Exhibit
Number Exhibit Description
EX-10.1 The Amended and Restated Agreement of Limited Partrnership of Enhance,
LP.
<PAGE>
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF
ENHANCE LIMITED PARTNERSHIP,
A LOUISIANA LIMITED PARTNERSHIP IN COMMENDAM
This Amended and Restated Agreement of Limited Partnership in is being
entered into effective as of the date written below by and between Metro City
Redevelopment Coalition, Inc. 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"), WNC Housing, L.P., as the
special limited partner (the "Special Limited Partner"), and Metro City
Management, Inc. as the withdrawing limited partner (the "Original Limited
Partner").
WHEREAS, on December 15, 1995, an Agreement and Certificate of Limited
Partnership was entered into by and between Metro City Redevelopment
Coalition, Inc. as the general partner (the "Original General Partner"),
and Metro City Redevelopment Coalition, Inc. as the limited partner (the
"Original Partnership Agreement").
WHEREAS, on October 13, 1998, a Certificate of Correction to the Original
Partnership Agreement was entered into to provide for the correction of naming
Metro City Redevelopment Coalition, Inc. as the General Partner and the Original
Limited Partner. The Original Limited Partner's name was corrected to reflect
Metro City Management, Inc.
The Limited Partner, Special Limited Partner and the General Partner desire
to hereby 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 Rodney LeBlanc of Pailet, Meunier & LeBlanc,
or such other firm of independent certified public accountants as may be
engaged by the General Partner with the consent of the Special Limited
Partner to prepare the Partnership income tax returns.
Section 1.2 "Act" shall mean the Revised Limited Partnership Act of the State.
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 year, 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
1.704-2(b)(2)(ii)(d)(4), 1.704-2(b)(2)(ii)(d)(5) and
1.704-2(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 (i) any Person directly or indirectly
controlling, controlled by, or under common control with another
Person; (ii) any Person owning or controlling 10% or more of the
outstanding voting securities of such other Person; (iii) any officer,
director, trustee, or partner of such other Person; and (iv) if such
Person is an officer, director, trustee or general partner, any
company 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.
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 "Break-even Operations" shall mean at such time as the
Partnership has Cash Receipts equal to Cash Expenses, as determined by
the Accountant and approved by the Special Limited Partner. For
purposes of this definition, any one-time up front fee paid to the
Partnership from any source shall not be included in Cash Receipts to
calculate Break-even Operations. Moreover, in the event any rent
concession is granted for the rental of an apartment unit the value of
the rental concession shall be amortized over the term of the lease.
Section 1.9 "Budget" shall mean the annual operating Budget of the
Partnership as more fully described in Section 14.3 of this Agreement.
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 of Partnership Income
(or items thereof) and any items in the nature of income or gain which
are specially allocated pursuant to Article X hereof, and decreased by
the amount of any Distributions made 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
Article X 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, provided that if the transfer of any interest causes a termination of
the Partnership pursuant to Code Section 708(b)(1)(B), the Capital Accounts of
all Partners, including the transferee, shall be redetermined as of the date of
such termination. In such event, the Capital Account of each Partner shall be
equal to the net fair market value of its interest as of such date. Subsequent
to such redetermination, allocations of Income and Loss with respect to assets
held by the Partnership on the date of such redetermination shall be governed by
the principles set forth in Code Section 704(c) and the Treasury Regulations.
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 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 initial Gross Asset Value of property (net of liabilities
securing such contributed property that the Partnership is considered
to assume or take subject to under Section 752 of the Code),
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 7.6 of this Agreement. A loan to the Partnership by a
Partner shall not be considered as a Capital Contribution.
Section 1.12 "Cash Expenses" shall mean all cash operating obligations of
the Partnership (other than those covered by Insurance) in accordance
with the applicable Budget, including without limitation, the payment
of Mortgage payments, the Management Agent fees (which shall be deemed
to include that portion of such fees which is currently deferred and
not paid), the funding of reserves in accordance with Article VIII of
this Agreement, advertising and promotion, utilities, maintenance,
repairs, Partner communications, legal, telephone, any other expenses
which may reasonably be expected to be paid in a subsequent period but
which on an accrual basis is allocable to the period in question, such
as Insurance, real estate taxes and audit, tax or accounting expenses
(excluding deductions for cost recovery of buildings; improvements and
personal property and amortization of any financing fees) and any
seasonal expenses (such as snow removal, the use of air conditioners
in the middle of the summer, or heaters in the middle of the winter)
which may reasonably be expected to be paid in a subsequent period
shall be allocated equally per month over the calendar year. Cash
Expenses payable to Partners or Affiliates of Partners shall be paid
after Cash Expenses payable to third parties.
Section 1.13 "Cash Receipts" shall mean 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, Capital
Contributions, borrowings, lump-sum payment, any extraordinary receipt
of funds, and any income earned on investment of its funds.
Section 1.14 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
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.
Section 1.17 "Debt Service Coverage" shall mean for the applicable period
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 1.05 Debt Service Coverage means that for every $1.00 of
debt service required to be paid there must be $1.05 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 "G" and incorporated herein by this reference.
Section 1.18 "Developer" shall mean Metro City Redevelopment Coalition,
Inc.
Section 1.19 "Development Fee" shall mean the fee payable to the Developer
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. Development activities do not
include services for the acquisition of the land or syndication
activities.
Section 1.20 "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 1.21 "Event of Bankruptcy" shall mean the adjudication of
bankruptcy or insolvency by a court of competent jurisdiction; the
making of an assignment for the benefit of creditors; or the filing of
a petition to accomplish any of the foregoing, unless such petition is
dismissed within 60 days thereafter; or the seizure of a Partner's
interest in the Partnerships or a like event.
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 within
90 days following the close of the first taxable year of the Project
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 mean Metro City Redevelopment
Coalition, Inc. ("Metro") and such other Persons as are admitted to
the Partnership as additional or substitute General Partners pursuant
to this Agreement. Metro will remain the General Partner pursuant to
the terms and conditions of this Partnership Agreement, except that,
Metro agrees to seek the consent and approval of the Special Limited
Partner should Metro decide to replace the Property Manager. In the
event that Metro and the Special Limited Partner are unable to agree
on a replacement of the Property Manager, the Property Manager shall
find a new General Partner subject to the consent and approval of the
Special Limited Partner and pay to Metro the sum of $500.00 for its
interest in the partnership. Metro agrees that it shall remain the
General Partner until an acceptable replacement can be found.
