the
General Partner shall so fail to pay, the General Partner and its Affiliates
shall forthwith cease to be entitled to any fees hereunder (other than the
Development Fee) and/or to the payment of any Net Operating Income or Sale or
Refinancing Proceeds to which the General Partner may otherwise be entitled
hereunder. Payments of fees and Distributions shall be restored only upon
payment of such damages in full.
Section 14.5 Annual Site Visits. On an annual basis a representative of
the Limited Partner, at the Limited Partner's expense, will conduct a site visit
which will include, in part, an inspection of the property, a review of the
office and tenant files and an interview with the property manager. The Limited
Partner may, in its sole discretion, cancel all or any part of the annual site
visit.
Section 14.6 Tax Returns. The General Partner shall cause income tax
returns for the Partnership to be prepared and timely filed with the appropriate
federal, state and local taxing authorities.
Section 14.7 Fiscal Year. The fiscal year of the Partnership shall be
the calendar year or such other period as may be approved by the Internal
Revenue Service for federal income tax purposes.
50
<PAGE>
Section 14.8 Banking. All funds of the Partnership shall be deposited
in a separate bank account or accounts as shall be determined by the General
Partner with the Consent of the Special Limited Partner. All withdrawals
therefrom shall be made upon checks signed by the General Partner or by any
person authorized to do so by the General Partner. The General Partner shall
provide to any Partner who requests same the name and address of the financial
institution, the account number and other relevant information regarding any
Partnership bank account.
Section 14.9 Certificates and Elections.
(a) The General Partner shall file the First Year Certificate within 90
days following the close of the taxable year during which Completion of
Construction occurs and thereafter shall timely file any certificates which the
Partnership must furnish to federal or state governmental authorities
administering the Tax Credit programs under Section 42 of the Code.
(b) The General Partner, with the Consent of the Special Limited
Partner, may, but is not required to, cause the Partnership to make or revoke
the election referred to in Section 754 of the Code, as amended, or any similar
provisions enacted in lieu thereof.
ARTICLE XV
DISSOLUTION, WINDING UP, TERMINATION
AND LIQUIDATION OF THE PARTNERSHIP
Section 15.1 Dissolution of Partnership. The Partnership shall be
dissolved upon the expiration of its term or the earlier occurrence of any of
the following events.
(a) The effective date of the Withdrawal or removal of the General
Partner, unless (1) at the time there is at least one other General Partner
(which may be the Special Limited Partner if it elects to serve as successor
General Partner under Section 13.4 hereof) who will continue as General Partner,
or (2) within 120 days after the occurrence of any such event the Limited
Partner elects to continue the business of the Partnership.
(b) The sale of the Project and the receipt in cash of the full amount
of the proceeds of such sale.
Notwithstanding the foregoing, however, in no event shall the
Partnership terminate prior to the expiration of its term if such termination
would result in a violation of the Mortgage or any other agreement with or rule
or regulation of Home Savings of America, FSB to which the Partnership is
subject.
Section 15.2 Return of Capital Contribution upon Dissolution. Except as
provided in Sections 7.3, and 7.4 of this Agreement, which provide for a
reduction or refund of the Limited Partner's Capital Contribution under certain
51
<PAGE>
circumstances, and which shall represent the personal obligation of the General
Partner, as well as the obligation of the Partnership, each Partner shall look
solely to the assets of the Partnership for all Distributions with respect to
the Partnership (including the return of its Capital Contribution) and shall
have no recourse therefor (upon dissolution or otherwise) against any General
Partner. No Partner shall have any right to demand property other than money
upon dissolution and termination of the Partnership, and the Partnership is
prohibited from such a distribution of property absent the Consent of the
Special Limited Partner.
Section 15.3 Distributions of Assets. Upon a dissolution of the
Partnership, the General Partner (or, if there is no General Partner then
remaining, such other Person(s) designated as the liquidator of the Partnership
by the Special Limited Partner or by the court in a judicial dissolution) shall
take full account of the Partnership assets and liabilities and shall liquidate
the assets as promptly as is consistent with obtaining the fair value thereof.
(a) Upon dissolution and termination, after payment of, or adequate
provision for, the debts and obligations of the Partnership pursuant to Section
11.2(a) through and including 11.2(c), the remaining assets of the Partnership
shall be distributed to the Partners in accordance with Section 11.2, after
taking into account all allocations under Article X hereof.
(b) In the event that a General Partner has a deficit balance in its
Capital Account following the liquidation of the Partnership or its Interest, as
determined after taking into account all Capital Account adjustments for the
Partnership's taxable year in which such liquidation occurs, such General
Partner shall pay to the Partnership the amount necessary to restore such
deficit balance to zero in compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(3).
The deficit make-up shall be paid by the General Partner by the end of
such taxable year and shall, upon liquidation of the Partnership, be paid to
creditors of the Partnership or distributed to other Partners in accordance with
their positive Capital Account balances. Notwithstanding, if the Special Limited
Partner has become successor General Partner, it shall not be responsible for
any deficit balance in its Capital Account which arose during the time the
former General Partner served as General Partner.
(c) With respect to assets distributed in kind to the Partners in
liquidation or otherwise:
(1) unrealized appreciation or unrealized depreciation in the
values of such assets shall be deemed to be Income and Losses realized by the
Partnership immediately prior to the liquidation or other Distribution event;
and
52
<PAGE>
(2) such Income and Losses shall be allocated to the Partners
in accordance with Section 10.2 hereof, and any property so distributed shall be
treated as a Distribution of an amount in cash equal to the excess of such Fair
Market Value over the outstanding principal balance of and accrued interest on
any debt by which the property is encumbered.
(d) For the purposes of Section 15.3(c), "unrealized appreciation" or
"unrealized depreciation" shall mean the difference between the Fair Market
Value of such assets, taking into account the Fair Market Value of the
associated financing but subject to Section 7701(g) of the Code, and the
Partnership's adjusted basis in such assets for book purposes. Section 15.3(c)
is merely intended to provide a rule for allocating unrealized Income and Losses
upon liquidation or other Distribution event, and nothing contained in Section
15.3(c) or elsewhere in this Agreement is intended to treat or cause such
Distributions to be treated as sales for value. The Fair Market Value of such
assets shall be determined by an independent appraiser to be selected by the
General Partner with the Consent of the Special Limited Partner.
Section 15.4 Deferral of Liquidation. If at the time of liquidation the
General Partner or other liquidator shall determine that an immediate sale of
part or all of the Partnership assets could cause undue loss to the Partners,
the liquidator may, in order to avoid loss, but only with the Consent of the
Special Limited Partner, either defer liquidation and retain all or a portion of
the assets or distribute all or a portion of the assets to the Partners in kind.
In the event that the liquidator elects to distribute such assets in kind, the
assets shall first be assigned a value (by appraisal by an independent
appraiser) and the unrealized appreciation or depreciation in value of the
assets shall be allocated to the Partners' Capital Accounts, as if such assets
had been sold, in the manner described in Section 10.2, and such assets shall
then be distributed to the Partners as provided herein. In applying the
preceding sentence, the Project shall not be assigned a value less than the
unamortized principal balance of any loan secured thereby.
Section 15.5 Liquidation Statement. Each of the Partners shall be
furnished with a statement prepared or caused to be prepared by the General
Partner or other liquidator, which shall set forth the assets and liabilities of
the Partnership as of the date of complete liquidation. Upon compliance with the
distribution plan as outlined in Sections 15.3 and 15.4, the Limited Partner and
Special Limited Partner shall cease to be such and the General Partner shall
execute, acknowledge and cause to be filed those certificates referenced in
Section 15.6.