Section 1.26 "Grant" shall collectively mean the non-repayable grants
received by the Partnership from the following: (a) City of Baton
Rouge through the HOME Investments Partnership Program in the amount
of $25,000 for necessary and reasonable operating expenses; and (b)
Federal Home Loan Bank of Dallas in the amount of $100,000.
Section 1.27 "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 gross 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 gross 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 gross fair market value, as
determined by the General Partner, as of the following times: (i)
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; (ii) the distribution by the
Partnership to a Partner of more than a de minimis amount of
Partnership property as consideration for an interest in the
Partnership; and (iii) 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 (i)
and (ii) 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 gross 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 1.27(d) to the extent the
General Partner determines that an adjustment pursuant to Section
1.27(b) hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant
to this Section 1.27(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Section 1.27(a), Section 1.27(b), or Section 1.27(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 1.28 "Income and Losses" shall mean, for each taxable 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:
(i) 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 definition shall be added
to such taxable income or loss;
(ii) 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 definition
shall be subtracted from such taxable income or loss;
(iii)In the event the Gross Asset Value of any Partnership asset
is adjusted pursuant to subparagraphs (ii) or (iii) of the
definition 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;
(iv) 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;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
depreciation for such fiscal year or other period, computed
as provided below; and
(vi) Notwithstanding any other provision of this definition, any
items which are specially allocated pursuant to Sections
10.3, 10.4 or 10.5 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 1.29 "Insurance"
(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, the Limited Partner and the certificate holder prior to
cancellation; and
(e) hazard coverage must include inflation and building or ordinance
endorsements.
Section 1.30 "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 1.31 "Interest" shall mean the entire 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 1.32 "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.
Section 1.33 "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 1.34 "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 1.35 "Liquidation" shall mean with respect to the Partnership the
orderly sale and liquidation of the Project and other Partnership
property following the first to occur of (a) the date upon which the
Partnership is terminated under Section 708(b)(1) of the Code unless
continued by a vote of the Partners, (b) the date upon which the
Partnership ceases to be a going concern (even though it may continue
in existence for the purpose of winding up its affairs, paying its
debts and distributing any remaining balance to its Partners), or (c)
the date this Agreement terminates at a time when the Partnership is
not in Liquidation, the liquidation of such Partner's interest in the
Partnership under Treasury Regulation 1.761-1(d), as amended, or any
successor thereto.
Section 1.36 "Property Manager" 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 Property Manager shall be
OSC Management, Inc. Further, the Property Manager shall be entitled
to a negotiated Guaranteed Operating Deficit Agreement Fee which shall
be funded by appropriate capital contributions or by loans made by the
Partners and paid upon the execution of said Agreement. The Property
Manager shall not be deemed an agent for the partnership, but is
deemed an independent contractor employed by the partnership to
perform a specific property management function.
Section 1.37 "Management Agreement" shall mean the agreement between the
Partnership and the Property Manager for property management services.
The management fee shall equal $45.00 per occupied unit per month. The
Management Agreement shall provide that it will be terminable at will
by the Partnership at anytime following the Withdrawal or removal of
the General Partner. The Property Manager shall be sole custodian of
all cash accounts. No Partner shall make any demand on the Property
Manager for control thereof. In the event all of the Partners desire
to change the Property Manager, all said cash accounts shall be
transferred to the new Property Manager, or to whatever person or
business entity that all of the Partners so direct.
Section 1.38 "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 1.39 "Mortgage or Mortgage Note" shall mean the permanent
nonrecourse financing wherein the Partnership promises to pay in the
following order: (a) First Bank or any successor thereof the principal
sum of $170,000 plus interest on the principal at the effective rate
of 8.5% per annum over a term of eighteen(18) years on the first day
of each month and amortized over a period of 300 months; (b) City of
Baton Rouge-Parish of East Baton Rouge through the HOME Investments
Partnership Program ("HOME") or any successor thereof the principal
sum of $550,000 under the terms and conditions acceptable to the
General Partner, the Limited Partner, and the Property Manager. , This
HOME loan is subordinate of the First Bank loan, and will be repaid
only if the Project maintains a Debt Service Coverage of 1.05 after
making the HOME loan payment required. Moreover, the Limited Partner
shall have no obligation to fund its capital contribution until the
Limited Partner is presented with the terms and conditions of the HOME
loan and provide its consent and approval thereto and subject to the
provisions of 7.2(a).
Section 1.40 "Net Operating Income" shall mean the cash available for
Distribution on an annual basis, when Cash Receipts exceed Cash
Expenses.
Section 1.41 "Operating Deficit" shall mean, for the applicable period,
insufficient funds to pay operating costs when Cash Expenses exceed
Cash Receipts, as determined by the Accountant and approved by the
Special Limited Partner.
Section 1.42 "Operating Deficit Guarantee Period" shall mean the period
commencing with the date of this agreement and ending on December 31,
2006.
Section 1.43 "Original Limited Partner" shall mean Metro City Management,
Inc.
Section 1.44 "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 1.45 "Partner Nonrecourse Debt" shall have the definition set forth
in Section 1.704-2(b)(4) of the Treasury Regulations.
Section 1.46 "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 (as defined in Section
1.704-2(b)(3) of the Treasury Regulations), determined in accordance
with Section 1.704-2(i)(3) of the Treasury Regulations.
Section 1.47 "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 1.48 "Partnership" shall mean the limited partnership continued
under this Agreement.
Section 1.49 "Partnership Administration Fee" shall mean the fee payable to
the Property Manager pursuant to Section 9.2 for services incident to
the administration of the business and affairs of the Partnership
which services shall include, but not be 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 financial statement of the Partnership, the 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.
Section 1.50 "Partnership Minimum Gain" shall mean the amount determined in
by computing, with respect to each nonrecourse liability of the
Partnership, the amount of gain, if any, that would be realized by the
Partnership if a reduction occurs in the amount by which the
nonrecourse liability exceeds the adjusted basis in the Project
encumbered by the nonrecourse liability. Such computation shall be
made in a manner consistent with Treasury Regulation Sections
1.704-2(b)(2) and 1.704-2(d).
Section 1.51 "Permanent Mortgage Commencement" shall mean the first date on
which the closing of the Mortgage shall have occurred and amortization
of the Mortgage shall have commenced.
Section 1.52 "Person(s)" shall mean an individual, proprietorship, trust,
estate, partnership, joint venture, association, company, corporation
or other entity.
Section 1.53 "Project" shall mean the land in Baton Rouge, East Baton Rouge
Parish, Louisiana as more fully described in Exhibit "A" attached
hereto and incorporated herein by this reference, and any and all
improvements now or hereafter to be rehabilitated thereon,
specifically including a twenty-three (23) unit low to moderate income
housing complex for families, including one on site manager unit.
Section 1.54 "Project Documents" shall mean and include all documents
delivered to or required by the Mortgage Loan and/or any governmental
agency having jurisdiction over the Project in connection with the
development, rehabilitation and financing of the Project, including
but not limited to, the approved plans and specifications for the
development and rehabilitation of the Project.
Section 1.55 "Projected Annual Tax Credits" shall mean LIHTC in the amount
of $81,796 for 1999 through 2007, 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 $818,121 to be available to the
Partnership; provided, however, that if the Actual Tax Credit for 1999
is less than $81,796, the Projected Tax Credit for the year 2007 shall
be increased by an amount equal to the amount by which the Actual Tax
Credit for 1999 is less than $81,796.
Section 1.56 "Projected Tax Credits" shall mean LIHTC in the aggregate
amount of $898,895. The Partners recognize and acknowledge that the
total amount of Tax Credits allocated to the Partnership equaled
$898,895. However, prior to the Limited Partner's admittance, the
Partnership had allocated $80,774 Tax Credits to the former partners
leaving the total available Tax Credits of $818,121 to be allocated
among the General Partner, Limited Partner and Special Limited
Partner.
Section 1.57 "Qualified Income Offset Item" shall have the meaning set
forth in Treasury Regulation Section 1.704-1(b)(2)(ii)(d), or any
successor provision.
Section 1.58 "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 1.59 "Refinancing" shall mean the refinancing of the Project so as
to retire the Mortgage Note and create a new permanent lender who
shall hold a first deed of trust on the Project. No Refinancing shall
be permitted without approval from the Limited Partner.
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 "Sale" shall mean and include the sale, exchange, condemnation
or similar eminent domain taking, casualty or other disposition of all
or any portion of the Project which is not in the ordinary course of
business, and the sale of easements, rights of way or similar
interests in the Project or any other similar items which in
accordance with the accounting methods used by the Partnership are
attributable to capital; provided, however, that "Sale" shall not
refer to any transaction to the extent gain or loss is not recognized,
or is elected not to be recognized, under any applicable section of
the Code.
Section 1.62 "Sale or Refinancing Proceeds" shall mean the net cash
(including both principal and interest) realized by the Partnership
from a Sale or Refinancing, after retirement of applicable Mortgage
debt, payment of all expenses related to the transaction, other than
the sales preparation fee which may be payable to the General Partner
or its Affiliates pursuant to Section 9.2, and payment of or provision
for other Partnership debts and obligations.
Section 1.63 "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 1.64 "State" shall mean the State of Louisiana.
Section 1.65 "State Tax Credit Agency" shall mean the allocation by the
appropriate state agency of LIHTC with respect to the Project.
Section 1.66 "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 1.67 "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 1.68 "Title Policy" shall mean the policy of insurance covering the
fee simple title to the Project from a company approved by the Special
Limited Partner. The Title Policy shall be an ALTA owners title policy
naming the Partnership as insured and including a non-imputation and
fairway endorsement. The Title Policy shall also insure against
rights-of-way, easements, or claims of easements, not shown by public
records. The Title Policy shall be in an amount equal to the Mortgage
and the Limited Partner's Capital Contribution.
Section 1.69 "TRA 1986" shall mean the Tax Reform Act of 1986.
Section 1.70 "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).
ARTICLE II
NAME
The name of the Partnership shall be "Enhance Limited Partnership, A Louisiana
Limited Partnership in Commendam."
ARTICLE III
PRINCIPAL EXECUTIVE OFFICE/AGENT FOR SERVICE
Section 3.1 Principal Executive Office. The principal executive office of the
Partnership is located at 2701 Houma Boulevard, Suite "C", Metairie, Louisiana
70006, 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 Clifford E. Olsen, whose address is 2701 Houma
Boulevard, Suite "C", Metairie, Louisiana 70006.
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 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 required by the Mortgage lenders.
Section 6.2 Operating Obligations. Throughout the Operating Deficit Guarantee
Period, 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 of one year's operating
expenses (including debt and reserves) approved by the Limited Partner and
the Special Limited Partner. Each Operating Loan shall be nonrecourse to
the Partners, and shall be repayable out of available Net Operating Income
or Sale or Refinancing Proceeds in accordance with Article XI of this
Agreement.
Section 6.3 General Partner Loans. After the expiration of the Operating Deficit
Guarantee Period, with the consent of the Limited Partner, the General
Partner may loan to the Partnership any sums required by the Partnership
and not otherwise reasonably available to it, at a rate of interest not to
exceed the lesser 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 the maximum legal rate. The amount and maturity
date of any such loan and the rate of interest thereto 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. The Original Limited Partner made a
Capital Contribution of $100. 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.
Section 7.2 Capital Contribution of Limited Partner. The Limited Partner shall
make a Capital Contribution in the amount of $588,929, in cash on the dates
and subject to the conditions hereinafter set forth:
(a) Including but not limited to any and all terms and conditions
otherwise found elsewhere in this Agreement, or waived, the obligation
of the Limited Partner to pay the aforesaid Capital Contribution shall
be subject to the satisfaction of the following conditions:
(1) 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 "B" and
incorporated herein by this reference;
(2) the General Partner shall deliver to the Limited Partner:
(A) a fully executed Certificate and Agreement in the form
attached hereto as Exhibit "C" and incorporated herein by
this reference;
(B) operating budget;
(C) Insurance required during operations;
(D) a copy of an ALTA Owner's Title Insurance Policy, in a form
and substance satisfactory to the Special Limited Partner.
The Title Insurance Policy will show the Project to be free
from liens, claims or rights to a lien or judgments filed
against the property or the Project, and other exceptions
not approved by the Special Limited Partner;
(E) Mortgage documents signed and the Mortgage funded;
(F) HOME's final loan commitment stating its loan subordination
to First Bank;
(G) the original and current tenant income verification
information which includes 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),
executed lease agreements collected by the Property Manager,
or General Partner, verifying each tenant's eligibility as a
Qualified Tenant;
(H) a copy of the Declaration of Restrictive Covenants/Extended
Use Agreement entered into between the Partnership and the
State Tax Credit Agency;
(I) an audited construction cost certification (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;
(J) 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 setting forth
the Project's eligible basis with the amount of Tax Credits
to which the Project is entitled; and
(K) Internal Revenue Code Form 8609, or any successor form.