Section 15.6 Certificates of Dissolution; Certificate of Cancellation
of Certificate of Limited Partnership.
(a) Upon the dissolution of the Partnership, the General Partner shall
cause to be filed in the office of, and on a form prescribed by the Secretary of
53
<PAGE>
State of the State, a certificate of dissolution. The certificate of dissolution
shall set forth the Partnership's name, the Secretary of State's file number for
the Partnership, the event causing the Partnership's dissolution and the date of
the dissolution.
(b) Upon the completion of the winding up of the Partnership's affairs,
the General Partner shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State of the State, a certificate of
cancellation of the Certificate of Limited Partnership. The certificate of
cancellation of the Certificate of Limited Partnership shall set forth the
Partnership's name, the Secretary of State's file number for the Partnership,
and any other information which the General Partner determines to include
therein.
ARTICLE XVI
AMENDMENTS
This Agreement may be amended at any time by the Limited Partner. This
Agreement may not be amended by the General Partner absent the Consent of the
Special Limited Partner. Notwithstanding the foregoing, no amendment shall
change the Partnership to a general partnership; extend the term of the
Partnership beyond the date provided for in this Agreement; modify the limited
liability of the Limited Partner and the Special Limited Partner; allow the
Limited Partner to take control of the Partnership's business within the meaning
of the Act; reduce or defer the realization of any Partner's interest in
allocations, Distributions, capital or compensation hereunder, or increase any
Partner's obligations hereunder, without the consent of the Partner so affected;
or change the provisions of this Article XVI.
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Voting Rights.
(a) The Limited Partner shall have no right to vote upon any matters
affecting the Partnership, except as provided in this Agreement. Notwithstanding
the foregoing, the Limited Partner may, without the concurrence of the General
Partner:
(1) approve or disapprove, but not initiate, the Sale or
Refinancing of the Project;
(2) remove the General Partner and elect a substitute
General Partner as provided in this Agreement;
(3) elect a successor General Partner upon the Withdrawal
of the General Partner;
54
<PAGE>
(4) approve or disapprove, but not initiate, the
dissolution of the Partnership; or
(5) subject to the provisions of Article XVI hereof,
amend this Agreement.
(b) On any matter where the Limited Partner has the right to vote,
votes may only be cast at a duly called meeting of the Partnership or through
written action without a meeting.
(c) The Special Limited Partner shall have the right to consent to
those actions or inactions of the Partnership and/or General Partner as
otherwise set forth in this Agreement, and the General Partner is prohibited
from any action or inaction requiring such consent unless such consent has been
obtained.
Section 17.2 Meeting of Partnership. Meetings of the Partnership may be
called either (a) at any time by the General Partner; or (b) upon the General
Partner's receipt of a written or facsimile request from the Limited Partner
setting forth the purpose of such meeting. Within ten days after receipt of the
Limited Partner's written or facsimile request for a meeting, the General
Partner shall provide all Partners with written notice of the meeting (which
shall be by telephone conference, or at the principal place of business of the
Partnership or such other location referenced in the notice) to be held not less
than 15 days nor more than 30 days after receipt of such written or facsimile
request from the Limited Partner, which notice shall specify the time and place
of such meeting and the purpose or purposes thereof. If the General Partner
fails to provide the written notice of the meeting within ten days after receipt
of the Limited Partner's request to hold a meeting, then the Limited Partner may
provide the written notice of the meeting to all the Partners, which notice
shall specify the time and place of such meeting and the purpose or purposes
thereof. All meetings and actions of the Limited Partner shall be governed in
all respects, including matters relating to notice, quorum, adjournment,
proxies, record dates and actions without a meeting, by the applicable
provisions of the Act, as it shall be amended from time to time.
Section 17.3 Notices. Any notice given pursuant to this Agreement may
be served personally on the Partner to be notified, or may be mailed, first
class postage prepaid, to the following address, or to such other address as a
party may from time to time designate in writing:
To the General Partner: Thomas P. Lam
3525 Lyon Avenue
Oakland, California 94601
Marilyn S. Lam
3525 Lyon Avenue
Oakland, California 94601
55
<PAGE>
To the Limited Partner: WNC Housing Tax Credit Fund VI, L.P.,
Series 5
c/o WNC & Associates, Inc.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
To the Special
Limited Partner: WNC Housing, L.P.
3158 Redhill Ave., Suite 120
Costa Mesa, CA 92626-3416
Section 17.4 Successors and Assigns. All the terms and conditions of
this Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the Partners.
Section 17.5 Recording of Certificate of Limited Partnership. If the
General Partner should deem it advisable to do so, the Partnership shall record
in the office of the County Recorder of the county in which the principal place
of business of the Partnership is located a certified copy of the Certificate of
Limited Partnership, or any amendment thereto, after such Certificate or
amendment has been filed with the Secretary of State of the State.
Section 17.6 Amendment of Certificate of Limited Partnership.
(a) The General Partner shall cause to be filed, within 30 days after
the happening of any of the following events, an amendment to the Certificate of
Limited Partnership reflecting the occurrence of any of the following.
(1) A change in the name of the Partnership.
(2) A change in the street address of the Partnership's
principal executive office.
(3) A change in the address, or the Withdrawal, of a General
Partner, or a change in the address of the agent for service of process, or
appointment of a new agent for service of process.
(4) The admission of a General Partner and that Partner's
address.
(5) The discovery by the General Partner of any false or
erroneous material statement contained in the Certificate of Limited Partnership
or any amendment thereto.
(b) The Certificate of Limited Partnership may also be amended in
conformity with this Agreement at any time in any other respect that the General
Partner determines.
56
<PAGE>
(c) The General Partner shall cause the Certificate of Limited
Partnership to be amended, when required or permitted as aforesaid, by filing a
certificate of amendment thereto in the office of, and on a form prescribed by,
the Secretary of State of the State. The certificate of amendment shall set
forth the Partnership's name, the Secretary of State's file number for the
Partnership and the text of the amendment.
Section 17.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument which may
sufficiently be evidenced by one counterpart.
Section 17.8 Captions. Captions to and headings of the Articles,
Sections and subsections of this Agreement are solely for the conveniences of
the Partners, are not a part of this Agreement, and shall not be used for the
interpretation or determination of the validity of this Agreement or any
provision hereof.
Section 17.9 Saving Clause. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 17.10 Tax Matters Partners. All the Partners hereby agree that
the Special Limited 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 the Special Limited Partner shall
withdraw from the Partnership or become Bankrupt, the General Partner shall
thereafter be the "Tax Matters Partner". If the Tax Matters Partner shall
determine to litigate any administrative determination relating to federal
income tax matters, it shall litigate such matter in such court as the Tax
Matters Partner shall decide in its sole discretion. In discharging its duties
and responsibilities, the Tax Matters Partner shall act as a fiduciary (i) to
the Limited Partner (to the exclusion of the other Partners) insofar as tax
matters related to the Tax Credits are concerned, and (ii) to all of the
Partners in other respects. The Limited Partner will make no claim against the
Partnership in respect of any action or omission by the Tax Matters Partner
during such time as the Special Limited Partner acts as the Tax Matters Partner.
Section 17.11 Expiration of Compliance Period.