Section 7.3 Repurchase of Limited Partner's Interest. Within 60 days after
receipt of written demand therefor 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) 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.
Section 7.4 Reduction of Capital Contribution.
(a) The General Partner will use its best efforts to rent 100% of the
Project's apartment units to Qualified Tenants over the fifteen (15)
year LIHTC life. If at any time the Accountants determine that the
Actual Tax Credit for any fiscal year or portion thereof is less than
the Projected Tax Credit pertaining to such fiscal year or portion
thereof, then the Capital Contribution of the Limited Partner shall be
reduced by an amount equal to the difference between (A) Projected Tax
Credits, and (B) the Actual Tax Credit. Any reduction in Capital
Contribution shall first be applied to reduce the Limited Partner's
next Capital Contribution, and any portion of such reduction in excess
of such Capital Contribution shall be applied to reduce succeeding
Capital Contributions of the Limited Partner. If no further Capital
Contribution payments are due and owing from the Limited Partner, then
the entire amount of such reduction shall be repaid by the Partnership
to the Limited Partner promptly after demand is made therefore. During
the first five calendar years of Partnership operations, the General
Partner is obligated to provide such funds to the Partnership as shall
be necessary to cause the aforesaid payment to be made by the
Partnership to the Limited Partner.
(b) In the event that, for any reason, at any time after the first five
calendar years of Partnership operations, if the amount of the Actual
Tax Credit shall be less than the Projected Tax Credit (the "Credit
Shortfall") then there shall be a corresponding reduction in the
General Partner's Net Operating Income in an amount equal to the
Credit Shortfall and said amount shall be paid to the Limited Partner.
In the event there is not sufficient funds to pay the full Credit
Shortfall to the Limited Partner at the time of the next Distribution
of Net Operating Income then the Limited Partner shall be treated as
having made a constructive advance to the Partnership with respect to
such year (a "Credit Shortfall Loan"), which shall be deemed to have
been made on January 1 of such year. Credit Shortfall Loans shall be
deemed to bear simple interest (not compounded) from the respective
dates on which such principal advances are deemed to have been made
under this Section 7.4(b) at 7% per annum. Credit Shortfall Loans
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 Credit Shortfall Loan then the excess will be paid in
accordance with Section 11.2(c).
(c) In the event there is: (1) a filing of a tax return by the Partnership
evidencing a reduction in the qualified basis of the Project causing a
recapture of Tax Credits previously allocated to the Limited Partner;
(2) 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; (3) a
decision by the United States Tax Court upholding the assessment of
such deficiency against the Partnership with respect to any Tax Credit
previously claimed in connection with the Project, unless the
Partnership shall timely appeal such decision and the collection of
such assessment shall be stayed pending the disposition of such
appeal; or (4) a decision of a court affirming such decision upon such
appeal then, in addition to any other payments to which the Limited
Partner and Special Limited Partner are entitled under the terms of
this Section 7.4, the General Partner shall pay to the Limited Partner
and the Special Limited Partner the sum of (A) the income tax
deficiency assessed against the Limited Partner or Special Limited
Partner as a result of the Tax Credit recapture, (B) any interest and
penalties imposed on the Limited Partner or Special Limited Partner
with respect to such deficiency, and (C) 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 (A) and
(B).
Section 7.5 Capital Contribution of the Special Limited Partner. The Special
Limited Partner shall make a Capital Contribution of $59 at the time of the
Limited Partner's Capital Contribution payment referenced in Section
7.2(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 7.6 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, in its sole
discretion, determine that such cash should, in whole or in part, be
returned to the Limited Partner in reduction of its Capital Contribution.
Any Distribution to the Limited Partner pursuant to this Section 7.5, or
pursuant to Section 7.4, shall be deemed to have been consented to by the
Limited Partner. No such return shall be made:
(a) Until this Agreement has been amended to reflect such reduction of
capital; and
(b) 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 the Limited Partner and the 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 its Capital Contributions in the amounts and on the
dates specified in this Agreement and 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 Operation and Maintenance Reserve. 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 improvements. 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 Apartment Housing shall be
allocated and distributed equally between the General Partner and the
Limited Partner.
Section 8.2 Reserve for Replacements. The Partnership shall fund, establish and
maintain a reserve account in an amount required by the Mortgage lenders,
or any successor thereof.
Section 8.3 Initially left blank.
Section 8.4 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 Code and applicable regulations; 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 other terms,
conditions, and restrictions or other limitations as may be provided
elsewhere 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. No
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.
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 $50,000 in
accordance with the Development Fee Agreement entered into by and between
the Developer and the Partnership on the even date hereof. The Development
Fee Agreement provides, in part, that 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 balance of the Development Fee
will be paid in accordance with Section 11.1 of this Agreement.
(b) The Partnership shall utilize the proceeds from the Capital
Contributions paid pursuant to Section 7.2 and Section 7.5 of this
Agreement to repay the contractor and sub-contractor, or others who
hold liens, encumbrances, judgments, or other claims against the
Project. If any Capital Contribution proceeds are remaining after all
construction costs, excluding the Development Fee, are paid in full,
then the remainder shall first be paid to the Developer in payment of
the Development Fee. Any and all funds remaining shall be reserved for
the future reserve, replacement, or other operating expenses as shall
be deemed appropriate by the General Partner, Limited Partner, and the
Property Manager.
(c) The Partnership shall pay to the Property Manager a property
management fee for the leasing and management of the Project in
accordance with the Management Agreement.
(i) As more particularly provided herein, the General Partner may dismiss
the Property Manager as the entity responsible for the Project under
the terms of the property management agreement; with the consent and
approval of the Special Limited Partner and the Limited Partner.
Moreover, and at the request of the Special Limited Partner, the
General Partner or the Mortgage Lender shall remove the Property
Manager in the event the Property Manager experiences an Event of
Bankruptcy, is dissolved, or makes an assignment for the benefit of
its creditors, or for any intentional misconduct by the Property
Manager or failure to exercise reasonable care in the discharge of its
duties and obligations as Property Manager, including without
limitation, for any action or failure to take any action which:
(A) violates in any material respect any provision of the property
management agreement; or
(B) violates in any material respect any provision of this Agreement
or provisions of applicable law.