(a) Notwithstanding any provision hereof to the contrary (other than
this Section 17.11), the Special Limited Partner shall have the right at any
time after the beginning of the last year of the Compliance Period to require,
by written notice to the General Partner, that the General Partner promptly
submit a written request to the applicable State Tax Credit Agency pursuant to
Section 42(h) of the Code (or any successor provision) that such agency endeavor
57
<PAGE>
to locate within one year from the date of such written request a purchaser for
the Project who will continue to operate the Project as a qualified low income
property, at a purchase price that is not less than the minimum amount set forth
in Section 42(h)(6) of the Code (or any successor provision). In the event that
the State Tax Credit Agency obtains an offer satisfying the conditions of the
preceding sentence, the General Partner shall promptly notify the Special
Limited Partner in writing with respect to the terms and conditions of such
offer, and, if the Special Limited Partner notifies the General Partner that
such offer should be accepted, the General Partner shall cause the Partnership
promptly to accept such offer and to proceed to sell the Project pursuant to
such offer.
(b) 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 Project on the most favorable terms then
available. The General Partner shall submit the terms of any proposed sale to
the Special Limited Partner for its approval in the manner set forth in Section
17.11(a) hereof. If the General Partner shall fail to so obtain a buyer for the
Project within six months of receipt of the Required Sale Notice or if the
Consent of the Special Limited Partner in its sole discretion shall be withheld
to any proposed sale, then the Special Limited Partner shall have the right at
any time thereafter to obtain a buyer for the Project 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 Project
to such buyer.
(c) A sale of the Project prior to the end of the Compliance Period may
only take place if the conditions of Section 42(j)(6) of the Code (or any
successor provision) will be satisfied upon such sale by having the purchaser of
the Project post the required bond on behalf of the Partnership.
Section 17.12 Number and Gender. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the Person or Persons may require.
Section 17.13 Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof and
all prior understandings and agreements between the parties, written or oral,
respecting this transaction are merged in this Agreement.
58
<PAGE>
Section 17.14 Governing Law. This Agreement and its application
shall be governed by the laws of the State.
Section 17.15 Attorneys' Fees. If a suit or action is instituted in
connection with an alleged breach of any provision of this Agreement, the
prevailing party shall be entitled to recover, in addition to costs, such sums
as the court may adjudge reasonable as attorney's fees, including fees on any
appeal.
Section 17.16 Receipt of Correspondence. The Partners agree that the
General Partner shall send to the Limited Partner and the Special Limited
Partner a copy of any correspondence relative to the Project's noncompliance
with the Mortgage, relative to the acceleration of the Mortgage and/or relative
to the disposition of the Project.
Section 17.17 Security Interest and Right of Set-Off. As security for
the performance of the respective obligations to which any Partner may be
subject under this Agreement, the Partnership shall have (and each Partner
hereby grants to the Partnership) a security interest in all funds distributable
to said Partner to the extent of the amount of such obligation.
59
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited
Partnership of Mark Twain Senior Community Limited Partnership, a California
limited partnership, is made and entered into as of the ________ day of
_________________, 1998.
GENERAL PARTNER
_______________________________________
Thomas P. Lam
_______________________________________
Marilyn S. Lam
LIMITED PARTNER
WNC Housing Tax Credit Fund VI, L.P.,
Series 5
By: WNC & ASSOCIATES, INC.
General Partner
By: _________________________
John B. Lester, Jr.,
President
SPECIAL LIMITED PARTNER
WNC HOUSING, L.P.
By: WNC & ASSOCIATES, INC.
General Partner
By: __________________________
John B. Lester, Jr.,
President
60
<PAGE>
EXHIBIT A TO PARTNERSHIP AGREEMENT
LEGAL DESCRIPTION
That portion of that certain 4.416 acre parcel of land in Rancho San Antonio
confirmed to Antonio Maria Peralta, conveyed to H.E. Harwood by Deed dated
November 1, 1983, and recorded in Book 250 of Deeds, page 454; and that portion
of Lot 7, Harwood Terrace, filed August 25, 1909, Map Book 25, page 3, Alameda
County, Records, described as follows:
Beginning at the point of intersection of the Southeastern line of County
Road No. 809, formerly known as the Redwood Road and now known as 35th Avenue
(as the same existed in the year 1883) with the most western corner of the land
described in said Deed to H.E. Harwood; thence north 53 degrees 24' east along
said line of Redwood Road, 120.31 feet to the Southwestern boundary line of lot
8 shown on said map; thence south 42 degrees 12'30" east along the Southwestern
boundary line of said Lot 8, 265.74 feet; thence north 47 degrees 38' east,
59.39 feet to the Southwestern line of Lyon Avenue, formerly Flora Street, as
shown on said map; thence south 41 degrees 51' east along said line of Lyon
Avenue 11.23 feet to the Northwestern boundary line of that certain piece or
parcel of land conveyed to J.W. Sigwald, et al., by Deed recorded February 4,
1925, Series No. W/9901; thence South 47 degrees 49' west along the said
Northwestern boundary line of said line land conveyed to said J.W. Sigwald,
179.12 feet to the Southwestern boundary line of the 4.416 acre tract of land;
thence north 42 degrees west along said last mention line 291.18 feet to the
point of beginning.
PARCEL TWO:
That portion of Lot 8 Harwood Terrace, filed August 26, 1909, Map Book 25,
Page 3, Alameda County Records, which lies southeasterly of a line drawn south
47 degrees 38 west from a point on the southwestern line of Lyon Avenue,
formerly Flora Street, distant thereon southeasterly 179.73 feet from the
southeastern line of 35th Avenue, formerly Redwood Road.
PARCEL THREE:
Portion of Lot 7, Map of Harwood Terrace, filed August 25, 1909, Map Book
25, Page 3, Alameda County Records, and a portion of that certain parcel of land
described in that certain deed from H.E. Harwood and wife, recorded in Book 746
of Deeds, Page 469, Alameda County Records, described as follows:
Beginning at a point on the southwestern line of Lyon Avenue, formerly
Flora Street, distant thereon north 42 degrees 11' west, 3.77 feet from point of
intersection thereof with the southeastern boundary line of Lot 7 as said line
of Lyon Avenue, 35 feet; thence south 47 degrees 49' west 179.12 feet to the
direct production
A-1
<PAGE>
north 42 degrees 36'20" west of the southwestern boundary line of Lot 12,
Block 17 of Boulevard Park, filed August 27, 1906, Map Book 21, Page 50, Alameda
County Records; thence south 42 degrees 36'20" east, along the last named line,
35 feet, more or less, to a point of intersection thereof with a line drawn
south 47 degrees 43'40" west, from the point of beginning; thence north 47
degrees 42'40" east, 179 feet, more or less, to the point of beginning.
PARCEL FOUR:
Lots 151 and 152, Florence Jones Tract, filed November 14, 1904, Map Book 19,
Page 88, Alameda County Records.
Assessors Parcel No. 032-2108-028.
A-2
<PAGE>
EXHIBIT B TO PARTNERSHIP AGREEMENT
FORM OF LEGAL OPINION
WNC Housing Tax Credit Fund VI, L.P., Series 5
c/o WNC & Associates, Inc.
3158 Redhill Avenue, Suite 120
Costa Mesa, California 92626
RE: Mark Twain Senior Community Limited Partnership
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the investment by WNC Housing Tax Credit Fund VI, L.P., Series
5, a California limited partnership (the "Limited Partner") in Mark Twain Senior
Community Limited Partnership (the "Partnership"), a California limited
partnership formed to own, develop, rehabilitate, finance and operate an
apartment complex for low-income persons (the "Apartment Complex") in Oakland,
Alameda County, California. The general partner(s) of the Partnership (is/are)
Thomas P. Lam and Marilyn S. Lam, (the "General Partner(s)").
In rendering the opinions stated below, we have examined and relied
upon the following:
(i) [Certificate of Limited Partnership];
(ii) [Agreement of Limited Partnership] (the "Partnership Agreement");
(iii) A preliminary reservation letter from [State
Allocating Agency] (the "State Agency") dated
_________, 199___ conditionally awarding
$_______________ in Federal tax credits annually for
each of ten years and $_______________ in California
tax credits annually for each of four years for the
Apartment Complex; and
(iv) Such other documents, records and instruments as we
have deemed necessary in order to enable us to render
the opinions referred to in this letter.
For purposes of rendering the opinions stated below we have assumed
that, in those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, that (a) the document
reviewed by us is an original document, or a true and accurate copy of the
original document, and has not been subsequently amended, (b) the signatures on
each original document are genuine, and (c) each party who executed the document
had proper authority and capacity.
B-1
<PAGE>
Based on the foregoing we are of the opinion that:
(a) ________________________, one of the General Partners, is a
[corporation/partnership] duly formed and validly existing under the laws of the
State of _____________________ and has full power and authority to enter into
and perform its obligations under the Partnership Agreement.
_____________________, one of the other General Partners, is a
[corporation/partnership] duly formed and validly existing under the laws of the
State of __________________ and has full power and authority to enter into and
perform its obligations under the Partnership Agreement.
(b) The Partnership is a limited partnership duly formed and validly
existing under the laws of the State of California.
(c) The Partnership is validly existing under and subject to the laws of
California with full power and authority to own, develop,
[construct/rehabilitate], finance and operate the Apartment Complex and to
otherwise conduct business under the Partnership Agreement.
(d) Execution of the Partnership Agreement by the General Partner(s) has
been duly and validly authorized by or on behalf of the General Partner(s) and,
having been executed and delivered in accordance with its terms, the Partnership
Agreement constitutes the valid and binding agreement of the General Partner(s),
enforceable in accordance with its terms.
(e) The execution and delivery of the Partnership Agreement by the General
Partner(s) does not conflict with and will not result in a breach of any of the
terms, provisions or conditions of any agreement or instrument known to counsel
to which any of the General Partner(s) or the Partnership is a party or by which
any of them may be bound, or any order, rule, or regulation to be applicable to
any of such parties of any court or governmental body or administrative agency
having jurisdiction over any of such parties or over the property.
(f) To the best of counsel's knowledge, after due inquiry, there is no
litigation or governmental proceeding pending or threatened against, or
involving the Apartment Complex, the Partnership or any General Partner which
would materially adversely affect the condition (financial or otherwise) or
business of the Apartment Complex, the Partnership or any of the Partners of the
Partnership.
(g) The Limited Partner and the Special Limited Partner have been admitted
to the Partnership as limited partners of the Partnership under __________ law
B-2
<PAGE>
and are entitled to all of the rights of limited partners under the Partnership
Agreement. Except as described in the Partnership Agreement, no person is a
partner of or has any legal or equitable interest in the Partnership, and all
former partners of record or known to counsel have validly withdrawn from the
Partnership and have released any claims against the Partnership arising out of
their participation as partners therein.
(h) Liability of the Limited Partner for obligations of the Partnership is
limited to the amount of the Limited Partner's capital contributions required by
the Partnership Agreement.
(i) Neither the General Partner(s) of the Partnership nor the Limited
Partner nor the Special Limited Partner will have any liability for the Mortgage
represented thereby (as those terms are defined in the Partnership Agreement,
and the lender of the Mortgage Loan will look only to its security in the
Apartment Complex for repayment of the Mortgage Loan.
(j) The Partnership owns a fee simple interest in the Apartment
Complex.
(k) To the best of our actual knowledge and belief, after due inquiry,
the Partnership has obtained all consents, permissions, licenses, approvals, or
orders required by all applicable governmental or regulatory agencies for the
development, [construction/rehabilitation] and operation of the Apartment
Complex, and the Apartment Complex conforms to all applicable Federal, state and
local land use, zoning, health, building and safety laws, ordinances, rules and
regulations.
(l) The Apartment Complex has obtained a preliminary reservation of low
income housing tax credits ("LIHTC") from the State Agency. The final allocation
of the LIHTC and ultimately eligibility of the Apartment Complex for such final
allocation are subject to a series of requirements which must be met, performed
or achieved at various times prior to and after such final allocation. Assuming
all such requirements are met, performed or achieved at the time or times
provided by applicable laws and regulations, the Apartment Complex will qualify
for LIHTC.
All of the opinions set forth above are qualified to the extent that
the validity of any provision of any agreement may be subject to or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. We do not express any opinion as to
the availability of any equitable or specific remedy upon any breach of any of
B-3
<PAGE>
the covenants, warranties or other provisions contained in any agreement. We
have not examined, and we express no opinion with respect to, the applicability
of, or liability under, any Federal, state or local law, ordinance or regulation
governing or pertaining to environmental matters, hazardous wastes, toxic
substances or the like.
We express no opinion as to any matter except those set forth above.
These opinions are rendered for use by the Limited Partner and its legal counsel
which will rely on this opinion in connection with federal income tax opinions
to be rendered by that firm. This opinion may not be delivered to or relied upon
by any other person or entity without our express written consent.
Sincerely,
_____________________
B-4
<PAGE>
EXHIBIT C TO PARTNERSHIP AGREEMENT
CERTIFICATION AND AGREEMENT
CERTIFICATION AND AGREEMENT made as of the date written below by Mark
Twain Senior Community Limited Partnership, a California limited partnership
(the "Partnership"), Thomas P. Lam and Marilyn S. Lam, husband and wife
(collectively referred to as the "General Partner") for the benefit of WNC
Housing Tax Credit Fund VI, L.P., Series 5, a California limited partnership
(the "Investment Partnership"), and WNC & Associates, Inc. ("WNC").
WHEREAS, the Partnership proposes to admit the Investment Partnership
as a limited partner thereof pursuant to an Amended and Restated Agreement of
Limited Partnership of the Partnership (the "Partnership Agreement"), in
accordance with which the Investment Partnership will make substantial capital
contributions to the Partnership; and
WHEREAS, the Investment Partnership and WNC have relied upon certain
information and representations described herein in evaluating the merits of
investment by the Investment Partnership in the Partnership;
NOW, THEREFORE, to induce the Investment Partnership to enter into the
Partnership Agreement and become a limited partner of the Partnership, and for
$1.00 and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Partnership and the General Partner hereby
agree as follows for the benefit of the Investment Partnership and WNC.
1. Representations, Warranties and Covenants of the Partnership and
the General Partner
The Partnership and the General Partner jointly and severally
represent, warrant and certify to the Investment Partnership and WNC that, with
respect to the Partnership, as of the date hereof:
1.1 The Partnership is duly organized and in good standing as
a limited partnership pursuant to the laws of the state of its formation with
full power and authority to own its apartment complex (the "Apartment Complex")
and conduct its business; the Partnership and the General Partner have the power
and authority to enter into and perform this Certification and Agreement; the
execution and delivery of this Certification and Agreement by the Partnership
and the General Partner have been duly and validly authorized by all necessary
action; the execution and delivery of this Certification and Agreement, the
fulfillment of its terms and consummation of the transactions contemplated
hereunder do not and will not conflict with or result in a violation, breach or
termination of or constitute a default under (or would not result in such a
conflict, violation, breach, termination or default with the giving of notice or
C-1
<PAGE>
passage of time or both) any other agreement, indenture or instrument by which
the Partnership or any General Partner is bound or any law, regulation,
judgment, decree or order applicable to the Partnership or any General Partner
or any of their respective properties; this Certification and Agreement
constitutes the valid and binding agreement of the Partnership and the General
Partner, enforceable against each of them in accordance with its terms.