(d) The Partnership shall pay to the Limited Partner a fee (the
"Reporting Fee") defined as 50% of the Net Operating Income and
commencing in the year 2000 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. If the Reporting Fee is not paid in any
year it shall not accrue for payment in subsequent years.
(e) The Partnership shall pay to the Property Manager a Partnership
Administration Fee equal to 50% of Net Operating Income
commencing in 1999 for services incident to the administration of
the business and affairs of the Partnership, which services shall
include, but not be 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,
and preparing and disseminating reports on the status of the
Project and the Partnership, all as required by Article XIV of
this Agreement. The Partnership Administration 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 Partnership
Administration 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.
(a) In the Partnership's name and behalf and with the consent of the
Property Manager, the General Partner may acquire (including by fee or
real estate contract), hold, sell, transfer, assign, lease or
otherwise deal with any real, personal or mixed property, interest
therein or appurtenance thereto;
(b) In the Partnership's name and behalf and with the consent of the
Property Manager, 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 attorneys, on such terms
as the General Partner shall determine;
(c) In the Partnership's name and 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 with
the Consent of the Special Limited Partner;
(d) In the Partnership's name and behalf and with the consent of the
Property Manager, 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 behalf and with the consent of the
Property Manager, 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) 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;
(g) In the Partnership's name and behalf, the General Partner may execute
the Mortgage; and
(h) In the Partnership's name and behalf, the General Partner may execute,
acknowledge and deliver any and all instruments to effectuate any of
the foregoing.
Section 9.4 Limitations on General Partner's Power and Authority. Including but
not limited to the other terms, conditions, limitations, or restrictions
contained in this Partnership Agreement , the General Partner shall not:
(a) 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 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 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; or
(l) Commingle funds of the Partnership with the funds of another Person
provided, however, that the General Partner may establish a master
fiduciary account pursuant to which separate subtrust accounts are
established for the benefit of affiliated limited partnerships,
provided that Partnership funds are protected from claims of such
other partnerships and/or their creditors.
Section 9.5 Restrictions on Authority of General Partner. Without the prior
approval of the Special Limited Partner neither the General Partner nor the
General Partner shall:
(a) Sell, exchange, lease or otherwise dispose of all or a substantial
part of the assets of the Partnership;
(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) Admit a General Partner, or elect to continue the Partnership's
business after a General Partner ceases to be a General Partner (other
than by removal) where there is no remaining or surviving General
Partner;
(e) Contract away the fiduciary duty owed to the Limited Partner and the
Special Limited Partner at common law; or
(f) 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.
Section 9.6 Duties of General Partner. The General Partner agrees that at all
times it shall:
(a) Use its best efforts to rent 100% of the apartment units to Qualified
Tenants during the Project's "compliance period" for purposes of Code
Section 42.
(b) 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;
(c) Aid and assist the Property Manager in the filing and publishing 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;
(d) Aid and assist the Property Manager of the Partnership to carry
adequate public liability insurance, comprehensive casualty insurance
for not less than the full insurable value of the Project and such
other insurance as is generally maintained for properties similar to
the Project;
(e) Have a fiduciary responsibility for any and all Partnership activities
whether or not the undertakings are in its immediate possession or
control;
(f) Comply with all Code and state rules and regulations for rural rental
housing and LIHTC; and
(g) Perform such other acts as may be expressly required of it under the
terms of this Agreement.
Section 9.7 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 reasonable the Partnership's Cash Expenses; unless
the General Partner is obligated to pay the same as an Operating
Deficit during the Operating Deficit Guarantee Period, and subject to
the limitations on the reimbursement of such expenses set forth
herein. For the purposes of this Section, 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:
(i) 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
(ii) 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 9.7(b)(ii),
"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: (1)
chairman or member of the board of directors; (2) executive
management, such as president, vice president or senior vice
president, corporate secretary or treasurer; (3) senior
management, such as the vice president of an operating division
who reports directly to executive management; or (4) 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 9.8 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 other expenses which are
unrelated to the business of the Partnership.
Section 9.9 Other Business of Partners. Notwithstanding, Section 9.5(c) any
Partner may engage independently or with others in other business ventures
of every nature and description, including, without limitation, the
acquisition, development, rehabilitation, 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 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.
Section 9.10 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.
(e) Additional Improvements on the Project, if any, shall be completed
substantially in conformity with the Project Documents or 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) 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 throughout the term of
the Partnership.
(h) The Project has obtained Permanent Mortgage Commencement, and will
maintain throughout the term of this Partnership Insurance written by
an Insurance Company.
(i) The Partnership owns the fee simple interest in the Project, subject
only to liens (except those with respect to which an adequate bond or
other financial security has been issued) which, in the aggregate, do
not exceed $10,000 and the Mortgage Loan.
(j) 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.
(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.
(l) The Partnership will allocate to the Limited Partner the Projected
Annual Tax Credits.
(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 elected the LIHTC to commence in accordance the Code, the
Project satisfied 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 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 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 99.98% to the Limited Partner, .01% to the Special Limited
Partner, and .01% collectively 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 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 for the year 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) The balance, if any, of such Income shall be allocated 50% to the
Limited Partner and 50% collectively 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 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 for
the year 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%
collectively 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 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 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,
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 and 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 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 99.98% to the Limited Partner, .01% to the Special Limited
Partner and .01% collectively to the General Partner.
(f) Any Partner Nonrecourse Deductions for any fiscal year shall be
specially allocated to the General Partner or Limited 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 Regulations 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 General Partner 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:
(i) Such interest income shall be specially allocated to the Limited
Partner to whom such promissory note relates; and
(ii) 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 Code Section 38 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 Code
Section 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, 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
10.3(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 10.3(h), 10.3(i),
10.3(j), 10.3(k), and 10.5. In exercising its discretion under 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 Code Section 38 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 99.98% to the Limited
Partner, .01% to the Special Limited Partner and .01% collectively to
the General Partner.
(b) In the event Partnership Code Section 38 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 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.
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 this Agreement).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant hereto, 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 and Assignees. In the event that
the Interest of the Limited Partner hereunder is at any time held by more
than one Limited Partner or Assignee all tax 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 tax 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 and
Assignees, 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, 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) working days
following each calendar year and shall be applied in the following order of
priority:
(a) To pay the Reporting Fee;
(b) To pay the Development Fee in accordance with the Development Fee
Agreement;
(c) To pay the Operating Loans, if any, as referenced in Section 6.2 of
this Agreement;
(d) To pay the Partnership Administration Fee;
(e) To pay 50% of the remaining Net Operating Income to Property Manager
as a Tax Credit Guarantee Fee; and
(f) The remaining Net Operating Income shall be paid to the Limited
Partner.