1.2 The General Partner has delivered to the Investment
Partnership, WNC or their affiliates all documents and information which would
be material to a prudent investor in deciding whether to invest in the
Partnership. All factual information provided to the Investment Partnership, WNC
or their affiliates either in writing or orally, did not, at the time given, and
does not, on the date hereof, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they are made.
1.3 Each of the representations and warranties contained
in the Partnership Agreement is true and correct as of the date hereof.
1.4 Each of the covenants and agreements of the Partnership
and the General Partner contained in the Partnership Agreement has been duly
performed to the extent that performance of any covenant or agreement is
required on or prior to the date hereof.
1.5 All conditions to admission of the Investment Partnership
as the investment limited partner of the Partnership contained in the
Partnership Agreement have been satisfied.
1.6 No default has occurred and is continuing under the
Partnership Agreement or any of the Project Documents (as such term is defined
in the Partnership Agreement) for the Partnership.
1.7 The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits, or the Revised Projected Tax Credits, if
applicable.
1.8 The General Partner agrees to take all actions necessary
to claim the Projected Tax Credit, including, without limitation, the filing of
Form(s) 8609 with the Internal Revenue Service.
1.9 No person or entity other than the Partnership holds
any equity interest in the Apartment Complex.
C-2
<PAGE>
1.10 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.
1.11 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.
1.12 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.
1.13 No General Partner is related in any manner to the
Investment Partnership, nor is any General Partner acting as an agent of the
Investment Partnership.
2. Miscellaneous
2.1 This Certification and Agreement is made solely for the
benefit of the Investment Partnership and WNC, and their respective successors
and assignees, and no other person shall acquire or have any right under or by
virtue of this Agreement.
2.2 This Certification and Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, all of
which together shall constitute one and the same instrument.
2.3 Capitalized terms used but not defined in this
Certification Agreement shall have the meanings given to them in the Partnership
Agreement.
IN WITNESS WHEREOF, this Certificate and Agreement is made and entered
into as of the day of ____________, 1998.
PARTNERSHIP
Mark Twain Senior Community Limited Partnership
________________________
Thomas P. Lam,
General Partner
________________________
Marilyn S. Lam,
General Partner
C-3
<PAGE>
GENERAL PARTNER
________________________
Thomas P. Lam
_________________________
Marilyn S. Lam
C-4
<PAGE>
EXHIBIT D TO THE PARTNERSHIP AGREEMENT
GENERAL PARTNER CERTIFICATION
This General Partner Certification is being issued to WNC Housing Tax
Credit Fund VI, L.P., Series 5 ("Limited Partner") by Thomas P. Lam and Marilyn
S. Lam, collectively the general partners (the "General Partner") of Mark Twain
Senior Community Limited Partnership, a California limited partnership
("Partnership") in accordance with Section 7.1 of the Amended and Restated
Agreement of Limited Partnership of the Partnership ("Partnership Agreement").
Capitalized terms used but not defined in this General Partner
Certification shall have the meanings given to them in the Partnership
Agreement.
WHEREAS, the Limited Partner is scheduled to make a Capital
Contribution to the Partnership;
WHEREAS, the Partnership Agreement requires the General Partner to
issue this Certification prior to the Limited Partner's payment; and
WHEREAS, the Limited Partner shall rely on this Certification in
evaluating the continued merits of its investment in the Partnership;
NOW, THEREFORE, to induce the Limited Partner to make its scheduled
Capital Contribution to the Partnership, the General Partner represents and
warrants to the Limited Partner that the following are true and correct as of
the date written below:
(a) The Partnership is a duly organized limited partnership validly
existing under the laws of the State and has complied with all filing
requirements necessary for the protection of the limited liability of the
Limited Partner and the Special Limited Partner.
(b) The Partnership Agreement and the Project Documents are in full
force and effect and neither the Partnership nor the General Partner is in
breach or violation of any provisions thereof.
(c) The Project is being operated in accordance with standards and
procedures which are prudent and customary for the operation of properties
similar to the Project.
(d) Additional Improvements on the Project, if any, shall be completed
substantially in conformity with plans and specifications approved by the
Special Limited Partner.
D-1
<PAGE>
(e) No Partner has or will have any personal liability with respect to,
or has or will have personally guaranteed the payment of, the Mortgage.
(f) The Partnership is in compliance with all codes applicable to the
Project and is not in violation of any zoning, environmental or similar
regulations applicable to the Project.
(g) All appropriate public utilities, including sanitary and storm
sewers, water, gas and electricity, are currently available and will be
operating properly for all units in the Project at the time of first occupancy
and throughout the term of the Partnership.
(h) The Partnership has obtained Insurance written by an Insurance
Company.
(i) The Partnership owns the fee simple interest in the Project.
(j) To the best of the General Partner's knowledge: (1) no Hazardous
Substance has been disposed of, or released to or from, or otherwise now exists
in, on, under or around, the Project and (2) no aboveground or underground
storage tanks are now or have ever been located on or under the Project. The
General Partner will not install or allow to be installed any aboveground or
underground storage tanks on the Project. The General Partner covenants that the
Project shall be kept free of Hazardous Materials and shall not be used to
generate, manufacture, refine, transport, treat, store, handle, dispose of,
transfer, produce or process Hazardous Materials, except in connection with the
normal maintenance and operation of any portion of the project. The General
Partner shall comply, or cause there to be compliance, with all applicable
Federal, state and local laws, ordinances, rules and regulations with respect to
Hazardous Materials and shall keep, or cause to be kept, the Project free and
clear of any liens imposed pursuant to such laws, ordinances, rules and
regulations. The General Partner must promptly notify the Special Limited
Partner in writing (3) if it knows, or suspects or believes there may be any
Hazardous Substance in or around any part of the Project, any Improvements
constructed on the Project, or the soil, groundwater or soil vapor, (4) if the
General Partner or the Partnership may be subject to any threatened or pending
investigation by any governmental agency under any law, regulation or ordinance
pertaining to any Hazardous Substance, and (5) of any claim made or threatened
by any Person, other than a governmental agency, against the Partnership or
General Partner arising out of or resulting from any Hazardous Substance being
present or released in, on or around any part of the Project.
(k) The General Partner has not executed and will not execute any
agreements with provisions contradictory to, or in opposition to, the provisions
of the Partnership Agreement.
D-2
<PAGE>
(l) The Partnership will allocate to the Limited Partner the
Projected Annual Tax Credits, or the Revised Projected Tax Credits, if
applicable.
(m) No charges or encumbrances exist with respect to the Project other
than those which are created or permitted by the Project Documents or are noted
or excepted in the title policy for the Project.
(n) The buildings on the Project site constitute or shall constitute a
"qualified low-income housing project" as defined in Section 42(g) of the Code,
and as amplified by the Treasury Regulations thereunder. In this connection, not
later than December 31 of the first year in which the Partners elect the LIHTC
to commence in accordance the Code, the Project will satisfy the Minimum
Set-Aside Test.
(o) All accounts of the Partnership required to be maintained under the
terms of the Project Documents, including, without limitation, any reserves in
accordance with Article VIII hereof, are currently funded to required levels,
including levels required by any authority.
(p) 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.
(q) No event has occurred which constitutes a material default under
any of the Project Documents.
(r) No event has occurred which has caused, and the General Partner has
not acted in any manner which will cause (1) the Partnership to be treated for
federal income tax purposes as an association taxable as a corporation, (2) the
Partnership to fail to qualify as a limited partnership under the Act, or (3)
the Limited Partner to be liable for Partnership obligations; provided however,
the General Partner shall not be in breach of this representation if all or a
portion of a Limited Partner's agreed upon Capital Contributions are used to
satisfy the Partnership's obligations to creditors of the Partnership and such
action by the General Partner is otherwise authorized under this Agreement and;
provided further, however, the General Partner shall not be in breach of this
representation if the action causing the Limited Partner to be liable for the
Partnership obligations is undertaken by the Limited Partner.
(s) No event or proceeding, including, but not limited to, any legal
actions or proceedings before any court, commission, administrative body or
other governmental authority, and acts of any governmental authority having
D-3
<PAGE>
jurisdiction over the zoning or land use laws applicable to the Project, has
occurred the continuing effect of which has: (1) materially or adversely
affected the operation of the Partnership or the Project; (2) materially or
adversely affected the ability of the General Partner to perform its obligations
hereunder or under any other agreement with respect to the Project; or (3)
prevented the completion of construction of the Improvements in substantial
conformity with the Project Documents, other than legal proceedings which have
been bonded against (or as to which other adequate financial security has been
issued) in a manner as to indemnify the Partnership against loss; provided,
however, the foregoing does not apply to matters of general applicability which
would adversely affect the Partnership, the General Partner, Affiliates of the
General Partner or the Project only insofar as they or any of them are part of
the general public.
(t) Neither the Partnership nor the General Partner has any
liabilities, contingent or otherwise, which have not been disclosed in writing
to the Limited Partner and the Special Limited Partner and which in the
aggregate affect the ability of the Limited Partner to obtain the anticipated
benefits of its investment in the Partnership.
(u) The General Partner and/or an acceptable guarantor has and shall
maintain a net worth equal to at least $1,000,000 computed in accordance with
generally accepted accounting principles.
IN WITNESS WHEREOF, the undersigned have set their hands to this
General Partner Certification this day of _________, 1998.
__________________________
Thomas P. Lam,
General Partner
__________________________
Marilyn S. Lam,
General Partner
D-4
<PAGE>
EXHIBIT E TO PARTNERSHIP AGREEMENT
FORM OF COMPLETION CERTIFICATE
(to be used when rehabilitation completed)
COMPLETION CERTIFICATE
The undersigned, an architect duly licensed and registered in the State of
California, has prepared final working plans and detailed specifications for
Mark Twain Senior Community Limited Partnership, a California limited
partnership (the "Partnership"), between WNC Housing Tax Credit Fund VI, L.P.,
Series 5, a California limited partnership ("Limited Partner") and the
Partnership in connection with the construction [rehabilitation] of improvements
on certain real property located in Oakland, Alameda County, California (the
"Improvements").
The undersigned hereby certifies (i) that the Improvements have been completed
in accordance with the aforesaid plans and specifications, (ii) that a permanent
certificate of occupancy and all other permits required for the continued use
and occupancy of the Improvements have been issued with respect thereto by the
governmental agencies having jurisdiction thereof, (iii) that the Improvements
are in compliance with all requirements and restrictions of all governmental
authorities having jurisdiction over the Improvements, including, without
limitation, all applicable zoning, building, environmental, fire, and health
ordinances, rules and regulations and (iv) that all contractors, subcontractors
and workmen who worked on the Improvements have been paid in full except for
normal retainages and amounts in dispute.
___________________________________
Project Architect
Date: ____________________________
Confirmed by:
___________________________________
General Partner
Date: ____________________________
E-1
<PAGE>
EXHIBIT F TO THE PARTNERSHIP
[ACCOUNTANT'S CERTIFICATE]
[Accountant's Letterhead]
_______________, 199____
WNC Housing Tax Credit Fund VI, L.P., Series 5
c/o WNC & Associates, Inc.
3158 Redhill Ave., Suite 120
Costa Mesa, California 92626
RE: Partnership
Certification as to Amount
of Eligible Tax Credit Base
Gentlemen:
In connection with the acquisition by WNC Housing Tax Credit Fund VI, L.P.,
Series 5 (the "Limited Partner") of a limited partnership interest in Mark Twain
Senior Community Limited Partnership, a California limited partnership (the
"Partnership") which owns a certain parcel of land located in Oakland, Alameda
County, California and improvements thereon (the "Project"), the Limited Partner
has requested our certification as to the amount of low-income housing tax
credits ("Tax Credits") available with respect to the Project under Section 42
of the Internal Revenue Code of 1986, as amended (the "Code"). Based upon our
review of [the financial information provided by the Partnership] of the
Partnership, we are prepared to file the Federal information tax return of the
Partnership claiming annual Tax Credits in the amount of $_______________, which
amount is based on an eligible basis (as defined in Section 42(d) of the Code)
of the Project of $________________, a qualified basis (as defined in Section
42(c) of the Code) of the Project of $_________________ and an applicable
percentage (as defined in Section 42(b) of the Code) of
- -----%.
Sincerely,
_________________________
F-1
<PAGE>
EXHIBIT G TO THE PARTNERSHIP AGREEMENT
[CONTRACTOR'S CERTIFICATE]
[Contractor's Letterhead]
_______________, 199____
c/o WNC & Associates, Inc.
3158 Redhill Avenue
Suite 120
Costa Mesa, California 92626
Re: a1
Dear Ladies and Gentlemen:
The undersigned h40, (hereinafter referred to as "Contractor"), has furnished or
has contracted to furnish labor, services and/or materials (hereinafter
collectively referred to as the "Work") in connection with the improvement of
certain real property known as __________________ located in p16 (hereinafter
known as the "Project").
Contractor makes the following representations and warranties regarding Work at
the Project.
Work on said Project has been performed and completed in accordance with
the plans and specifications for the Project.
Contractor acknowledges that all amounts owed pursuant to the contract for
Work performed for a1 is paid in full.
Contractor acknowledges that a1 is not in violation with terms and
conditions of the contractual documents related to the Project.
Contractor warrants that all parties who have supplied Work for
improvement of the Project have been paid in full.
Contractor acknowledges the contract to be paid in full and releases any
lien or right to lien against the above property.
The undersigned has personal knowledge of the matters stated herein and is
authorized and fully qualified to execute this document on behalf of the
Contractor.