Section 11.2 Distribution Upon Sale or Refinancing. Provided the Distribution is
not determined to be a liquidating distribution pursuant to Treasury
Regulation 1.704-1(b)(2)(ii)(g), funds available for distribution upon Sale
or Refinancing shall be distributed in the following order:
(a) To the payment of the Mortgage Note and other matured debts and
liabilities of the Partnership, if applicable;
(b) To the payment of the original capital contribution of the Limited
Partner, including 8% per annum on said contribution;
(c) To the payment of Operating Loans and any other priority debt in
accordance with State law, excluding payment pursuant to Section
11.2(c); and
(d) Thereafter, 91% to the Limited Partner and 9% 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 its interest in the Partnership to any other Person, whether or not a
Partner, except:
(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 or
appropriate 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 an opinion of counsel
acceptable to the General Partner that such assignment complies with
all applicable federal and state securities laws; and
(d) Upon receipt by the General Partner of the Assignee's written
representation that the Partnership Interest is to be acquired by him
for his 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 in Section 12.1 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 of Partnership tax items and
Distributions from the Partnership attributable to the Partnership 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 of Partnership items 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; except that an Assignee which is
an Affiliate of the Limited Partner or Special Limited Partner, may
become a Substitute Limited Partner or Substitute Special Limited
Partner without the consent of the General Partner.
(b) A nonadmitted Assignee of a Limited Partner's or Special Limited
Partner's Interest in the Partnership under an assignment complying
with Section 12.1 shall only be entitled to receive that share of
allocations, Distributions and the return of Capital Contribution to
which its transferor would otherwise be 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 an Assignee and
assignor jointly advise the General Partner in writing of a transfer
of an Interest in the Partnership complying with Section 12.1, furnish
the Assignee with pertinent tax information at the end of each fiscal
year of the Partnership.
(c) The General Partner may elect to treat an Assignee of a Partnership
interest who has not become a substitute Limited Partner as a
substitute Limited Partner in the place of its Assignor should it deem
in its absolute discretion that such treatment is in the best interest
of the Partnership.
Section 12.6 Bankruptcy Provisions. Notwithstanding anything to the contrary
contained in this Agreement, this Agreement shall be deemed an executory
contract under Section 365 of the U.S. Bankruptcy Code, until all of the
requirements of Section 9.2 of this Agreement are satisfied.
Section 12.7 Death, Bankruptcy, Incompetency, etc. of a Limited Partner. Upon
the death, dissolution, adjudication of bankruptcy, insanity or
adjudication of incompetency 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 assign his
interest 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
predecessors-in-interest unless the General Partner consents in accordance
with Section 12.5(a).
Section 12.8 Assignment. For the purposes of this Article XII, "assign" and
"assignment" shall mean any grant, vesting, conveyance, or transfer
whatsoever of any interest whatsoever (including without limitations
security interests), whether by operation of law or consensually,
gratuitously or for considerations.
ARTICLE XIII
RESIGNATION, REMOVAL AND REPLACEMENT OF
GENERAL PARTNER
Section 13.1 Resignation of General Partner. A General Partner may resign only
with the prior written approval of the Limited Partner. The Consent of the
Limited Partner may be conditioned upon the agreement of one or more
successor General Partners who satisfy the requirements of Section 13.3 of
this Agreement to be admitted as substitute General Partner(s). Section
13.2 Removal of General Partner.
(a) The Limited Partner or the Special Limited Partner may remove any or
all of the General Partner:
(1) For cause if any such General Partner has:
(A) Been subject to an event of Bankruptcy;
(B) Committed any fraud, willful misconduct, breach of fiduciary
duty or other grossly negligent conduct in the performance
of its duties under this Agreement;
(C) Convicted of, or entering into a plea of guilty to, a
felony;
(D) Made personal use of Partnership funds or properties;
(E) Violated the terms of the Mortgage Note, and such violation
prompts Mortgage Lenders to issue a default letter or
acceleration notice to the Partnership or General Partner,
except that in regard to the Mortgage the cure period shall
be the sooner of thirty days or ten days prior to the
expiration of the cure period referenced in the loan
documents, if any;
(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 and such conduct
caused the Partnership to suffer an uninsurable loss;
(I) Violated any federal or state tax law which causes a
recapture of LIHTC; or
(J) Failed during any six-month period during the first 15 years
of Project operations 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 a 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.
(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 thorough the
date of receipt of such notice and thereafter it shall not sell or
dispose of Partnership assets in the ordinary course of business of
the Partnership or otherwise unless such sale or disposition is
subject to a conduct entered into by and binding upon the Partnership
prior to the date upon which such notice was received by the General
Partner. If possible 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. The expense of the
accounting shall be borne by the General Partner.
(d) The removal of the General Partner for cause shall become effective
upon the date set forth in the notice. Such General Partner shall (i)
cease to be a Partner of, or have any further interest in, the
Partnership as of the effective date of the removal; (ii) be entitled
to receive as its sole compensation for its interest in the
Partnership an amount equal to its Capital Account balance as of the
effective date of the removal, payable upon the dissolution and
termination of the Partnership after all of the Partners have been
distributed the positive balances in their Capital Accounts; and (iii)
remain liable to restore any deficit balance in its Capital Account as
of the date of its removal as provided in Section 15.3(b) of this
Agreement.
Section 13.3 Admission of Substitute General Partner. Except as may be otherwise
provided in this Agreement, 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 13.4 Continuing Liability. In the event a General Partner is removed or
otherwise withdraws from the Partnership or sells, transfers or assigns its
entire interest pursuant to this Article XIII, such General Partner shall
be, and shall remain, liable for all obligations and liabilities incurred
as General 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 General
Partner.
Section 13.5 Transfer of Interest. Except as otherwise provided herein, the
General Partner may not assign, transfer, mortgage or sell any portion of
its interest in 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 Limited Partner. A transferee of the General Partner's
interest in the Partnership shall not become a General Partner unless
admitted in accordance with Section 13.3.
Section 13.6 Payment to General Partner Upon Resignation, Death or Insanity.