(NAME OF COMPANY)
By:_________________________________________
Title:________________________________________
G-1
<PAGE>
REPORT OF OPERATIONS
QUARTER ENDED:____________________________,199X
- ------------------------------------- -----------------------------------
LOCAL PARTNERSHIP:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
GENERAL PARTNER:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
FIRM NAME:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ADDRESS:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CITY, STATE, ZIP:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PHONE:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PROPERTY NAME:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ADDRESS:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CITY, STATE, ZIP:
-----------------------------------
- ------------------------------------- -----------------------------------
RESIDENT MANAGER:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PHONE:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ACCOUNTANT:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
FIRM:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ADDRESS:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CITY, STATE, ZIP:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PHONE:
- ------------------------------------- -----------------------------------
- ------------------------------------ -----------------------------------
MANAGEMENT COMPANY
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
ADDRESS:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CITY, STATE, ZIP:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
PHONE:
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
CONTACT:
- ------------------------------------- -----------------------------------
- -------------------------------------------------------------------------------
OCCUPANCY INFORMATION
A. Number of Units_____ Number of RA Units_____ Number of Section 8 Tenants ____
B. Occupancy for the Quarter has: Increased ____ Decreased_____
Remained the Same _____
C. Number of: Move-Ins ______ Move-Outs __________ % of Occupancy ______
D. Average length of tenant residency: 1-6 months ______ 6-12 months ______
1-3 years ______ Over 4 years_____
E. Number of Basic rent qualified applicants on waiting list: ________
F. If the apartments are less than 90% occupied, please explain why and
describe what efforts are being made to lease-up remaining units.
___________________________________________________________________________
G. On site manager: Full Time__________ Part Time____________.
If part-time, the number of hours per week_____________.
H-1
<PAGE>
OPERATIONAL INFORMATION
Rent Schedule and Increases from Previous Quarter
Number Monthly Rent Rent Increases Effective
of Units Basic / Market Amount Percent Date
1 Bedroom ________ ______________ _________________ ________
2 Bedroom ________ ______________ _________________ ________
3 Bedroom ________ ______________ _________________ ________
PROPOSED MAINTENANCE
Completed Funded by
Type Description or Operations or Amount
Planned Reserves
- ------------------------------------------------------------------------------
Interior Painting
- ------------------------------------------------------------------------------
Exterior Painting
- ------------------------------------------------------------------------------
Siding
- ------------------------------------------------------------------------------
Roofing
- ------------------------------------------------------------------------------
Drainage
- ------------------------------------------------------------------------------
Paving
- ------------------------------------------------------------------------------
Landscaping
- ------------------------------------------------------------------------------
Playground
- ------------------------------------------------------------------------------
Community Room
- ------------------------------------------------------------------------------
Laundry Room
- ------------------------------------------------------------------------------
Common Areas
- ------------------------------------------------------------------------------
Carpet
- ------------------------------------------------------------------------------
Appliances
- ------------------------------------------------------------------------------
Lighting
- ------------------------------------------------------------------------------
Other
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Please describe in detail any major repairs:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
H-2
<PAGE>
CONDITION OF PROPERTY
THE OVERALL APPEARANCE OF THE BUILDING(S) IS:
Excellent Good Fair Bad
THE OVERALL APPEARANCE OF THE GROUNDS IS:
Excellent Good Fair Bad
EXTERIOR CONDITION (Please Check Appropriate Box)
- ------------------------------------------------------------------------------
Type of Condition Excellent Good Fair Problems/Comments
- ------------------------------------------------------------------------------
Signage
- -------------------------------------------------------------------------------
Parking Lots
- -------------------------------------------------------------------------------
Office/Storage
- -------------------------------------------------------------------------------
Equipment
- -------------------------------------------------------------------------------
Community Building
- -------------------------------------------------------------------------------
Laundry Room
- -------------------------------------------------------------------------------
Benches/Playground
- -------------------------------------------------------------------------------
Lawns, Plantings
- -------------------------------------------------------------------------------
Drainage, Erosion
- -------------------------------------------------------------------------------
Carports
- -------------------------------------------------------------------------------
Fences
- -------------------------------------------------------------------------------
Walks/Steps/Guardrails
- -------------------------------------------------------------------------------
Lighting
- -------------------------------------------------------------------------------
Painting
- -------------------------------------------------------------------------------
Walls/Foundation
- -------------------------------------------------------------------------------
Roof/Flashing/Vents
- -------------------------------------------------------------------------------
Gutters/Splashblocks
- -------------------------------------------------------------------------------
Balconies/Patios
- -------------------------------------------------------------------------------
Doors Windows/Screens
- -------------------------------------------------------------------------------
Elevators
- -------------------------------------------------------------------------------
INTERIOR CONDITION
- -------------------------------------------------------------------------------
Stairs
- -------------------------------------------------------------------------------
Flooring
- -------------------------------------------------------------------------------
Doors/Cabinets/Hardware
- -------------------------------------------------------------------------------
Drapes/Blinds
- -------------------------------------------------------------------------------
Interior Painting
- -------------------------------------------------------------------------------
Refrig/Stoves/Sinks
- -------------------------------------------------------------------------------
Bathroom/Tubs/Showers
Toilets
- -------------------------------------------------------------------------------
H-3
<PAGE>
FINANCIAL STATUS
A. Replacement Reserve is: Fully-funded Under-funded Amount
(complete attached schedule)
Tax/Insurance Escrow is: Fully-funded Under-funded Amount
(complete attached schedule)
Property is operating at a: Surplus Deficit Amount
If deficit, General Partner funding? Yes No Amount
Mortgage Payments are: On Schedule Delinquent Amount
Are the taxes current? Yes No
(please provide copy of paid tax bill)
Is the insurance current? Yes No Renewal Date
(please provide copy of yearly renewal)
B. Please note and explain any significant changes in the following:
Administrative Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Repairs/Maintenance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Utility Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
Taxes/Insurance Expense Increase Decrease Amount
------------------------------------------------------------------------
------------------------------------------------------------------------
C. Do you anticipate making a return to owner distribution? Yes No
Explanation:
------------------------------------------------------------------------
------------------------------------------------------------------------
D. Please explain in detail any change in the financial condition:
------------------------------------------------------------------------
------------------------------------------------------------------------
E. Any insurance claims files? Yes______ No______
If yes, please explain:
------------------------------------------------------------------------
------------------------------------------------------------------------
H-4
<PAGE>
SCHEDULE OF RESERVES
Replacement Tax & Insurance Other Total
Beginning Balance:
Deposits:
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
---------- ----------- ---------- ------- -------
Total Deposits
----------- ---------- ------- -------
Authorized Disbursements:
Description:
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
--------- ----------- ---------- ------- -------
Total Disbursements: ----------- ---------- -------- ------
Ending Balance: (1) ----------- ---------- -------- ------
Required Balance: ----------- ---------- -------- ------
Over/under funding: ----------- ---------- -------- ------
(1) Must agree with amount shown on the balance sheet.
Prepared By: Date:
- -------------------------------------------------------------------------------
Firm: Telephone:
- -------------------------------------------------------------------------------
Reminder: Please include the following documents:
1. Completed Report of Operations
2. Balance Sheet
3. Statement of Income & Expenses
4. Rent roll for quarter ending
5. Tax Credit Compliance Report
H-5
<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
Fund: Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
Property Name: [ ] 20/50 or [ ] 40/60 Election
Address: Does the 51% average apply? [ ] Y [ ] N
Deeper Set-Aside __% @ 50% AMI
County:
Management Company
[ ] Multi-Family Contact Person:
[ ] Elderly
24 Number of Units Phone #
Number of Exempt
Units
LIHTC Project#
- -----------------------------------------------------------------------------
Gross Move-In
Unit First Time Move-In No. of No. in Income Income
No. Tenant Name Date Bdrms Sq. Ft. Set-Aside Unit Move-In Limits
- -------------------------------------------------------------------------------
BIN # Certificate of Occupancy Date:
- -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BIN # Certificate of Occupancy Date:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BIN # Certificate of Occupancy Date:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
(CONTINUED)
Tenant Tenant
Income Income Asset Unit Rent Tenant Utility
Qualified Verification Verification Rent Subsidy Payment Allowance
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INITIAL TENANT CERTIFICATIONS
PARTNERSHIP NAME
(CONTINUED)
Tenant Tenant Overall
Gross Maximum Rent Tenant
Rent Rent Qualified Eligible
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
YES YES
- -------------------------------------------------------------------------------
H-6
<PAGE>
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
Quarter Ending: Tax Credit Set-Asides Information: Loan/Regulatory Set-Asides:
[ ] 20/50 or [ ] 40/60 Election
Does the 51% average apply? [ ] Y [ ] N
Deeper Set-Aside : ( List Details)
County: Allocation: Management Company:
Pre-1990 (Rent based on number of persons) Contact Person:
Elected to change No. Bedrm
Post-1989 (Based on number of Bedroom)
[ ] Multi-Family [ ] Elderly Phone No.