(a) Upon the resignation of the General Partner pursuant to Section 13.1,
or the death or insanity of the General Partner if an individual, or
dissolution of the General Partner if a corporation, partnership,
trust or other form of legal entity, and if the business of the
Partnership is to be continued with one or more successor or
additional General Partner(s), the Partnership shall have the right,
with the approval of the Limited Partner to liquidate such General
Partner's Partnership Interest upon payment to such General Partner of
the Fair Market Value of such Interest as determined by two
independent appraisers. If the Partnership does not liquidate the
General Partner's Partnership Interest pursuant to the previous
sentence, then the General Partner shall retain the same Interest in
the Income, Losses, Tax Credits, Distributions and Capital of the
Partnership as it previously held under this Agreement, but such
Interest shall be held as a special limited partner; and the General
Partner shall not be personally liable for Partnership debts incurred
after such General Partner's general partner Interest is liquidated.
The resigning General Partner or its representative as the case may be
shall choose one appraiser and the successor or continuing General
Partner(s) shall choose one appraiser. If such appraisers cannot agree
upon the Fair Market Value of the General Partner's Partnership
Interest within 30 days after liquidation of the General Partner's
Interest, the two appraisers so chosen shall jointly choose a third
appraiser. The Fair Market Value of the General Partner's Partnership
Interest shall be the appraisal submitted by the third appraiser whose
determination shall be final and binding. Each of the parties shall
compensate its own appraiser and the compensation of the third
appraiser shall be borne equally by such parties. If the continuing or
successor General Partner(s) fail to choose an appraiser, the Fair
Market Value of the General Partner's Partnership Interest shall be
determined by the appraiser chosen by the resigning General Partner or
its representative as the case may be. If the General Partner fails to
choose an appraiser, the Fair Market Value of the General Partner's
Partnership Interest shall be determined by the appraiser chosen by
the continuing or successor General Partner(s).
(b) The purchase price of the General Partner's Partnership Interest upon
resignation, dissolution, death or insanity, as determined pursuant to
Section 13.6(a), shall be paid by the Partnership by delivering to the
General Partner or its representative as the case may be the
Partnership's unsecured promissory note bearing interest at a rate
which is equal to the lesser of 2% per annum in excess of the then
prevailing prime or reference rate charged by Bank of America N.T. &
S.A., Main Office, San Francisco, California, or the maximum legal
rate. Said note shall be payable upon Liquidation in accordance with
state law priority. The note shall also provide that the Partnership
may prepay all or any part thereof without penalty. Notwithstanding
the foregoing: if such note is delivered following the resignation of
the General Partner then (i) such note shall not bear interest and
(ii) the principal payable to the resigned General Partner shall be
limited in amount and date of payment to Distributions which such
resigned General Partner would have received under this Agreement had
the General Partner not resigned.
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 profits
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)(1),(2) or (4) 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, and, upon
reasonable request, to obtain from the General Partner copies of the
Partnership's federal, state and local income tax or information
returns, promptly after such returns become available.
Section 14.2 Accounting Reports.
(a) By February 20 of each calendar year the General Partner shall provide
to each Person who was a Limited Partner at any time during the fiscal
year ending during that calendar year all tax information necessary
for the preparation of his 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
each Person who was a Limited Partner at any time during such fiscal
year: (i) a balance sheet as of the end of such fiscal year and
statements of income, Partners, equity and changes in financial
position of 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; (ii) a report
(which need not be audited) of any Distributions made to Persons who
were Limited Partners 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; (iii) 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; (iv) a copy of the Project's rent roll for the most
recent calendar quarter; (v) a statement signed by the General Partner
indicating the number of apartment units which are occupied by
Qualified Tenants; and (vi) a report of the significant activities of
the Partnership during the quarter.
(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
each Person who was a Limited Partner at the time of the Sale or
Refinancing a report as to the nature of the Sale or Refinancing and
as to the profits and losses for tax purposes and Sale or Refinancing
Proceeds arising from the Sale or Refinancing.
(d) By March 1 of each calendar year of the Partnership, the General
Partner shall provide to each person who was a Limited Partner at any
time during such fiscal year an audited report of the Project's
financial affairs.
Section 14.3 Other Reports. The General Partner shall also provide to the
Limited Partner:
(a) As the rent-up phase is completed, the tax credit worksheet similar to
the form in Exhibit "G", and a copy of the initial tenants'
certification forms. Upon request the General Partner will provide to
the Limited Partner the information collected by the property
management company, or General Partner, verifying the tenant's
eligibility for LIHTC purposes. The Limited Partner will ask for
information on approximately 10% of the tenants unless the
circumstances warrant a more thorough review;
(b) By September 15 of each year, an estimate of LIHTC for that year;
(c) During the 15-year compliance period under Section 42 of the Code,
copies of any certifications which the Partnership must furnish to
federal or state governmental authorities administering the Tax Credit
programs under Section 42 of the Code. The General Partner shall also
cause a review of not less than 50% of the tenants by an outside
auditor who will certify that the tenants reviewed are tax credit
eligible as of the end of the fiscal year of the Partnership;
(d) On or before 30 days after each calendar quarter the Partnership shall
send to the Limited Partner a report on operations, in the form
attached hereto as Exhibit "D" (which is incorporated herein by this
reference) which shall include, in part, a rent roll as of the last
day of the calendar quarter;
(e) On or before March 15th of each calendar year, the General Partner
shall send to the Limited Partner the General Partner's updated
financial statement as of December 31 of the previous year;
(f) On or before December 30 of each calendar year, the General Partner
shall send a copy of the following year's proposed Budget; and
(g) 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 9.10 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 cause the Partnership
to fulfill its obligations under Sections 14.2 and 14.3 within the time
periods set forth therein, the General Partner shall pay as damages the sum
of $100.00 per week (plus interest) 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. In addition, if the General
Partner shall so fail to pay, the General Partner and its Affiliates shall
forthwith cease to be entitled to the annual Partnership Management Fee and
to the payment of any Net Operating Income to which the General Partner may
otherwise be entitled hereunder. Such payments of the annual Partnership
Administration Fee and Net Operating Income shall be suspended, and shall
be restored only upon payment of such damages in full, and any amount of
such damages not so paid shall be deducted against suspended payments of
the annual Partnership Administration Fee and Net Operating Income
otherwise due to the General Partner under Section 11.1.
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 examination of the grounds, a review
of the office and files and an interview with the property manager.
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. The General Partner shall be
the tax matters partner for purposes of Section 6231(a)(7) of the Code.
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 retirement, removal, Event of Bankruptcy, dissolution, death or
insanity 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 all of the
Partners elect 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;
(c) The written election to do so of the Limited Partner upon written
consent of the General Partner; or
(d) The Partnership becomes subject to an Event of Bankruptcy.