Number of Units
Number of Exempt Units Fax No.
Prepared by:
LIHTC Project#
- -----------------------------------------------------------------------------
Gross Annual
Unit Tenant Move-In No. Of Inc. Set- No. In Annual Income
No. Name Date Bdrms Pct. Aside Unit Income Limits
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
QUARTERLY TAX CREDIT COMPLIANCE REPORT
PROPERTY NAME
(CONTINUED)
Annual Tenant Less
Recert. Income Income Assets Unit Rent Tenant
Date Qualified Verified Verified Rent Subsidy Payment
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Tenant Tenant Overall
Utility Gross Maximum Rent Tenat
Allow. Rent Rent Qualified Eligible
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
H-7
<PAGE>
Tenant Tax Credit Compliance Audit
Document Transmittal Checklist
Unit Number Property Name Date
Tenant Name Completed By:
Initial _________ Annual________
Check Box for Type of Certification Management Company
This Section For WNC Use Only
Check Documents Being Sent
Received. Reviewed
___Internal Checklist or worksheet
___Initial - Rental Application/Rental Agreement
___Initial - Questionnaire of Income/Assets
___Recertification - Questionnaire of Income/Assets
___Recertification - Addendum to Lease
___Employment Verification
___Employment Termination Verification
___Military Verification
___Verification of Welfare Benefits
___Verification of Social Security Benefits
___Verification of Disability Benefits
___Unemployment Verification
___Verification of Unemployment Compensation
___Verification Worksmen Compensation
___Retirement/Annuities Verification
___Verification of Veterans Pension
___Verification of Child Support
___Verification of Alimony Support
___Disposed of Assets Last 2 yrs.
___Real Estate
___Investment
___Assets Verifications (savings, stocks etc.)
___Trusts/with Current Tax Return
___Lump Sum Settlements
___Notarized Affidavit of Support
___Certification of Handicap
___Notarized Self-Employed-Tax Return
___Notarized statement of no income
___Tenant Certification
- ------------------------------------------------------------------------------
This Section For WNC Use Only
YES NO
Are all required forms completed?
Are all required forms dated?
Did the Manager and Tenant sign all documents?
Third party verification of income completed?
Third party verification of assets completed?
Are verifications completed for all members 18 yrs. and
over?
Did all the members of the household 18 yrs. and
over sign all documents?
Is lease completed with a minimum of six months/ SRO
monthly?
Addendum completed?
Tenant Certification completed?
Are all members of the household full-time students?
Is utility allowance correct?
Is correct income limit being used?
Is correct rent limit being used?
For tenants with no income
Was notarized statement of no income obtained with tax
return?
or Were all sources verified (AFDC, Unemployment,
Soc. Sec., Disability)?
H-8
<PAGE>
TAX CREDIT COMPLIANCE MONITORING:
ANNUAL CERTIFICATION
As General Partner of Mark Twain Senior Community Limited Partnership,
I hereby certify as to the following:
1. Mark Twain Senior Community Limited Partnership owns a one hundred
six (106) unit project ("Project") in Oakland, Alameda County, California.
2. An annual income certification (including supporting documentation)
has been received from each tenant. The income certification reflects that the
tenant's income meets the income limitation applicable to the Project pursuant
to Section 42(g)(1) of the Internal Revenue Code ("Code").
3. The Project satisfies the requirements of the applicable minimum
set aside test as defined in Section 42(g)(1) of the Code.
4. Each unit within the Project is rent restricted as defined in
Section 42(g)(2)of the Code.
5. Each unit in the Project is available for use by the general public
and not for use on a transient basis.
6. Each building in the Project is suitable for occupancy in
accordance with local health, safety, and building codes.
7. During the preceding calendar year, there had been no change in
the eligible basis, as defined in Section 42(d)of the Code, of any building
within the Project.
8. All common area facilities included in the eligible basis of the
Apartment Complex are provided to the tenants on a comparable basis without a
separate fee to any tenant in the Project.
9. During the preceding calendar year when a unit in the Project became
vacant reasonable attempts were made to rent that unit to tenants whose incomes
met the income limitation applicable to the Project pursuant to Section 42(g)(1)
of the Code and while that unit was vacant no units of comparable or smaller
size were rented to tenants whose income did not meet the income limitation
applicable to the Project pursuant to Section 42(g)(1) of the Code.
10. If the income of a tenant in a unit increased above the limit
allowed in Section 42 (g)(2)(D)(ii), then the next available unit of comparable
or smaller size was rented to tenants whose incomes met the income limitation
applicable to the Project pursuant to Section 42(g)(1) of the Code.
H-9
<PAGE>
IN VERIFICATION OF THE FOREGOING ENCLOSED HEREWITH IS A COPY OF THE ANNUAL
INCOME CERTIFICATION RECEIVED FROM EACH TENANT IN THE PROJECT. UPON REQUEST I
WILL PROVIDE COPIES OF ALL DOCUMENTATION RECEIVED FROM THE TENANT TO SUPPORT
THAT CERTIFICATION.
I declare under penalty of perjury under the law of the State of
California that the foregoing is true and correct.
Executed this ______ day of _______________________ at
______________________ , ______.
H-10
<PAGE>
Calculation of Debt Service Coverage
Month 1 Month 2 Month 3
------------ ------------ ------------
INCOME
Gross Potential Rent
Other Income
Vacancy Loss
------------ ------------ ------------
Adjusted Gross Income
------------ ------------ ------------
OPERATING EXPENSES
Utilities
Maintenance
Management Fee
Administration
Insurance
Real Estate Taxes
Other Expenses
------------ ------------ ------------
Total Operating Expenses
------------ ------------ ------------
Net Operating Income (1)
Accrual adjustments for:
R/E Taxes
Insurance
Tax/ Accounting
Other
Replacement Reserves
============ ============ ============
Income for DSC Calculation
============ ============ ============
------------ ------------ ------------
Stabilized Debt Service
------------ ------------ ------------
------------ ------------ ------------
Debt Service Coverage (2)
------------ ------------ ------------
Please submit this form along with the following supporting
documentation:
Monthly Financial Reports (income statement, balance sheet, general
ledger and rent rolls) Operating Budget
Copies of bank statements.
(1) This number should reconcile easily with the monthly financial
statements
(2) The ratio between the Income for DSC calculation and Stabilized
Debt Service. As example, a 1.15 DSC means that for every $1.00 of
Stabilized Debt Service required to be paid there must be $1.15 of
Net Operating Income available.
H-11