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 and 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
holder of a Partnership interest 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 the General
Partner or any Limited Partner. No Partner shall have any right to demand
or receive property other than money upon dissolution and termination of
the Partnership.
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 (or the proceeds of sales or other dispositions in
liquidation of the Partnership assets, as may be determined by the
General Partner or other liquidator) shall be distributed to the
Partners in accordance with the positive balances in their Capital
Accounts. In order to make a final determination of the Capital
Account of each Partner.
(1) the allocations pursuant to Section 11.2(c) shall be made, but
not distributed; and
(2) the Income and Losses of the Partnership upon Liquidation or
dissolution and winding up shall then be allocated among the
Partners as set forth in Section 10.2.
(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 lesser of:
(1) the amount necessary to restore such deficit balance to zero in
compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(3); or
(2) 1.01% of the Capital Contributions.
(3) The deficit reduction amount shall be paid by the General Partner
by the end of such taxable year (or, if later, within 90 days
after the date of Liquidation) 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
(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 asset's Gross Asset Value. 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 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 by a unanimous consent of the Partners after
a meeting of the Partners, which meeting shall be held after proper notice as
provided in Section 17.2 of this Agreement,. For purposes of this Article XVI, a
Partner shall grant its consent to a proposed amendment unless such Partner
reasonably determines that the proposed amendment is adverse to the Partner's
Interest.
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, but not initiate, the Sale or Refinancing of the
Project;
(2) Remove a General Partner for cause pursuant to this Agreement and
elect a substitute General Partner;
(3) Approve, but not initiate, the dissolution of the Partnership; or
(4) 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 inaction 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: at any time by a General Partner; or upon the General Partner's
receipt of a written or request from the Limited Partner setting forth the
purpose of such meeting. Within ten days after receipt of the Limited
Partner's written request for a meeting, the General Partner shall provide
all Partners with written notice of the meeting (which shall be 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 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 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: Metro City Redevelopment Coalition, Inc.
860 North Street
Baton Rouge, Louisiana 70802
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 the successors and assigns of the Partners,
but shall not inure to the benefit of the successors and assigns of the
Partners except as otherwise expressly provided in this Agreement.
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 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,
unless a corporate agent is designated, 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 Certain Provisions. If the operation of any provision of this
Agreement would contravene the provisions of applicable law, or would
result in the imposition of general liability on any Limited Partner, such
provisions shall be void and ineffectual.
Section 17.10 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 17.11 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.
Section 17.14 Legal Proceedings. Should any dispute or claim arise between the
General Partner and the Limited Partner during the existence of this
Agreement, the Partners hereby agree that any and all such disputes and
claims shall be settled by arbitration. The arbitration panel shall be
composed of three (3) arbitrators, one appointed by the Limited Partner,
one appointed by the General Partner and one appointed by mutual agreement
between the appointees of the General Partner and the Limited Partner. The
arbitration panel shall determine the location of the arbitration hearing
which location shall be a mutually convenient location of the Partners. A
majority vote by the panel shall be controlling and its judgment final
binding upon the Partners with the full force and effect of law. Included
but not limited to, attorney fee and all cost, the General Partner and the
Limited Partner, shall bear their own cost of any arbitration proceeding or
any proceeding brought to appeal the decision of the arbitration panel.
Section 17.15 Intervention of Spouses. Each Partner's spouse signatory hereto,
hereby agree with each Partner (other than his or her spouse and each
Partner's spouse to be bound by all the terms and conditions of these
Articles of Partnership as they may relate to his or her interest in the
Partnership owned by him or her directly as his or her share of the
community of gains existing between himself and herself and his or her
spouse of these Articles or Partnership and, in particular, the
authorization by his or her spouse given the General Partner contained
herein to borrow funds and mortgage (or otherwise encumber) or sell
Partnership assets. Each said spouse does further agree and recognize that
any transfer by his or her spouse of any interest in the Partnership shall
constitute a transfer of the entire interest purported to be transferred
and that no additional consideration for such transfer shall be required to
be paid by him or her and that he or she shall join in such transfer upon
request of any Partner, and shall not become a Partner without the approval
of all of the other Partners. This provision is merely directory and
non-mandatory. The General Partner in his sole discretion has the right to
waive said intervention of spouses.
Section 17.16 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 17.17 Receipt of Correspondence. The Partners agree that the General
Partner shall send to the Limited Partner and the Special Limited Partner
within five days of receipt a copy of any correspondence relative to the
Project's noncompliance with the Mortgage, relative to the Project's
noncompliance with the Tax Credit rules or regulations, relative to the
acceleration of the Mortgage and/or relative to the disposition of the
Project.
Section 17.18 Security Interest and Right of Set-Off. As security for the
performance of the respective obligations to which it 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. Each Partner, by
the execution of this Agreement, irrevocably constitutes and appoints each
of the other Partners, with full power of substitution in the premises, his
true and lawful attorney-in-fact with full power and authority in his name,
place and stead to execute, acknowledge, deliver, swear to, file and record
at the appropriate public offices all financing statements, continuation
statements or other documents and amendments thereto which such other
Partner deems appropriate to perfect or continue the perfection of the
aforesaid security interest. The appointment of each such attorney-in-fact
shall be deemed to be a power coupled with an interest, recognition of the
fact that each of the Partners under this Agreement will be relying upon
its power to act as contemplated by this Agreement in any such filing, and
shall survive and shall not be affected by the subsequent bankruptcy,
death, adjudication of incompetence or insanity, disability, incapacity or
dissolution of any Person hereby giving the power nor by the transfer or
assignment of all or any part of the interest in the Partnership of any
such Person.
IN WITNESS WHEREOF, this Amended and Restated Agreement of Limited Partnership
of Enhance Limited Partnership, A Louisiana Limited Partnership in Commendam, is
made and entered into as of the day of ________________________________, 1999.
GENERAL PARTNER
Metro City Redevelopment Coalition, Inc.
By: _________________________________
Lawrence Triggs, Jr.,
President
WITHDRAWING ORIGINAL LIMITED PARTNER
Metro City Management, Inc.
By: _________________________________
Lawrence Triggs, Jr.,
President
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
SPECIAL LIMITED PARTNER
WNC Housing, L.P.
By: WNC & Associates, Inc.,
General Partner
By: ___________________________
David N. Shafer,
Senior Vice President
